rewrite this title Alarm.com Shows Smart Homes Are Saturated – Nanalyze

There are some emerging technology stock categories that are so compelling that it is hard to keep up. Artificial intelligence is the obvious one. Since the beginning of the year, we’ve published or posted more than two dozen articles and videos on AI stocks. Meanwhile, other categories have fallen off a cliff – like IoT stocks. The investing opportunities have been far and few between for a technology that we once thought would be a major economic engine of the global economy. Instead, it has become something of an afterthought, even as smart devices in the home, office, and elsewhere become ever more ubiquitous.

So, we’re just a bit sheepish to admit that it’s been five years since we last checked in with Alarm.com (ALRM). Its vast, unified IoT platform connects just about anything to the cloud, from video cameras to data centers, with the usual dashboard of data and analytics. The company has come a long way since launching its first product in the early aughts – a remotely controlled security system that used a pager network to send wireless signals to a central monitoring station. The dedicated cellular connection meant the system could remain secure even if the phone line was cut, the internet was down, or the power was out. Now it offers AI-enabled features only possible in our dystopian 21st-century-like active shooter detection.

Technology is not the only thing changing for Alarm.com. Gone are the days of significant double-digit revenue growth. Since 2023, the company has averaged annual revenue growth of less than 6% (including 2025 guidance for this year). Next year is no better. Management predicts about 4% total revenue growth at the midpoint of guidance, just north of $1 billion.

Is there any reason to be excited about the future of Alarm.com stock?

New Growth Engines

The short answer: maybe … but probably not. One sign of life is the company’s core software-as-a–service (SaaS) and licensing revenue stream, which makes up about 68% of total revenues. (The rest is basically hardware like video cameras and other smart-enabled devices – roughly the same revenue mix since our first article on the company when it IPO’d 10 years ago.) SaaS and software licenses revenue is expected to be up nearly 9% this year and about the same in 2026. However, the company’s bread-and-butter residential business has flatlined. Instead, growth is coming from three specific areas – commercial, utility grids, and international markets. Collectively, those three segments now represent 30% of total SaaS revenue and are reportedly growing at 20% or more per year.

The commercial segment is pretty self explanatory. These are businesses that are shifting from legacy, single-purpose systems to fully integrated smart solutions. And these subscribers account for more revenue – two to six times higher average revenue per user than a typical residential subscriber, according to management. This is also the fastest-growing segment, with the commercial access control subscriber base increasing by about 30% over the last year.

EnergyHub is an Alarm.com subsidiary that offers a virtual power plant platform, helping utilities manage energy demand, including the “electrification of transportation and the growing footprint of data centers.” EnergyHub’s software orchestrates millions of distributed energy resources – like smart thermostats, EV chargers, and residential batteries – to reduce or shift electricity demand in real-time. For instance, it recently expanded a partnership with Tesla that allows owners of the electric vehicle company’s EV chargers to enroll directly in EnergyHub utility programs.

Alarm.com is also betting that future growth comes from outside of North America. Management identified Latin America and the Middle East as the fastest-growing regions, with a strategic push underway into Asia as well. However, international expansion is a “bit more of the laggard” among the three primary growth initiatives, according to CEO Steve Trundle. For example, it’s taken the company two years to grow international revenues from 4% to 6% of total revenues – or about $60 million today. 

Old Headwinds

This seems like a good time to pause and remind readers that Alarm.com does not sell its hardware or software subscriptions directly to consumers. Instead, it works through a network of about 12,000 service-provider partners. These partners – ranging from local security dealers to large national brands – handle the costly and complex tasks of customer acquisition, professional installation, and ongoing support. However, the 10 largest service providers (just 0.0008%) account for almost half of total revenue. A single key partner, ADT, represents over 15% of revenue. Customer concentration risk is never a good thing.

That is not the only risk in the company’s business model. The smart home market is already saturated with low-cost DIY players like Amazon’s Ring, Google’s Nest, and SimpliSafe. Manufacturers in Asia are also flooding the market with cheaper smart devices, particularly cameras. Meanwhile, the U.S. housing market, due to elevated interest rates, has been a “headwind” that has reduced new account creation. How much? We don’t know, because management has declined to specify subscriber numbers, arguing that the “definition of a ‘subscriber’ has evolved.” That is often corporate speak for “we don’t want to tell you because the metrics suck.” 

A couple of other red flags that retail investors usually just ignore but might be worth a mention here to further gauge how strong the headwinds are blowing. One involves a legal battle with a former partner, SkyBell Technologies, which filed a lawsuit earlier this year. The allegation accuses Alarm.com of stealing trade secrets related to a video doorbell that SkyBell originally designed to be integrated and used within the Alarm.com ecosystem. 

Low Investor Confidence

The other red flag is more symbolic of current investor sentiment. Filings from Q4-2025 revealed that several institutional investors dumped vast amounts of shares in Alarm.com stock. For instance, William Blair Investment Management, which was involved in the company’s 2015 IPO as one of the co-managers of the underwriting, liquidated its entire position – more than 560,000 shares of Alarm.com stock. Morgan Stanley sold more than 350,000 shares, a 25% reduction. Taking profit or cutting losses? 

Meanwhile, the company is sitting on about $1 billion in cash and other ready assets. It has the money to make some major moves but one of its most significant strategic moves, so far, this year was the acquisition of CHeKT, which added $23.5 million in goodwill to the balance sheet. CHeKT is powering the company’s new AI-driven video analytics that enables “proactive deterrence” by using AI-generated verbal warnings and live video to deter crime before it occurs, rather than just recording it.

Investor sentiment about the company’s future appears to be baked into the current share price of Alarm.com. The company has a simple valuation ratio ($2.5 billion market cap/$1.025 annualized revenue) of about 2.5. That’s nearly a third of the average SVR of our Nanalzye Disruptive Tech portfolio. Investors are just not seeing much in the way of future growth – and neither are we.

Conclusion

No doubt Alarm.com remains a high-quality, profitable, and reasonably well-managed company. It possesses a nice recurring SaaS-based model and a robust balance sheet. However, the high-growth story of earlier years appears to be over for now, along with our interest in Alarm.com stock. Without strong revenue growth, you’re not disrupting much of anything.