What happened

Shares of Arlo Technologies (ARLO 0.38%) took off on Wednesday, rising 12.6% through 2:40 p.m. EST a day after reporting an earnings beat for its fiscal fourth quarter of 2020.

Analysts had forecast that the maker of Internet-of-Things (IoT) wireless security cameras, audio and video doorbells, and floodlights would lose $0.18 per share (pro forma) on $111.6 million in sales in Q4. Instead, Arlo reported an $0.08-per-share loss, and sales of $114.8 million.  

Both sales and earnings came in toward the high end of the company's previous guidance.

A glowing green arrow climbs higher on a digital background.

Image source: Getty Images.

So what

Still, the news wasn't all great. A loss is a loss, after all, and Arlo's loss -- when calculated according to generally accepted accounting principles (GAAP) -- was even bigger than the pro forma number makes it seem. Arlo lost $0.19 per share in Q4, and $1.30 per share for the whole year. Sales declined 6% in Q4, and 4% for the year.  

The quarterly loss was a big change from the $0.26 per share Arlo earned in Q4 2019. And the $1.30 per share fiscal 2020 loss was more than the $1.14 Arlo lost in 2019.

Now what

So why are investors happy with Arlo's results? As CEO Matthew McRae pointed out, Arlo grew its paid accounts by 89% for the quarter, laying a "solid foundation to become a more profitable and predictable business" going forward. In 2021, the CEO predicts paid account additions will triple to reach 1 million total.

More immediately, Arlo says Q1 2021 sales should range from $70 million to $80 million, with pro forma losses of about $0.20 per share and GAAP net losses of about $0.32. Taken at the midpoint, that works out to probably a sales miss for Arlo, but an earnings beat relative to the $0.22 per share loss than analysts are forecasting.

Two earnings beats in a row? No wonder investors are smiling.