So here's the thing about earnings reports: sometimes the past is great, but the future looks a little wobbly. That's the story for Owlet Inc. (OWLT) this week. The stock took another leg down on Monday, continuing a slide that started Friday after the company laid out its financials and, more importantly, its forecast.

Let's break down what happened. For the fourth quarter, Owlet actually did pretty well. Revenue came in at $26.6 million, which is up 29.6% from a year ago and even beat what analysts were expecting. Gross profit also increased to $12.6 million. So far, so good.

But then you look a little closer. The company's gross margin—that's the percentage of revenue left after the cost of making its products—dropped by nearly 6 percentage points year-over-year to 47.6%. The culprit? Tariffs. It's a classic business headache: selling more stuff, but making a little less on each sale because of external costs.

The company's adjusted EBITDA, a measure of operating profitability, was a slim $0.1 million for the quarter, down from $0.5 million a year ago.

Now, the CEO, Jonathan Harris, was understandably focused on the bigger picture. "By delivering $105.7 million in revenue, the strongest in our history, alongside record gross margin and adjusted EBITDA results, we believe we have proven the scalability and resilience of our business model," he said.

He also highlighted the company's strategic shift. "The launch of Owlet360 subscription service has been a paradigm shift, deepening our relationship with parents and diversifying our long-term revenue streams. Surpassing 110,000 paying subscribers validates the value and trust families place in our connected ecosystem."

That's the dream for a lot of hardware companies: stop being just a gadget seller and become a recurring-revenue platform. Owlet is pushing hard on that front, pairing subscriptions with new products like an AI-enabled camera. Harris framed it as building "a sophisticated data platform establishing the gold standard for accurate infant biometric baselines."

But here's where the story hit a bump for investors: the outlook. For the current quarter—the first quarter of 2026—Owlet's guidance came in well below what Wall Street was hoping for.

The company expects revenue between $20 million and $21 million. Analysts, according to consensus estimates, were looking for about $26.2 million. That's a meaningful miss. It also expects adjusted EBITDA to be a loss of between $1.5 million and $2.5 million.

For the entire 2026 year, the picture is a bit more mixed. Owlet projects revenue of $126 to $130 million, which is roughly in line with the analyst consensus of about $128.1 million. But profitability is expected to remain under pressure. The company forecasts gross margins between 49% and 52% (noting that tariffs are still a factor) and adjusted EBITDA of only $3 to $5 million for the full year.

So, you have a company that just reported its best annual revenue ever and is successfully building a subscription base, telling the market that the very next quarter is going to be softer than expected. Investors tend to focus on what's coming next, and in this case, they didn't like what they heard. Owlet shares were down about 13% on Monday, trading around $7.27.

It's a classic tale of a growth stock: the long-term story might be intact, but a short-term guidance miss can still send shares tumbling while everyone recalibrates their expectations.