Life360’s (ASX: 360) 2025 underlying EBITDA doubled to USD 93 million, driven by 33% growth in core subscription revenue and a 90% increase in other revenue, which includes advertising. But a corresponding uplift in marketing spending suggests user growth is becoming more expensive. Shares fell 18% on the day.

Why it matters: The result was largely announced early. But 2026 guidance was disappointing, with underlying EBITDA roughly 13% lower than our prior forecasts at the midpoint. We cut our forecast by 8% to the top end of management’s USD 128 million-USD 138 million range.

  • Marketing spending in 2025 was around 32% of revenue, slightly up on the prior year. We expected operating leverage from 2026 as its user base scaled. Instead, 2026 guidance implies continued investment to support its target monthly active user growth of 20%, which we already baked in.
  • We now forecast elevated spending on sales and marketing over the medium term. We believe this shows that user growth is becoming harder, likely because international markets have a less safety-focused culture than the US, resulting in higher acquisition costs.

The bottom line: We maintain our fair value estimate of $25 for no-moat Life360. Increases from rolling forward on full-year results are offset by higher sales and marketing forecasts. Shares have fallen 60% since their peak last year and now screen as undervalued.

  • We are optimistic that Life360 can improve paid-user acquisition and retention through bundled offerings that include its tracking hardware, currently included at cost to drive adoption. Our valuation implies a 13% compound annual growth rate in sales revenue over the next decade.
  • But we see limited use cases for location-specific advertising. We believe Life360 simply does not possess valuable data to sell to advertisers or valuable digital real estate to display ads on. Users also don’t actively interact with the app for prolonged periods, limiting advertising growth.

Business strategy and outlook

We expect Life360 to primarily focus on continued investment in the improvement of user retention within its core Life360 product.

Life360 has achieved impressive user retention, especially in the US on iOS, and we expect this to continue, especially beyond the US and on Android. First-month user retention in the US has reached 70% since 2021 from around 60% during 2018. By comparison, its international first-month retention reached only 45% by 2023 from around 30% during 2018. We believe international markets have a less safety-focused culture compared with the US, which could bring lower retention, but we expect further convergence of product features and offerings to result in more narrowing of the gap.

We also expect continued improvement in retention across all Life360 markets through the development of new features and offerings. We are especially optimistic about Life360’s ability to improve paid-user acquisition and retention through bundled offerings with its Tile hardware, and we expect these trackers to be initially included in a subscription at cost or at a small loss to drive adoption. We also expect Life360 retention to improve through integration of its Jiobit wearables, which provide higher-quality tracking that will benefit from increased pet-humanization and helicopter-parenting trends.

Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years.

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Bulls say

  • Life360 is the clear leader in family focused networking, with industry-leading customer retention and engagement metrics.
  • Retention is likely to increase in the short term as international markets converge with the US market.
  • Retention rates are forecast to improve in the medium to long term because of continued expansion in features and offerings, especially from the integration of the Tile and Jiobit acquisitions.

Bears say

  • Life360 has not yet proven that its business model can be consistently profitable in the future.
  • Life360 faces formidable potential competitors in the mobile operating system operators and social-network companies.
  • Life360’s business is reliant on continued access to the mobile operating systems iOS and Android and may lose access to core functionalities.