$3.32
$15.49
bear $3.32
base $10.96
bull $15.49
margin of safety $6.00
market price* $6.87
ADT sells and monitors home and small-business security systems in the United States. About 85% of its 2025 revenue of $5.13 billion was monitoring fees paid monthly under customer contracts. Recurring monthly revenue was $358.7 million at the end of 2025, against $359.5 million a year earlier and $353.1 million at the end of 2023, so the customer base is holding steady rather than growing. Holding it steady is expensive: about 13.1% of recurring revenue was lost to cancellations in 2025 (12.7% in 2024), and ADT spends roughly $1.1 to $1.2 billion a year buying customer accounts from dealers, installing equipment it owns and maintaining its own property to replace them. We treat all of that spending as the cost of staying in business, with only a small slice counted as growth spending in years when revenue rose. What changed since our previous estimate. Our earlier estimate valued ADT’s cash flow after interest and never subtracted the $7.8 billion it owes. That approach quietly assumed the debt would shrink along with the business once earnings began to fade, which lenders will not accept. We now value the business before its lenders are paid and then subtract what it owes, which lowers every case. We also corrected the share count: the earlier figure of about 896 million counted Google’s 54.7 million Class B shares twice. The correct figure is about 829 million. How we measured the cash the business produces before its lenders. We start from cash generated by operations, subtract stock compensation and the customer-replacement and equipment spending described above, and add back the cash interest actually paid ($523 million in 2023, $372 million in 2024 and $409 million in 2025). We also removed year-to-year swings in receivables, payables and accrued liabilities. Those were outflows in 2023 to 2025, largely from winding down the former solar business and payables falling from $487 million at the end of 2022 to $107 million at the end of 2025. They have since begun to reverse: payables and accrued liabilities rose by about $160 million in the first half of 2026. We did not remove the swings in accrued interest, because we add back cash interest in full. That gives $952 million in 2023, $1,089 million in 2024 and $1,409 million in 2025. Two adjustments put these on today’s footing. First, cash taxes are rising as ADT uses up its tax losses: $22 million in 2024 and $142 million in 2025, with the first half of 2026 pointing to about $200 million a year. We charge every year at $200 million. Second, 2024 still carried about $113 million of cash operating losses from the solar business, which stopped operating in mid-2024, so we remove them. The commercial business was sold in October 2023, so 2023 describes a different company and is excluded. On this basis 2024 is $1,023 million and 2025 is $1,351 million. We take the midpoint, $1,187 million, as the normal level. Cash flow grew about 29% in 2025. Our base case assumes no growth in its first year, starting from a level 12% below 2025, because the 2025 figure leaned on one year of low equipment spending and on working-capital outflows that we added back. What ADT owes. At the end of 2025 ADT owed $7,799 million in principal plus $48 million of finance leases, and held $81 million of cash. It then paid $164 million in February 2026 for Origin AI, a presence-detection technology company. Because it has no earnings record yet, we give it no value. About $2.7 billion of the debt is fixed-rate notes at 3.375% to 4.875% (due 2027, 2029 and 2032). Borrowing that cheaply is worth about $153 million to shareholders until those notes mature, and we deduct that benefit from the debt. Net debt is $7.78 billion. The main maturities are $1.18 billion in 2027 (mostly the $1.0 billion of 3.375% notes due August 2027), $1.09 billion in 2029 and $1.99 billion in 2030. ADT refinanced comfortably in 2025, issuing $1.0 billion of 5.875% notes due 2033, so we assume future borrowing costs about 6% rather than building a refinancing crisis into any case. Debt is about 6.5 times the normal annual cash flow, so small changes in the business produce large changes in what is left for shareholders. Base case, $10.96 per share. Cash flow before interest holds at $1,187 million a year for ten years. We credit no growth: recurring revenue has been flat for three years, and price increases and the newer ADT+ platform do not yet have a record of lifting it. After year ten, cash flow declines 2% a year. ADT has kept its customer base roughly level for years by spending to replace cancellations, but cancellations are drifting up, and customers on older systems that are not compatible with ADT+ face a disclosed, heightened risk of leaving. The business is worth about $16.86 billion, it owes $7.78 billion, and about $9.08 billion is left for shareholders, or $10.96 on about 829 million shares. Bear case, $3.32 per share. Cash flow starts at the 2024 level of $1,023 million and declines 3% a year for ten years, then 4% a year after that. This case rests on named risks: cancellations rose from 12.7% to 13.1% in 2025 on more non-payment and voluntary disconnects (each point costs about $40 million of recurring revenue a year), and ADT ended its State Farm partnership programs after that development agreement expired in October 2025. In the first half of 2026 ADT also spent 28% less buying dealer accounts ($239 million versus $331 million a year earlier), which raises cash now but adds fewer customers later. The business is worth about $10.53 billion, it owes $7.78 billion, and about $2.75 billion is left for shareholders. Even at year ten in this case, cash flow of about $750 million comfortably covers roughly $410 million of annual interest, so the case can carry its debt. Because the debt is so large, though, the shareholders’ slice shrinks much faster than the business does. Bull case, $15.49 per share. Cash flow holds at the 2025 level of $1,351 million, after the higher cash taxes, for ten years. The support is structural: the solar business is gone, and about a quarter of new direct customers now buy their equipment outright, which lowered equipment spending by $127 million in 2025. ADT has said it is moving certain other residential sales to the same model from early 2026. Part of this saving shows up as higher costs in operating cash flow, so we do not count it as a pure gain. After year ten, cash flow declines 1% a year, reflecting a customer base that has held roughly level for years. No revenue growth is assumed. The business is worth about $20.61 billion, it owes $7.78 billion, and about $12.84 billion is left for shareholders. What the shares appear to be worth. Roughly $3.30 to $15.50 per share, with $10.96 as the central estimate. The margin-of-safety price is $6.00. That is a wide discount to the central estimate, because the heavy debt means a modest disappointment in the business removes a large share of the value left for shareholders. ADT spent $607 million on buybacks in 2025 and $600 million in the first half of 2026, and a new $1.5 billion authorization runs to April 2029; we give no value to future buybacks. What could make this wrong. On the upside, recurring revenue could start growing if ADT+ and outright equipment sales win customers faster than cancellations remove them. On the downside, cancellations could keep rising, the lower spending on dealer accounts could shrink the customer base, or refinancing the 2027 to 2030 maturities could cost well above 6%. We could not reconcile why the change in accrued interest on the cash-flow statement ran about $65 to $85 million a year larger than the change in the interest liability on the balance sheet. Our approach of using cash interest actually paid sidesteps it, but we note it.