Owlet (NYSE: OWLT) stays profitable but withdraws outlook over camera cable safety update

What happened

Owlet, Inc. (NYSE: OWLT) withdrew its full-year 2026 outlook on Nov. 13 after starting a safety update for its camera cable guard. The move overshadows a third quarter in which the infant-monitor maker stayed profitable and generated cash.

Owlet said it learned of a safety incident report involving exposed camera cables. It sent all camera owners a safety update and action request that requires certain safety measures. Starting Nov. 13, it is shipping a replacement enclosed cable guard system free to every camera owner who asks.

The company gave four reasons for pulling the outlook: expected remediation expenses, a fourth-quarter pause in retail sales, retailer returns and near-term demand uncertainty. CEO Kurt Workman said the update affects the fourth quarter, but he is confident the long-term opportunity remains intact.

Key numbers

Metric	Latest	Change	Source
Q3 revenue	$30.4 million	from $32.0 million, -4.9%	SEC 8-K, Exhibit 99.1 press release
Q3 gross margin	53.8%	from 50.6%, +315 basis points	SEC 8-K, Exhibit 99.1 press release
Q3 subscription revenue	$3.6 million	from $1.5 million, +$2.1 million	SEC 8-K, Exhibit 99.1 press release
Q3 operating income	$1.2 million	from $1.3 million, -$0.1 million	Calculated from SEC 8-K
Q3 net income	$1.4 million	from $4.2 million, -$2.8 million	Calculated from SEC 8-K
Q3 Adjusted EBITDA (non-GAAP)	$3.5 million	from $1.6 million, +$1.9 million	Calculated from SEC 8-K

Read more: Owlet (OWLT) company research

A smaller top line and a wider margin

Revenue fell 4.9% to $30.4 million from $32.0 million in the third quarter of 2025, and hardware drove the shortfall. Owlet said revenue was in line with its expectations.

Hardware revenue dropped to $26.8 million from $30.5 million, a 12.1% decline by OptimistFi's calculation. Owlet pointed to the prior-year Dream Sight launch and heavy competitor discounting ahead of Amazon's Aug. 10 FDA-clearance deadline. Stronger underlying consumer demand partly offset both.

Subscriptions filled part of the gap. Owlet360 subscription revenue rose $2.1 million to $3.6 million, and the service ended the quarter with over 142,000 paying subscribers. Subscription gross margin was 68.4%.

That mix helped lift gross margin to 53.8% from 50.6% a year earlier, a gain Owlet put at about 315 basis points. The company also credited favorable product mix and lower direct product and fulfillment costs.

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Profit, cash and revised figures

Operating income was $1.2 million against $1.3 million a year earlier. Operating expenses rose to $15.2 million from $14.9 million. Owlet cited higher stock-based compensation and a net unfavorable change in insurance recoveries.

Net income fell to $1.4 million from $4.2 million, or $0.02 a share from $0.17. The year-earlier result included $4.3 million from a common stock warrant liability adjustment, against $0.1 million this year. Most of the drop sits below operating income.

Adjusted EBITDA, a non-GAAP measure, rose to $3.5 million from $1.6 million. It adds back stock-based compensation, which was $2.6 million this quarter and lower a year earlier.

Operations brought in $2.2 million of cash in the quarter. Over nine months, operating activities used $3.0 million, down from $10.3 million a year earlier. Cash and cash equivalents were $31.6 million on Sept. 30, down from $35.5 million on Dec. 31, 2025. The line of credit rose to $11.0 million from $6.9 million.

The release also revises prior-period figures. Owlet said it had overstated stock-based compensation expense because of valuation miscalculations in its employee stock purchase plan. It judged the errors not material to any previously issued financial statements.

Why it matters

OptimistFi has argued that Owlet works only if its regulated health positioning turns parent demand into profitable scale before cash burn or competition closes the window. The quarter supports the profit half of that view, with a wider margin, positive operating income and cash flowing in from operations.

The safety update tests the demand half. Owlet itself cites retailer returns and near-term demand uncertainty, so one profitable quarter does not settle the next one.

The cost of the update is also open. The number of replacement requests will help set the cost of the update and of retailer returns. Owlet says those amounts may differ materially from its estimates.

What's next

Owlet says more details will come in its Form 10-Q for the quarter ended Sept. 30, 2026. Holders should look there for the remediation expenses, retailer returns and fourth-quarter sales pause the company cited in withdrawing its outlook.

Cost figures that offset the quarter's margin gains would weaken the case. Contained figures would support it.

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