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.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has the following options: short January 2019 $15 calls on Sonos Inc. The Motley Fool has a disclosure policy.