Audio technology Sonos company (NASDAQ: SONO) reported Q2 CY2025 results exceeding the market’s revenue expectations, but sales fell by 13.2% year on year to $344.8 million. Its non-GAAP profit of $0.19 per share was 26.7% above analysts’ consensus estimates.

Is now the time to buy SONO? Find out in our full research report (it’s free).

StockStory’s Take

Sonos’ second quarter results reflected a mix of operational discipline and external headwinds, as management cited cost controls and targeted product updates as primary factors behind the company’s performance. CEO Thomas Conrad attributed the quarter’s outcome to “tight focus on execution,” highlighting gains in U.S. home theater market share and ongoing expense reductions. Persistent category softness and tariff-related pressures continued to weigh on results, with Conrad acknowledging, “We lost the momentum in 2024. We’re starting to get it back, and we’re going to accelerate our pace from here.”

Looking ahead, Sonos’ guidance is shaped by planned pricing adjustments in response to rising tariffs, a cautious approach to consumer demand, and a renewed emphasis on software and platform enhancements. Management indicated that upcoming price increases are intended to optimize gross profit dollars while closely monitoring customer response and competitive trends. Conrad stated, “Our portfolio of hardware products deliver exceptional value that compounds over time, thanks to software updates that deliver new experiences,” underscoring plans to further integrate AI and expand the Sonos ecosystem.

Key Insights from Management’s Remarks

Management emphasized that the quarter’s performance was driven by disciplined cost reductions, selective product innovation, and ongoing challenges in the global trade environment.

• Operational cost reductions: Sonos continued its cost optimization strategy, including a reduction in force and targeted expense management across research, development, and marketing. CFO Saori Casey noted non-GAAP operating expenses declined by 15% year-over-year, with further savings expected as restructuring measures are fully realized in coming quarters.

• Tariff-driven pricing strategy: The company is preparing for higher tariffs on products manufactured in Vietnam and Malaysia, prompting plans for selective price increases later this year. Management is evaluating price elasticity and aims to minimize the impact on demand while protecting gross profit.

• Product innovation focus: The latest quarter saw new AI-powered features such as voice enhancement for Arc Ultra and adaptive noise cancellation for Sonos Ace. Conrad described these updates as part of a broader strategy to differentiate Sonos through software-driven experiences rather than just hardware launches.

• Platform and ecosystem expansion: Sonos is repositioning itself as a platform company, seeking to increase value through software integrations, partner collaborations, and a growing installed base. Conrad explained that approximately 40-45% of annual product registrations come from existing households, illustrating the compounding effect of system expansion.

• Category and macro headwinds: Management acknowledged ongoing weakness in the home audio category due to post-pandemic demand normalization and soft housing markets, but pointed to long-term trends in home entertainment and streaming consumption as supportive for future growth.

Drivers of Future Performance

Sonos’ outlook for the next year centers on navigating tariff-related cost pressures, maintaining disciplined spending, and expanding the software-driven platform to support revenue and margin stabilization.

• Tariff and pricing actions: Planned price increases on select products are expected to offset higher input costs from new tariffs, but management cautioned that consumer response could impact unit volumes and overall demand.

• Continued cost discipline: Sonos aims to further optimize its expense structure, with additional benefits from workforce reductions and operational efficiencies expected to materialize fully in future quarters. This focus is intended to support adjusted EBITDA growth despite modest top-line expectations.

• Platform and AI investments: The company is prioritizing enhancements to its software platform, including AI-powered features, to drive customer engagement and differentiate its ecosystem. Management believes these investments will encourage both new customer acquisitions and repeat purchases from existing households.

Catalysts in Upcoming Quarters

In the coming quarters, our analyst team will be watching (1) how effectively Sonos executes its planned price increases in the face of higher tariffs, (2) whether cost optimization efforts continue to materialize as operating margin improvements, and (3) the pace of software-driven innovation and ecosystem expansion, particularly around AI features and platform integration. These milestones will be crucial in assessing Sonos’ ability to stabilize sales and return to growth in a challenging market environment.

Sonos currently trades at $11.70, up from $11.05 just before the earnings. In the wake of this quarter, is it a buy or sell? The answer lies in our full research report (it’s free).

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