Arlo Technologies (ARLO) drew fresh attention after Q1 2026 results topped Wall Street expectations, with 26% year over year revenue growth, stronger subscriptions and services, and a new US$50 million share buyback.

The Q1 beat and buyback news landed against a backdrop of firm momentum, with a 90 day share price return of 20.16% and a 1 year total shareholder return of 40.04%, while the 3 year total shareholder return of 111.35% points to a stock that has already rewarded patient holders.

If Arlo’s recent move has you rethinking where growth might come from next, it could be worth lining up other opportunities in AI driven infrastructure using the 40 AI infrastructure stocks

With Q1 numbers ahead of forecasts, a turnaround from last year’s loss to a US$14.9 million profit, and the stock still trading around a 43% discount to one valuation estimate, investors may be wondering whether there is genuine upside left here or whether the market is already pricing in future growth.

Most Popular Narrative: 30.7% Undervalued

With Arlo trading at $14.90 against a narrative fair value of $21.50, the widely followed view sees a gap that hinges on subscriptions and ecosystem growth.

Continual migration of subscribers to higher-priced AI-driven service tiers (Arlo Secure 6) and the corresponding increase in ARPU (now over $15, up 26% y/y) reinforces the long-term shift to recurring, high-margin (85% non-GAAP service margin) subscription revenue, supporting expanding net margins and earnings visibility.

Want to see why this narrative leans so heavily on subscription mix, margin expansion, and future earnings power, rather than hardware sales alone? The full story joins revenue assumptions, profit margin targets, and a future earnings multiple that is far from conservative into one tight valuation case.

Result: Fair Value of $21.50 (UNDERVALUED)

However, this hinges on consumers sticking with recurring fees and international revenue stabilizing, as weaker demand or pricing pressure could quickly challenge the current thesis.

Another Take: Rich P/E Against Peers

The narrative fair value of $21.50 presents Arlo as undervalued. However, the current P/E of 108.8x is far higher than both the US Electronic industry at 27.7x and the peer average at 62.9x, and also more than double the fair ratio of 51.4x. That gap points to meaningful valuation risk if sentiment cools or growth expectations reset. Which signal do you trust most?

Next Steps

With mixed signals on valuation, growth, and risk, the real question is how this all lines up for you. If you want to weigh both sides before reacting to the latest move, start by reviewing the 4 key rewards and 2 important warning signs.

Ready to hunt for your next opportunity?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.