What happened

Shares of Sonos Inc. (NASDAQ:SONO) surged on Friday after the speaker company reported its fiscal fourth-quarter results. Sonos beat analyst estimates for both revenue and earnings, posting double-digit growth driven by the launch of the Beam smart soundbar. The stock was up about 12.5% at 12:25 p.m. EST.

So what

Sonos reported fourth-quarter revenue $272.9 million, up 27.5% year over year and $24.3 million higher than the average analyst estimate. Home theater speakers accounted for essentially all of that growth, with revenue growing 62.8% year over year to $134.5 million.

The Sonos Beam in front of a TV.

The Sonos Beam. Image source: Sonos.

Sonos sold 1.12 million products in the fourth quarter, up 47% year over year. The difference between unit growth and revenue growth was due to a shift toward lower-priced wireless speakers. The Sonos Beam was the main driver of the company's revenue growth, with the product capturing 8% of the U.S. soundbar market.

Earnings per share came in at a loss off $0.02, up from a loss of $0.26 in the prior-year period and $0.10 better than analysts were expecting. Gross margin was 42.6%, down from 48.1% in the fourth quarter of 2017, but a decline in operating expenses helped boost the bottom line.

Now what

Sonos expects to grow revenue by 10% to 12% in fiscal 2019, while growing adjusted EBITDA by 20% to 27%. The company's long-term gross margin target is 42% to 44%, but it expects its fiscal 2019 gross margin to be between 40% and 41% due to component shortages and a mix shift toward newer products.

Investors cheered Sonos' strong report on Friday, but exactly how profitable the company will be in the coming years remains to be seen.