Smart property technology provider Alarm.com (NASDAQ: ALRM) reported revenue ahead of Wall Street’s expectations in Q4 CY2025, with sales up 8% year on year to $261.7 million. On the other hand, the company’s full-year revenue guidance of $1.06 million at the midpoint came in 99.9% below analysts’ estimates. Its non-GAAP profit of $0.78 per share was 21.5% above analysts’ consensus estimates.
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Alarm.com (ALRM) Q4 CY2025 Highlights:
- Revenue: $261.7 million vs analyst estimates of $250.8 million (8% year-on-year growth, 4.3% beat)
- Adjusted EPS: $0.78 vs analyst estimates of $0.64 (21.5% beat)
- Adjusted EBITDA: $54.89 million vs analyst estimates of $49.86 million (21% margin, 10.1% beat)
- Adjusted EPS guidance for the upcoming financial year 2026 is $2.79 at the midpoint, beating analyst estimates by 3.9%
- EBITDA guidance for the upcoming financial year 2026 is $214 million at the midpoint, above analyst estimates of $211.5 million
- Operating Margin: 13.4%, in line with the same quarter last year
- Free Cash Flow Margin: 13.4%, down from 25.7% in the previous quarter
- Market Capitalization: $2.26 billion
Company Overview
Processing over 325 billion data points annually from more than 150 million connected devices, Alarm.com (NASDAQ: ALRM) provides cloud-based platforms that enable residential and commercial property owners to remotely monitor and control their security, video, energy, and other connected devices.
Revenue Growth
A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Alarm.com grew its sales at a 10.3% compounded annual growth rate. Though this growth is acceptable on an absolute basis, we need to see more than just topline growth for the software sector, which can display significant earnings volatility. This means our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, five-year CAGR starts around Covid, when revenue was depressed then rebounded.
Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Alarm.com’s recent performance shows its demand has slowed as its annualized revenue growth of 7.1% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
This quarter, Alarm.com reported year-on-year revenue growth of 8%, and its $261.7 million of revenue exceeded Wall Street’s estimates by 4.3%.
Looking ahead, sell-side analysts expect revenue to grow 2.9% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and suggests its products and services will face some demand challenges.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Alarm.com is extremely efficient at acquiring new customers, and its CAC payback period checked in at 15.3 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.
Key Takeaways from Alarm.com’s Q4 Results
We were impressed by how significantly Alarm.com blew past analysts’ EBITDA expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance fell short of Wall Street’s estimates. Still, this print was mostly positive. The stock traded up 7.9% to $48.74 immediately following the results.
Big picture, is Alarm.com a buy here and now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).
