Alarum in the First Quarter: Gross Margin Rebounds and Receivables Fall, but NRR Still Sits Below 1
Alarum opened 2026 with 64% revenue growth, a gross-margin rebound, and a sharp decline in receivables from year-end 2025. That supports the case that infrastructure investments are beginning to work, but NRR of 0.93 and lower midpoint Adjusted EBITDA guidance for the second quarter keep growth quality under review.
Alarum Technologies delivered the first evidence that the weak margin profile at the end of 2025 does not have to become the new normal. First-quarter revenue held at roughly $11.7 million, gross margin recovered to 61.7% from 53.8% in the fourth quarter, and trade receivables fell to $8.7 million after reaching $11.8 million at the end of 2025. Those are precisely the proof points left open after the prior annual analysis: whether AI demand is durable, whether infrastructure cost can settle, and whether growth begins to release pressure from the balance sheet. Still, this is not yet a clean growth-quality proof. NRR is 0.93, which means the existing customer base is still not expanding on a net basis, and management guides to a second quarter with slightly higher revenue but lower midpoint Adjusted EBITDA. The read is therefore more constructive than the headline revenue alone, but still unfinished: Alarum has moved from proving demand exists to proving that demand can produce margin, collection, and customer retention over several quarters.
Margin Recovered From the Fourth Quarter
The important first-quarter number is not only 64% growth versus the prior-year quarter. Growth was already part of the 2025 story. What changed is that Alarum kept revenue close to the fourth-quarter run rate while improving gross margin from 53.8% to 61.7%.
That does not return the company to the 67.5% gross margin it reported in the first quarter of 2025, so it would be too early to declare the issue solved. It does change the evidence. In 2025, the concern was that the shift toward larger data-collection products, AI traffic, and infrastructure-heavy workloads was producing volume at the cost of structural margin pressure. The current quarter shows at least the beginning of infrastructure efficiency: more traffic, better infrastructure utilization, and operating expenses that stayed stable versus the prior quarter.
Management frames the improvement through scale efficiencies, better utilization, and the benefit of infrastructure investments made to support larger traffic volumes. That explanation is plausible because the platform is now described as handling more than 50 petabytes of monthly traffic, supported by more than 80 million IPs and a success rate above 85%. But it still deserves caution. Cost of revenue rose faster than revenue versus the prior-year quarter because Alarum needed to serve more data volume, more servers, and third-party costs tied to new products. The fourth-quarter improvement is a positive signal, not the end of the margin debate.
Receivables Fell, but Full Cash Conversion Is Still Missing
The earlier problem was that growth was getting stuck in receivables. The first quarter moved in the right direction: net trade receivables fell to $8.7 million from $11.8 million at the end of 2025 while revenue remained high. At the same time, cash and debt investments increased to $24.2 million from $22.5 million, and shareholders' equity rose to $33.4 million.
That is not a complete cash-flow proof because the quarterly release does not include a detailed cash-flow statement. It would be too aggressive to move directly from lower receivables to a conclusion that operating cash flow has stabilized. But the decline in receivables changes the quality of evidence compared with year-end 2025. If AI and data customers were continuing to drive growth mainly through heavier customer credit, receivables would likely have remained elevated or continued to rise. Instead, the company reported a roughly $3.1 million decline in the balance-sheet item that most weighed on the prior read.
All-in cash flexibility after actual cash uses cannot be fully calculated from the quarterly material. The company still has about $2.6 million of lease liabilities, roughly $2.0 million of contract liabilities, and operating expenses that continue to rise year over year. On the other hand, there is no long-term loan balance on the balance sheet, and cash plus debt investments cover a meaningful part of the balance sheet. The question is no longer whether Alarum faces immediate funding pressure. It is whether growth at this pace can continue without reverting to high receivables and working capital that funds the customers.
NRR Still Does Not Prove an Expanding Customer Base
NRR of 0.93 is the number that prevents the quarter from looking like a full repair. The metric measures revenue from existing customers over the past four quarters versus the revenue generated by the same customers a year earlier. When it sits below 1, churn and contraction still outweigh upsells and cross-sells, even if total revenue is growing fast.
Alarum presents this as part of a strategic transition toward larger AI infrastructure accounts and reduced exposure to lower-quality legacy segments. That may be the right explanation, and it fits the operating narrative: larger customers, higher traffic workloads, and use cases across LLMs, eCommerce, marketing intelligence, and digital monitoring. For shareholders, though, that transition still has to prove it improves revenue quality rather than only replacing one customer base with another.
| Proof Point | What Improved in Q1 | What Still Needs Proof |
|---|---|---|
| Revenue | $11.7 million, up 64% year over year | Slightly lower than Q4, so acceleration is not linear |
| Gross margin | 61.7%, up from 53.8% in Q4 | Still below 67.5% in the prior-year quarter |
| Trade receivables | Down to $8.7 million from $11.8 million at year-end 2025 | No detailed cash-flow statement yet to confirm full cash conversion |
| NRR | 0.93, closer to 1 but still below it | The existing base is still not expanding net |
| Q2 outlook | Revenue guided to roughly $12.2 million, plus or minus 5% | Adjusted EBITDA guided to roughly $1.8 million, below Q1's $2.1 million |
This is the difference between growth driven by a demand wave and growth that builds a stable business base. More than 850 active customers gives Alarum some breadth, but NRR below 1 shows that breadth is not enough if the existing cohort is still shrinking. Over the next quarters, the market will need to see not just more large AI customers, but better net revenue retention, lower concentration if disclosed, and stronger contribution from higher-margin products such as Website Unblocker, SERP, and AI-ready datasets.
The Second Quarter Is Another Proof Step
Second-quarter guidance says a lot about how management wants the market to read 2026. Alarum expects revenue of roughly $12.2 million, plus or minus 5%, and Adjusted EBITDA of about $1.8 million, plus or minus $0.5 million. Compared with the first quarter, that means modest sequential revenue growth, but a lower midpoint for Adjusted EBITDA.
The message is not acceleration at any cost. Management continues to prioritize infrastructure investment, platform capabilities, and long-term positioning over short-term profitability optimization. That can be rational for a data-infrastructure company sitting inside a fast AI demand wave, especially when AI workloads require availability, capacity, and reliability. It also means the next quarter will not answer the story through revenue alone. If revenue rises but gross margin falls again, or if NRR remains below 1, the first-quarter progress will look more like a temporary repair than a deeper change.
The planned launch of agentic workflow capabilities to customers in the second half of 2026 could extend the platform beyond access and collection. At this stage it is not yet a financial anchor for the quarter. It does show where Alarum is trying to take the story: less of a proxy provider, more of an AI data-infrastructure layer. For the market to accept that transition, the new platform needs to improve margin and customer retention, not only add another layer of development spend before revenue arrives.
Conclusions
The first quarter improves Alarum's proof position. Gross margin rebounded from the fourth quarter, receivables declined, cash and debt investments increased, and the company stayed profitable under IFRS. These are not numbers to dismiss as noise. They suggest that part of the infrastructure investment is starting to work, and that the end of 2025 was not necessarily evidence of permanent deterioration.
The blocker is still customer-base quality. NRR of 0.93 keeps Alarum in a state where total growth looks better than net retention from existing customers. The read will improve over the next quarters if revenue keeps rising, gross margin stays above the late-2025 level, receivables do not start building again, and NRR approaches or crosses 1. It will weaken if infrastructure investments pressure margin again, or if growth continues to rely mainly on new AI customers while the existing base contracts. That is why the first quarter matters: it does not close the thesis, but it moves Alarum from a cash-defense story into a proof year for growth quality.
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