Life360 announced a big earnings beat this week, and even an acquisition that will help it diversify its business. So why is the Life360 share price down 25% in the last month?

By the numbers: Life360's record earnings

It's another record quarter for Life360, and now there's a new ad-tech acquisition and new products on the table.

Total revenue jumped 34% year-on-year to $124.5 million, driven primarily by growth in paying subscribers (dubbed “Paying Circles”) which reached a record 2.7 million. Net income climbed to $9.8 million, up 27% from the prior year, and operating cash flow soared by 319% to $26.4 million. The company’s annualised monthly revenue is now at $446.7 million, reflecting continued gains in both the U.S. and international markets. Life360 has raised its full-year guidance for both revenue and adjusted EBITDA on the back of this strong result.

One of the biggest headlines is Life360’s agreement to acquire advertising technology company Nativo for around $120 million in cash and stock. This acquisition signals a strategic push into new revenue streams, allowing Life360 to leverage its extensive first-party location data to drive more contextually relevant advertising. The Nativo deal is expected to help diversify the company’s business beyond subscriptions and hardware, giving it more exposure to the booming ad tech sector.

Despite the upbeat results, the pace of growth in monthly active users (MAUs) is showing signs of moderation. While global MAUs increased 19% year-on-year to 91.6 million, the sequential growth rate has slowed compared to previous periods. In the U.S., MAUs rose 15% to 48.7 million, while international MAUs were up 24%. The company acknowledged the slowdown but emphasised record net additions in paying circles (170,000 for the quarter) as evidence of improving monetisation and strong conversion rates, particularly in international markets.

So with profits, guidance and cash flow all very much in the green, why is the stock in the red?

The drop: why shares are down 25%

There are a few reasons Life360 could be down. The most obvious comes from how the Technology sector is losing ground as concern swells about a potential AI bubble. Over the last week alone we've seen the tech-focussed NASDAQ slip more than a few points as folks rotate out to less speculative bets.

The other is the potential for profit-taking activity. Markets are up big-time after this seemingly never-ending surge, and Life360 is one massive beneficiary. If you bought it a year ago you'd still be up 61% on your initial investment even after the most recent backslide. There's also the analyst view that Life360 was running a little too hot for its own good, which I reported on when analysts changed their guidance back in September.

There are more company-specific reasons that the company may be sliding, however. Two, in fact.

The first is that Life360's monthly average user (MAU) growth is slowing. This company lives and dies by how many people it can convert from the free tier of its service to the paid tier. Remarkable conversion numbers are what kicked off the hype about Life360 in the first place. In Q3, Life360's global MAUs increased by 19% year-on-year to 91.6 million, with net additions of 3.7 million. But that pace is down from previous years, suggesting the company may be running up against the limits of its current markets. Growth in the US (still Life360’s biggest market) rose just 15% year-on-year, lagging international markets, where MAUs were up 24%.

This slowing growth number might have been enough to spook off some conservative investors who only wanted to stick with the stock while customer adds were on the increase.

Secondly, I've seen reports that this acquisition of Nativo for $120m. The deal marks a clear pivot beyond subscriptions and hardware, with Life360 aiming to tap into new revenue streams by using its rich trove of first-party location data for targeted advertising. Management sees the acquisition as a way to diversify the business and reduce reliance on paid subscriptions alone, especially as user growth slows.

And that's a potential worry to some investors who see a shift into the ad market as a tacit warning sign that the company's core business may not have what it takes to deliver this sort of growth for the long term.

Both of these - along with market pullbacks and profit takers - are likely what has driven the price down by 25% in the last 30 days.

When I started looking at this story last night, Life360 was trading at around $72 a share. Overnight it jumped as traders sought to capitalise on the pullback, meaning it's now sitting at around $76 after the bell in New York. Either way, it's a far cry from where it was this time last month its record of just over $94 a share.

Don't get me wrong, it's still a very nice-looking chart provided you bought in more than six months ago. But investors who hopped on the hype train late may be wondering what it was all about in the first place.