What happened

Shares of Arlo Technologies Inc. (NYSE:ARLO) fell 12.3% despite strong third-quarter 2018 results from the wireless home-security-camera specialist.

More specifically, in Arlo's first report as a public company since spinning off from Netgear in August, its quarterly revenue climbed 25.1% year over year, to $131.2 million, which translated to an adjusted net loss of $3.4 million, or $0.05 per diluted share. 

Four Arlo wireless security cameras and a Netgear router

IMAGE SOURCE: ARLO.

So what

Arlo CEO Matthew McRae called it a "strong" quarter, noting that the Arlo Pro 2 Wi-Fi camera is leading the company's growth.

"We grew our registered users by approximately 300,000 in the quarter, up 88% year over year, and grew our paid subscribers by more than 100% year over year," McRae added. "After our successful IPO, we are well-positioned to invest in product innovation and our go to market strategy to further strengthen our leadership position in the market."

Now what

What's more, for the fourth quarter of 2018, Arlo expects revenue of $140 million to $155 million, the midpoint of which is well above the $141 million most analysts were modeling. That said, one potential culprit for today's decline is that the company told investors to expect adjusted gross margin next quarter of between 13% to 15%, contracting sequentially from 23.1% in Q3.

It likely doesn't help that Arlo still is susceptible to more than its fair share of post-IPO volatility or that the broader market simultaneously extended its own steep declines to end the week. But considering Arlo's big quarterly beat and the top-line momentum the company is demonstrating as it seeks to expand its presence, I think the market was wrong to bid down its shares today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Netgear. The Motley Fool has a disclosure policy.