Alarum Technologies Ltd. (ALAR) Earnings

Management highlights

- Platform Evolution and Strategic Positioning * Alarm Technologies has transitioned from a traditional proxy-focused provider to a broader AI data infrastructure platform, with current offerings including global proxy infrastructure, web scraping solutions, and AI-ready datasets. New agentic workflow capabilities are scheduled for gradual customer launch in H2 2026. * Management prioritizes long-term infrastructure leadership and strategic market positioning over short-term profitability optimization amid the early-stage growth of the AI data infrastructure market, so investment levels and profitability will continue to fluctuate as the business scales. * The company maintains a strong, debt-free balance sheet with $24.2 million in cash, cash equivalents, and debt investments as of March 31, 2026, supporting continued strategic investment in growth. - Operational Scale and Competitive Advantages * In Q1 2026, the platform handled an average of over 50 petabytes of monthly data traffic and tens of billions of requests across a global network of more than 80 million IP addresses, maintaining data collection success rates exceeding 85%. This represents a 10x increase in monthly traffic from the end of 2024, reflecting rapid scaling to meet growing AI workload demand. * Rising operational complexity of public web environments and increasingly sophisticated anti-bot protections have increased technological barriers to large-scale reliable data collection. Management believes Alarm's large-scale global infrastructure, operational expertise, routing optimization, and IP scale create a significant competitive moat that favors established players like Alarm. - Customer and Market Trends * AI-related workloads (including model training, fine-tuning, retrieval systems, inference optimization, and continuous model updating) remain the primary growth driver, but the company is seeing encouraging diversification across enterprise verticals including e-commerce, digital monitoring, and data enrichment. * The overall AI data infrastructure market dynamic is characterized by occasional quarterly demand volatility, as large AI customers adjust consumption based on training cycles, model releases, data refreshes, and internal infrastructure decisions. Management expects the business to gradually become more diversified and resilient as the platform expands across products, customers, and verticals. - Operating Leverage * Heavy investments in infrastructure, network expansion, platform development, and organizational scaling throughout 2025 began delivering early benefits in Q1 2026, including improved infrastructure utilization, higher routing efficiency, and overall operating leverage that drove sequential margin improvement even amid foreign exchange headwinds.

Guidance

- For Q2 2026, management expects revenue of approximately $12.2 million, ±5%, representing 39% year-over-year growth at the guidance midpoint. - Adjusted EBITDA is guided to approximately $1.8 million, ±$0.5 million. - Guidance is based on current visibility into existing customer activity and consumption patterns. Management continues to prioritize long-term infrastructure leadership and strategic positioning in the AI data infrastructure market while maintaining operational discipline for ongoing strategic investment.

Segment performance

Alarm Technologies reports consolidated results for Q1 2026, and does not break out separate financial performance for individual product segments. Total consolidated revenue for the quarter was $11.7 million, representing 64% year-over-year growth. Gross profit margin for the quarter was 61.7%, down from 67.5% year-over-year but up from 53.8% sequentially from Q4 2025. Total operating expenses were $6.4 million, up from $4.5 million year-over-year, driven primarily by payroll and R&D costs. IFRS net income was $0.6 million, up from $0.4 million year-over-year, and adjusted EBITDA was $2.1 million, up from $1.3 million year-over-year.

Risks & headwinds

- The AI data infrastructure market is highly dynamic and early-stage, with volatile customer demand patterns that can cause significant quarter-to-quarter variability in financial performance. - Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from expectations, referenced in the company's SEC filings including its annual report on Form 20-F. - Public web data collection is facing growing operational challenges from increasingly sophisticated anti-bot and anti-scraping protections, requiring continuous investment to maintain performance and success rates. - Most operating expenses are denominated in New Israeli Shekels, so US dollar depreciation against the NIS creates foreign exchange headwinds for profitability and margins.

Analyst Q&A

• Q: Can you share the vision, customer demand, and revenue impact of the upcoming agentic workflow product launching in H2 2026? /

  A: The agentic workflow product is an intelligent automation layer that sits on top of all of Alarm's existing products, not a standalone revenue-generating product. It automatically matches customer use cases to the optimal combination of Alarm's sub-products (such as specific proxy types, geographies, and configurations), simplifying the customer experience. Management expects it to drive upsell opportunities and attract new customers, but cannot share additional commercial details publicly.

• Q: How do you assess your competitive moat for web scraping amid growing anti-scraping protections from platforms like Cloudflare? /

  A: The difficulty of large-scale reliable public web data collection continues to increase, but Alarm's competitive position has not changed materially. The core of Alarm's moat is its extremely large, diversified global network of IP endpoints across geographies and types, which enables higher success rates bypassing anti-bot protections. Alarm also has purpose-built tools like SERP API that are continuously updated to adapt to evolving protection technologies, and core performance KPIs including success rate remain strong amid growing scale.

• Q: What drove the sequential improvement in gross margins in Q1 2026, and what is the outlook for margins going forward? /

  A: The sequential margin improvement came from fruits of heavy infrastructure investments made in prior quarters: existing use cases did not require new incremental investment or third-party services, and R&D improvements to IP routing and efficiency reduced underlying costs. Management's top priority remains market penetration and long-term leadership in AI data infrastructure, so the company is willing to accept margin declines to invest in new customer acquisition and new market expansion if needed. If no new major investments are required, margins can remain at or improve from current levels, with prior penetration investments delivering strong ROI in later quarters.

• Q: What is the retention and durability of AI customer segment demand, and why is NRR lumpy? /

  A: Alarm's NRR is calculated on a four-quarter over four-quarter basis, so the rapid shift in customer mix from almost no AI customers one year ago to AI being the largest growth segment has created temporary lumpiness in the metric. Public web data is the core fuel for AI model development and production, so AI customer demand is durable long-term. AI customer logo retention is very strong to date, but consumption is naturally volatile quarter-to-quarter as customers adjust usage between training cycles and new use case development.