Why Is Sonos (SONO) Down 1.5% Since Last Earnings Report?

It has been about a month since the last earnings report for Sonos (SONO). Shares have lost about 1.5% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Sonos due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its latest earnings report in order to get a better handle on the important catalysts.

Sonos Q1 Earnings Surpass Estimates

Sonos reported first-quarter fiscal 2026 non-GAAP earnings per share of 93 cents, topping the Zacks Consensus Estimate of 81 cents. The company reported 68 cents in the prior-year quarter. On a GAAP basis, the company reported earnings per share of 75 cents compared with 40 cents in the year-ago quarter.

Quarterly revenues decreased marginally by 0.9% year over year to $545.7 million. However, the figure came near the high end of the company’s guidance of $510 million to $560 million. The Zacks Consensus Estimate for the top line was pegged at $538.7 million.

Management highlighted that fiscal 2026 began on a strong note for Sonos as it makes progress toward a return to growth, driven by coordinated execution across product innovation, software, marketing and global expansion. The company announced the launch of Amp Multi, with additional products planned later in the year, as part of its renewed focus on strengthening the Sonos ecosystem through a simpler, more reliable and more scalable platform, while maintaining operational discipline and creating long-term value for customers, partners and the business.

Revenue Details

Revenues from Sonos speakers were $459.2 million, down 1.7% year over year.
Sonos’ system products’ revenues of $65.1 million increased 7.9%.
Revenues from Partner products and other totaled $21.4 million, down 8.9% year over year.

Region-wise, revenues from the Americas of $328.9 million increased 1.3% year over year. Europe, the Middle East and Africa generated revenues of $189.4 million, down 4.1%. Revenues from the Asia Pacific decreased 4.6% to $27.3 million.

Margin Performance

Non-GAAP gross profit was $259.2 million, up 5.3% on a year-over-year basis.

Non-GAAP gross margin expanded 280 basis points (bps) to 47.5%.

Adjusted operating expenses amounted to $136.6 million, down 19.2% year over year. The company’s first-quarter operating expenses were unusually low, reflecting the timing of product launches and related spending.

Non-GAAP research and development (R&D) expenses declined 21%. Non-GAAP general and administrative (G&A) expenses were up 1.8%. Non-GAAP sales and marketing expenses decreased 23%.

Non-GAAP adjusted EBITDA totaled $132.1 million, which came near the upper end of the company’s guidance of adjusted EBITDA between $94 million and $137 million.

Cash Flow & Liquidity

In the fiscal first quarter, Sonos had $163.3 million of cash from operations. Free cash flow was $157.4 million, up from $143.1 million in the same period last year.

As of Dec. 27, cash and cash equivalents were $312.5 million compared with $174.7 million as of Sept. 27, 2025. SONO has no debt.

In the first quarter, the company spent $25 million on share repurchases. Sonos still has $105 million remaining under its current share repurchase authorization.

Guidance

Sonos expects second-quarter revenues to be between $250 million and $280 million, indicating a year-over-year 4% decline to an 8% increase, with a 2% rise at the midpoint.

For the second quarter, GAAP gross margin is expected to be between 44% and 46%, with non-GAAP gross margin approximately 220-bp higher. At the midpoint, this represents a year-over-year increase of 130 bps on a GAAP basis and 10 bps on a non-GAAP basis, translating into gross profit dollar growth of 5% and 2%, respectively.

Second-quarter GAAP operating expenses are forecast at $150 million to $160 million, indicating an 11% year-over-year decline at the midpoint as the company laps prior-year workforce reductions and related restructuring charges. Non-GAAP operating expenses are expected to be roughly $16 million lower than GAAP.

The company’s second-quarter adjusted EBITDA is expected to range from a loss of $18 million to a profit of $10 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -38.46% due to these changes.

VGM Scores

Currently, Sonos has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a score of B on the value side, putting it in the top 40% for value investors.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Interestingly, Sonos has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Sonos is part of the Zacks Audio Video Production industry. Over the past month, Dolby Laboratories (DLB), a stock from the same industry, has gained 0.5%. The company reported its results for the quarter ended December 2025 more than a month ago.

Dolby Laboratories reported revenues of $346.71 million in the last reported quarter, representing a year-over-year change of -2.9%. EPS of $1.06 for the same period compares with $1.14 a year ago.

For the current quarter, Dolby Laboratories is expected to post earnings of $1.31 per share, indicating a change of -2.2% from the year-ago quarter. The Zacks Consensus Estimate has changed -2.2% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Dolby Laboratories. Also, the stock has a VGM Score of F.

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This article originally published on Zacks Investment Research (zacks.com).

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