Executive Summary / Key Takeaways

• Alarum Technologies is strategically transforming into a foundational enabler of the artificial intelligence (AI) revolution, focusing its entire business on high-demand data collection solutions.
• The company is making significant, deliberate investments in its IP proxy network, R&D, and talent, which are currently compressing short-term gross margins and Adjusted EBITDA but are essential for capturing massive long-term revenue opportunities in the AI data supply chain.
• Alarum reported a net profit of $0.3 million in Q2 2025, with Q3 2025 revenue guidance projecting a substantial 78% year-over-year increase to $12.8 million, driven by a new large-scale AI data project.
• Proprietary technologies like its global IP proxy network and the Website Unblocker provide a competitive edge in a dynamic market where websites increasingly try to block data collection, positioning Alarum as a critical partner for major AI players.
• Investors should adopt a long-term perspective, as the nascent and volatile AI data market, coupled with strategic investments, means quarter-to-quarter results may fluctuate, but the underlying opportunity for sustainable growth remains compelling.

The Strategic Pivot: Powering the AI Data Revolution

Alarum Technologies Ltd., founded in 2013 and formerly known as Safe-T Group Ltd., has undergone a profound strategic transformation, culminating in its rebranding in January 2023. This pivot saw the company divest from its previous activities, including its consumer internet access business, to focus almost entirely on its data collection business unit, NetNut. This strategic shift is evident in its financial trajectory: data collection revenues, which represented approximately 45% of total revenues in 2022, surged to 80% by 2023, and by 2024, constituted a dominant 97% of its record annual revenue of $31.8 million.

The company's current strategic direction is deeply intertwined with the burgeoning AI revolution, which management views as a "once-in-a-generation opportunity." Data has emerged as the "new oil," serving as the critical fuel for training, retraining, and fine-tuning foundational AI models. Alarum positions itself as a "key enabler" and "backbone" for this global AI boom, providing essential infrastructure to overcome growing barriers to data access, such as compliance, geographical distribution, and traffic unblocking. This foundational role is attracting major tech giants and emerging startups, leading to significantly larger potential deal sizes.

Technological Edge: Unlocking Data Access at Scale

Alarum's competitive advantage is rooted in its differentiated technology, which is designed to provide reliable, scalable, and accurate public web data. At the core of its offerings is the IP Proxy Network (IPPN), a robust and expanding global network comprising both exit points based on proprietary reflection technology and hundreds of servers with ISP partners. This infrastructure is optimally designed to guarantee privacy, quality, stability, and speed, enabling organizations to collect data anonymously at any scale from public sources. The IPPN supports "more throughput" and serves "native demand with fast ROI," directly addressing the "huge sales from massive amounts of training data for foundational AI models."

Complementing the IPPN is the Website Unblocker, a specialized product engineered to bypass increasingly sophisticated blocking technologies employed by websites. This solution provides enhanced data access and improved operational efficiency for customers. The Website Unblocker has been "tested and rated as a market leader by industry experts," demonstrating its efficacy. A notable success includes a Fortune 200 company, already an IPPN customer, expanding its subscription to the Website Unblocker in Q3 2024, which is now generating an annual run rate (ARR) of over $500,000. This product is considered a "crucial enabler" for Alarum's entry into the multi-billion dollar data collection and labeling market.

Further enhancing its technological suite, Alarum is developing a comprehensive AI Data Collector solution. This flagship product features a no-code interface and advanced AI that automatically adapts to website changes, ensuring continuous data collection with minimal downtime. It aims to enable companies to quickly create collectors in minutes, providing "continuous access to hard-to-find data." These technological differentiators are critical in the ongoing "technology war" between AI platforms and websites, where websites are actively implementing measures to block AI engines. Alarum's solutions directly address this challenge, making its offerings indispensable for companies reliant on public web data. The company is actively investing in R&D and growing its high-quality talent pool to accelerate the development of new products and capabilities for large-scale customer projects, aiming to attract new customers and cross-sell to existing ones "under one roof."

Financial Performance: Strategic Investments for Long-Term Value

Alarum's recent financial performance reflects its strategic decision to heavily reinvest in its data collection capabilities to capitalize on the AI opportunity. For the second quarter of 2025, the company reported revenues of $8.8 million, a slight decrease from $8.9 million in Q2 2024, primarily due to a shift in customer mix as the AI segment grew significantly, largely replacing customers from other segments. Despite this, Alarum achieved a net profit of $0.3 million, a turnaround from a net loss in the prior year's second quarter, and an Adjusted EBITDA of $1 million. These results were "well ahead of the expectations" and "in line with the upgraded guidance" issued earlier in June.

The strategic investments have, by design, impacted short-term profitability metrics. The non-IFRS gross margin for Q2 2025 was 63%, a notable decline from 78% in Q2 2024. This trend was also observed in Q1 2025, with a gross margin of 69.4% compared to 80.4% in Q1 2024. Management explicitly stated that working with major customers at lower gross profit margins is a deliberate choice due to the "high revenue and long-term potential." Increased operating expenses, which rose to $5.4 million in Q2 2025 from $4.2 million in Q2 2024, are primarily driven by higher employee salary-related costs, particularly in R&D, as the company diligently grows its team to accelerate product development. The net retention rate (NRR) for Q2 2025 was 0.98, which management clarified as potentially "a little bit misleading" given the significant shift in customer focus towards the AI segment.

Alarum's robust balance sheet provides a strong foundation for these strategic initiatives. As of June 30, 2025, shareholders' equity reached a record $29.1 million, up from $26.4 million at the end of 2024. The company maintained a healthy cash, cash equivalents, and long-term investment balance of approximately $25 million, despite a one-time $1.7 million tax payment in January 2025. This solid cash position "ensures we can invest strategically while maintaining a focus on sustainable value creation."

Competitive Landscape: Niche Strength in a Dynamic Arena

Alarum operates in a "very competitive landscape" within the broader cybersecurity and data collection industries. While precise market share figures for all niche competitors are not publicly detailed, Alarum's positioning is that of a specialized player, particularly strong in customizable privacy solutions and zero-trust access.

Compared to larger, more integrated players like Cloudflare (NET), Alarum's ZoneZero SDP and Proxy solutions offer specialized zero-trust and privacy tools that emphasize user-specific access controls and on-premise options like Proxy-in-a-Box. This potentially provides greater flexibility for organizations with strict data sovereignty needs, differentiating Alarum from Cloudflare's broader, more integrated platform. While Cloudflare benefits from wider market reach and rapid product development, Alarum's tailored approach can foster stronger customer loyalty in regulated markets.

Against Akamai Technologies (AKAM), which specializes in edge computing and content delivery, Alarum's iShield for threat protection and SDE for data exchange offer comprehensive cybersecurity that may be more accessible for smaller enterprises. Alarum's proxy services provide greater anonymity and data collection capabilities tailored for international users, contrasting with Akamai's strength in high-speed content delivery. Alarum's focus on user privacy and zero-trust models allows it to exploit Akamai's relative weakness in highly specialized privacy tools.

Palo Alto Networks (PANW) and Fortinet (FTNT), both leaders in advanced network security and integrated security platforms, represent formidable competition in enterprise-grade solutions. Alarum's ZoneZero SDP and MFA solutions directly compete with Palo Alto's zero-trust offerings, potentially providing more straightforward deployment for specific use cases and appealing to cost-sensitive markets. Similarly, Alarum's proxy and cybersecurity tools, with their specialized privacy features and user-friendly API-based data collection, differentiate it from Fortinet's broader security focus. However, these larger competitors generally demonstrate stronger financial metrics, such as higher growth rates, margins, and cash flow generation, benefiting from their scale and established market positions.

Alarum's competitive advantages, or "moats," include its proprietary zero-trust technology, which translates into enhanced security for sensitive data exchanges and potentially superior customer retention. Its diverse distribution channels, utilizing resellers and distributors, provide effective market penetration. However, vulnerabilities exist due to its comparatively smaller scale, which can lead to higher operational costs and potentially lower margins, and technological gaps in rapidly evolving areas like AI integration, where larger rivals might have longer development cycles. The ongoing "technology war" between AI platforms and websites, where websites actively block data collection, paradoxically strengthens Alarum's position by increasing the demand for its specialized unblocking and proxy solutions.

Outlook and Guidance: A Long-Term Growth Trajectory

Alarum's outlook for the third quarter of 2025 underscores its aggressive growth strategy. The company anticipates revenues to reach $12.8 million, representing an approximate 78% year-over-year increase. Adjusted EBITDA for Q3 2025 is expected to be around $1.1 million, with a range of plus/minus $0.5 million. This significant revenue growth is primarily driven by a new large-scale AI data project with a highly strategic, existing customer, expected to contribute approximately $3 million in Q3 revenue. This project, involving one of the world's largest online marketplaces in Asia, focuses on large-scale data collection for a new advanced generative AI model.

Management acknowledges that this new project is in its "early ramp-up stages" and that its "full scope and length... is currently not clear." Furthermore, near-term profitability from this project is expected to be limited, impacting overall Q3 gross margins. This is due to the "huge scale data demand" and "unbelievable bandwidth" requirements, necessitating substantial initial investments in infrastructure, servers, and cloud computing to optimize costs. This deliberate "sacrifice short-term profitability" is a strategic choice aimed at achieving "massive long-term revenue and much higher profit stretching over longer periods."

The company's guidance is based on current customer orders and backlog, but management cautions that the market is "highly dynamic and unpredictable," and "volatility is high." Major customers in the AI space often cannot articulate their needs more than a few months ahead, which can lead to outsized impacts from changes in their strategies. Therefore, Alarum urges investors to "judge our development over periods of many quarters, not quarter-by-quarter," emphasizing its focus on playing the long game to become the "destination for any company" with significant data collection needs.

Conclusion

Alarum Technologies is undergoing a profound and deliberate transformation, strategically positioning itself at the very core of the AI data revolution. By fully committing to its data collection business and making substantial, calculated investments in its proprietary IP proxy network, Website Unblocker, and emerging AI Data Collector, the company is building the foundational infrastructure necessary to power the global AI boom. While these strategic choices are currently resulting in compressed short-term profitability and increased operational expenses, they are a necessary trade-off for capturing what management believes will be massive long-term revenue and significantly higher profits.

The company's technological differentiation, particularly its ability to navigate the complex "technology war" between AI platforms and websites, provides a critical competitive advantage in a highly dynamic market. Despite the inherent volatility and unpredictable nature of the nascent AI data landscape, Alarum's strong balance sheet and clear long-term vision underscore its potential. For discerning investors with a patient, multi-quarter outlook, Alarum Technologies represents a compelling opportunity to participate in the foundational infrastructure of the AI era, driven by technological leadership and a strategic commitment to sustainable value creation.