Sonos Beats EPS Estimates But Faces Revenue Challenges

Sonos reported fiscal Q1 earnings exceeding estimates with an EPS of $0.64 vs $0.30 expected. However, revenue decreased to $551 million from $613 million last year. The company is restructuring, including a 12% workforce reduction to improve efficiency.

Date: 07-02-2025

AI Rating: 5

Earnings Per Share (EPS)
Sonos reported adjusted EPS of $0.64, which surpassed the consensus estimate of $0.30. This is a strong positive indicator as it exceeded expectations. However, this figure shows a decline of 23.8% year-over-year from the previous EPS of $0.84.

Revenue Growth
The company achieved revenue of $551 million in Q1 FY 2025, which was above the estimated $519 million. Despite this positive meeting of estimates, it represents a 10.1% drop compared to $613 million in the same quarter last year, indicating a worrying trend in revenue contraction.

Free Cash Flow (FCF)
The free cash flow decreased significantly to $143.1 million from $269.3 million year-over-year, reflecting ongoing operational challenges and reduced liquidity. This decline of 47% can raise concerns regarding future cash availability for operations or investments.

Adjusted EBITDA
Sonos reported an adjusted EBITDA of $91.2 million, down from $115.2 million in the prior year. This indicates a 21% decline in earnings before interest, taxes, depreciation, and amortization, suggesting deteriorating operational efficiency.

Gross Margin
The adjusted gross margin fell to 44.7% from 46.4% year-over-year, representing a decline of 1.7 percentage points. This decline illustrates that while revenue decreased, the cost of goods sold remains a burden.

Overall Assessment
Despite positive signs in EPS and meeting revenue estimates, the significant declines in revenue, free cash flow, adjusted EBITDA, and gross margin indicate operational weaknesses. The company's restructuring efforts and workforce reduction of approximately 12% aim to address these challenges but may also introduce short-term disruptions. Investors should closely monitor Sonos' strategic execution and market adaptation, especially in light of geopolitical and economic pressures affecting revenue, particularly in the Americas.

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