Sonos (SONO) Q4 2026 earnings review
Sonos sales jump 20%, but memory chip costs shrink margins
Sonos is selling more speakers across every region, but rising memory chip prices are eating up the extra profit. The wireless audio maker grew fourth-quarter sales 20% from a year ago, or 11% by our math without the extra calendar week. However, gross margin excluding one-offs fell 3 percentage points because of expensive memory chips, leaving operating profit before depreciation and one-offs unchanged at $6 million. Chief executive Tom Conrad also announced a new $150 million share buyback after collecting $41 million in full-year tariff refunds.
| Q4 sales excluding extra week (by our math) | +11% reported sales: $344M (+20% from a year ago) |
|---|---|
| Q4 gross margin, excluding one-offs | 42.1% down 3.0 percentage points from a year ago |
| Ending inventory | $273M +60% from a year ago |
| Forward outlook in release | Deferred to be provided on the conference call |
โ๏ธ Verdict: โช Neutral
The story is unchanged because the fourth quarter confirmed both the sales recovery and the memory cost squeeze while leaving next year's numbers for the conference call. Double-digit growth in speakers and installer amplifiers proved that the five products launched this year are selling well. The bad news: inventory jumped 60% from a year ago and drained cash flow, while the press release omitted the annual household count and next year's outlook.
The question now is whether Sonos can offset higher memory chip costs in fiscal 2027 without raising speaker prices so much that customer demand slows. Either cost-saving changes and steady holiday sales keep profit near this year's level, or high chip bills and a 60% larger inventory force margin cuts. The fiscal 2027 outlook and annual household metrics on the conference call will tell.
๐ Bull Case
Sales Grew Double Digits Without the Extra Week
"We said Fiscal 2026 would be the year Sonos returned to growth, and we delivered," chief executive Tom Conrad said. The maker of wireless home speakers and soundbars grew fourth-quarter revenue 19.6% from a year ago to $344.4 million, beating the middle of its outlook for an eighth straight quarter. Even after stripping out an estimated $24 million from an extra 14th fiscal week, sales rose 11.3% by our math.
- Sonos speakers: $247.5 million, up 19.9% from a year ago
- Sonos system products (amplifiers and components for custom installers): $77.0 million, up 18.1% after falling 5.4% last quarter
- Europe, Middle East and Africa revenue: $95.9 million, up 23.6%
- Asia Pacific revenue: $23.8 million, up 29.0%
The rebound in system products matters because Sonos began shipping Amp Multi, its new multi-room amplifier for professional installers, in late August. Growth accelerated across every product line and region, showing that the five products launched this year brought customers back. Still, fourth-quarter sales rested on an easy comparison and initial shipments to retail stores.
What to watch: first-quarter fiscal 2027 revenue outlook on the earnings call. A forecast for growth above 3% in a standard 13-week holiday quarter would show demand holds up after initial store stocking.
Tariff Refunds Help Fund a New $150M Buyback
Sonos finished its previous $150 million stock buyback program this quarter by spending $35 million to repurchase 2.2 million shares. Across fiscal 2026, the audio group returned $130 million to shareholders and retired 8.2 million shares, cutting its basic share count by 1.9% from a year ago. The board immediately approved a new $150 million buyback plan, removing any concern that cash returns would stop.
One-time tariff refunds funded a third of this year's buybacks. Following a US Supreme Court ruling that struck down certain emergency tariffs, the US government refunded Sonos $18.0 million in the fourth quarter and $41.2 million across the second half, plus $1.4 million in interest. That payment resolved the timing uncertainty around the remaining refund balance and helped lift ending cash and marketable securities to $227.1 million.
What to watch: first-quarter share repurchases and employee stock grant dilution in the next quarterly filing. While basic shares fell, diluted shares excluding one-offs ticked up 0.3% in the fourth quarter because employees exercised $34.8 million of stock options this year.
๐ป Bear Case
Memory Chip Costs Wiped Out Fourth-Quarter Profit Growth
Finance chief Saori Casey said fiscal 2026 showed how Sonos improved its earning power, "all while absorbing $56 million of higher memory costs". That full-year framing hides the fourth-quarter damage. By our math, about $33 million of that memory chip inflation hit in the fourth quarter alone as artificial intelligence data centers drove up industry chip prices.
- Gross margin excluding one-offs: 42.1%, down 3.0 percentage points from 45.1% a year ago
- GAAP gross margin excluding the $18.0M tariff refund: 40.9% by our math, down 2.8 points from a year ago
- Adjusted EBITDA (operating profit before depreciation, stock pay and one-offs): $6.0 million, down 5.8% from $6.4 million a year ago
Cost of revenue excluding one-offs โ the direct cost of making and shipping speakers โ rose by 3.1 percentage points of revenue from a year ago. Because memory chips took a larger bite out of every speaker sold, 19.6% revenue growth produced zero growth in Adjusted EBITDA. Beating the middle of the fourth-quarter margin outlook only shows the outlook already baked in the 10-point memory penalty.
What to watch: the fiscal 2027 gross margin outlook on the conference call. Three months ago, Casey indicated full-year GAAP gross margin would drop near 39%, downmore than 5 percentage points from fiscal 2026 excluding tariff refunds by our math.
Inventory Jumped 60% and Drained Underlying Cash Flow
Sonos reported that full-year free cash flow rose 13.6% to $122.9 million, while fourth-quarter free cash flow was negative $4.6 million. However, operating cash flow included $42.6 million in non-repeating government tariff refunds and interest. Stripping out that windfall, full-year free cash flow fell 25.8% from a year ago to $80.3 million by our math.
A sharp buildup in unsold goods absorbed the cash. Balance-sheet inventories rose 59.6% from a year ago and 72.6% from last quarter to $273.0 million, consuming $104.0 million of cash across the fiscal year. Stocking up ahead of the holiday season is normal, and accounts payable rose 38.7% to $255.3 million to help finance the goods. Yet building inventory by 60% when sales grew 20% leaves Sonos holding goods built at peak memory chip prices.
What to watch: the split between raw components and finished speakers on the call, plus first-quarter inventory levels. If holiday sales slow, Sonos risks discounting finished speakers or writing down high-cost components.
Risks this quarter didn't answer
Sonos did not include a numeric outlook or its annual customer metrics in the earnings release, stating that "The company will provide guidance on its Fourth Quarter and Fiscal 2026 earnings call". That leaves five standing concerns and debates unsettled in the printed tables.
- Forward margin and pricing plan: without the fiscal 2027 outlook, readers cannot see whether memory cost savings are arriving or whether Sonos will raise speaker prices and risk slowing unit sales.
- Household growth and devices per home: Sonos usually updates its 17.1 million household count and 3.13 devices-per-home average at year-end, but the release omitted both, leaving no proof that cheaper entry speakers are adding new homes rather than just lowering average selling prices.
- Sonos 27 and AI competition: Conrad said "every product improves those our customers already own, and with Sonos 27, that will keep getting stronger every year", but the release gives no revenue model for its new software or defense against big-tech AI home devices.
- Macro premium audio demand: the release does not separate how much of the fourth-quarter sales jump came from overall category demand versus retail store stocking of new products.
- Finance chief succession: Saori Casey announced her retirement plans last quarter, and the release gives no timeline for naming her replacement during a major margin reset.
๐ฒ Other KPIs
Uncollected bills from retail partners rose 55.1% from a year ago, almost เคคเฅเคจ times the 19.6% pace of fourth-quarter revenue growth. Receivables dipped from $117.2 million in the third quarter, but across fiscal 2026 the rise in unpaid customer invoices tied up $39.0 million of operating cash flow.
Deferred revenue โ cash set aside from speaker sales to cover future software updates and cloud services โ fell 2.3% from a year ago and shrank by $1.2 million from last quarter by our math. After spiking to $97.9 million in the second quarter on early retailer shipments, the balance has returned to its normal $79โ84 million band.
One-off operating charges shifted from layoffs to court bills this year. Restructuring costs for staff cuts and "exiting a contract manufacturing partnership" fell to zero in the fourth quarter and $7.5 million for the year, down from $33.5 million last year. Meanwhile, legal fees for the patent lawsuit against Alphabet and Google nearly tripled to $15.6 million.
๐ฎ Guidance
Beat. Sonos did not issue a fiscal 2027 outlook in the release, deferring forward targets to its conference call. Against the full-year fiscal 2026 target set in Q3, GAAP gross margin excluding $41.2 million of tariff refunds finished at 44.3% by our math, beating the 44.1% outlook as fourth-quarter clean margin hit 40.9% against the 39.0โ41.0% plan.
โ Key Questions
What is the fiscal 2027 revenue and margin outlook?
Sonos deferred its forward outlook to the conference call. Investors need to know whether first-quarter holiday sales will grow over last year's soft comparison and whether full-year GAAP gross margin still sits near the 39% level management flagged last quarter.
How many households and devices per home did FY26 add?
The company usually reports its annual household count and devices per household in the fourth quarter, but the release only repeated "more than 17 million households". Without exact numbers, investors cannot tell if cheaper entry speakers brought in new families or just cannibalized pricier models.
Why did inventory grow 60% to $273 million?
Inventories jumped by $115 million in a single quarter and $102 million from a year ago, draining $104 million in cash. Management needs to split that balance between finished speakers for the holidays and raw memory components bought at peak prices.
What is Sonos 27 and will Sonos raise prices?
Conrad highlighted "Sonos 27" in the release, while memory costs cut fourth-quarter gross margin excluding one-offs by 3 percentage points. Management has not explained whether Sonos 27 carries a new revenue model or whether it will raise hardware prices to protect margins.