There's a part of me that cynically wants to just guess that it does always go up to the cloud, but it's also silly (read "expensive") to ship video up to the cloud just to potentially ship it right back down to the very same wifi network, so maybe not.
(Of course I assume the cloud does proxy it if you're not home, because $90 million probably isn't anywhere near enough to actually take on trying to make IPv6 work for consumers reliably enough to make this work. Sad.)