Sonos Inc. Earnings Call: Mixed Sentiment Amid Growth

Sonos Inc ((SONO)) has held its Q4 earnings call. Read on for the main highlights of the call.

The latest earnings call from Sonos Inc. conveyed a mixed sentiment, highlighting both achievements and challenges. While the company reported strong revenue growth in Q4, particularly in EMEA and growth markets, and improved gross margins, it also faced a full-year revenue decline and significant tariff impacts expected on margins. Despite these challenges, Sonos remains optimistic about future growth, focusing on a cohesive system and expanding market share.

Revenue Growth

In the fourth quarter, Sonos achieved a 13% year-over-year revenue increase, reaching $288 million, which was near the high end of their guidance range. This growth underscores the company’s ability to capitalize on market opportunities and deliver strong financial performance.

Strong Performance in EMEA and Growth Markets

EMEA experienced robust double-digit growth, while growth markets more than doubled in Q4, contributing over a quarter of the overall growth rate. This performance highlights Sonos’s successful expansion efforts and strong market presence in these regions.

Improved Gross Margin

Sonos reported a Q4 GAAP gross margin of 43.7% and a non-GAAP gross margin of 45.1%, both at the high end of the guidance range. These figures represent significant improvements of nearly 340 and 400 basis points respectively from the previous year, showcasing enhanced operational efficiency.

Positive Adjusted EBITDA

The company reported a positive adjusted EBITDA of $6 million for Q4, marking a $29 million improvement year-over-year. This was driven by higher revenue, better gross margins, and reduced operating expenses, reflecting effective cost management.

Strong Share Repurchase Activity

In fiscal 2025, Sonos invested $81 million to repurchase 5.7 million shares, reducing their share count by 1.3% in Q4 alone. This move demonstrates the company’s commitment to returning value to shareholders.

Growth in Installed Base

Sonos’s installed base grew by 5% to 17.1 million households, with the average number of devices per household increasing to 3.13. This growth indicates a strong consumer demand and brand loyalty.

Revenue Decline for Full Year

Despite the positive Q4 results, Sonos experienced a 5% year-over-year revenue decline for fiscal 2025. This decline highlights the challenges the company faces in maintaining consistent growth across all markets.

Tariff Impact on Margins

Tariffs are expected to have a 300-400 basis points impact on margins, with a fully realized impact of about 100 basis points across the business. This presents a significant challenge for Sonos as it navigates the complexities of international trade.

Challenges in U.S. Market

The U.S. market posed challenges for Sonos, with tariffs and competitive pressures impacting performance. Despite growth in some segments, these factors continue to affect the company’s overall market position.

Forward-Looking Guidance

Looking ahead, Sonos provided Q1 fiscal 2026 revenue guidance in the range of $510 million to $560 million, with a GAAP gross margin of 44% to 46% and adjusted EBITDA expected to grow by 27% year-over-year. The company is focusing on creating a cohesive sound system for the home and expanding its market share in the $24 billion global premium audio market.

In summary, Sonos’s earnings call reflected a mixed sentiment with strong Q4 performance but challenges in the full fiscal year. The company’s strategic focus on expanding its market share and enhancing its product offerings positions it well for future growth, despite the hurdles it faces in the U.S. market and tariff impacts.