Life360 (NASDAQ: LIF) experienced a sharp selloff in after-hours trading on Monday, with shares plunging 24% to $49.10, despite the company reporting record-breaking second-quarter revenue. The family-safety platform's robust financial performance was overshadowed by a 2026 guidance that remained unchanged, failing to meet the market's heightened expectations.
The company posted revenue of $159.0 million for the quarter, a 38% increase year-over-year and surpassing the consensus estimate of $156.7 million. Subscription revenue grew 31% to $115.6 million, while advertising revenue surged 315% to $22.0 million, reflecting the successful integration of its advertising platform. However, the full-year revenue guidance remained at a midpoint of $667.5 million, approximately $4.2 million below the FactSet consensus, and adjusted EBITDA guidance was also left unchanged.
Investor disappointment centered on the composition of the guidance. Life360 raised its subscription revenue forecast by $5 million at the midpoint, but offset this by lowering hardware revenue guidance by an equal amount. This shift, while neutral to total revenue, raised questions about the sustainability of its hardware business and the quality of future earnings.
Despite the revenue beat, profitability showed mixed signals. Adjusted EBITDA rose 53% to $31.1 million, and gross margin improved to 80% from 78%. However, GAAP net income declined 28% to $5.1 million, and diluted earnings per share fell to 6 cents from 8 cents, as operating expenses increased 43% to $127.0 million. The rise in expenses, driven by investments in growth and the advertising platform, tempered investor enthusiasm.
Monthly active users reached 102.4 million, up 16% year-over-year, crossing the 100 million milestone for the first time. Paying Circles, groups of billed subscribers, grew 27% to 3.2 million, and average revenue per Paying Circle increased 5%. Advertising revenue now represents 13.8% of total revenue, up from 4.6% a year earlier, while subscription revenue's share slipped to 72.7% from 76.8%.
Chief Executive Lauren Antonoff highlighted the user milestone, stating, "This quarter, Life360 crossed 100 million monthly active users—proof of the trust millions of families place in us to stay connected, coordinated, and safe." Chief Financial Officer Russell Burke added, "Advertising revenue reached a record $22.0 million in the quarter as the Life360 Advertising Platform continues to gain momentum post integration."
Cash generation improved significantly, with operating cash flow up 79% to $23.8 million. The company ended June with $467.7 million in cash, restricted cash, and short-term investments, providing a solid liquidity position. However, the market's reaction suggests concerns about future margin expansion and the potential deceleration of advertising growth following recent acquisitions.
Analyst sentiment ahead of the earnings release was largely positive, with six buy ratings and two holds. The average price target stood at $62.61, representing a 27.5% premium to the after-hours price. However, the lowest target of $42 suggests possible further downside. The company reiterated its forecast for monthly active user growth of 17% to 20% for the year, with stronger gains expected in the second half.
The key question now is whether the upcoming peak advertising season will push total revenue beyond its current range. Without such a boost, Monday's $1.70 billion market value adjustment puts pressure on the company to deliver on margin improvements and user growth to regain investor confidence.