Smart property technology provider Alarm.com (NASDAQ: ALRM) announced better-than-expected revenue in Q3 CY2025, with sales up 6.6% year on year to $256.4 million. Its non-GAAP profit of $0.76 per share was 24.3% above analysts’ consensus estimates.
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Alarm.com (ALRM) Q3 CY2025 Highlights:
- Revenue: $256.4 million vs analyst estimates of $251 million (6.6% year-on-year growth, 2.2% beat)
- Adjusted EPS: $0.76 vs analyst estimates of $0.61 (24.3% beat)
- Adjusted EBITDA: $59.16 million vs analyst estimates of $50.46 million (23.1% margin, 17.2% beat)
- Management raised its full-year Adjusted EPS guidance to $2.53 at the midpoint, a 5.4% increase
- Operating Margin: 14.4%, in line with the same quarter last year
- Free Cash Flow Margin: 25.7%, up from 7.1% in the previous quarter
- Billings: $257.1 million at quarter end, up 6.4% year on year
- Market Capitalization: $2.38 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
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Over the last five years, Alarm.com grew its sales at a 10.8% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds.
We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Alarm.com’s recent performance shows its demand has slowed as its annualized revenue growth of 7.2% over the last two years was below its five-year trend. 
This quarter, Alarm.com reported year-on-year revenue growth of 6.6%, and its $256.4 million of revenue exceeded Wall Street’s estimates by 2.2%.
Looking ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months, a deceleration versus the last two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
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Billings
Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.
Alarm.com’s billings came in at $257.1 million in Q3, and over the last four quarters, its growth was underwhelming as it averaged 7% year-on-year increases. This performance mirrored its total sales and suggests that increasing competition is causing challenges in acquiring/retaining customers. 
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 very efficient at acquiring new customers, and its CAC payback period checked in at 26.7 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 Q3 Results
We were impressed by how significantly Alarm.com blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EPS guidance trumped Wall Street’s estimates. Zooming out, we think this was a solid print. The stock remained flat at $47.13 immediately after reporting.
Sure, Alarm.com had a solid quarter, but if we look at the bigger picture, is this stock a buy? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
