Sonos Inc.

07/29/2026 | Press release | Distributed by Public on 07/29/2026 15:22

Quarterly Report for Quarter Ending June 27, 2026 (Form 10-Q)

Management's discussion and analysis of financial condition and results of operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report.
We operate on a 52- week or 53- week fiscal year ending on the Saturday nearest September 30 each year. Our fiscal year is divided into four quarters of 13 weeks, each beginning on a Sunday and containing two 4-week periods followed by a 5-week period. An additional week is included in the fourth fiscal quarter approximately every five years to realign fiscal quarters with calendar quarters.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding future operations and performance, are forward-looking statements. In some cases, forward-looking statements may be identified by words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "would," "expect," "objective," "plan," "potential," "seek," "grow," "target," "if," and similar expressions intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations, objectives, restructuring efforts, cost initiatives, timing of certain tax impacts and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled "Risk Factors" set forth in Part I, Item 1A of the Annual Report and in our other SEC filings. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results may differ materially and adversely from those anticipated or implied in the forward-looking statements. You should read this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. Except as required by law, we do not undertake any obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise.
Overview
Sonos is a leading audio company dedicated to elevating life through sound. Since pioneering multi-room wireless audio in 2005, Sonos has built a system that unites every dimension of sound - music, movies, stories and conversations - into one connected platform. The portfolio includes home theater speakers, components, plug-in and portable speakers, and headphones that compound in value with every room and device its customers add. Known for exceptional sound, thoughtful design, ease of use and seamless access to the world's audio content, Sonos is trusted by more than 17 million households in 60+ countries around the world.
Entering the second half of fiscal 2026, we continue to leverage the strong foundation established during our transformational prior fiscal year. With our Chief Executive Officer, Tom Conrad's strategic direction in motion, we have restored our software with reliability now exceeding historical levels, reorganized our operations to improve our efficiency and effectiveness and recommitted to delivering the kind of premium experience our customers expect. We recommitted to new product introductions, including the announcement of Amp Multi in January 2026, followed by Sonos Play™ and Sonos Era 100™ SL in March 2026. With every new product, software feature and integration, the Sonos platform becomes more powerful, provides greater value to our customers, and further strengthens our position as the differentiated system for connected home audio. Additionally, we are evolving our marketing strategy to build a strong system narrative aligned with our long-term brand differentiation.
In fiscal 2026, we continued to optimize our organizational structure, workforce, and operational footprint. Key actions included reorganization of certain corporate functions and organizational changes driven by new leadership. Furthermore, we successfully completed the operational exit of a contract manufacturing partnership in the second quarter of fiscal 2026 (initiated in the third quarter of fiscal 2025) to improve supply chain efficiency, and optimized our real estate footprint by reducing office space. We remain focused on continually improving both our operational efficiency and effectiveness.
Macroeconomic Conditions and Other Factors Affecting our Business
Our business has been, and may continue to be, adversely impacted by the potential expansion of tariffs on goods imported into the U.S., as well as any retaliatory tariffs or policies enacted in other countries or any "trade wars." In addition, we have been and expect to continue to be affected by the increases in demand for memory chips and other components caused by the build out of new AI
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technologies and data centers. We also face global macroeconomic challenges such as inflation, ongoing geopolitical conflicts, uncertainty in the financial markets, volatility in exchange rates, and low or negative growth in certain regions.
Global economic and political conditions and uncertainties, as well as global trade tensions and memory supply constraints, have caused and may continue to cause volatility in demand for our products as well as cost of materials and logistics, and as a result may impact our results of operations. We are continuing to evaluate and implement mitigating actions, including evaluating our pricing strategy across the portfolio and new product pipeline, taking measures to manage our expenses and contain costs, leveraging our supply chain flexibility, inventory management and engineering optimization.
For additional information, see Part II, Item 1A "Risk Factors."
Seasonality
Historically, we have typically experienced the highest levels of revenue in the first fiscal quarter of the year coinciding with the holiday shopping season and our promotional activities.
Key Metrics
We use the following key metrics, including measures presented in our condensed consolidated financial statements, to evaluate our business, measure our performance, identify trends affecting our business and assist us in making operational and strategic decisions. Our key metrics are total revenue, products sold, Adjusted EBITDA, and Adjusted EBITDA margin. The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA is net income (loss). The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA margin is net income (loss) margin.
Three Months Ended Nine Months Ended
June 27,
2026 		June 28,
2025 		June 27,
2026 		June 28,
2025
(In thousands, except percentages)
Total revenue $ 375,260 $ 344,764 $ 1,202,449 $ 1,155,376
Products sold 1,266 1,078 3,847 3,696
Net income (loss)
$ 29,853 $ (3,379) 94,765 (23,286)
Net income (loss) margin(1)
8.0 % (1.0) % 7.9 % (2.0) %
Adjusted EBITDA(2)
$ 43,966 $ 35,589 177,822 125,936
Adjusted EBITDA margin(2)
11.7 % 10.3 % 14.8 % 10.9 %
(1)Net income (loss) margin is calculated by dividing net income (loss) by revenue.
(2)For additional information regarding Adjusted EBITDA and Adjusted EBITDA margin (which are non-GAAP financial measures), including reconciliations of net income to Adjusted EBITDA, see the section titled "Non-GAAP Financial Measures" below.
Products Sold
Products sold represents the number of products that are sold during a period, net of returns, and includes units sold from the Sonos speakers and Sonos system products categories, as well as architectural speakers sold through our partnerships from our Partner products and other revenue category. Growth rates between products sold and revenue are not perfectly correlated because our revenue is affected by other variables, such as the mix of products sold during the period, promotional discount activity, the price at which we sell our products, the introduction of new products that may have higher or lower than average selling prices, the impact of foreign exchange rate fluctuations, as well as the impact of recognition of previously deferred revenue.
Non-GAAP Financial Measures
To supplement our condensed consolidated financial statements presented in accordance with U.S. GAAP, we use Adjusted EBITDA, Adjusted EBITDA margin, and constant currency which are non-GAAP financial measures. We use these non-GAAP financial measures to evaluate our operating performance and trends and make planning decisions. We believe that these non-GAAP financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses and other items that we exclude from these non-GAAP financial measures. Accordingly, we believe that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past
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performance and future prospects, and allowing for greater transparency with respect to a key financial metric used by our management in its financial and operational decision-making.
We define Adjusted EBITDA as net income (loss) adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income (expense), income taxes, legal and transaction related costs, restructuring and other costs, and other items that we do not consider representative of underlying operating performance. We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue.
We present percentage sales growth in constant currency to show performance unaffected by fluctuations in currency exchange rates. We calculate constant currency growth percentages by translating our current period financial results using the prior period average currency exchange rates and comparing these amounts to our prior period reported results.
These non-GAAP financial measures are not based on standardized methodology prescribed by U.S. GAAP and are not necessarily comparable to similarly titled measures presented by other companies. Furthermore, other companies may not publish these or similar metrics. These metrics may also have certain limitations as they do not include the impact of certain expenses that are reflected in our condensed consolidated statements of operations and comprehensive income, including stock-based compensation, which has been and will continue to be, a significant recurring expense for our business and an important part of our compensation strategy. Because of these limitations, these non-GAAP financial measures should be considered along with other operating and financial performance measures presented in accordance with U.S. GAAP.
The following table presents a reconciliation of net income (loss) to Adjusted EBITDA:
Three Months Ended Nine Months Ended
June 27,
2026 		June 28,
2025 		June 27,
2026 		June 28,
2025
(In thousands, except percentages)
Net income (loss)
$ 29,853 $ (3,379) $ 94,765 $ (23,286)
Add (deduct):
Depreciation and amortization
11,062 15,879 36,924 48,657
Stock-based compensation expense
16,330 19,352 46,386 64,789
Interest income
(2,182) (1,572) (5,442) (5,406)
Interest expense
110 117 330 336
Other (income) expense, net
(695) (661) 246 5,176
Provision for income taxes 4,448 2,566 10,475 7,121
Legal and transaction related costs(1)
3,789 1,306 9,823 2,928
IEEPA tariff refund benefit(2)
(23,154) - (23,154) -
Restructuring and other charges(3)(4)
4,405 1,981 7,469 25,621
Adjusted EBITDA
$ 43,966 $ 35,589 $ 177,822 $ 125,936
Revenue
$ 375,260 $ 344,764 $ 1,202,449 $ 1,155,376
Net income (loss) margin
8.0 % (1.0) % 7.9 % (2.0) %
Adjusted EBITDA margin
11.7 % 10.3 % 14.8 % 10.9 %
(1)Legal and transaction-related costs consist of expenses related to our intellectual property ("IP") litigation against Alphabet and Google, which we do not consider representative of our underlying operating performance.
(2)See Note 7. Commitments and Contingencies for further information on tariff refunds.
(3)Restructuring and other charges for the three and nine months ended June 27, 2026, include employee-related costs resulting from a reorganization of certain corporate functions and organizational changes driven by new leadership. Additionally, the charges include costs related to exiting a contract manufacturing partnership to consolidate and improve supply chain efficiency and exit costs associated with the partial abandonment of office space.
(4)Restructuring and other charges for the three and nine months ended June 28, 2025 reflect costs associated fiscal 2025 actions including a reduction-in-force announced in February 2025, rationalization of our product roadmap, as well as non-recurring CEO transition costs related to modifications to equity awards.
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Results of Operations
Comparison of the three and nine months ended June 27, 2026 and June 28, 2025
Revenue
We generate substantially all of our revenue from the sale of Sonos speakers and Sonos system products. We also generate a portion of revenue from Partner products and other revenue sources, such as architectural speakers from our Sonance partnership, accessories such as speaker stands and wall mounts, professional services, licensing, and advertising revenue.
Revenue by Product
Three Months Ended Change Nine Months Ended Change
June 27,
2026 		June 28,
2025 		$ % June 27,
2026 		June 28,
2025 		$ %
(In thousands)
Sonos speakers $ 285,325 $ 253,669 $ 31,656 12.5 % $ 954,583 $ 915,330 $ 39,253 4.3 %
% of total revenue 76.0 % 73.6 % 79.4 % 79.2 %
Sonos system products 69,252 73,179 (3,927) (5.4) 186,721 183,993 2,728 1.5
% of total revenue 18.5 % 21.2 % 15.5 % 15.9 %
Partner products and other revenue 20,683 17,916 2,767 15.4 61,145 56,053 5,092 9.1
% of total revenue 5.5 % 5.2 % 5.1 % 4.9 %
Total revenue $ 375,260 $ 344,764 $ 30,496 8.8 % $ 1,202,449 $ 1,155,376 $ 47,073 4.1 %
Volume data (products sold in thousands) Units % Units %
Total products sold 1,266 1,078 188 17.4 % 3,847 3,696 151 4.1 %
Comparison of the three months ended June 27, 2026 and June 28, 2025
Total revenue increased $30.5 million, or 8.8%, for the three months ended June 27, 2026 compared to the three months ended June 28, 2025, due to the introduction of Era 100 SL and Play, partially offset by declines in Arc Ultra.
Sonos speakers revenue represented 76.0% of total revenue for the three months ended June 27, 2026, and increased 12.5% compared to the three months ended June 28, 2025, driven by Era 100 SL, Play, and Beam, partially offset by the impact of the introduction of Arc Ultra in the prior year and by expected declines in Era 100. Sonos system products represented 18.5% of total revenue for the three months ended June 27, 2026, and decreased 5.4% compared to the three months ended June 28, 2025. Partner products and other revenue represented 5.5% of total revenue for the three months ended June 27, 2026, and increased 15.4% compared to the three months ended June 28, 2025.
The volume of products sold increased 17.4% for the three months ended June 27, 2026 compared to the three months ended June 28, 2025, outpacing revenue growth due to a shift in product mix toward lower-priced offerings, including Era 100 SL and Play.
Comparison of the nine months ended June 27, 2026 and June 28, 2025
Total revenue increased $47.1 million, or 4.1%, for the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025, primarily due to the introduction of Era 100 SL and favorability from foreign exchange rates, partially offset by the phase-out of Arc sales.
Sonos speakers revenue represented 79.4% of total revenue for the nine months ended June 27, 2026 and increased 4.3% compared to the nine months ended June 28, 2025, primarily driven by Era 100 SL, Arc Ultra, and Play, partially offset by the phase-out of Arc sales. Sonos system products represented 15.5% of total revenue for the nine months ended June 27, 2026 and increased 1.5% compared to the nine months ended June 28, 2025. Partner products and other revenue represented 5.1% of total revenue for the nine months ended June 27, 2026, and increased 9.1% compared to the nine months ended June 28, 2025.
The volume of products sold increased 4.1% for the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025, consistent with the increase in revenue.
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Revenue by Region
The following table presents the change in revenue for the three and nine months ended June 27, 2026 compared with the three and nine months ended June 28, 2025:
Three Months Ended
June 27, 2026 		Nine Months Ended
June 27, 2026
Change (%)
Constant Currency Change (%)(1)
Change (%)
Constant Currency Change (%)(1)
Americas 3.8 % 3.5 % 2.3 % 1.9 %
EMEA 17.4 % 14.3 % 6.4 % (0.3) %
APAC 27.2 % 20.6 % 11.7 % 8.4 %
Total revenue 8.8 % 7.4 % 4.1 % 1.6 %
(1)Constant currency is a financial measure that is not calculated in accordance with U.S. GAAP. For additional information, see the section titled "Non-GAAP Financial Measures" above.
Cost of Revenue and Gross Profit
Cost of Revenue
Cost of revenue consists of product costs, including costs of our contract manufacturers for production, components, shipping and handling, tariffs, duty costs, warranty replacement costs, packaging, fulfillment costs, manufacturing and tooling equipment depreciation, warehousing costs, hosting costs, and excess and obsolete inventory write-downs. It also includes licensing costs, such as royalties to third parties, and amortization attributable to acquired developed technology. In addition, we attribute certain costs to cost of revenue related to management and facilities, personnel-related expenses, and supply chain logistic costs. Personnel-related expenses consist of salaries, bonuses, benefits, and stock-based compensation expenses.
Gross Margin
Our gross margin fluctuates from period to period based on a number of factors, including the mix of products we sell, the mix of channels through which we sell our products, fluctuations of our product and material costs, fluctuations in our logistics markets, product pricing strategies and promotional activity, the foreign currency in which our products are sold, and tariffs and duty costs implemented by governmental authorities.
Three Months Ended Change Nine Months Ended Change
June 27,
2026 		June 28,
2025 		$ % June 27,
2026 		June 28,
2025 		$ %
(In thousands, except percentages)
Cost of revenue
$ 185,950 $ 195,040 $ (9,090) (4.7) % $ 635,030 $ 650,637 $ (15,607) (2.4) %
Gross profit
$ 189,310 $ 149,724 $ 39,586 26.4 % $ 567,419 $ 504,739 $ 62,680 12.4 %
Gross margin
50.4 % 43.4 % 47.2 % 43.7 %
Comparison of the three months ended June 27, 2026 and June 28, 2025
Cost of revenue decreased $9.1 million, or 4.7%, for the three months ended June 27, 2026 compared to the three months ended June 28, 2025, primarily due to tariff refunds. Excluding the impact of tariff refunds, cost of revenue increased primarily due to higher memory costs, tariff expenses, and increased products sold, partially offset by a decrease in inventory-related write-downs.
Gross margin increased 700 basis points for the three months ended June 27, 2026 compared to the three months ended June 28, 2025, primarily due to tariff refunds. Excluding the impact of tariff refunds, the increase in gross margin was driven by the impact of price changes, and a decrease in inventory-related write-downs, partially offset by higher memory costs, and unfavorable product mix shift.
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Comparison of the nine months ended June 27, 2026 and June 28, 2025
Cost of revenue decreased $15.6 million, or 2.4%, for the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025, primarily due to tariff refunds. Excluding the impact of tariff refunds, cost of revenue increased slightly primarily due to increased tariff expenses and higher memory costs, partially offset by product and material cost savings and by a decrease in inventory-related write-downs.
Gross margin increased 350 basis points for the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025, which was partially related to the benefit of tariff refunds. Excluding the impact of tariff refunds, the increase in gross margin was driven by product and material cost savings, and the impact of pricing changes, partially offset by increased tariff expenses, and higher memory costs.
Operating Expenses
Three Months Ended Change Nine Months Ended Change
June 27, 2026 June 28, 2025 $ % June 27, 2026 June 28, 2025 $ %
(Dollars in thousands)
Research and development $ 67,875 $ 59,750 $ 8,125 13.6 % $ 191,771 $ 218,011 $ (26,240) (12.0) %
Less restructuring and other charges(1)(2)
4,014 (824) 4,838 * 4,871 11,882 (7,011) (59.0)
Research and development, net of restructuring and other charges $ 63,861 $ 60,574 $ 3,287 5.4 % $ 186,900 $ 206,129 $ (19,229) (9.3) %
Sales and marketing $ 59,624 $ 62,576 $ (2,952) (4.7) % $ 187,273 $ 213,430 $ (26,157) (12.3) %
Less restructuring and other charges(1)(2)
46 1,038 (992) (95.6) 1,499 3,831 (2,332) (60.9)
Sales and marketing, net of restructuring and other charges $ 59,578 $ 61,538 $ (1,960) (3.2) % $ 185,774 $ 209,599 $ (23,825) (11.4) %
General and administrative $ 30,277 $ 30,327 $ (50) (0.2) % $ 88,001 $ 89,357 $ (1,356) (1.5) %
Less restructuring and other charges(1)(2)
214 2,281 (2,067) (90.6) 304 6,488 (6,184) (95.3)
General and administrative, net of restructuring and other charges $ 30,063 $ 28,046 $ 2,017 7.2 % $ 87,697 $ 82,869 $ 4,828 5.8 %
Operating expenses $ 157,776 $ 152,653 $ 5,123 3.4 % $ 467,045 $ 520,798 $ (53,753) (10.3) %
Less restructuring and other charges(1)(2)
4,274 2,495 1,779 71.3 6,674 22,201 (15,527) (69.9)
Operating expenses, net of restructuring and other charges $ 153,502 $ 150,158 $ 3,344 2.2 % $ 460,371 $ 498,597 $ (38,226) (7.7) %
* Not meaningful
(1)Restructuring and other charges for the three and nine months ended June 27, 2026, include employee-related costs resulting from a reorganization of certain corporate functions and organizational changes driven by new leadership. Additionally, the charges include costs related to exiting a contract manufacturing partnership to consolidate and improve supply chain efficiency and exit costs associated with the partial abandonment of office space.
(2)Restructuring and other charges for the three and nine months ended June 28, 2025 reflect costs associated with fiscal 2025 actions including a reduction-in-force announced in February 2025, rationalization of our product roadmap, as well as non-recurring CEO transition costs related to modifications to equity awards.
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Research and Development
Research and development expenses consist primarily of personnel-related expenses, third-party resource expenses, tooling, test equipment, prototype materials, and related overhead costs. To date, software development costs have been expensed as incurred because the period between achieving technological feasibility and the release of the software has been short and development costs qualifying for capitalization have been insignificant.
Comparison of the three months ended June 27, 2026 and June 28, 2025
Research and development expenses, excluding restructuring and other charges, increased by $3.3 million, or 5.4%, for the three months ended June 27, 2026, compared to the three months ended June 28, 2025. This increase was driven by higher personnel costs and investments in our product roadmap, partially offset by lower stock-based compensation related to timing of grants as well as favorable comparison to one-time retention grants for key personnel in the prior year.
Comparison of the nine months ended June 27, 2026 and June 28, 2025
Research and development expenses, excluding restructuring and other charges, decreased $19.2 million, or 9.3%, for the nine months ended June 27, 2026, compared to the nine months ended June 28, 2025. This decrease was primarily driven by lower headcount and our prior year reorganization efforts, partially offset by investments in our product roadmap.
Sales and Marketing
Sales and marketing expenses consist primarily of advertising and marketing activity for our products and personnel-related expenses, expenses for our product displays, as well as depreciation, customer experience expenses, revenue related sales fees from our direct-to-consumer and installer solution sales channels, and related overhead costs.
Comparison of the three months ended June 27, 2026 and June 28, 2025
Sales and marketing expenses, excluding restructuring and other charges, decreased slightly by $2.0 million, or 3.2%, for the three months ended June 27, 2026, compared to the three months ended June 28, 2025.
Comparison of the nine months ended June 27, 2026 and June 28, 2025
Sales and marketing expenses, excluding restructuring and other charges, decreased $23.8 million, or 11.4 %, for the nine months ended June 27, 2026, compared to the nine months ended June 28, 2025. This decrease was primarily driven by management's reprioritization of marketing spend, timing of product launches - including the launch of Arc Ultra in October 2024, and lower personnel-related costs due to lower headcount.
General and Administrative
General and administrative expenses consist of administrative personnel-related expenses for our information technology, finance, legal, human resources, and similar personnel, as well as the costs of professional services, information technology, litigation, patents, related overhead, and other administrative expenses.
Comparison of the three months ended June 27, 2026 and June 28, 2025
General and administrative expenses, excluding restructuring and other charges, increased by $2.0 million, or 7.2%, for the three months ended June 27, 2026, compared to the three months ended June 28, 2025. This increase was primarily driven by legal fees mainly related to our IP litigation.
Comparison of the nine months ended June 27, 2026 and June 28, 2025
General and administrative expenses, excluding restructuring and other charges, increased $4.8 million, or 5.8%, for the nine months ended June 27, 2026, compared to the nine months ended June 28, 2025. This increase was primarily driven by an increase in legal fees mainly related to our IP litigation, partially offset by lower personnel-related costs due to lower headcount.
Interest Income, Interest Expense, and Other Income (Expense), Net
Interest income consists primarily of interest income earned on our cash, cash equivalents, and marketable securities balances as well as interest earned on tariff refunds. Interest expense consists primarily of interest expense associated with our debt financing arrangements and amortization of debt issuance costs. Other income (expense), net consists primarily of our foreign currency exchange
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gains and losses relating to transactions and remeasurement of asset and liability balances denominated in currencies other than the U.S. dollar. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.
Three Months Ended Change Nine Months Ended Change
June 27,
2026 		June 28,
2025 		$ % June 27,
2026 		June 28,
2025 		$ %
(In thousands, except percentages)
Interest income $ 2,182 $ 1,572 $ 610 38.8 % $ 5,442 $ 5,406 $ 36 0.7 %
Interest expense (110) (117) 7 (6.0) (330) (336) 6 (1.8)
Other income (expense), net 695 661 34 5.1 (246) (5,176) 4,930 (95.2)
Total other income (expense), net $ 2,767 $ 2,116 $ 651 30.8 % $ 4,866 $ (106) $ 4,972 *
* Not meaningful
Comparison of the three months ended June 27, 2026 and June 28, 2025
Interest income for the three months ended June 27, 2026 compared to the three months ended June 28, 2025, increased primarily due to interest earned on tariff refunds. Interest expense for the three months ended June 27, 2026 compared to the three months ended June 28, 2025, remained relatively consistent. Other income for the three months ended June 27, 2026 compared to the three months ended June 28, 2025, increased due to a gain on sale of excess components, partially offset by foreign currency exchange fluctuations.
Comparison of the nine months ended June 27, 2026 and June 28, 2025
Interest income and interest expense for the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025, remained relatively consistent. Other expense for the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025, decreased due to foreign currency exchange fluctuations partially offset by a gain on sale of excess components.
Provision for Income Taxes
We are subject to income taxes in the United States and foreign jurisdictions in which we operate. Foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rate will vary depending on jurisdictional mix of earnings, and changes in tax laws. In addition, certain U.S. tax regulations subject the earnings of our non-U.S. subsidiaries to current taxation in the United States. Our effective tax rate will be impacted by our ability to claim deductions and foreign tax credits to offset the taxation of foreign earnings in the United States. On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), was enacted. The legislation includes provisions such as accelerated cost recovery of qualified property, immediate expensing of U.S.-based research and development costs, and changes to the U.S. international taxation regime.
Three Months Ended Change Nine Months Ended Change
June 27,
2026 		June 28,
2025
$
% June 27,
2026 		June 28,
2025
$
%
(In thousands, except percentages)
Provision for income taxes $ 4,448 $ 2,566 $ 1,882 73.3 % $ 10,475 $ 7,121 $ 3,354 47.1 %
Comparison of the three and nine months ended June 27, 2026 and June 28, 2025
Provision for income taxes increased $1.9 million, or 73.3%, for the three months ended June 27, 2026 compared to the three months ended June 28, 2025. Provision for income taxes increased $3.4 million, or 47.1%, for the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025. These increases were primarily driven by shifts in our forecasted geographic earnings mix, which required us to apply a single consolidated estimated annual effective tax rate ("AETR") in the current year, whereas the prior year required separate U.S. and non-U.S. AETRs. These increases were partially offset by the favorable impact of the OBBBA, including the repeal of the requirement to capitalize research and experimental expenditures under Section 174 of the U.S. Internal Revenue Code, which reduced our current tax expense with no impact to deferred tax expense as a result of the full valuation allowance maintained against our net U.S. deferred tax assets.
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Liquidity and Capital Resources
Our operations are financed primarily through cash flows from operating activities. As of June 27, 2026, our principal sources of liquidity consisted of cash flows from operating activities, cash and cash equivalents of $206.9 million, including $102.1 million held by our foreign subsidiaries, marketable securities of $54.1 million, proceeds from the exercise of stock options, and borrowing capacity under the credit facility under our Revolving Credit Agreement. In accordance with our policy, the undistributed earnings of our non-U.S. subsidiaries remain indefinitely reinvested outside of the United States as of June 27, 2026, as they are intended to fund needs outside of the United States. In the event funds from foreign operations are repatriated to the United States, we may incur income or withholding taxes associated with such distributions. In addition, certain of our non-U.S. subsidiaries have the ability to repatriate funds to the United States in a tax-free manner.
As of June 27, 2026, our open purchase orders to contract manufacturers for finished goods were approximately $148 million, the majority of which are expected to be paid over the next six months. As of June 27, 2026, our expected commitments to suppliers for components were in the range of $264 million to $296 million, the majority of which is expected to be paid and/or utilized by our contract manufacturers in building finished goods within the next two years. The expected commitments are subject to change as a result of fluctuations in the demand forecast, as well as ongoing negotiations with contract manufacturers and suppliers. These commitments are related to components that can be specific to Sonos products and comprised 1) indirect obligations to third-party manufacturers and suppliers, 2) the inventory owned by contract manufacturers procured to manufacture Sonos products, and 3) purchase commitments made by contract manufacturers to their upstream suppliers.
We believe our existing cash and cash equivalent balances, cash flows from operations and committed credit lines will be sufficient to meet our long-term working capital and capital expenditure needs for at least the next 12 months. We hold our cash with a diverse group of major financial institutions and have processes and safeguards in place to manage our cash balances and mitigate the risk of loss. In October 2021, we entered into the Revolving Credit Agreement, which was amended in October 2025 to provide for aggregate commitments of up to $80.0 million with a maturity date in October 2030. Our obligations under the Revolving Credit Agreement are secured by substantially all of our assets. The Revolving Credit Agreement contains customary representations and warranties, customary affirmative and negative covenants, a financial covenant that is tested quarterly and requires us to maintain a certain consolidated leverage ratio, and customary events of default. As of June 27, 2026, we were in compliance with all financial covenants under the Revolving Credit Agreement. Refer to Note 6. Debt for further information.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, our planned sales and marketing activities, the timing of new product introductions, our potential merger and acquisition activity, market acceptance of our products, and overall economic conditions. To the extent that current and anticipated sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in increased dilution to our stockholders. If we were to incur additional debt financing, it would result in increased debt service obligations and the instruments governing such debt could require additional operating and financing covenants that would restrict our operations.
Cash Flows
The following table summarizes our cash flows for the periods indicated:
Nine Months Ended
June 27,
2026 		June 28,
2025
(In thousands)
Net cash provided by (used in):
Operating activities $ 144,167 $ 133,948
Investing activities (17,957) (24,167)
Financing activities (93,373) (78,703)
Effect of exchange rate changes (611) 463
Net increase in cash and cash equivalents
$ 32,226 $ 31,541
Cash flows from operating activities
Net cash provided by operating activities of $144.2 million for the nine months ended June 27, 2026, consisted of net income of $94.8 million, which included the benefit of $23.2 million in IEEPA tariff refunds, non-cash adjustments of $93.6 million, and an unfavorable impact of net changes in operating assets and liabilities of $44.2 million. Non-cash adjustments primarily consisted of stock-
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based compensation expense of $46.4 million. The net decrease in cash from the change in operating assets and liabilities was primarily due to an increase in accounts receivable of $53.6 million due to sales growth, and an increase in other assets of $15.9 million driven by a cash outlay related to components. The net decrease in cash from the change in operating assets and liabilities was partially offset by a decrease in inventories of $11.3 million due to seasonality partially offset by the impact of higher memory costs, an increase in accrued compensation of $10.3 million, and an increase in accounts payable and accrued expenses of $6.0 million.
Cash flows from investing activities
Cash used in investing activities of $18.0 million for the nine months ended June 27, 2026, primarily consisted of the purchases of marketable securities of $44.6 million and purchases of property and equipment of $16.7 million mainly related to manufacturing-related tooling and test equipment to support the launch of new products, partially offset by cash provided from the maturity of marketable securities of $43.3 million.
Cash flows from financing activities
Cash used in financing activities of $93.4 million for the nine months ended June 27, 2026, primarily consisted of payments for repurchases of common stock of $95.3 million, and payments for repurchases of common stock related to shares withheld for tax in connection with vesting of stock awards of $20.4 million, partially offset by proceeds from the exercise of stock options of $23.1 million.
Commitments and Contingencies
See Note 7. Commitments and Contingencies in the notes to condensed consolidated financial statements.
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates.
Other than items discussed in Note 2 of our condensed consolidated financial statements, there have been no material changes to our critical accounting policies as compared to the critical accounting policies and significant judgments and estimates disclosed in our Annual Report on Form 10-K.
Sonos Inc. published this content on July 29, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on July 29, 2026 at 21:22 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]