Summary
Alarm.com's fiscal 2025 third quarter showed steady top-line growth but weaker GAAP profit. Total revenue rose 6.6% to $256.4 million. Operating income climbed 11.5% to $37.0 million, and operating margin expanded to 14.4%, up 0.6 percentage points. Net income, however, fell 3.7% to $35.1 million. Diluted EPS fell to $0.65. The gap between operating income and net income reflects items below the operating line. For the nine months, revenue rose 7.4% to $749.5 million. Operating income rose 27.0% to $98.7 million. Net income rose 5.0% to $97.0 million. Diluted EPS rose to $1.80. Operating margin for the nine months was 13.2%, up 2.0 percentage points.
Non-GAAP measures painted a stronger picture. Non-GAAP adjusted EBITDA increased 18.4% to $59.2 million for the quarter, compared with $50.0 million. Non-GAAP adjusted net income attributable to common stockholders increased 20.6% to $42.4 million, or $0.76 per diluted share, compared with $35.2 million, or $0.62 per diluted share. The company also reported non-GAAP free cash flow of $102.0 million for the nine months, down from $142.3 million. Operating cash flow, a GAAP measure, was $117.4 million for the nine months, down 21.8%. Capital expenditures for the nine months were $15.4 million, up 96.1%. Deferred revenue was $27.96 million, up 3.5%.
Operational highlights were product and acquisition focused. OpenEye introduced intelligent video monitoring tools, including Active Deterrent, which uses camera-based LED lights to respond to customized analytics events. Alarm.com launched the V730 outdoor Wi-Fi spotlight camera with a 4-megapixel sensor, two-way audio, and Bluetooth enrollment. EnergyHub acquired Bridge to Renewables, a Washington, D.C.-based startup providing managed charging for EV manufacturers and drivers. Alarm.com paid $12.4 million in cash for BTR on August 15, 2025, after deducting $1.6 million for holdback provisions. Earlier in the year, the company paid $23.6 million for 81% of CHeKT and made equity investments in Safe Streets, Safe Haven, and All Access. SaaS and license revenue represented 68% of revenue in the quarter, according to MD&A.
Guidance points to continued SaaS and license revenue growth. For the fourth quarter of 2025, SaaS and license revenue is expected to be $176.0 million to $176.2 million. For the full year 2025, SaaS and license revenue is expected to be $685.2 million to $685.4 million, up $4.1 million from the midpoint of the full year guidance provided last quarter. Non-GAAP adjusted EBITDA is expected to be $199.0 million. Non-GAAP adjusted net income attributable to common stockholders is expected to be $140.5 million, or $2.53 per diluted share, based on an estimated 21.0% tax rate and 58.9 million weighted average diluted shares. Those full-year figures cover the fiscal year, while the SaaS and license revenue range quoted first is for the next quarter.
Risks remain. The company said tariffs add costs to hardware produced in Vietnam, Thailand, and Taiwan, and it has begun absorbing additional costs that are expected to negatively impact hardware revenue margins. It does not currently anticipate making further pass-through adjustments for the remainder of 2025. Macroeconomic conditions, supply chain disruptions, interest rates, the U.S. government shutdown, inflation, and litigation are also cited as risks. General and administrative expense rose partly on a $1.9 million increase in legal costs related to intellectual property litigation for the quarter. The 2026 Notes are due January 15, 2026 and are presented as a current liability. The company also faces the ongoing transition of software license customers to the cloud, which reduces software license revenue over time.
The quarter reflects a business with solid recurring revenue growth but increasing tax and cost pressure on GAAP earnings. Non-GAAP profitability and cash generation remain healthy, though operating cash flow declined year over year for the nine-month period. Management's raised full-year SaaS and license revenue guidance suggests confidence in demand. Execution on acquisitions, hardware margin management, and litigation costs will shape the next few quarters.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2025 | Q2 FY2025 | QoQ | Q3 FY2024 | YoY |
|---|---|---|---|---|---|
| Revenue | $256.4M | $254.3M | +0.8% | $240.5M | +6.6% |
| Gross profit | $168.8M | $166.8M | +1.2% | $155.7M | +8.4% |
| Gross margin | 65.8% | 65.6% | +0.2 pp | 64.8% | +1.1 pp |
| Research & development | $66.6M | $69.1M | -3.5% | $62.2M | +7.1% |
| Sales & marketing | $29.5M | $31.1M | -5.3% | $27.0M | +9.2% |
| General & administrative | $27.9M | $27.1M | +3.0% | $25.7M | +8.5% |
| Total operating expenses | $131.8M | $134.8M | -2.2% | $122.6M | +7.6% |
| Operating income (loss) | $37.0M | $32.0M | +15.6% | $33.2M | +11.5% |
| Operating margin | 14.4% | 12.6% | +1.8 pp | 13.8% | +0.6 pp |
| Net income (loss) | $35.1M | $34.2M | +2.6% | $36.5M | -3.7% |
| Net margin | 13.7% | 13.4% | +0.2 pp | 15.2% | -1.5 pp |
| Diluted EPS | $0.65 | $0.63 | +$0.02 | $0.67 | -$0.02 |
Risks
New and increased U.S. tariffs, including the April 2025 baseline 10% tariff and country-specific rates, affect hardware produced in Vietnam, Thailand and Taiwan. The company began passing through baseline tariff costs in Q2 2025 but has not adjusted for newer higher tariffs, so it expects to absorb additional costs that will negatively impact hardware revenue margins.
Macroeconomic Conditions, including inflation, tariffs, interest rates, recession risk and the U.S. government shutdown, have caused uncertainty and may reduce consumer discretionary spending and new home construction or renovation, which could lower demand for the company's platforms and solutions.
The U.S. government shutdown that began October 1, 2025 has significantly limited the FCC's ability to approve new products, causing and potentially continuing delays in the launch of certain new products.
A substantial portion of revenue comes from a limited number of service provider partners. The loss of, or a significant reduction in, orders from one or more major service provider partners would decrease revenue and profitability.
Ongoing patent lawsuits, including EcoFactor and Causam, and related intellectual property litigation costs increased general and administrative expense by $1.9 million in Q3 2025. Negative outcomes could result in material damages or costly licenses.
The 2026 Notes are due January 15, 2026 and are presented as a current liability. The company may not have enough cash or be able to obtain financing to settle cash conversions or repurchase notes upon a fundamental change, and conversion could dilute stockholders.
Markets for connected property, security monitoring, video and energy management are highly competitive, with large technology companies and service providers. Competitors may use aggressive tactics such as discounting or bundling that could reduce revenue and profitability.
Substantially all revenue is generated through service provider partners. Their inability to attract additional subscribers, retain current subscribers or provide adequate support could adversely affect operating results.
Cyberattacks and data breaches could expose the company to liability, fines and reputational harm. Acquired businesses and subsidiaries operate distinct data infrastructure with potentially less mature security, and the hybrid return-to-office plan may increase vulnerability.
The strategy includes acquisitions, and recent purchases of BTR, CHeKT and equity investments in Safe Streets, Safe Haven and All Access create integration, valuation and management risks. Guidance for acquired businesses is inherently more speculative.
SaaS and license revenue renewal rate decreased to 94% for the trailing twelve months ended September 30, 2025 from 95% for the trailing twelve months ended September 30, 2024, indicating potential subscriber retention pressure.
Dependence on suppliers and third-party manufacturers, with a significant portion of hardware produced outside the United States, creates risk of supply delays or cost increases. Cost of hardware and other revenue as a percentage of hardware and other revenue was 78% in Q3 2025 versus 76% in Q3 2024.
Total revenue increased 7% to $256.4 million in Q3 2025 and increased 7% to $749.5 million for the nine months ended September 30, 2025, but the company does not expect similar growth rates and may fail to manage expansion, headcount and infrastructure effectively.
The company sells security and life safety solutions. If these solutions fail due to defects, carrier outages, network operations center failures, improper installation by service provider partners or user error, the company could be subject to liability and reputational harm.
SaaS KPIs
All quarters →SaaS and license revenue
Non-GAAP free cash flow
Non-GAAP adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from Alarm.com Holdings, Inc.'s SEC filings for Q3 FY2025 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.