Alarum grew Q1 2026 revenue 64% to $11.7M with $0.6M IFRS profit, but July’s FBI seizure of NetNut domains paused services, delayed Q2 results and signals significant losses ahead.
Revenue
$12M
+64.2% YoY
Net income
$590K
+45.3% YoY
Operating margin
6.9%
This period vs a year ago
Same period last year
This period
Revenue▲+64.2%
≈$7.1M
$12M
Net income▲+45.3%
≈$406K
$590K
Year-ago figures (≈) are worked out from the growth rate the company reported. Each row has its own scale.
Q1 2026: 64% revenue growth, then an FBI domain seizure in July
Alarum Technologies, through its Israeli subsidiary NetNut, sells access to a "proxy network" — tens of millions of internet addresses (IPs) that customers route traffic through to collect public web data at scale, increasingly to train AI language models. In the quarter ended March 31, 2026, revenue rose 64% to $11.7 million and the company stayed profitable under IFRS (the international accounting rules it reports under) with $0.6 million of net profit. Those results, released on May 28, now read very differently: on July 2 the company disclosed that the FBI had seized domains associated with NetNut, on July 6 it paused traffic on the affected network services, and on August 27 it delayed its second-quarter results, saying it expects "significant operating and net losses."
At a glance
$11.7 million revenue, up 64.2% year on year — but 0.9% down from the fourth quarter of 2025, so growth had already flattened before July.
$0.8 million operating profit (6.9% operating margin) — operating margin is the share of revenue left after running the business, before interest and tax; up from 4.7% a year earlier.
$24.2 million of cash and debt investments, no bank debt — the cushion the company now has to fund an investigation, layoffs and litigation while services are disrupted.
Metric
Q1 2026
Q1 2025
YoY Change
Revenue
$11.7M
$7.1M
+64.2%
Gross margin
61.7%
67.5%
-5.8 pts
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Operating profit
$0.81M
$0.33M
+143%
Operating margin
6.9%
4.7%
+2.2 pts
Net profit (IFRS)
$0.59M
$0.41M
+45.3%
Basic EPS per ADS
$0.08
$0.06
+33%
Adjusted EBITDA (non-IFRS)
$2.1M
$1.3M
+62%
Net retention rate (NRR)
0.93
n/a
—
Cash + debt investments (period end)
$24.2M
$24.0M
+0.8%
Per-share figure is per American Depositary Share (ADS), the unit traded on Nasdaq; 7.3 million ADSs represented 72.6 million ordinary shares at March 31. The company does not report diluted EPS per ADS.
Takeaway: Q1 2026 is the last clean snapshot of Alarum before July's FBI domain seizure, and it should not be read as a run-rate. The company has since paused part of its network, begun cutting or furloughing about a third of its workforce, delayed its Q2 results and said it expects significant operating and net losses — so the May guidance of $12.2 million Q2 revenue no longer holds.
What drove the quarter
Revenue. The company attributes the $4.6 million year-on-year increase "mainly" to "strong demand for the Company's proxy solutions, as well as increased sales of new products" (its Website Unblocker, search-results scraping tools and ready-made datasets). Management says AI and large-language-model workloads were the main growth driver, with monthly traffic averaging above 50 petabytes versus about 5 petabytes at the start of 2025. Against the prior quarter, though, revenue slipped 0.9% — the 64% growth figure compares with a much smaller base a year ago, not with recent momentum.
Gross margin fell even as revenue rose. Gross margin — revenue minus the direct cost of delivering the service, as a share of revenue — dropped from 67.5% to 61.7%. Cost of revenue nearly doubled to $4.5 million, which the filing puts down to "the larger volume of servers as well as a stronger and higher-quality infrastructure," plus third-party costs tied to the new products. Sequentially the trend improved: gross margin was 53.8% in Q4 2025, so Q1 recovered roughly 8 points as newly added server capacity was used more fully.
Operating costs grew slower than revenue. Operating expenses rose 43% to $6.4 million, against 64% revenue growth. Research and development was the fastest-growing line ($2.3 million vs $1.4 million, +68%), driven by "payroll and other employee related costs... due to an increased number of employees." Sales and marketing rose 29% and general and administrative 37%. That difference is why operating profit more than doubled from a small base, to $0.81 million.
Below the operating line. Net financial items swung from $0.2 million of income to a $0.03 million expense, which the company attributes to fair-value changes on financial instruments, partly offset by interest income. Tax was $0.18 million. Net profit rose 45%, less than operating profit, because last year's financial income was not repeated.
Customers. The company reports more than 850 active customers. Its net retention rate — revenue from existing customers over the past year versus what the same customers paid a year earlier, where anything below 1.0 means churn and downgrades outweigh upsells — was 0.93. Management describes this as a deliberate move toward larger AI accounts and away from "lower-quality legacy segments." Put plainly: growth came from new, large AI customers, while the existing base shrank by about 7% on balance — which concentrates the business in a few large accounts.
What the headline numbers hide
Adjusted vs reported profit. Adjusted EBITDA of $2.1 million is about 3.5x IFRS net profit of $0.6 million. The gap is $0.9 million of share-based compensation (staff pay in shares and options, a real cost to shareholders through dilution), $0.4 million of depreciation and amortization, and $0.2 million of tax. Share-based pay alone equals 7.7% of revenue. The non-IFRS gross margin of 66.5% is flattered the same way, versus 61.7% reported.
Cash conversion. The earnings release does not include a cash-flow statement, so operating cash flow can't be compared directly with net profit. The balance sheet points the right way: trade receivables (money customers owe) fell from $11.8 million at December 31 to $8.7 million, and cash and debt investments rose $1.7 million in the quarter to $24.2 million. Receivables are still up 131% year on year — faster than revenue's 64% — so year-end 2025 collections had lagged, and Q1 caught up.
Dilution. No new equity was raised in Q1; share premium rose $0.8 million, consistent with option exercises and share-based pay. On May 28 the company registered 5 million more ordinary shares for its employee incentive plan (Form S-8), about 7% of the 72.6 million outstanding. That isn't a capital raise, but it shows share-based pay will keep adding to the share count. In June the company filed post-effective amendments deregistering unsold securities under several older F-1/F-3 registration statements; its F-3 shelf (File No. 333-283429) is still listed in later filings.
EPS growth is mostly operations, but small in absolute terms. Basic EPS per ADS went from $0.06 to $0.08. The increase came from higher operating profit rather than buybacks or a lower tax rate, but at $0.02 per ADS the growth rate is heavily affected by rounding.
Guidance was already pointing to a slower Q2. Even before July, management guided Q2 revenue to about $12.2 million (±5%), 39% growth year on year, and adjusted EBITDA to about $1.8 million (±$0.5 million) — below Q1's $2.1 million. In other words, the company expected growth to slow and margins to shrink while it kept investing.
After the quarter: the NetNut disruption
The events after March 31 matter more to the outlook than Q1's figures:
July 2–3: Alarum disclosed that the FBI had seized domains associated with NetNut, and then additional domains. As of July 3, neither company "has been formally contacted by the FBI or any other governmental or regulatory authority." Alarum said it was investigating "whether its network or services have been used for malicious, fraudulent or unlawful purposes by third parties," and that extended disruption "is likely to have a material adverse effect" on operations and results.
July 6: it paused traffic through the affected network services "for several days," saying service availability would be "significantly reduced."
July 13: it still did not know the "exact root cause," had hired an external cybersecurity and forensic investigation team, and began an efficiency plan affecting about one-third of its workforce (possible terminations and unpaid leave). Any restart would go through an "enhanced and documented legal, technical and compliance review."
July–August litigation: a motion in Tel Aviv to certify a securities class action (claimed damages up to NIS 120 million, covering buyers from March 29, 2022 to July 2, 2026), two shareholder motions for document discovery ahead of possible derivative suits (hearings set for December 14 and 15, 2026), and a U.S. class action filed in New Jersey on August 5 that the company says it has not been served with.
August 27: results for the three and six months to June 30 were delayed "due to the ongoing impact of recently announced developments," and the company referred to "its expectation of having significant operating and net losses."
Outlook
Management's only formal guidance — Q2 revenue of about $12.2 million and adjusted EBITDA of about $1.8 million — was issued before the disruption, and the company now expects significant losses, so it should be treated as withdrawn in substance even though it hasn't been formally restated. Three things will decide the next few quarters:
Whether and when NetNut's paused services restart, and how many of the large AI customers behind the 64% growth return after a compliance-driven restart. With an NRR already below 1.0, losing even a few large accounts would show up quickly in revenue.
Cash burn against the $24.2 million cushion. The company had no bank debt at March 31, which gives it room. But it will be paying for the forensic investigation, legal defense and severance while revenue is impaired, and the workforce cut suggests management is planning for a lengthy disruption.
Legal and regulatory outcomes, none of which have been resolved: the FBI matter itself (no formal contact as of the last update), the Israeli class-action certification motion, the U.S. complaint and the December discovery hearings.
Our view: until the delayed Q2/H1 results come out, Q1 2026 shows what the business could earn at full operation — about $47 million in annualised revenue at a thin IFRS profit — not what it is earning now. The next filing, the delayed half-year results, will be the first to show how much of that revenue base survived July.