ADT (ADT) reported Q4 results and fiscal 2026 guidance that fell short of expectations as it shifts its customer acquisition strategy, though strong free cash flow generation and disciplined capital deployment remain key positives, RBC Capital Markets said in a Monday note.

The firm noted that ADT is moving away from higher-cost acquisition channels toward e-commerce and DIY offerings, a shift expected to pressure subscriber growth and keep fiscal 2026 revenue and adjusted earnings per share roughly flat. Management has positioned 2026 as a cash focused transition year centered on investments in AI and product expansion.

Despite the weaker revenue outlook, RBC said ADT's Q4 free cash flow beat expectations and said fiscal 2026 adjusted free cash flow is likely to grow more than 20%, well ahead of consensus, driven by lower interest expense, reduced cash taxes, and improved working capital management.

The company also approved a $1.5 billion multi-year share repurchase program, with RBC highlighting management's willingness to pursue opportunistic buybacks, particularly if major shareholder Apollo proceeds with a secondary offering.

RBC said the company's technology initiatives and ongoing AI-driven service enhancements underpin ADT's updated long-term targets of roughly 5% revenue growth, 10% adjusted EPS growth, and more than 10% annual free cash flow expansion.

The firm maintained its sector perform rating on the stock with a $9 price target.

ADT shares were down 5% in recent trading.

Price: 6.77, Change: -0.35, Percent Change: -4.92