Executive Summary

Q1 FY2025 revenue landed near the high end of guidance at $550.9M, with non-GAAP diluted EPS of $0.64; results benefited from strong Arc Ultra demand and better mix/costs, while categories remained highly promotional and app issues weighed on demand .
The company announced a ~12% reduction in force with estimated $15–$18M of restructuring charges to be recognized mostly in Q2, and outlined $60–$70M run-rate savings into FY2026 from announced and FY2024 actions, marking a sharper pivot to efficiency under interim CEO Tom Conrad .
Q2 FY2025 guidance: revenue $240–$265M, GAAP gross margin 42–44%, non-GAAP gross margin 44–45.8%, non-GAAP OpEx $140–$145M, and adjusted EBITDA of -$27M to -$6M; minimal tariff impact expected due to prior supply chain shifts to Malaysia/Vietnam .
Street context: Q1 beat S&P Global consensus on revenue ($550.9M vs $519.5M*) and EPS ($0.64 vs $0.30*), while Q2 revenue guidance brackets consensus ($254.1M*)—a setup that makes execution on app recovery and the cost program the near-term stock catalysts. Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

Mix-led and cost-driven gross margin outperformance: GAAP gross margin of 43.8% was ~80 bps above the high end of guidance; non-GAAP gross margin was 44.7% .
Product momentum: Stronger-than-expected demand for Arc Ultra drove a record quarterly U.S. home theater market share (dollar basis) in Q1 .
Balance sheet and cash: Free cash flow of $143.1M; period-end inventories down 39% sequentially to $140.9M; channel inventory “comfortable”; resumed buybacks ($27M in Q1) .

What Went Wrong

Top-line pressure: Revenue declined 10% YoY on softer demand, ongoing app recovery, and heavy promotions in portables; non-GAAP OpEx still includes $6M of app recovery spend .
Year-over-year margin headwind: New amortization tied to sound motion technology in Arc Ultra was a ~40 bps headwind to GAAP gross margin YoY .
Other P&L pressure: “Other (expense) income, net” swung to a $6.0M expense vs a $10.3M income last year, pressuring income before tax .

Financial Results

P&L Summary (oldest → newest)

Metric	Q3 FY2024	Q4 FY2024	Q1 FY2025
Revenue ($M)	$397.1	$255.4	$550.9
GAAP Gross Margin %	48.3%	40.3%	43.8%
Non-GAAP Gross Margin %	48.7%	41.0%	44.7%
GAAP Diluted EPS ($)	0.03	-0.44	0.40
Non-GAAP Diluted EPS ($)	0.23	-0.18	0.64
Adjusted EBITDA ($M)	48.9	-22.6	91.2

Actual vs Street Consensus (Q1 FY2025)

Metric	Actual	Consensus	Surprise
Revenue ($M)	$550.9	$519.5*	+6.0%
Non-GAAP EPS ($)	$0.64	$0.30*	+112.0%
Values retrieved from S&P Global.

Product & Geography Mix

Category ($M)	Q1 FY2024	Q1 FY2025
Sonos speakers	$503.0	$467.1
Sonos system products	$84.6	$60.3
Partner products & other	$25.3	$23.4
Total Revenue	$612.9	$550.9

Geography ($M)	Q1 FY2024	Q1 FY2025
Americas	$392.4	$324.6
EMEA	$191.8	$197.6
Asia Pacific	$28.6	$28.7
Total Revenue	$612.9	$550.9

KPIs

KPI	Q1 FY2024	Q1 FY2025
Free Cash Flow ($M)	$269.3	$143.1
Cash from Operations ($M)	$275.4	$156.2
Inventory ($M)	$231.5 (FY2024 YE)	$140.9
Cash & Cash Equivalents ($M)	$467.3	$280.0
Net cash (company commentary)	n/a	$328M incl. marketable securities
Shares repurchased ($M)	$23.5	$27.2

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	Q2 FY2025	None prior	$240–$265	Initiated
GAAP Gross Margin %	Q2 FY2025	None prior	42–44%	Initiated
Non-GAAP Gross Margin %	Q2 FY2025	None prior	44–45.8%	Initiated
Non-GAAP OpEx ($M)	Q2 FY2025	None prior	$140–$145	Initiated
Adjusted EBITDA ($M)	Q2 FY2025	None prior	-$27 to -$6	Initiated
App recovery investment ($M)	Q2 FY2025	None prior	$4–$8	Initiated
Tariffs impact	Q2 FY2025	None prior	Minimal (supply chain in MY/VN)	Initiated
RIF charges ($M)	Q2 FY2025	None prior	$15–$18 (mostly in Q2)	Initiated

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 FY2024, Q4 FY2024)	Current Period (Q1 FY2025)	Trend
App recovery / core experience	App rollout issues overshadowed results; clear action plan . Progress on app recovery enabling Arc Ultra/Sub 4 launch .	“Return to excellence” focus with workstreams in performance/reliability, UX/design, and new experiences .	Improving but ongoing remediation
Organizational restructuring / costs	6% RIF announced Aug’24, cost base reduction .	Reorg to functional model; ~12% RIF (~200 employees) with $60–$70M run-rate savings into FY2026 .	Accelerating efficiency drive
Product performance	Ace launch drove Q3 revenue growth; category headwinds .	Arc Ultra stronger-than-expected; record U.S. home theater share in Q1 .	Premium HT driving mix
Supply chain / tariffs	Diversification underway; not central to Q3/Q4 discourse.	Minimal tariff impact expected in Q2 due to manufacturing shift to MY/VN .	Risk reduced
Capital allocation	Buybacks ongoing in FY2024 (paused in Q4) .	Buybacks resumed in Q1; later, new $150M authorization announced Feb 24 .	Active returns resuming
Seasonality / compares	—	Very tough Q3’25 YoY compare due to ACE channel fill last year .	Harder upcoming compare

Management Commentary

“We’re moving quickly and with purpose… returning Sonos to a scrappier and more focused enterprise… I’ve reorganized our product and engineering staff into functional teams… [and] this means… saying goodbye to about 200 employees” — Tom Conrad, Interim CEO .
“We delivered Q1 revenue towards the high end of our guidance at $551 million… GAAP gross margin was 43.8%, plus 80 basis points above the high end of our guidance range, driven by better cost and product mix” — Saori Casey, CFO .
“We expect the run rate savings of the announced actions from yesterday and those taken in FY '24 to be in the range of $60 million to $70 million into FY '26” — Saori Casey, CFO .
“We expect tariffs to have a minimal impact to our gross margin in Q2 based on what we know today” — Saori Casey, CFO .

Q&A Highlights

Timing/process: Management explained unconventional release/call timing to balance communications around the reorg and earnings; apologized for disruption .
App/product experience: CEO emphasized ongoing improvements across performance/reliability, usability/design, and new experiences; no fixed timetable, continuous improvement mindset .
Operating model: Shift from BU structure to functional org to remove redundancies and increase agility; exited ~six VPs and reorganized leadership .
Channel/inventory: Channel inventory ended Q1 at a “comfortable place” heading into Q2 .
Capital allocation: Repurchases resumed in Q1; management remains judicious; returning capital remains a pillar .
Outlook cadence: Q2 guided; management flagged lack of consistent sequential pattern for Q3 and very difficult YoY compare due to ACE channel fill in Q3 last year .

Estimates Context

Q1 FY2025 actual vs S&P Global consensus: Revenue $550.9M vs $519.5M*; non-GAAP EPS $0.64 vs $0.30* — both beats . Values retrieved from S&P Global.
Q2 FY2025: Company revenue guidance $240–$265M vs consensus $254.1M*; company provided margin/OpEx/EBITDA ranges, but no EPS guidance . Values retrieved from S&P Global.
Implication: Street models likely need higher gross margin for Q2 on mix/tariff relief and lower OpEx from cost actions, while top-line remains bracketed by guidance; Q3 consensus likely needs tougher compares reflected given prior-year ACE channel fill .

Key Takeaways for Investors

Execution beat: Q1 revenue/EPS outperformed consensus on stronger Arc Ultra mix and expense timing; non-GAAP gross margin beat guidance high end by ~80 bps .
Cost realignment accelerates: Functional reorg and ~12% RIF target $60–$70M run-rate savings into FY2026—raising confidence in earnings power when demand stabilizes .
App recovery is the swing factor: Continued investment ($6M in Q1; $4–$8M planned in Q2) with multi-quarter improvement path; sustained progress is key to brand repair and category momentum .
Supply chain/tariffs de-risked: Manufacturing shift to Malaysia/Vietnam reduces tariff risk; minimal impact expected in Q2 GM .
Balance sheet optionality: Strong FCF, reduced inventories, and resumed buybacks (and subsequent $150M authorization) support downside protection and capital returns .
Near-term setup: Q2 guide brackets Street; Q3 faces very tough YoY due to ACE channel fill last year—investors should calibrate models for seasonality and compares .
Medium-term thesis: If app experience returns to excellence and cost actions stick, leverage to premium HT and multi-product homes can re-accelerate growth and expand margins.

Values retrieved from S&P Global.

Citations: Press release Q1 FY2025: 8-K and exhibits: Earnings call transcript Q1 FY2025: Prior quarters: Q4 FY2024 press release –; Q3 FY2024 press release – Other releases: CEO transition ; $150M repurchase authorization

Sonos Inc (SONO)·Q1 2025 Earnings Summary