Sonos' Q3 Earnings Meet Estimates, Revenues Beat, Stock Up

Core Insights - Sonos, Inc. reported third-quarter fiscal 2025 non-GAAP earnings per share (EPS) of 19 cents, meeting the Zacks Consensus Estimate, but down from 23 cents in the prior-year quarter. On a GAAP basis, the company reported a loss of 3 cents compared to an EPS of 3 cents in the year-ago quarter [1][2] Revenue Performance - Quarterly revenues declined 13.2% year over year to $344.8 million, exceeding the company's guidance of $310 million to $340 million, driven by stronger-than-expected sales of portables and components [2][10] - Revenues from Sonos speakers were $253.7 million, down 15.8% year over year, while system products generated $73.2 million, a decrease of 2.7% year over year. Partner products and other revenues totaled $17.9 million, down 14.1% year over year [5] - Region-wise, revenues from the Americas decreased 13.2% to $229.7 million, Europe, the Middle East, and Africa generated $97.2 million, down 12.3%, and revenues from the Asia Pacific fell 17.4% to $17.9 million [6] Margin and Expense Analysis - Non-GAAP gross profit was $154.1 million, down 20.3% year over year, with non-GAAP gross margin contracting 400 basis points to 44.7% [7] - Adjusted operating expenses were $131.1 million, down 15.4% year over year, reflecting a 23% decline in non-GAAP operating expenses due to workforce reductions and cost optimization initiatives [8][10] - Research and development (R&D) expenses decreased 17%, general and administrative (G&A) expenses fell 16%, and sales and marketing expenses were down 13% [9] Cash Flow and Liquidity - In the fiscal third quarter, Sonos generated $37.4 million in cash from operations, with free cash flow at $32.7 million, down from $40.3 million in the same period last year. Cash and cash equivalents stood at $201.3 million as of June 28, compared to $173.2 million as of March 29, 2025 [12] Future Guidance - For the fourth quarter, Sonos expects revenues to range between $260 million and $290 million, indicating a year-over-year increase of 2% to 14%. Projected GAAP gross margin is between 42% and 44%, and non-GAAP gross margin is expected to be between 43.7% and 45.5% [14] - GAAP operating expenses are projected to be between $150 million and $155 million, a decline of 10% to 13% from $172 million in the same period last year [15] - Adjusted EBITDA is anticipated to range from a loss of $10 million to a gain of $14 million, marking an improvement compared to a negative EBITDA of $22.6 million in the fourth quarter of the prior year [16]