Sonos (SONO 2.20%), a leader in wireless audio systems and soundbars, reported its fiscal third-quarter results on August 6, 2025. The standout news was that both revenue (GAAP) and earnings per share (non-GAAP) topped analyst expectations, thanks mainly to lower operating costs and solid execution in home theater products. Revenue (GAAP) reached $344.8 million, beating the $324.8 million GAAP revenue estimate, while non-GAAP earnings per share were $0.19, far exceeding the anticipated loss, as Sonos reported non-GAAP EPS of $0.19. However, revenue and profitability (GAAP) declined compared to Q3 FY2024 due to a difficult comparison following last year’s launch of Ace headphones. Overall, the quarter was strong versus expectations.
| Metric | Q3 Fiscal 2025 | Q3 Estimate | Q3 Fiscal 2024 | Y/Y Change |
|---|---|---|---|---|
| EPS (Non-GAAP) | $0.19 | ($0.10) | $0.23 | (17.4%) |
| Revenue | $344.8 million | N/A | $397.1 million | (13.2%) |
| Adjusted EBITDA (Non-GAAP) | $35.6 million | $48.9 million | (27.2%) | |
| Gross Margin (Non-GAAP) | 44.7% | 48.7% | (4.0 pp) | |
| Free Cash Flow (Non-GAAP) | $32.7 million | N/A | N/A |
Source: Analyst estimates for the quarter provided by FactSet.
Understanding the Business and Keys to Success
Sonos designs and sells wireless speakers, soundbars for TVs, and audio equipment that connect through both Wi-Fi and Bluetooth. Its system allows users to stream music throughout their homes. The company competes on product quality, reliability, and a seamless listening experience.
Recently, Sonos has focused on innovation with new hardware launches, and expanded its direct-to-consumer sales channel. Success relies on delivering quality products, growing recurring customer purchases, and protecting its technology through patents. Building strong relationships with content partners and car manufacturers also shapes its growth trajectory.
Quarter in Review: What Drove Results
Sonos outperformed analyst expectations for revenue and non-GAAP profit, despite reporting declines on most core metrics compared to Q3 FY2024. The main reason: a sharp drop in operating costs. Total operating expenses (GAAP) fell from $179.1 million to $152.7 million as the company reorganized and trimmed spending in research, marketing, and administration. Research and development expenses (non-GAAP) dropped 18% year-over-year. Sales and marketing, as well as general and administrative costs, also trended down, showing a clear focus on cost control.
The decline in revenue versus last year mainly reflects a tough comparison: in Q3 FY2024, the company had just launched its Ace headphones, driving a surge in demand. Year-over-year, revenue from Sonos speakers dropped 15.8%, and system products also declined, while partner and other products (GAAP) fell 14.0%. The home theater category showed some resilience, with the company’s Arc Ultra soundbar helping Sonos maintain or grow its share in both the U.S. and Europe, according to management. However, portable speakers remained a weak spot amid steep competition.
Adjusted EBITDA (non-GAAP) dropped over 27% year-over-year to $35.6 million. The company continued to shift production to Vietnam and Malaysia to limit U.S. tariff risk, forecasting higher tariff expenses ahead.
On the product innovation front, Sonos highlighted two new hardware launches this year: the Arc Ultra Sub 4 (a home theater subwoofer) and the Era 100 Pro (a wireless speaker). The company also prioritized software updates to improve device stability, releasing nine separate updates in just four months. Sonos cited a strong patent portfolio, as seen in IEEE Spectrum’s ranking, and announced it had ended its product development partnership with IKEA to focus resources internally. Litigations around intellectual property, including two cases against Google, are ongoing.
Outside product and cost management, inventory levels were kept tight, with total inventory down significantly from the previous year. Free cash flow landed at $32.7 million, down 18.9% year-over-year, partly due to softer cash from operations. The balance sheet remains solid, with total cash and equivalents of $201.3 million. While Sonos authorized $150 million in share repurchases, there was no new update on buybacks for the quarter.
Looking Ahead: Guidance and What to Watch
Management did not provide new guidance for the upcoming quarter or full fiscal year. Leadership highlighted continued uncertainty around consumer demand, the risk of higher tariffs, and a difficult comparison against last year’s Ace headphones launch. While hoping for modest year-over-year growth in the upcoming quarter, management signaled caution and deferred updates to future communications.
For investors and followers, key areas to monitor include the pace of new product launches and efforts to recover margins. Tracking ongoing developments in tariff policy and litigation could also impact results and future outlook. SONO does not currently pay a dividend.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
