Sonos — Fourth Quarter and Fiscal 2026 Earnings Summary

Financial Performance:

• Fiscal 2026 revenue increased 7% year-over-year to $1,547 million; Q4 fiscal 2026 revenue grew 20% year-over-year to $344 million.
• Fiscal 2026 GAAP gross margin was 46.9% and Non-GAAP gross margin was 45.5%; Q4 GAAP gross margin was 46.1% and Non-GAAP gross margin was 42.1%.
• Fiscal 2026 GAAP net income increased $151 million year-over-year to $90 million, with diluted EPS of $0.73; Q4 GAAP net loss improved by $33 million year-over-year to ($5) million, with diluted loss per share of ($0.04).
• Fiscal 2026 Non-GAAP net income increased 92% year-over-year to $150 million, with diluted EPS of $1.23; Q4 Non-GAAP net income increased $12 million year-over-year to $5 million, with diluted EPS of $0.04.
• Fiscal 2026 Adjusted EBITDA increased 39% year-over-year to $184 million; Q4 Adjusted EBITDA was flat year-over-year at $6 million.
• Fiscal 2026 cash flows provided by operating activities increased 6% to $145 million; Free cash flow increased 14% year-over-year to $123 million.
• Fiscal 2026 Non-GAAP operating expenses decreased 3% year-over-year.
• Fiscal 2026 GAAP operating expenses were $636.5 million; Q4 GAAP operating expenses were $169.5 million.
• Fiscal 2026 inventory increased to $273 million from $171 million in the prior year; Accounts receivable increased to $102 million from $66 million in the prior year.
• Fiscal 2026 deferred revenue decreased to $79.3 million (current $21.9 million, non-current $57.4 million) from $81.2 million (current $21.8 million, non-current $59.5 million) in the prior year.

Guidance and Future Outlook:

• The company provided guidance on its Fourth Quarter and Fiscal 2026 earnings call, details of which are not included in this press release.
• Management stated that the "system strategy is working" and that every product improves those customers already own, with "Sonos 27" expected to strengthen this further.
• Management noted they are actively managing levers to optimize financial performance and have structurally improved earning power.

Business Segments and Product Lines:

• Fiscal 2026 revenue growth was achieved in every region.
• The company brought five new products to market during Fiscal 2026.
• Revenue by product category for Fiscal 2026: Sonos speakers ($1,202 million), Sonos system products ($264 million), and Partner products and other revenue ($81 million).
• Revenue by geographical region for Fiscal 2026: Americas ($973 million), Europe, Middle East and Africa ($483 million), and Asia Pacific ($92 million).
• Fiscal 2026 R&D expenses decreased to $258 million from $280 million in the prior year; Sales and marketing expenses decreased to $256 million from $281 million in the prior year.

Market and Competitive Landscape:

• Sonos is trusted by more than 17 million households in over 60 countries.
• The company highlighted the success of its "system strategy" in improving customer-owned products.
• The press release mentions industry-wide increases in demand for semiconductors and components related to AI technologies and data centers as a potential supply chain challenge in forward-looking statements.

Risks and Challenges:

• Fiscal 2026 included $56 million of higher memory costs which were absorbed.
• Fiscal 2026 included $41.2 million of IEEPA tariff refunds, which are non-recurring.
• Risks include difficulties in implementing operating model improvements, restructuring charges being greater than anticipated, inventory management challenges, and supply chain challenges regarding component availability.
• Risks also include global economic conditions, tariffs, inflation, high interest rates, foreign currency fluctuations, and competition.

Management Commentary and Tone:

• Tom Conrad, CEO, stated, "We said Fiscal 2026 would be the year Sonos returned to growth, and we delivered," citing growth in every region, higher profitability, and five new product launches.
• Saori Casey, CFO, stated, "Fiscal 2026 demonstrated how much the earning power of Sonos has structurally improved," highlighting revenue growth, expense reduction, and EBITDA growth despite higher memory costs.
• The tone is confident and positive regarding the return to growth and the effectiveness of the system strategy.

Other Key Points:

• The company returned $130 million to shareholders in Fiscal 2026 through the repurchase of 8.2 million shares.
• In the fourth quarter, the company returned $35 million to shareholders through the repurchase of 2.2 million shares.
• The Board of Directors authorized a new common stock repurchase program of up to $150 million, following the completion of the prior $150 million program in Q4 Fiscal 2026.
• Fiscal 2026 included restructuring and other charges of $7.5 million, related to reorganization, exiting a contract manufacturing partnership, and office space abandonment.
• Fiscal 2026 included legal and transaction-related costs of $15.6 million related to IP litigation against Alphabet and Google.
• Fiscal 2026 included $41.2 million of IEEPA tariff refunds and $1.4 million of interest earned on those refunds.