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What changed in Sonos Inc's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Sonos Inc's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+241 added−242 removedSource: 10-K (2025-11-14) vs 10-K (2024-11-15)

Top changes in Sonos Inc's 2025 10-K

241 paragraphs added · 242 removed · 169 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe cases in Canada, Germany, France, and the Netherlands have been decided against Google. In the California case, all of Google's patent claims have been dismissed or decided against Google. See Note 13. Commitments and Contingencies of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.
Biggest changeCommitments and Contingencies of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details. While our intellectual property, including our patent portfolio, is an important aspect of our business, our long-term success also depends on the creativity, marketing and technical expertise, and commercial capabilities of our people.
Our marketing investments are focused on increasing brand awareness through advertising, public relations, and brand promotion activities, including digital platforms, sponsorships, collaborations, brand activations, and channel marketing. We also invest in capital expenditures on product displays to support our retail channel partners.
Our marketing investments are focused on increasing brand awareness through advertising, public relations, and brand promotion activities, including digital platforms, sponsorships, collaborations, brand activations, and channel marketing. We also invest in product displays to support our retail channel partners.
We maintain a policy requiring our employees, contractors, consultants and other third parties to enter into confidentiality and proprietary rights agreements to control access to our proprietary information. These laws, procedures and restrictions provide only limited protection, and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated.
We maintain policies requiring our employees, contractors, consultants and other third parties to enter into confidentiality and proprietary rights agreements to control access to our proprietary information. These laws, procedures and restrictions provide only limited protection, and any of our intellectual property rights may be challenged, invalidated, circumvented, infringed or misappropriated.
We completed the initial public offering ("IPO") of our common stock in August 2018 and our common stock is listed on The Nasdaq Global Select Market under the symbol of "SONO." Our principal executive offices are located at 301 Coromar Drive, Santa Barbara, California 93117, and our telephone number is (805) 965-3001. Our website address is www.sonos.com.
We completed the initial public offering of our common stock in August 2018 and our common stock is listed on The Nasdaq Global 9 Table of contents Select Market under the symbol of "SONO." Our principal executive offices are located at 301 Coromar Drive, Santa Barbara, California 93117, and our telephone number is (805) 965-3001. Our website address is www.sonos.com.
We partner with third-party developers to build new applications and services on top of the Sonos platform, increasing customer engagement and creating new experiences for our customers, such as architectural in-ceiling, in-wall and outdoor speakers in partnership with Sonance, and automotive sound in partnership with Audi. Research and Development Our products and software demand significant technical expertise to develop competitively.
We partner with third-party developers to build new applications and services on top of the Sonos platform, increasing customer engagement and creating new experiences for our customers, such as architectural in-ceiling, in-wall and outdoor speakers, as well as automotive sound. Research and Development Our products and software demand significant technical expertise to develop competitively.
Sonos, the Sonos logo, Sonos One, Sonos Five, Sonos Beam, Play:5, Playbase, Playbar, Sonos Arc, Amp, Sub, Sonos Move, Sonos Move 2, Port, Ray, Sonos Ray, Sonos Roam, Sonos Roam 2, Sonos Voice Control, Sonos Voice Control logo, Trueplay, Sub Mini, Sonos Sub Mini, Mayht, Era 100, Era 300, Sonos Ace and our other registered or common law trademarks, tradenames or service marks appearing in this Annual Report on Form 10-K are our property.
Sonos, the Sonos logo, Sonos One, Sonos Five, Sonos Beam, Play:5, Playbase, Playbar, Sonos Arc, Sonos Arc Ultra, Sound Motion, Amp, Sub, Sub 4, Sonos Move, Sonos Move 2, Port, Ray, Sonos Ray, Sonos Roam, Sonos Roam 2, Sonos Voice Control, Sonos Voice Control logo, Trueplay, Sub Mini, Sonos Sub Mini, Mayht, Era 100, Era 100 Pro, Era 300, Sonos Ace and our other registered or common law trademarks, tradenames or service marks appearing in this Annual Report on Form 10-K are our property.
Our system enables our speakers to work individually or together in synchronized playback groups, powered by wireless network and Bluetooth capabilities to route and play audio optimally from all the different content services that our customers enjoy. 5 Table of conten ts • Open platform for content partners.
Our system enables our speakers to work individually or together in synchronized playback groups, powered by wireless network and Bluetooth capabilities to route and play audio optimally from all the different content services that our customers enjoy. • Open platform for content partners.
As part of these efforts, we strive to offer a competitive compensation and benefits program, foster a community where everyone feels included and empowered to do their best work, and give employees the opportunity to give back to their communities and make a social impact. As of September 28, 2024, we had 1,708 full-time employees.
As part of these efforts, we strive to offer a competitive compensation and benefits program, foster a community where everyone feels included and empowered to do their best work, and give employees the opportunity to give back to their communities and make a social impact.
(General availability: May 2024) • Move 2 : Our portable, battery-powered smart speaker that delivers spacious stereo sound, with ultra-durable water resistant design for outdoor and indoor listening. Originally introduced as Move in September 2019. (General availability: September 2023) Home theater: • Ray : Our smallest, smart soundbar for TV, music, and more.
(General availability: May 2024) • Move 2 : Our portable, battery-powered smart speaker that delivers spacious stereo sound, with ultra-durable water resistant design for outdoor and indoor listening. Originally introduced as Move in September 2019.
Originally launched as One in October 2017 and completely redesigned in March 2023 as Era 100. (General availability: March 2023) • Era 300: Our bold, revolutionary speaker that offers the best out-loud listening experience for your favorite spatial audio content with Dolby Atmos. (General availability: March 2023) • Five: Our high-fidelity speaker for superior sound.
(General availability: March 2023) • Era 300: Our bold, revolutionary speaker that offers the best out-loud listening experience for your favorite spatial audio content with Dolby Atmos. (General availability: March 2023) • Five: Our high-fidelity speaker for superior sound. Originally launched as Play:5 (Gen 1) in November 2009 and completely redesigned in November 2015 as Play:5 (Gen 2).
Originally launched as Play:5 (Gen 1) in November 2009 and completely redesigned in November 2015 as Play:5 (Gen 2). (General availability: June 2020) Portables: • Roam 2 : Our ultra-portable, durable, portable smart speaker with Bluetooth and WiFi for listening on the go and at home. Originally introduced as Roam in April 2021.
(General availability: June 2020) Portables: • Roam 2 : Our ultra-portable, durable, portable smart speaker with Bluetooth and WiFi for listening on the go and at home. Originally introduced as Roam in April 2021.
The principal competitive factors in our market include: • brand awareness and reputation; • breadth of product offering; • price; • sound quality; 8 Table of conten ts • multi-room and wireless capabilities; • customer support; • product quality, reliability and design; • ease of setup and use; and • network of technology and content partners.
In some cases, our competitors are also our partners in our product development and resale and distribution channels. 8 Table of contents The principal competitive factors in our market include, but are not limited to: brand awareness and reputation; breadth of product offering; sound quality; product quality, reliability and design; customer support; ease of set up and use; multi-room and wireless capabilities; price; and network of technology and content partners.
Our platform enables customers to easily search and browse for content from a list of more than 100 content partners from around the world including stations, artists, albums, podcasts, audio books, and more. Content partners can connect to Sonos via our platform and find a new and growing audience for their catalogs. • Intuitive and flexible control.
Our platform enables customers to easily search and browse for content from a list of more than 100 content partners from around the world including stations, artists, albums, podcasts, 6 Table of contents audio books, and more.
Our Trueplay technology uses the microphones on an iOS device to analyze room attributes, speaker placement and other acoustic factors to improve sound quality. We also developed Automatic TruePlay to deliver the same audio tuning experience, directly using the microphones integrated to our speakers and make this available to iOS and Android users. • Sonos Voice Control.
We also developed Automatic TruePlay to deliver the same audio tuning experience, directly using the microphones integrated to our speakers and make this available to iOS and Android users. • Sonos Voice Control.
International Trade Commission ("ITC") against Alphabet Inc. ("Alphabet") and Google LLC ("Google") and a counterpart lawsuit in the U.S. District Court for the Central District of California against Google alleging infringement of five Sonos patents. In September 2020, the Company filed another lawsuit against Google alleging infringement of an additional four Sonos patents.
We actively enforce our intellectual property rights when appropriate. In January 2020, we filed a complaint with the U.S. International Trade Commission ("ITC") against Alphabet Inc. ("Alphabet") and Google LLC ("Google") and a counterpart lawsuit in the U.S. District Court for the Central District of California against Google alleging infringement of five Sonos patents.
In addition to cash and equity compensation, we also offer employees benefits such as life and health (medical, dental & vision) insurance, paid time off, paid parental leave, and a 401(k) plan with employer matching. Diversity, Equity and Inclusion .
In addition to cash and equity compensation, we also offer employees benefits such as life and health (medical, dental & vision) insurance, time off, paid parental leave, and a 401(k) plan with employer matching. Global Inclusion . At Sonos, we believe that embracing all voices fuels innovation and allows us to create extraordinary sound experiences that resonate with people everywhere.
Human Capital Sonos is dedicated to creating the ultimate listening experience for our customers, and our employees are critical to achieving this mission. In order to continue to design innovative experiences and products, and compete and succeed in our highly competitive and rapidly evolving market, it is crucial that we continue to attract and retain talented employees.
In order to continue to design innovative experiences and products, and compete and succeed in our highly competitive and rapidly evolving market, it is crucial that we continue to attract and retain talented employees.
Additionally, we own foundational intellectual property in wireless multi-room and other audio technologies and our patent portfolio grows each year. We were included in the Intellectual Property Owners Association's "Top 300 Patent Owners" report for 2023, marking our seventh consecutive year. As of calendar year 2023, we have obtained 1,551 issued patents in the United States.
Additionally, we own foundational intellectual property in wireless multi-room and other audio technologies and the next generation of connected intelligence in the home, and our patent portfolio grows each year. We were included in the Intellectual Property Owners Association's "Top 300 Patent Owners" report for 2024, marking our eighth consecutive year on the list.
Our platform has attracted a broad range of more than 100 streaming content providers, such as Apple Music, Spotify, Deezer, and Pandora. These partners find value in our independent platform and access to our millions of desirable and engaged customers. Our partner ecosystem spans across content, control, and third-party applications: • Content .
These partners find value in our independent platform and access to our millions of desirable and engaged customers. Our partner ecosystem spans across content, control, and third-party applications: • Content .
Our software platform and cloud service enables feature enhancements and delivery of new experiences on an ongoing basis. As a result, the Sonos experience improves for customers over time. Our Partner Ecosystem We have built a platform that attracts partners to enable our customers to play content from their preferred services.
Our software platform and cloud service enables feature enhancements and delivery of new experiences on an ongoing basis. We intend to continually prioritize software update releases to optimize and enhance our app. As a result, the Sonos experience improves for customers over time.
We intend to continue to invest in our marketing and brand development efforts, including investing in capital expenditures on product displays to support our channel marketing through our retail partners. 6 Table of conten ts Manufacturing, Logistics and Fulfillment We outsource the manufacturing of our speakers and components to contract manufacturers, who produce our products based on our design specifications.
We intend to continue to invest in our marketing and brand development efforts. 7 Table of contents Manufacturing, Logistics and Fulfillment We outsource the manufacturing of our speakers and components to contract manufacturers, who produce our products based on our design specifications. Our products are manufactured by contract manufacturers in Vietnam, China and Malaysia.
Our third-party warehouses are located in North America, Australia, Europe, and Asia. We use a small number of logistics providers for substantially all of our product delivery to both distributors and retailers. This approach generally allows us to reduce order fulfillment time, reduce shipping costs, and improve inventory flexibility.
The vast majority of our products are shipped to our third-party warehouses which are then shipped to our distributors, retailers, and directly to our customers. Our third-party warehouses are located in North America, Australia, Europe, and Asia. We use a small number of logistics providers for substantially all of our product delivery to both distributors and retailers.
To establish and protect our proprietary rights, we rely upon a combination of patent, copyright, trade secret and trademark laws, and contractual restrictions such as confidentiality agreements, licenses and intellectual property assignment agreements.
Intellectual property is an important element of our business strategy. We seek to protect our innovations through a combination of patent, copyright, trade secret and trademark laws, as well as contractual measures such as confidentiality, license and intellectual property assignment agreements.
Corporate Information We incorporated in Delaware in August 2002 as Rincon Audio, Inc. and we changed our name to Sonos, Inc. in May 2004.
We are proud to support high-impact nonprofits in Santa Barbara, where our company was founded, and we also work to create positive impact across borders. Corporate Information We incorporated in Delaware in August 2002 as Rincon Audio, Inc. and we changed our name to Sonos, Inc. in May 2004.
In fiscal 2024, existing customers accounted for approximately 44% of new product registrations. As of September 28, 2024, we had a total of nearly 50.4 million products registered in approximately 16.3 million households globally, including the addition of approximately 1.0 million new households during fiscal 2024. Our customers have typically purchased additional Sonos products over time.
As of September 27, 2025, we had a total of nearly 53.4 million products registered in approximately 17.1 million households globally. Our customers have typically purchased additional Sonos products over time. As of September 27, 2025, 61% of our 17.1 million households had registered more than one Sonos product.
We frequently introduce new services and features across our platform, providing our customers with enhanced functionality, improved sound, and an enriched user experience. Since we launched our first product 19 years ago, we have grown our install base by launching innovative new products, delivering a seamless customer experience, and expanding our global footprint.
Since we launched our first product 20 years ago, we have grown our install base by launching innovative new products, delivering a seamless customer experience, and expanding our global footprint. In fiscal 2025, existing customers accounted for approximately 45% of new product registrations.
Replaced Playbar, our first smart soundbar released in April 2013 and Playbase, our powerful sound base for TVs released in 2017. (General availability: June 2020) 4 Table of conten ts • Sub Mini : Our wireless subwoofer which delivers powerful, balanced bass, rich, clear low end frequencies, in a compact cylindrical design.
(General availability: October 2024) • Sub Mini : Our wireless subwoofer which delivers powerful, balanced bass, rich, clear low end frequencies, in a compact cylindrical design. (General availability: October 2022) • Ray : Our smallest, smart soundbar for TV, music, and more.
We are committed to continuous technological innovation as reflected in our growing global patent portfolio. We believe our patents comprise the foundational intellectual property for wireless multi-room and other audio technologies. Our software includes the following key benefits: • Multi-room, multi-service experience.
Our commitment to innovation and technological excellence is reflected in our growing global patent portfolio, which comprises the core intellectual property behind wireless multi-room audio and the next generation of connected intelligence in the home. Our software includes the following key benefits: • Multi-room, multi-service experience.
In accordance with our agreements with our contract manufacturers, they will enter into purchase orders with their upstream suppliers for component inventory necessary to manufacture our products, based on our demand forecasts. The vast majority of our products are shipped to our third-party warehouses which are then shipped to our distributors, retailers, and directly to our customers.
We expect to complete this exit with minimal disruption to our business during fiscal 2026. In accordance with our agreements with our contract manufacturers, they will enter into purchase orders with their upstream suppliers for component inventory necessary to manufacture our products, based on our demand forecasts.
In calendar year 2023 alone, we acquired 229 US patents and are on pace to obtain approximately 200 US patents in calendar year 2024. Seasonality Historically, we have typically experienced the highest levels of revenue in the first fiscal quarter of the year coinciding with the holiday shopping season and our promotional activities.
Seasonality Historically, we have typically experienced the highest levels of revenue in the first fiscal quarter of the year coinciding with the holiday shopping season and our promotional activities. Human Capital Sonos is dedicated to creating the ultimate listening experience for our customers, and our employees are critical to achieving this mission.
Our customers can control their experiences through the Sonos app, voice control, from Sonos devices directly, or an expanding number of third-party apps and smart devices. As our customers navigate across different controllers, our technology synchronizes the control experience across the Sonos platform to deliver the music and entertainment experience they desire. • Smart audio tuning.
Content partners can connect to Sonos via our platform and find a new and growing audience for their catalogs. • Intuitive and flexible control. Our customers can control their experiences through the Sonos app, voice control, from Sonos devices directly, or an expanding number of third-party apps and smart devices.
(General availability: October 2022) • Sub (Gen 3) : Our wireless subwoofer for deep bass. Originally introduced as Sub (Gen 1) in June 2012. (General availability: June 2020) Headphones • Ace : Our first-ever Sonos headphones featuring lossless and spatial audio, Active Noise Cancellation, and extended battery life.
Replaced Playbar, our first smart soundbar released in April 2013 and Playbase, our powerful sound base for TVs released in 2017. (General availability: June 2020) Headphones • Ace : Our first-ever Sonos headphones featuring lossless and spatial audio, Active Noise Cancellation, and extended battery life.
Sonos Speakers Our Sonos speakers category includes our all-in-one speakers, portables, home theater products, and beginning in June 2024, headphones, as follows: All-in-one speakers: • Era 100 : Our powerful smart speaker with improved acoustics and design that delivers detailed stereo sound and deep bass.
(General availability: January 2025) • Era 100 : Our powerful smart speaker with improved acoustics and design that delivers detailed stereo sound and deep bass. Originally launched as One in October 2017 and completely redesigned in March 2023 as Era 100.
Sonos continues to invest in protecting its expanding innovation through ongoing development of its patent portfolio. In addition to its own intellectual property, Sonos also enters into licensing agreements with our third-party partners to provide access to a broad range of technology, services, and content for our customers. In January 2020, the Company filed a complaint with the U.S.
Our patents expire at various times, and no single patent or other intellectual property right is solely responsible for protecting Sonos’ products and services. In addition to our own intellectual property, we also enter into licensing agreements with our third-party partners to provide access to a broad range of technologies, services, and content for our customers.
Our products are manufactured by contract manufacturers in China and Malaysia, and Vietnam. We have continued to maintain diversified contract manufacturing partnerships with more of our production in Malaysia and Vietnam, resulting in savings including tariff avoidance.
We have continued to maintain diversified contract manufacturing partnerships with more of our production in Malaysia and Vietnam. During the third quarter of fiscal 2025, we began the process of exiting a partnership with one of our contract manufacturers to consolidate and improve supply chain efficiency.
We believe we compete favorably with our competitors on the basis of the factors described above. Our leading sound system, proprietary app, open platform, long-term customer base, and intellectual property distinguish us from competitors. We have developed and refined our system for the last 21 years, resulting in significant customer awareness and market share among home audio professionals. .
We have developed and refined our system for the last 22 years, resulting in significant customer awareness, a long-term customer base, and market share among home audio professionals. We are also designed to be independent, serving as the premier platform built to connect across multiple services and formats.
Community Involvement . We aim to enhance the communities where we live and work, and believe that this commitment helps in our efforts to attract and retain employees. We offer employees the opportunity to give back through our Sonos Soundwaves program, which partners with leading non-profits.
Just as we continually optimize our product design for performance, we regularly assess and refine our inclusion strategies to ensure they are meaningful, impactful, and aligned with our evolving business goals. Community Involvement . We aim to enhance the communities where we live and work, and believe that this commitment helps in our efforts to attract and retain talented employees.
While we believe that our active patents and patent applications are an important aspect of our business, we also rely heavily on the innovative skills, technical competence and marketing abilities of our personnel. Competition We compete against established, audio-focused sellers and developers of smart speakers, headphones and sound systems.
Competition We compete against established, audio-focused sellers and developers of smart speakers, headphones and sound systems.
As of September 28, 2024, 39% of our 16.3 million households had registered more than one Sonos product. As of September 28, 2024, our households own 3.1 products on average. Our Products Our portfolio of products encourages customers to uniquely tailor their Sonos sound systems to best meet their sound and design preferences.
Our Products Our portfolio of products encourages customers to uniquely tailor their Sonos sound systems to best meet their sound and design preferences. In fiscal 2025, we introduced Arc Ultra, Sub (Gen 4), and Era 100 Pro.
Additionally, we use independent contractors and temporary personnel to supplement our workforce. Of our full-time employees, 1,235 were in the United States and 473 were in our international locations. Except for our employees in France and the Netherlands, none of our employees are represented by a labor union or covered by a collective bargaining agreement. Compensation and Benefits Program .
With the exception of our employees in France and the Netherlands, who are represented by labor unions and covered by collective bargaining agreements, our workforce is not unionized. Compensation and Benefits Program .
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Item 1: Business Overview Sonos is one of the world's leading sound experience brands. We pioneered multi-room, wireless audio products, debuting the world’s first multi-room wireless sound system in 2005. In June 2024, we introduced Sonos Ace, marking Sonos' entry into the personal listening category.
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Item 1: Business Overview Sonos is a leading audio company dedicated to elevating life through sound. Since pioneering multi-room wireless audio in 2005, Sonos has built a system that unites every dimension of sound - music, movies, stories and conversations - into one connected platform.
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Today, our product lineup includes wireless, portable, and home theater speakers, headphones, components, and accessories to address consumers’ evolving audio needs. We are known for delivering unparalleled sound, thoughtful design aesthetic, simplicity of use, and an open platform.
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The portfolio includes home theater speakers, components, plug-in and portable speakers, and headphones that compound in value with every room and device its customers add. Known for exceptional sound, thoughtful design, ease of use and seamless access to the world’s audio content, Sonos is trusted by more than 17 million households in 60+ countries around the world.
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In fiscal 2024, we introduced Ace, our first-ever headphones and Roam 2, our ultra-portable smart speaker.
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As of September 27, 2025, our households owned 3.13 products on average. In fiscal 2025, we made several executive leadership changes, including the appointment of Tom Conrad as our new Chief Executive Officer in July 2025 following his tenure as interim Chief Executive Officer since January 2025. Under Mr.
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(General availability: February 2019) Partner Products and Other Revenue Our partner products and other revenue category includes our partnerships, accessories, professional services, licensing, and advertising revenue, as follows: • Sonos Pro : Our software-as-a-service subscription offering for commercial audiences.
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Conrad's direction, we have significantly improved our software products, reorganized our operations to improve our efficiency and effectiveness and recommitted to delivering the kind of premium experience our customers expect. With every new product, software feature and integration, the Sonos platform becomes more powerful and provides greater value to our customers.
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(General availability: April 2023) • Audi Partnership : Our first-ever automotive audio partnership delivering Sonos-tuned premium sound experience for the Q4 e-tron and further models including the A1, Q2, and Q3. (General availability: April 2021) • Sonos Radio HD : Our subscription service of ad-free, high-definition streaming tier of our streaming radio, Sonos Radio.
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We started a cost transformation initiative in fiscal 2024 aimed at optimizing our investments for sustainable, long-term growth and to enhance our agility. We have taken steps to streamline, reorganize and flatten our organizational structures, including workforce reductions of approximately 6% in August 2024 (the "2024 restructuring plan") and approximately 12% in February 2025 (the "2025 restructuring plan").
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(General availability: November 2020) • Sonos Radio : Our free, ad-supported streaming radio experience bringing together more than 60,000 stations from multiple streaming partners alongside original programming from Sonos.
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See Note 13. Restructuring and Other Charges in the notes to our consolidated financial statements for further information. Furthermore, we remain focused on additional transformation efforts to improve both our operational efficiency and effectiveness.
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(General availability: April 2020) • Sonos Architectural by Sonance : Our collection of installed passive speakers for indoor and outdoor use designed and optimized for Amp in partnership with Sonance, including in-ceiling, in-wall, and outdoor speakers.
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Additionally, during the third quarter of fiscal 2025, we began the process of exiting a partnership with one of our contract manufacturers to consolidate and improve supply chain efficiency. We expect to complete this exit with minimal disruption to our business by the second quarter of fiscal 2026. We continue to maintain diversified contract manufacturing partnerships.
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(General availability: April 2020) • Accessories : Accessories allow our customers to integrate our products seamlessly into their homes including our custom-designed stands, mounts, shelves, cables, chargers, and more. Our Software Our proprietary software is the foundation of the Sonos sound system and further differentiates our products and services from those of our competitors.
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Macroeconomic environment Our business and financial performance depend significantly on worldwide economic conditions.
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In May 2024, we launched an extensive redesign of our Sonos app. We rebuilt the app from the ground up with the purpose of improving the user experience through a modern user interface and to provide a modular developer platform allowing us to drive more innovation faster in the future.
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We face global macroeconomic challenges such as inflation, ongoing geopolitical conflicts, uncertainty in the financial markets, volatility in exchange rates, low or negative growth in certain regions, declining consumer sentiment of international customers towards U.S.-based companies as a result of U.S. trade policy, and uncertainty in consumer demand.
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Following our launch, some of our customers and partners experienced missing features and performance issues and since May 2024, we have addressed these issues with software updates improving our app's performance and adding back certain features. We intend to continue to prioritize software update releases to optimize and enhance our app.
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In addition, our business may be adversely impacted by the potential expansion of tariffs on goods imported into the U.S., as well as any retaliatory tariffs or policies enacted in other countries or any "trade wars." Global economic and political conditions and uncertainties, including global trade tensions, have caused and may continue to cause volatility in demand for our products as well as cost of materials and logistics, and as a result may impact our results of operations.
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Our Growth Strategies Key elements of our growth strategy include: Continued introduction of innovative products and services and expansion into new categories. Since 2005, we have released products in multiple audio categories. To address our market opportunity, we have developed a long-term roadmap to deliver innovative products, services and software enhancements, and expand into new categories.
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We are continuing to evaluate and implement mitigating actions, including taking measures to manage our expenses and contain costs, leveraging our supply chain flexibility and evaluating potential pricing and promotion strategies. Our Purpose Our purpose is to elevate life through sound.
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For example, in fiscal 2024, we introduced Ace, marking our entry into the personal listening category. We intend to continue to introduce products and services across multiple categories. Expansion of direct-to-consumer efforts and building relationships with existing channel partners and prospective customers.
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We deliver this through the Sonos system, which unites every dimension of sound - music, movies, stories, and conversations - into one connected platform. The Sonos system is independent by design and is the premier platform to connect first and third party experiences with incredible audio.
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We believe growing our own e-commerce channel will continue to be important to supporting our overall growth and profitability as consumers continue the shift from physical to online sales channels. We are investing in our e-commerce capabilities and in-app experience to drive direct sales.
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We bring together Bluetooth, Airplay, Spotify Connect, and analog sources alongside formats like Dolby Atmos and lossless audio to uniquely deliver every dimension of sound. As our platform grows, its value to our customer compounds: stronger with scale, smarter through continual evolution, and more essential to our customers over time.
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In fiscal 2024 and 2023, sales through our direct-to-consumer channel, primarily through sonos.com, represented 22.9% and 23.8% of our total revenue, respectively. We expect that our partnerships with third-party retailers will continue to be an important part of our ecosystem.
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Our Strategy The Sonos platform occupies a unique and trusted position in our customers’ homes. Our hardware and software roadmaps are designed to build on this position in the home to deliver a set of exceptional experiences that make Sonos even more relevant and 4 Table of contents beloved in the eyes of our customers.
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We will continue to seek retail partners that can deliver differentiated in-store and e-commerce experiences to support customer demand for product demonstrations. Additionally, we intend to expand and strengthen our partnerships with custom installers who are valuable to our customer base and contribute to our new household growth.
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Our growth strategy is underpinned by a compounding model built on generating new households and increasing lifetime value. Generating New Households We aim to expand our installed base by introducing Sonos to more homes around the world.
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In fiscal 2024 and 2023, we generated 21.6% and 20.7%, respectively, of total revenue through our installer solutions channel. Expansion of our partner ecosystem to enhance platform . We believe our partner ecosystem improves customer experience, attracting more customers to Sonos, which in turn attracts more partners to the platform, further enhancing customer experience.
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This includes developing compelling gateway products, executing sharper and more resonant marketing campaigns that articulate our brand story, and continuing our international expansion efforts. Increasing Lifetime Value We seek to deepen relationships with existing households by growing their Sonos systems over time: adding new rooms, new products, or more comprehensive room setups.
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We intend to deepen our relationships with our current partners and expand our partner ecosystem by providing our customers access to streaming music services, voice assistants, internet radio, podcasts and audiobook content. Continued cultivation of customer experience with existing customers .
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As of the end of fiscal 2025, the average Sonos household owned 3.13 products, and multi-product households averaged 4.49 products—a meaningful opportunity relative to what we believe represents a fully built-out Sonos home. Lifetime value is more than just how many products a household owns; it also reflects the horizon over which they are investing in their Sonos systems.
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Our ability to sell additional products to existing customers is a key part of our business model, as follow-on purchases indicate high customer engagement and satisfaction, decrease the likelihood of competitive substitution, and result in higher customer lifetime value. Our differentiated customer experience has cultivated a long-term, passionate, and engaged customer base.
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We aim for households to upgrade, expand and enjoy our products for years. To do this we will keep systems fresh and relevant through reliable software updates, delivering superior customer service, and bringing product innovations to market that inspire system upgrades.
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Coupled with our continuous improvements and enhancements to our products and software, this has driven momentum in our flywheel, prompting existing customers to add more products to their homes while we continually introduce new ones. In fiscal 2024, existing households represented approximately 44% of new product registrations.
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Sonos Speakers Our Sonos speakers category includes our all-in-one speakers, portables, home theater products, and headphones, as follows: All-in-one speakers: • Era 100 Pro : Our first-ever speaker optimized for professional installation for light-commercial and residential spaces offering simplified setup with PoE+ (power over Ethernet) for a wired-first connection and a new software tool to manage larger scale installations.
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As we execute on our product roadmap to address evolving consumer preferences, we believe we can expand the number of products in our customers’ homes. We will continue to innovate and invest in product development in order to enhance customer experience and drive sales of additional products to existing customers. Expansion into new and existing geographic markets.
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(General availability: September 2023) Home theater: • Arc Ultra : Our most advanced premium smart soundbar featuring breakthrough Sound Motion™ technology for deeper bass, more precise sound placement and greater immersion than the previous generation Arc in a smaller package.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe experience seasonal demand for our products, and if our sales in high-demand periods are below our forecasts, our overall financial condition and operating results could be adversely affected. Our business is seasonal, and we have historically experienced significantly higher revenue in our first fiscal quarter due to increased consumer spending patterns during the holiday season.
Biggest changeThe failure of any significant investment or initiative could materially adversely affect our business, reputation, results of operations and financial condition. We experience seasonal demand for our products, and if our sales in high-demand periods are below our forecasts, our overall financial condition and operating results could be adversely affected.
This subjects us to a variety of risks inherent in doing business internationally, including: • fluctuations in currency exchange rates and costs of imposing currency exchange controls; • political, social and/or economic instability; • tariffs, trade barriers and duties; • protectionist laws and business practices that favor local businesses in some countries; • higher levels of credit risk and payment fraud and longer payment cycles associated with, and increased difficulty of payment collections from certain international customers; • burdens and risks of complying with a number and variety of foreign laws and regulations, including the Foreign Corrupt Practices Act; • laws and regulations may change from time to time unexpectedly and may be unpredictably enforced; • potential negative consequences from changes in or interpretations of U.S. and foreign tax laws; • the cost of developing connected products for countries where Wi-Fi technology has been passed over in favor of more advanced cellular data networks; • reduced protection for intellectual property rights in some countries; • difficulties and associated costs in managing and staffing multiple international locations; and • delays from customs brokers or government agencies.
This subjects us to a variety of risks inherent in doing business internationally, including: • fluctuations in currency exchange rates and costs of imposing currency exchange controls; • political, social and/or economic instability; • tariffs, trade barriers and duties; • protectionist laws and business practices that favor local businesses in some countries; • higher levels of credit risk and payment fraud and longer payment cycles associated with, and increased difficulty of payment collections from certain international customers; • burdens and risks of complying with a number and variety of foreign laws and regulations, including the Foreign Corrupt Practices Act; 16 Table of contents • laws and regulations may change from time to time unexpectedly and may be unpredictably enforced; • potential negative consequences from changes in or interpretations of U.S. and foreign tax laws; • the cost of developing connected products for countries where Wi-Fi technology has been passed over in favor of more advanced cellular data networks; • reduced protection for intellectual property rights in some countries; • difficulties and associated costs in managing and staffing multiple international locations; and • delays from customs brokers or government agencies.
If we are unable to effectively sell our products due to conflicts with our distribution partners or the inability to find alternative distribution channels, our business would be harmed. The expansion of our direct-to-consumer channel could alienate some of our channel partners.
If we are unable to effectively sell our products due to conflicts with our distribution partners or the inability to find alternative distribution channels, our business would be harmed. Any expansion of our direct-to-consumer channel could alienate some of our channel partners.
For example, in January 2020 we filed a complaint with the ITC against Alphabet and Google and a counterpart lawsuit in the U.S. District Court for the Central District of California against Google alleging infringement of five Sonos patents, and in September 2020 we filed another lawsuit against Google alleging infringement of an additional four Sonos patents. See Note 13.
For example, in January 2020 we filed a complaint with the ITC against Alphabet and Google and a counterpart lawsuit in the U.S. District Court for the Central District of California against Google alleging infringement of five Sonos patents, and in September 2020 we filed another lawsuit against Google alleging infringement of an additional four Sonos patents. See Note 12.
While we regularly assess the likelihood of favorable or unfavorable outcomes resulting from examinations by the IRS and other tax authorities to determine the adequacy of our provision for income taxes, there can be no assurance that the actual outcome resulting from these examinations will not materially adversely affect our financial condition and results of operations.
While we regularly assess the likelihood of favorable or unfavorable outcomes resulting from examinations by the IRS and other tax authorities to determine the adequacy of our provision for income taxes, there can be no assurance that the actual outcome resulting from these examinations will not materially adversely affect our financial condition and 19 Table of contents results of operations.
Our process for tracking these metrics may change over time, including to improve their accuracy, which could result in unexpected changes to the data reported. As our business develops, we may revise or cease reporting certain metrics if we determine that such metrics are no longer accurate or appropriate measures of our performance.
Our process for tracking these metrics may change over time, including to improve their accuracy, which could result in unexpected changes to the data reported. As our business develops, 18 Table of contents we may revise or cease reporting certain metrics if we determine that such metrics are no longer accurate or appropriate measures of our performance.
However, these investments may not yield the innovation or the results expected on a timely basis, or our competitors may surpass us in technological innovation, hindering our ability to timely commercialize new and competitive products that meet the needs and demands of the market, which consequently may adversely impact our operating results as well as our reputation.
However, these investments may not yield the innovation or the results expected on a timely basis, or our competitors may surpass us in technological innovation, hindering our 12 Table of contents ability to timely commercialize new and competitive products that meet the needs and demands of the market, which consequently may adversely impact our operating results as well as our reputation.
As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable. Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products and services and consumer demand for our products and services may not grow as we expect.
As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable. Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products and services and consumer demand for our products and services may not 11 Table of contents grow as we expect.
If we or those with whom we share information fail to comply with laws and regulations, such as the General Data Protection Regulation ("GDPR") and California Consumer Privacy Act ("CCPA"), our 18 Table of conten ts reputation could be damaged, possibly resulting in lost business, and we could be subjected to additional legal risk or financial losses as a result of non-compliance.
If we or those with whom we share information fail to comply with laws and regulations, such as the General Data Protection Regulation ("GDPR") and California Consumer Privacy Act ("CCPA"), our reputation could be damaged, possibly resulting in lost business, and we could be subjected to additional legal risk or financial losses as a result of non-compliance.
We may require additional equity or debt financing to fund our operations and capital expenditures. Our ability to obtain financing will depend, among other things, on our development efforts, business plans, operating performance and the condition of the capital markets at the time we seek financing.
We may require additional equity or debt financing to fund our operations and capital expenditures. Our ability to obtain financing will depend, among other things, on our 21 Table of contents development efforts, business plans, operating performance and the condition of the capital markets at the time we seek financing.
We use AI in our business, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations. We have in the past and may in the future incorporate AI, including generative AI, into our products, services and business.
We use AI in our business, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations. We have in the past and may in the future incorporate AI, including generative AI, internally for business purposes and into our products and services.
System failures and disruptions could impede the manufacturing and shipping of products, functionality of our products, transactions processing and financial reporting, and result in the loss of intellectual property or data, require substantial repair costs and damage our reputation, competitive position, financial condition and results of operations.
System failures and disruptions 17 Table of contents could impede the manufacturing and shipping of products, functionality of our products, transactions processing and financial reporting, and result in the loss of intellectual property or data, require substantial repair costs and damage our reputation, competitive position, financial condition and results of operations.
Any material disruption in our relationship with our manufacturers would harm our ability to compete effectively and satisfy demand for our products and could adversely impact our revenue, gross margin and operating results. 15 Table of conten ts Beginning in fiscal 2020, we have engaged in efforts to diversify our supply chain through the addition of new contract manufacturers and geographic diversification.
Any material disruption in our relationship with our manufacturers would harm our ability to compete effectively and satisfy demand for our products and could adversely impact our revenue, gross margin and operating results. Beginning in fiscal 2020, we have engaged in efforts to diversify our supply chain through the addition of new contract manufacturers and geographic diversification.
Any of these catastrophic events, whether in the United States or abroad, may have a strong negative impact on the global economy, us, our contract manufacturers, our suppliers or 21 Table of conten ts customers, and could decrease demand for our products, create delays and inefficiencies in our supply chain and make it difficult or impossible for us to deliver products to our customers.
Any of these catastrophic events, whether in the United States or abroad, may have a strong negative impact on the global economy, us, our contract manufacturers, our suppliers or customers, and could decrease demand for our products, create delays and inefficiencies in our supply chain and make it difficult or impossible for us to deliver products to our customers.
We may not be 13 Table of conten ts able to prevent infringement of our proprietary rights without incurring substantial expense. Such infringement could have a material adverse effect on our brand, business, financial condition and results of operations. We have initiated legal proceedings to protect our intellectual property rights, and we may file additional actions in the future.
We may not be able to prevent infringement of our proprietary rights without incurring substantial expense. Such infringement could have a material adverse effect on our brand, business, financial condition and results of operations. We have initiated legal proceedings to protect our intellectual property rights, and we may file additional actions in the future.
In the event that actual demand for our products differs from our forecast, we may end up with excess component inventory, as we saw in fiscal 2024, negatively impacting our working capital. We also use a small number of logistics providers for substantially all our product delivery to both distributors and retailers.
In the event that actual demand for our products differs from our forecast, we may end up with excess component inventory, negatively impacting our working capital. We also use a small number of logistics providers for substantially all our product delivery to both distributors and retailers.
If we determine that a product does not meet product quality standards or may contain a defect, the launch of such product could be delayed until we remedy 16 Table of conten ts the quality issue or defect. The costs associated with any protracted delay necessary to remedy a quality issue or defect in a new product could be substantial.
If we determine that a product does not meet product quality standards or may contain a defect, the launch of such product could be delayed until we remedy the quality issue or defect. The costs associated with any protracted delay necessary to remedy a quality issue or defect in a new product could be substantial.
If one of these providers were to experience financial difficulties or disruptions in its business, or be subject to closures or other disruptions, our own operations could be adversely affected.
If one of these providers were to experience financial difficulties or disruptions in its business, or be subject to closures or other 15 Table of contents disruptions, our own operations could be adversely affected.
Although in certain instances our agreements with certain suppliers allow us the option to cancel, reschedule, and adjust our requirements based on our business needs, our loss contingencies may include liabilities for contracts that we cannot cancel, reschedule or adjust with suppliers or partners.
Although certain of our supplier agreements allow us the option to cancel, reschedule, and adjust our requirements based on our business needs, our loss contingencies may include liabilities for contracts that we cannot cancel, reschedule or adjust with suppliers or partners.
We have operations outside the United States and generate a significant portion of our revenue from international sales. Our products are sold in more than 60 countries and, in fiscal 2024, 38.7% of our revenue was generated outside the United States.
We have operations outside the United States and generate a significant portion of our revenue from international sales. Our products are sold in more than 60 countries and, in fiscal 2025, 40.7% of our revenue was generated outside the United States.
We have incurred operating losses in the past, may incur operating losses in the future, and may not achieve a return to profitability in the future. Although we were profitable in fiscal 2021 and fiscal 2022, we had a net loss of $10.3 million in fiscal 2023 and a net loss of $38.1 million in fiscal 2024.
We have incurred operating losses in the past, may incur operating losses in the future, and may not achieve a return to profitability in the future. Although we were profitable in fiscal 2022, we had net losses of $10.3 million, $38.1 million and $61.1 million in fiscal 2023, fiscal 2024 and fiscal 2025, respectively.
Our products and services may be considered consumer discretionary items. Factors affecting the level of consumer spending for consumer discretionary items include general economic conditions, including the potential for an extended global recession, global economic and political uncertainty, continued inflationary pressures, high interest rates, consumer confidence and, in certain markets, foreign currency exchange rate fluctuations.
Factors affecting the level of consumer spending for consumer discretionary items include general economic conditions, including the potential for an extended global recession, global economic and political uncertainty, continued inflationary pressures, high interest rates, consumer confidence and, in certain markets, foreign currency exchange rate fluctuations.
Conflicts with our technology partners could harm our business and operating results. Certain of our products incorporate the technologies of our partners.
Conflicts with our technology partners could harm our business and operating results. 14 Table of contents Certain of our products incorporate the technologies of our partners.
We may also deem it necessary or advisable to renegotiate agreements with our supply partners in order to scale our inventory with demand. 11 Table of conten ts Global economic conditions and any associated impact on consumer discretionary spending could have a material adverse effect on our business, results of operations and financial condition.
We may also deem it necessary or advisable to renegotiate agreements with our supply partners in order to scale our inventory with demand. Global economic conditions and any associated impact on consumer discretionary spending could have a material adverse effect on our business, results of operations and financial condition. Our products and services may be considered consumer discretionary items.
Our contracts with our channel partners allow them to exercise significant discretion in the placement and promotion of our products, and such contracts do not contain any long-term volume commitments.
We compete with other consumer products for placement and promotion of our products in the stores of our channel partners. Our contracts with our channel partners allow them to exercise significant discretion in the placement and promotion of our products, and such contracts do not contain any long-term volume commitments.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business. We do not intend to pay dividends for the foreseeable future.
If we are unable to compete with these consolidated companies or if consolidation in the market disrupts our partnerships or reduces the number of companies we partner with, our business would be adversely affected.
If we are unable to compete with these consolidated companies or if consolidation in the market disrupts our partnerships or reduces the number of companies we partner with, our business would be adversely affected. Our investments in research and development may not yield the results expected.
Operational Risks We are dependent on a limited number of contract manufacturers to manufacture our products and our efforts to diversify manufacturers may not be successful. We depend on a limited number of contract manufacturers to manufacture our products, with our key manufacturer, Inventec Appliances Corporation, manufacturing a majority of our products.
Operational Risks We are dependent on a limited number of contract manufacturers to manufacture our products and our efforts to diversify manufacturers may not be successful. We depend on a limited number of contract manufacturers to manufacture our products.
If we are unsuccessful in pursuing producers or sellers of counterfeit products, continued sales of these products could adversely impact our brand, business, financial condition and results of operations.
We have and may in the future discover unauthorized products in the marketplace that are counterfeit reproductions of our products. If we are unsuccessful in pursuing producers or sellers of counterfeit products, continued sales of these products could adversely impact our brand, business, financial condition and results of operations.
If the quality and user experience of the Sonos app and related services do not meet the expectations of our customers and partners, or if we cannot successfully address the concerns raised by our customers and partners related the redesigned Sonos app, our operating results, financial condition, customer or partner relationships and reputation may be further adversely impacted.
If the quality and user experience of the Sonos app and operating system do not meet the expectations of our customers and partners, our operating results, financial condition, customer or partner relationships and reputation may be further adversely impacted.
Following the launch of our redesigned Sonos app, certain of our customers and partners experienced missing features and performance issues, including trouble with set up and general unreliability.
In particular, following the May 2024 launch of an extensive redesign of our Sonos app and operating system, certain of our customers and partners experienced missing features and performance issues, including trouble with set up and general unreliability.
Accordingly, if we cannot properly manage the introduction of new products and services, our operating results, financial condition, customer or partner relationships and reputation may be adversely impacted.
New products and services can also affect the sales and profitability of existing products and services as they may replace sales or shorten the life cycle of existing products and services. Accordingly, if we cannot properly manage the introduction of new products and services, our operating results, financial condition, customer or partner relationships and reputation may be adversely impacted.
Legal and Regulatory Risks Changes in international trade policies, including the imposition of tariffs have had, and may continue to have, an adverse effect on our business, financial condition and results of operations.
Legal and Regulatory Risks Changes in international trade policies, including the imposition of tariffs, have had, and may continue to have, an adverse effect on our business, financial condition and results of operations. Starting in 2018, the U.S. government imposed significant tariffs on China for U.S.-bound goods in our product categories.
Due to advanced technological innovation and the relative ease of technology imitation, new products and services tend to become standardized more rapidly, leading to more intense competition and ongoing price erosion.
Our business operates in intensely competitive markets characterized by changing consumer preferences and rapid technological innovation. Due to advanced technological innovation and the relative ease of technology imitation, new products and services tend to become standardized more rapidly, leading to more intense competition and ongoing price erosion.
Given the seasonal nature of our sales, accurate forecasting is critical to our business. Any shortfalls in expected first fiscal quarter revenue could cause our annual operating results to suffer significantly.
Our business is seasonal, and we have historically experienced significantly higher revenue in our first fiscal quarter due to increased consumer spending patterns during the holiday season. Given the seasonal nature of our sales, accurate forecasting is critical to our business. Any shortfalls in expected first fiscal quarter revenue could cause our annual operating results to suffer significantly.
Also, if we fail to keep pace with rapidly evolving technological developments in artificial intelligence, our competitive position and business results may suffer. 17 Table of conten ts As with many innovations, the use of AI may lead to challenges, concerns and risks that are significant or that we may not be able to predict, especially if our use of these technologies in our products and services becomes more important to our operations over time.
As with many innovations, the use of AI may lead to challenges, concerns and risks that are significant or that we may not be able to predict, especially if our use of these technologies in our products and services becomes more important to our operations over time.
There are provisions in our restated certificate of incorporation and restated bylaws that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control were considered favorable by our stockholders.
Certain provisions in our corporate charter documents and under Delaware law may prevent or hinder attempts by our stockholders to change our management or to acquire a controlling interest in us. 20 Table of contents There are provisions in our restated certificate of incorporation and restated bylaws that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control were considered favorable by our stockholders.
These issues with the app have led to increased customer complaints and dissatisfaction, including complaints expressed publicly on social media and elsewhere, and we believe that the app rollout has led to decreased sales of our existing products and reputational harm. Since May 2024, we addressed these issues with software updates to improve performance and add back certain features.
These issues with the app resulted in increased customer complaints and dissatisfaction, including complaints expressed publicly on social media and elsewhere, and we believe that the app rollout led to decreased sales of our existing products and reputational harm.
Going forward, we intend to prioritize software update releases to optimize and enhance our app. We cannot guarantee that we will be able to release software updates on a cadence or with results that meet the expectations of our customers and partners.
We cannot guarantee that we will be able to release software updates and enhancements that are error-free or that are on a cadence or with results that meet the expectations of our customers and partners.
As of September 28, 2024, we had gross state net operating loss carryforwards of $33.4 million, which expire beginning in 2032, as well as $39.9 million in foreign net operating loss carryforwards with an indefinite life.
As of September 27, 2025, we had gross state net operating loss carryforwards of $58.2 million, which expire beginning in 2032, as well as $37.8 million in foreign net operating loss carryforwards with an indefinite life.
As of September 28, 2024, we also had U.S. federal research and development tax credit carryforwards as filed of $37.6 million, and state research and development tax credit carryforwards as filed of $48.0 million, which will expire beginning in 2041 and 2026, respectively.
As of September 27, 2025, we also had U.S. federal research and development tax credit carryforwards as filed of $30.1 million, and state research and development tax credit carryforwards as filed of $50.2 million, which will expire beginning in 2042 and 2026, respectively.
Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. In addition, the terms of our credit facilities contain restrictions on our ability to declare and pay cash dividends on our capital stock.
Any determination to pay dividends in the future will be at the discretion of our Board of Directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
The success of the streaming music market depends on the quality, reliability and adoption of streaming technology and on the continued success of streaming music services such as Apple Music, Spotify, Deezer, and Pandora.
Accordingly, we believe our future revenue growth will depend in part on the continued expansion of the market for streaming music. The success of the streaming music market depends on the quality, reliability and adoption of streaming technology and on the continued success of streaming music services such as Apple Music, Spotify, Deezer, and Pandora.
This risk is heightened with respect to introduction of new products and services planned for release during the holiday shopping season during which we typically see a significant increase in consumer spending patterns. We face risks related to the adoption and operations of our redesigned Sonos app.
This risk is heightened with respect to introduction of new products and services planned for release during the holiday shopping season during which we typically see a significant increase in consumer spending patterns. We must regularly update and enhance our proprietary software, which could result in software errors or other implementation issues.
We do not intend to pay dividends for the foreseeable future. 20 Table of conten ts We have never declared or paid any cash dividends on our common stock, and we do not intend to pay any cash dividends in the foreseeable future.
We have never declared or paid any cash dividends on our common stock, and we do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all our future earnings for use in the development of our business and for general corporate purposes.
Any damage to our brand or reputation may adversely affect our business, financial condition and operating results. We sell our products through a limited number of key channel partners, and the loss of any such channel partner would adversely impact our business. We are dependent on our channel partners for a vast majority of our product sales.
We sell our products through a limited number of key channel partners, and the loss of any such channel partner would adversely impact our business. We are dependent on our channel partners for a vast majority of our product sales. Best Buy, one of our key channel partners, accounted for 14% of our revenue in fiscal 2025.
In addition, certain of our customers and partners experienced performance issues with our redesigned Sonos app launched in May 2024, which has negatively affected, and could further negatively affect, our brand and reputation. See "We face risks related to the adoption and operations of our redesigned Sonos app" above for further details.
In addition, certain of our customers and partners experienced performance issues with our redesigned Sonos app launched in May 2024, which has negatively affected, and could further negatively affect, our brand and reputation. Any damage to our brand or reputation may adversely affect our business, financial condition and operating results.
For example, our AI-related efforts, particularly those related to generative AI, subject us to risks related to accuracy, intellectual property infringement or misappropriation, data privacy, and cybersecurity, among others.
For example, our AI-related efforts, particularly those related to generative AI, subject us to risks related to accuracy, intellectual property infringement or misappropriation, data privacy, and cybersecurity, among others. AI solutions, including generative AI, may create output that appears correct but is inaccurate, biased or otherwise flawed, or that infringes or otherwise violates intellectual property or other rights.
In the event of expansion of trade restrictions, the imposition of future tariffs on imports of our products or other government actions related to tariffs or trade agreements, our business may be impacted and we may be required to raise prices or make changes to our operations, any of which could materially harm our revenue or operating results.
In the event of an expansion of trade restrictions, the imposition of future tariffs on the import of our products or other governmental actions related to tariffs or trade agreements, our business and results of operations may be adversely impacted.
Our competition includes established, well-known sellers of audio products such as Bose, Samsung (and its subsidiaries Harman International and JBL), Sony, Bang & Olufsen, Sennheiser, Apple, Google, Amazon, and Masimo (and its subsidiary Sound United that owns, among others, the Denon, Polk Audio and Bowers and Wilkens brands).
Our competition includes established, well-known sellers of audio products such as Bose, Samsung (and its subsidiaries and brands Harman International, Denon, Polk Audio and Bowers and Wilkens, and JBL), Sony, Bang & Olufsen, Sennheiser, Apple, Google, and Amazon. We could also face competition from new market entrants, some of whom might be current partners of ours.
Companies in the consumer electronics industries own large numbers of patents, copyrights, trademarks, domain names and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property or other rights.
We currently are, and may continue to be, subject to intellectual property rights claims and other litigation which are expensive to support, and if resolved adversely, could have a significant impact on us and our stockholders. 13 Table of contents Companies in the consumer electronics industries own large numbers of patents, copyrights, trademarks, domain names and trade secrets, and frequently enter into litigation based on allegations of infringement, misappropriation or other violations of intellectual property or other rights.
As of September 28, 2024, we had an accumulated deficit of $50.9 million.
As of September 27, 2025, we had an accumulated deficit of $112.1 million.
If any such expansion does not enhance our ability to maintain or grow our revenue or recover any associated development costs, our operating results could be adversely affected. If market demand for streaming music does not grow as anticipated or the availability and quality of streaming services does not continue to increase, our business could be adversely affected.
If market demand for streaming music does not grow as anticipated or the availability and quality of streaming services does not continue to increase, our business could be adversely affected. A large portion of our customer base uses our products to listen to content via subscription-based streaming music services.
Failure to comply with such requirements can subject us to liability, additional costs and reputational harm and, in extreme cases, force us to recall products or prevent us from selling our products in certain jurisdictions. 19 Table of conten ts We may incur costs in complying with changing tax laws in the United States and abroad, which could adversely impact our cash flow, financial condition and results of operations.
Failure to comply with such requirements can subject us to liability, additional costs and reputational harm and, in extreme cases, force us to recall products or prevent us from selling our products in certain jurisdictions.
Commitments and Contingencies of the notes to our consolidated financial statements included elsewhere in this Form 10-K for further details. Further, parties we bring legal action against could retaliate through non-litigious means, which could harm our ability to compete against such parties or to enter new markets.
Further, parties we bring legal action against could retaliate through non-litigious means, which could harm our ability to compete against such parties or to enter new markets. In addition, the regulations of certain foreign countries do not protect our intellectual property rights to the same extent as the laws of the United States.
In October 2021, we entered into a credit agreement with JPMorgan Chase Bank, N.A., Bank of America N.A., Morgan Stanley Senior Funding, Inc., and Goldman Sachs Bank USA (the "Revolving Credit Agreement"), which allows us to borrow up to $100.0 million, with a maturity date of October 2026.
We may need additional capital, and we cannot be certain that additional financing will be available. We are parties to a credit agreement with JPMorgan Chase Bank, N.A., KeyBank National Association and Goldman Sachs Bank USA, which allows us to borrow up to $80.0 million, with a maturity date of October 2030.
In addition, we have relocated a substantial portion of our contract manufacturing from China to Malaysia and Vietnam, mitigating the effects of the Section 301 tariffs on a going forward basis. It remains unclear what the U.S. or foreign governments will do with respect to tariffs, international trade agreements and policies on a short-term or long-term basis.
It remains unclear what actions the U.S. or foreign governments will take with respect to tariffs, international trade agreements and policies on a short-term or long-term basis. The U.S. and other countries may announce new or changed restrictions with little advance notice.
We are a U.S.-based company subject to taxes in multiple U.S. and foreign tax jurisdictions.
We may incur costs in complying with changing tax laws in the United States and abroad, which could adversely impact our cash flow, financial condition and results of operations. We are a U.S.-based company subject to taxes in multiple U.S. and foreign tax jurisdictions.
For example, Google has responded to our legal proceedings by filing multiple patent infringement lawsuits against us in the U.S. District Court for the Northern District of California, cases against us in the ITC, and patent infringement lawsuits against us and our subsidiary Sonos Europe B.V. in various foreign jurisdictions. See Note 13.
For example, Google responded to our legal proceedings by filing multiple patent infringement lawsuits against us domestically and internationally, as well as cases against us in the ITC. See Note 12. Commitments and Contingencies of the notes to our consolidated financial statements included elsewhere in this Form 10-K for further details.
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New products and services can also affect the sales and profitability of existing products and services as they may replace sales or shorten the life cycle 10 Table of conten ts of existing products and services.
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Our proprietary software is the foundation of the Sonos sound system and further differentiates our products and services from those of our competitors. We update and enhance our software on a regular basis, and, despite our quality assurance processes, software errors could be introduced in the process of any such update or enhancement.
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In May 2024, we launched an extensive redesign of our Sonos app and operating system. We did this to provide our customers with a more modern user interface and a modular developer platform that would allow us to deliver new and innovative customer experiences at a faster pace.
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These errors can manifest in any number of ways, including through diminished performance, general unreliability, missing features, security vulnerabilities, or data loss. 10 Table of contents Software errors can lead to increased customer complaints and dissatisfaction with our products and result in a loss of revenue, loss of customer and partner goodwill, and increased costs, any of which could harm our business, operating results and financial condition.
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Further, the issues resulting from the launch of the redesigned Sonos app, as well as the need to manage challenges associated with maintaining and improving the operations of the app, may result, and have resulted, in impacts to other areas of our business.
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Other areas of our business were also impacted, as we delayed the introduction of two new products for a quarter, negatively impacting fiscal 2024 fourth quarter sales, slowed certain product development efforts and incurred short-term costs as part of our efforts to improve the app experience and address the concerns of our customers and partners.
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For example, we delayed the introduction of two new products originally planned for launch in the fourth fiscal quarter of 2024 until October 2024, negatively impacting fourth quarter sales.
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We believe we have substantially addressed these issues with software updates to improve performance and add back certain features. Going forward, we intend to prioritize software update releases to optimize and enhance our app.
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Moreover, we expect to incur short-term costs of up to $30 million as part of our efforts to improve the app experience and address the concerns of our customers and partners, including increasing customer support staff and taking other measures to engage with and support customers and partners.
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Investment in new business strategies could disrupt our ongoing business, present risks not originally contemplated and materially adversely affect our business, reputation, results of operations and financial condition. We have invested, and in the future may invest, in new business strategies and restructuring initiatives.
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We could also face competition from new market entrants, some of whom might be current partners of ours.
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Such endeavors may involve significant risks and uncertainties, including distraction of management from current operations, greater-than-expected liabilities and expenses, economic, political, legal and regulatory challenges associated with operating in new businesses, regions or countries, inadequate return on capital, potential impairment of tangible and intangible assets, and significant write-offs. New ventures are inherently risky and may not be successful.
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Our investments in research and development may not yield the results expected. 12 Table of conten ts Our business operates in intensely competitive markets characterized by changing consumer preferences and rapid technological innovation.
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Additionally, during the third quarter of fiscal 2025, we began the process of exiting a partnership with one of our contract manufacturers to consolidate and improve supply chain efficiency and our business could be disrupted as a result of this transition.
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If we are not successful in continuing to expand our direct-to-consumer sales channel by driving consumer traffic and consumer purchases through our website, our business and results of operations could be harmed.
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Also, if we fail to keep pace with rapidly evolving technological developments in artificial intelligence, our competitive position and business results may suffer.
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We have invested significant resources in our direct-to-consumer sales channel, primarily through our website and our app, and our future growth relies, in part, on our continued ability to attract consumers to this channel, which has and will continue to require significant expenditures in marketing, software development and infrastructure.
Added
AI solutions as part of our products or services may not gain acceptance by our customers and may, in the event of inaccurate, biased or flawed output, may lead to customer dissatisfaction. The use of AI may result in cybersecurity incidents that implicate the personal data of users of AI solutions as well as disclosure of our confidential information.
Removed
If we are unable to continue to drive traffic to, and increase sales through, our website and our app, our business and results of operations could be harmed. The continued success of direct-to-consumer sales through our website is subject to risks associated with e-commerce, many of which are outside of our control.
Added
We received exemptions to almost all of those tariffs until such time as we were able to diversify our supply chain, primarily to Vietnam and Malaysia. As a result, our reliance on China for our U.S.-bound products is expected to be very modest.
Removed
Our inability to adequately respond to these risks and uncertainties or to successfully maintain and expand our direct-to-consumer business via our website and our app may have an adverse impact on our results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeWe use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including professional services firms, cybersecurity software providers, and certain testing firms. 22 Table of conten ts We have processes in place designed to identify and mitigate risks from third-party vendors, including, as appropriate, pre-contractual security assessments and review of contractual terms addressing cybersecurity and data protection.
Biggest changeWe have processes in place designed to identify and mitigate risks from third-party vendors, including, as appropriate, pre-contractual security assessments and review of contractual terms addressing cybersecurity and data protection.
Our enterprise-wide cybersecurity program is managed by a dedicated information security team, led by our Head of Cybersecurity, Risk & Trust (“Head of Cybersecurity”). Our Head of Cybersecurity has almost 25 years of cybersecurity, information governance, and IT experience in the technology industry.
Our enterprise-wide cybersecurity program is managed by a dedicated information security team, led by our Head of Cybersecurity, Risk & Trust (“Head of Cybersecurity”). Our Head of Cybersecurity has over 25 years of cybersecurity, information governance, and IT experience in the technology industry.
Cybersecurity governance Our Board of Directors oversees the management of risks inherent in the operation of our business, with a focus on the most significant risks that we face, including those related to cybersecurity. The Board of Directors has delegated oversight of our cybersecurity program to the Audit Committee.
Cybersecurity governance Our Board of Directors oversees the management of risks inherent in the operation of our business, with a focus on the most significant risks that we face, including those related to cybersecurity. The Board of Directors has delegated oversight of our 22 Table of contents cybersecurity program to the Audit Committee.
The response plan includes procedures for identifying, containing, and responding to cybersecurity incidents. Our ability to respond to cybersecurity incidents is tested on a recurring basis.
The response plan includes procedures for identifying, containing, and responding to cybersecurity incidents. Our ability to respond to cybersecurity incidents is tested on a recurring basis. We use third-party service providers to assist us from time to time to identify, assess, and manage material risks from cybersecurity threats, including professional services firms, cybersecurity software providers, and certain testing firms.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed2 unchanged
Biggest changeItem 3. Legal Proceedings From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Other than the matters described in Note 13. Commitments and Contingencies of the notes to our consolidated financial statements included in Part II.
Biggest changeItem 3. Legal Proceedings From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. Other than the matters described in Note 12. Commitments and Contingencies of the notes to our consolidated financial statements included in Part II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+1 added−3 removed3 unchanged
Biggest changePeriod Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (2) Jun 30- Jul 27 18,912 $ 14.76 18,912 $ 71,069 Jul 28 - Aug 24 — $ — — $ 71,069 Aug 25 - Sep 28 — $ — — $ 71,069 Total 18,912 18,912 (1) In November 2023, the Board authorized a common stock repurchase program of up to $200 million.
Biggest changePeriod Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) (2) Jun 29- Jul 26 — $ — — $ 150,000 Jul 27 - Aug 23 844,679 $ 13.21 844,679 $ 138,845 Aug 24 - Sep 27 677,337 $ 13.60 677,337 $ 129,633 Total 1,522,016 1,522,016 (1) Aggregate purchase price and average price per share exclude commission and excise tax.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information for Our Common Stock Shares of our common stock trade on The Nasdaq Global Select Market under the symbol “SONO.” Holders of Record As of October 31, 2024, there were 4 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information for Our Common Stock Shares of our common stock trade on The Nasdaq Global Select Market under the symbol “SONO.” Holders of Record As of October 27, 2025, there were 3 holders of record of our common stock.
(2) Approximate dollar value of shares that may yet to be purchased under the plans or programs does not include the impact of direct costs incurred to acquire shares. 24 Table of conten ts Stock Performance Graph
See Note 8. Stockholders' Equity of the Company's consolidated financial statements for further information. (2) Approximate dollar value of shares that may yet to be purchased under the plans or programs does not include the impact of direct costs incurred to acquire shares. 24 Table of contents Stock Performance Graph
In addition, the terms of our credit facilities contain restrictions on our ability to declare and pay cash dividends on our capital stock. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities The following table presents information with respect to our repurchase of common stock during the quarter ended September 28, 2024.
In addition, the terms of our credit facilities contain restrictions on our ability to declare and pay cash dividends on our capital stock. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities On November 15, 2023, the Board authorized a common stock repurchase program of up to $200 million (the "2023 Stock Repurchase Program").
Removed
During the twelve months ended September 28, 2024, the Company repurchased 7,796,120 shares for an aggregate purchase price of $128.9 million at an average price of $16.54 per share under the repurchase program. Aggregate purchase price and average price per share exclude commission and excise tax. See Note 9. Stockholders' Equity of the Company's consolidated financial statements for further information.
Added
On February 24, 2025, the Board authorized a new common stock repurchase program of up to $150 million (the "2025 Stock Repurchase Program") resulting in the expiration of the $11.1 million remaining under the 2023 Stock Repurchase Program. The following table presents information with respect to our repurchase of common stock during the quarter ended September 27, 2025.
Removed
The Company withholds shares of common stock from certain employees in connection with the vesting of stock awards issued to such employees to satisfy applicable tax withholding requirements.
Removed
Although these withheld shares are not issued or considered common stock repurchases under the Company's stock repurchase program and therefore are not included in the preceding table, they are treated as common stock repurchases in the Company's financial statements as they reduce the number of shares that would have been issued upon vesting.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

57 edited+14 added−8 removed41 unchanged
Biggest changeThe increase was primarily due to a decrease in product and material costs, decreased inventory-related write-downs, and favorability from product mix, partially offset by higher promotional activity. 29 Table of conten ts Operating Expenses Fiscal Year Ended Change from Prior Fiscal Year September 28, 2024 September 30, 2023 $ % (Dollars in thousands) Research and development $ 298,815 $ 294,445 $ 4,370 1.5 % Restructuring and abandonment costs (1) 5,743 6,556 (813) (12.4) Total research and development $ 304,558 $ 301,001 $ 3,557 1.2 % Percentage of revenue 20.1 % 18.2 % Sales and marketing $ 287,839 $ 261,883 $ 25,956 9.9 % Restructuring and abandonment costs (1) 2,770 5,635 (2,865) (50.8) Total sales and marketing $ 290,609 $ 267,518 $ 23,091 8.6 % Percentage of revenue 19.1 % 16.2 % General and administrative $ 138,912 $ 165,060 $ (26,148) (15.8) % Restructuring and abandonment costs (1) 3,340 3,458 (118) (3.4) Total general and administrative $ 142,252 $ 168,518 $ (26,266) (15.6) % Percentage of revenue 9.4 % 10.2 % Operating expenses $ 725,566 $ 721,388 $ 4,178 0.6 % Restructuring and abandonment costs (1) 11,853 15,649 (3,796) (24.3) Total operating expenses $ 737,419 $ 737,037 $ 382 0.1 % Percent of revenue 48.6 % 44.5 % (1) On August 14, 2024, we initiated a restructuring plan to reduce our cost base (the “2024 restructuring plan”), including a reduction in force involving approximately 6% of our employees.
Biggest changeThe decrease was primarily due to the impact of reorganization efforts, unfavorable channel mix, and increased amortization primarily related to the completion of our Mayht in-process research and development project and related reclassification into finite-lived intangible assets, partially offset by decreased product and material costs. 29 Table of contents Operating Expenses Fiscal Year Ended Change from Prior Fiscal Year September 27, 2025 September 28, 2024 $ % (Dollars in thousands) Research and development $ 279,969 $ 304,558 $ (24,589) (8.1 %) Less restructuring and other charges (1) 12,555 5,743 6,812 118.6 Research and development, net of restructuring and other charges $ 267,414 $ 298,815 $ (31,401) (10.5 %) Sales and marketing $ 281,192 $ 290,609 $ (9,417) (3.2) % Less restructuring and other charges (1) 9,779 2,770 7,009 253.0 Sales and marketing, net of restructuring and other charges $ 271,413 $ 287,839 $ (16,426) (5.7) % General and administrative $ 119,837 $ 142,252 $ (22,415) (15.8) % Less restructuring and other charges (1) 7,736 3,340 4,396 131.6 General and administrative, net of restructuring and other charges $ 112,101 $ 138,912 $ (26,811) (19.3) % Operating expenses $ 680,998 $ 737,419 $ (56,421) (7.7) % Less restructuring and other charges (1) 30,070 11,853 18,217 153.7 Operating expenses, net of restructuring and other charges $ 650,928 $ 725,566 $ (74,638) (10.3) % (1) Restructuring and other charges for fiscal 2025 and fiscal 2024 primarily reflect costs associated with our cost transformation initiatives including the 2024 restructuring plan, 2025 restructuring plan, rationalization of our product roadmap, and non-recurring costs related to write-offs of assets no longer in use, as well as non-recurring CEO transition costs related to modifications to equity awards.
GAAP. For additional information, see the section titled "Non-GAAP Financial Measures" above.
For additional information, see the section titled "Non-GAAP Financial Measures" above.
It also includes licensing costs, such as royalties to third parties, and attributable amortization of acquired developed technology. In addition, we allocate certain costs related to management and facilities, personnel-related expenses, and supply chain logistic costs. Personnel-related expenses consist of salaries, bonuses, benefits, and stock-based compensation expenses.
It also includes licensing costs, such as royalties to third parties, and amortization attributable to acquired developed technology. In addition, we allocate certain costs related to management and facilities, personnel-related expenses, and supply chain logistic costs. Personnel-related expenses consist of salaries, bonuses, benefits, and stock-based compensation expenses.
Interest expense consists primarily of interest expense associated with our debt financing arrangements and amortization of debt issuance costs. Other income, net consists primarily of our foreign currency exchange gains and losses relating to transactions and remeasurement of asset and liability balances denominated in currencies other than the U.S. dollar.
Interest expense consists primarily of interest expense associated with our debt financing arrangements and amortization of debt issuance costs. Other income (expense), net consists primarily of our foreign currency exchange gains and losses relating to transactions and remeasurement of asset and liability balances denominated in currencies other than the U.S. dollar.
We have also determined cloud-based services to be a separate performance obligation based as they are additive to our products rather than transformative. Transaction price Revenue is recognized at transaction price which is the amount that we expect to receive in exchange for our products and services.
We have also determined cloud-based services to be a separate performance obligation as they are additive to our products rather than transformative. Transaction price Revenue is recognized at transaction price which is the amount that we expect to receive in exchange for our products and services.
Inventory write-downs and losses on purchase commitments are recorded as a component of cost of revenue in our consolidated statement of operations and comprehensive income (loss). If actual demand is lower than our forecasted demand, we could be required to write down the value of additional inventory, which would have a negative effect on our gross profit.
Inventory write-downs and losses on purchase commitments are recorded as a component of cost of revenue in our consolidated statement of operations and comprehensive loss. If actual demand is lower than our forecasted demand, we could be required to write down the value of additional inventory, which would have a negative effect on our gross profit.
For a description of our revenue recognition policies, see the section titled "Critical accounting policies and estimates." Products Sold Products sold represents the number of products that are sold during a period, net of returns and includes the sale of products in the Sonos speakers and Sonos system products categories, as well as module units sold through our Partner products and other revenue category.
For a description of our revenue recognition policies, see the section titled "Critical accounting policies and estimates." Products Sold Products sold represents the number of products that are sold during a period, net of returns, and includes the sale of products in the Sonos speakers and Sonos system products categories, as well as architectural speakers and module units sold through our Partner products and other revenue category.
(2) For additional information regarding Adjusted EBITDA and Adjusted EBITDA margin (which are non-GAAP financial measures), including reconciliations of net income (loss), to Adjusted EBITDA, see the sections titled "Adjusted EBITDA and Adjusted EBITDA Margin" and "Non-GAAP Financial Measures" below. Revenue We generate substantially all of our revenue from the sale of Sonos speakers and Sonos system products.
(2) For additional information regarding Adjusted EBITDA and Adjusted EBITDA margin (which are non-GAAP financial measures), including reconciliations of net loss to Adjusted EBITDA, see the sections titled "Adjusted EBITDA and Adjusted EBITDA Margin" and "Non-GAAP Financial Measures" below. Revenue We generate substantially all of our revenue from the sale of Sonos speakers and Sonos system products.
A hypothetical 10% change to our SSP estimates and/or the estimated recognition period for unspecified software upgrades and cloud-based services, would not result in a material change to our fiscal 2024 revenue. Inventories Inventory consists of finished goods and component parts, which we purchase from contract manufacturers and component suppliers.
A hypothetical 10% change to our SSP estimates and/or the estimated recognition period for unspecified software upgrades and cloud-based services, would not result in a material change to our fiscal 2025 revenue. Inventories Inventory consists of finished goods and component parts, which we purchase from contract manufacturers and component suppliers.
The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA and Adjusted EBITDA margin are net income (loss) and net income (loss) margin, respectively.
The most directly comparable financial measure calculated under U.S. GAAP for Adjusted EBITDA and Adjusted EBITDA margin are net loss and net loss margin, respectively.
We define Adjusted EBITDA as net income (loss) adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income (expense), income taxes, legal and transaction related costs, restructuring and abandonment costs, and other items that we do not consider representative of underlying operating performance.
We define Adjusted EBITDA as net income (loss) adjusted to exclude the impact of depreciation and amortization, stock-based compensation expense, interest income, interest expense, other income (expense), income taxes, legal and transaction related costs, restructuring and other charges, and other items that we do not consider representative of underlying operating performance.
Leases and Note 13. Commitments and Contingencies of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP.
Leases and Note 12. Commitments and Contingencies of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP.
The Revolving Credit Agreement provides for (i) a five year senior secured revolving credit facility in the amount of up to $100 million and (ii) an uncommitted incremental facility subject to certain conditions. Proceeds are to be used for working capital and general corporate purposes.
The Revolving Credit Agreement provided for (i) a five year senior secured revolving credit facility in the amount of up to $100 million and (ii) an uncommitted incremental facility subject to certain conditions. Proceeds are to be used for working capital and general corporate purposes.
A hypothetical 10% change to our inventory reserves percentages would not result in a material change to our fiscal 2024 cost of revenue. Income Taxes Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect our best estimate of current and future taxes to be paid.
A hypothetical 10% change to our inventory reserves percentages would not result in a material change to our fiscal 2025 cost of revenue. Income Taxes Our income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect our best estimate of current and future taxes to be paid.
The estimated service period may change in the future in response to competition, technology developments and our business strategy. For fiscal 2024, there has not been any event that would require us to materially change the underlying assumptions of revenue estimates.
The estimated service period may change in the future in response to competition, technology developments and our business strategy. For fiscal 2025, there has not been any event that would require us to materially change the underlying assumptions of revenue estimates.
In the event funds from foreign operations are needed to fund operations in the United States and if U.S. tax has not already been previously provided, we may be required to accrue and pay additional U.S. taxes to repatriate these funds.
In the event funds from foreign operations are needed to fund operations in the United States and if U.S. tax has not already been previously paid, we may be required to accrue and pay additional U.S. taxes to repatriate these funds.
We determined that unspecified software upgrades represent a separate performance obligation as they occur subsequent to the time of purchase, fulfillment of these promises can be made separately, there are no resulting significant modification or customization to our products, and these services are provided to customers at no additional charge.
We determined that unspecified software upgrades represent a separate performance obligation as they occur subsequent to the time of purchase, fulfillment of these promises can be made separately, there are no resulting significant modification or 33 Table of contents customization to our products, and these services are provided to customers at no additional charge.
Estimates for sales incentives are developed using the most likely amount based on our past experience with 33 Table of conten ts similar contracts and are included in the transaction price to the extent that a significant reversal of revenue would not result once the uncertainty is resolved. We accept returns from direct customers and from certain resellers.
Estimates for sales incentives are developed using the most likely amount based on our past experience with similar contracts and are included in the transaction price to the extent that a significant reversal of revenue would not result once the uncertainty is resolved. We accept returns from direct customers and from certain resellers.
See the section titled "Results of Operations —Non-GAAP Financial Measures" for information regarding our use of Adjusted EBITDA and Adjusted EBITDA margin, and a reconciliation of net income (loss) to Adjusted EBITDA and net income (loss) margin to Adjusted EBITDA margin. Non-GAAP Financial Measures To supplement our consolidated financial statements presented in accordance with U.S.
Adjusted EBITDA and Adjusted EBITDA Margin See the section titled "Results of Operations —Non-GAAP Financial Measures" for information regarding our use of Adjusted EBITDA and Adjusted EBITDA margin, and a reconciliation of net income (loss) to Adjusted EBITDA and net income (loss) margin to Adjusted EBITDA margin. 26 Table of contents Non-GAAP Financial Measures To supplement our consolidated financial statements presented in accordance with U.S.
The Revolving Credit Agreement contains customary representations and warranties, customary affirmative and negative covenants, a financial covenant that is tested quarterly and requires us to maintain a certain consolidated leverage ratio, and customary events of default. As of September 28, 2024, we were in compliance with all financial covenants under the Revolving Credit Agreement.
The Revolving Credit Agreement contains customary representations and warranties, customary affirmative and negative covenants, a financial covenant that is tested quarterly and requires us to maintain a certain consolidated leverage ratio, and customary events of default. As of September 27, 2025, we were in compliance with all financial covenants under the Revolving Credit Agreement.
We recorded a valuation allowance against all our U.S. deferred tax assets as of September 28, 2024. We intend to continue maintaining a full valuation allowance on our U.S. deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
We recorded a valuation allowance against all our U.S. deferred tax assets as of September 27, 2025. We intend to continue maintaining a full valuation allowance on our U.S. deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
Significant judgments and estimates are required in the determination of the consolidated income tax expense. We prepare and file income tax returns based on our interpretation of each jurisdiction’s tax laws and regulations.
Significant judgments and estimates are required in the determination of the consolidated income tax expense. 34 Table of contents We prepare and file income tax returns based on our interpretation of each jurisdiction’s tax laws and regulations.
Changes in the recognition 34 Table of conten ts or measurement of uncertain tax positions could result in material increases or decreases in our income tax expense in the period in which we make the change, which could have a material impact on our effective tax rate and operating results.
Changes in the recognition or measurement of uncertain tax positions could result in material increases or decreases in our income tax expense in the period in which we make the change, which could have a material impact on our effective tax rate and operating results.
Growth rates between products sold and revenue are not perfectly correlated because our revenue is affected by other variables, such as the mix of products sold during the period, promotional discount activity, the introduction of new products that may have higher or lower than average selling prices, as well as the impact of recognition of previously deferred revenue.
Growth rates between products sold and revenue are not perfectly correlated because our revenue is affected by other variables, such as the mix of products sold during the period, promotional discount activity, the price at which we sell our products, the introduction of new products that may have higher or lower than average selling prices, the impact of foreign exchange fluctuations, as well as the impact of recognition of previously deferred revenue.
Comparison of Fiscal Years 2023 and 2022 For the comparison of fiscal years 2023 and 2022, refer to Part II, Item 7 "Management's discussion and analysis of financial condition and results of operations" on Form 10-K for our fiscal year ended September 30, 2023, filed with the SEC on November 20, 2023, under the subheading "Comparison of fiscal years 2023 and 2022." Liquidity and Capital Resources Our operations are financed primarily through cash flows from operating activities.
Comparison of Fiscal Years 2024 and 2023 For the comparison of fiscal years 2024 and 2023, refer to Part II, Item 7 "Management's discussion and analysis of financial condition and results of operations" on Form 10-K for fiscal 2024, filed with the SEC on November 15, 2024, under the subheading "Comparison of fiscal years 2024 and 2023." Liquidity and Capital Resources Our operations are financed primarily through cash flows from operating activities.
References to fiscal 2024 are to our 52-week fiscal year ended September 28, 2024, references to fiscal 2023 are to our 52-week fiscal year ended September 30, 2023, references to fiscal 2022 are to our 52-week fiscal year ended October 1, 2022 and references to fiscal 2021 are to our 52-week fiscal year ended October 2, 2021.
References to fiscal 2025 are to our 52-week fiscal year ended September 27, 2025, references to fiscal 2024 are to our 52-week fiscal year ended September 28, 2024, references to fiscal 2023 are to our 52-week fiscal year ended September 30, 2023 and references to fiscal 2022 are to our 52-week fiscal year ended October 1, 2022.
In accordance with our policy, the undistributed earnings of our non-U.S. subsidiaries remain indefinitely reinvested outside of the United States as of September 28, 2024, as they are required to fund needs outside of the United States.
In accordance with our policy, the undistributed earnings of our non-U.S. subsidiaries remain indefinitely reinvested outside of the United States as of September 27, 2025, as they are required to fund needs 31 Table of contents outside of the United States.
As of September 28, 2024, we did not have any outstanding borrowings and $1.8 million in undrawn letters of credit that reduce the availability under the Revolving Credit Agreement. Our obligations under the Revolving Credit Agreement are secured by substantially all of our assets.
As of September 27, 2025, we did not have outstanding borrowings and $2.4 million in undrawn letters of credit that reduce the availability under the Revolving Credit Agreement. Our obligations under the Revolving Credit Agreement are secured by substantially all of our assets.
Cash Flows from Investing Activities Cash used in investing activities of $105.2 million for fiscal 2024, primarily consisted of the purchases of marketable securities of $90.5 million, and purchases of property and equipment of $55.2 million mainly related to point-of-sale product displays, manufacturing-related tooling and test equipment to support the launch of new products, and leasehold improvements, partially offset by cash provided by maturities of marketable securities of $40.5 million.
Cash Flows from Investing Activities Cash used in investing activities of $29.5 million for fiscal 2025, primarily consisted of the purchases of marketable securities of $57.9 million, and purchases of property and equipment of $28.7 million mainly related to point-of-sale product displays, manufacturing-related tooling and test equipment to support the launch of new products, and leasehold improvements, partially offset by cash provided by maturities of marketable securities of $57.1 million.
We also generate a portion of revenue from partner products and other revenue sources, such as architectural speakers from our Sonance partnership, and accessories such as speaker stands and wall mounts, as well as professional services, advertising revenue, licensing and subscription revenue such as Sonos Radio HD and Sonos Pro (software-as-a-service).
We also generate a portion of revenue from partner products and other revenue sources, such as architectural speakers from our Sonance partnership, and accessories such as speaker stands and wall mounts, as well as professional services, advertising revenue, licensing and subscription revenue. Our contracts generally include a combination of products and related software, and services.
General and Administrative General and administrative expenses consist of administrative personnel-related expenses for our finance, legal, human resources and similar personnel, as well as the costs of professional services, information technology, litigation, patents, related overhead, and other administrative expenses. General and administrative expenses decreased $26.3 million, or 15.6%, for fiscal 2024 compared to the fiscal 2023.
General and Administrative General and administrative expenses consist of administrative personnel-related expenses for our information technology, finance, legal, human resources, and similar personnel, as well as the costs of professional services, information technology, litigation, patents, related overhead, and other administrative expenses. 30 Table of contents General and administrative expenses excluding restructuring and other charges decreased $26.8 million, or 19.3%, for fiscal 2025 compared to the fiscal 2024.
GAAP. 27 Table of conten ts The following table presents a reconciliation of net income (loss) to adjusted EBITDA: Fiscal Year Ended September 28, 2024 September 30, 2023 October 1, 2022 (In thousands, except percentages) Net income (loss) $ (38,146) $ (10,274) $ 67,383 Add (deduct): Depreciation and amortization 52,378 48,969 38,504 Stock-based compensation expense 84,294 76,857 75,640 Interest income (11,965) (10,201) (1,655) Interest expense 441 733 552 Other (income) expense, net (9,371) (15,473) 21,905 Provision for income taxes 10,995 14,668 1,347 Legal and transaction related costs (1) 7,383 32,950 22,873 Restructuring, abandonment, and related expenses (2) 11,853 15,649 — Adjusted EBITDA $ 107,862 $ 153,878 $ 226,549 Revenue 1,518,056 1,655,255 1,752,336 Net income (loss) margin (2.5) % (0.6) % 3.8 % Adjusted EBITDA margin 7.1 % 9.3 % 12.9 % (1) Legal and transaction-related costs consist of expenses related to our intellectual property ("IP") litigation against Alphabet and Google as well as legal and transaction costs associated with our acquisition activities, which we do not consider representative of our underlying operating performance.
GAAP. 27 Table of contents The following table presents a reconciliation of net loss to adjusted EBITDA: Fiscal Year Ended September 27, 2025 September 28, 2024 September 30, 2023 (In thousands, except percentages) Net loss $ (61,144) $ (38,146) $ (10,274) Add (deduct): Depreciation and amortization 62,321 52,378 48,969 Stock-based compensation expense 81,564 84,294 76,857 Interest income (6,934) (11,965) (10,201) Interest expense 465 441 733 Other (income) expense, net 6,498 (9,371) (15,473) Provision for income taxes 10,647 10,995 14,668 Legal and transaction related costs (1) 5,384 7,383 32,950 Restructuring and other charges (2) 33,490 11,853 15,649 Adjusted EBITDA $ 132,291 $ 107,862 $ 153,878 Revenue 1,443,276 1,518,056 1,655,255 Net loss margin (4.2) % (2.5) % (0.6 %) Adjusted EBITDA margin 9.2 % 7.1 % 9.3 % (1) Legal and transaction related costs consist of expenses related to our intellectual property ("IP") litigation against Alphabet and Google as well as legal and transaction costs associated with our acquisition activities, which we do not consider representative of our underlying operating performance.
As of September 28, 2024, our principal sources of liquidity consisted of cash flows from operating activities, cash and cash equivalents of $169.7 million, including $36.4 million held by our foreign subsidiaries, marketable securities of $51.4 million, proceeds from the exercise of stock options, and borrowing capacity under the Credit Facility.
As of September 27, 2025, our principal sources of liquidity consisted of cash flows from operating activities, cash and cash equivalents of $174.7 million, including $105.5 million held by our foreign subsidiaries, marketable securities of $52.9 million, proceeds from the exercise of stock options, and borrowing capacity under the Credit Facility.
Cost of Revenue and Gross Profit Fiscal Year Ended Change from Prior Fiscal Year September 28, 2024 September 30, 2023 $ % (Dollars in thousands) Cost of revenue $ 828,683 $ 938,765 $ (110,082) (11.7) % Gross profit $ 689,373 $ 716,490 $ (27,117) (3.8) % Gross margin 45.4 % 43.3 % Cost of revenue consists of product costs, including costs of our contract manufacturers for production, components, shipping and handling, tariffs, duty costs, warranty replacement costs, packaging, fulfillment costs, manufacturing and tooling equipment depreciation, warehousing costs, hosting costs, and excess and obsolete inventory write-downs.
Cost of Revenue and Gross Profit Fiscal Year Ended Change from Prior Fiscal Year September 27, 2025 September 28, 2024 $ % (Dollars in thousands) Cost of revenue $ 812,746 $ 828,683 $ (15,937) (1.9) % Gross profit $ 630,530 $ 689,373 $ (58,843) (8.5) % Gross margin 43.7 % 45.4 % Cost of revenue consists of product costs, including costs of our contract manufacturers for production, components, shipping and handling, tariffs, duty costs, warranty replacement costs, packaging, fulfillment costs, manufacturing and tooling equipment depreciation, warehousing costs, hosting costs, and excess and obsolete inventory write-downs.
We have determined that products and related software represent a single performance obligation. The basis of our determination is these products are highly dependent on, and interrelated with, the embedded software and cannot function as they are intended without the software.
The basis of our determination is these products are highly dependent on, and interrelated with, the embedded software and cannot function as they are intended without the software.
Sales and Marketing Sales and marketing expenses consist primarily of advertising and marketing activity for our products and personnel-related expenses, as well as trade show and event costs, sponsorship costs, consulting and contractor expenses, travel costs, depreciation for product displays, as well as related maintenance and repair expenses, customer experience and technology support tool expenses, revenue related sales fees from our direct-to-consumer business, and overhead costs.
Sales and Marketing Sales and marketing expenses consist primarily of advertising and marketing activity for our products and personnel-related expenses, maintenance and repair expenses for product displays, as well as related depreciation, customer experience expenses, revenue related sales fees from our direct-to-consumer and installer solutions sales channels, and related overhead costs.
Fiscal Year Ended September 28, 2024 September 30, 2023 October 1, 2022 (In thousands, except percentages) Revenue $ 1,518,056 $ 1,655,255 $ 1,752,336 Products sold 5,000 5,725 6,281 Net income (loss) (38,146) (10,274) 67,383 Net income (loss) margin (1) (2.5) % (0.6) % 3.8 % Adjusted EBITDA (2) $ 107,862 $ 153,878 $ 226,549 Adjusted EBITDA margin (2) 7.1 % 9.3 % 12.9 % (1) Net income (loss) margin is calculated by dividing net income (loss) by revenue.
Fiscal Year Ended September 27, 2025 September 28, 2024 September 30, 2023 (In thousands, except percentages) Revenue $ 1,443,276 $ 1,518,056 $ 1,655,255 Products sold 4,625 5,000 5,725 Net loss (61,144) (38,146) (10,274) Net loss margin (1) (4.2) % (2.5) % (0.6 %) Adjusted EBITDA (2) $ 132,291 $ 107,862 $ 153,878 Adjusted EBITDA margin (2) 9.2 % 7.1 % 9.3 % (1) Net loss margin is calculated by dividing net loss by revenue.
Cash Flows Fiscal 2024 Changes in Cash Flows The following table summarizes our cash flows for the periods indicated: Fiscal Year Ended (In thousands) September 28, 2024 September 30, 2023 Net cash provided by (used in): Operating activities $ 189,906 $ 100,406 Investing activities (105,242) (50,286) Financing activities (137,309) (108,592) Effect of exchange rate changes 2,146 3,848 Net decrease in cash, cash equivalents and restricted cash $ (50,499) $ (54,624) Cash Flows from Operating Activities Net cash provided by operating activities of $189.9 million for fiscal 2024 consisted of a net loss of $38.1 million, a favorable impact of non-cash adjustments of $125.3 million, and a favorable impact of net changes in operating assets and liabilities of $102.8 million.
Cash Flows Fiscal 2025 Changes in Cash Flows The following table summarizes our cash flows for the periods indicated: Fiscal Year Ended (In thousands) September 27, 2025 September 28, 2024 Net cash provided by (used in): Operating activities $ 136,869 $ 189,906 Investing activities (29,520) (105,242) Financing activities (102,342) (137,309) Effect of exchange rate changes (71) 2,146 Net increase (decrease) in cash and cash equivalents $ 4,936 $ (50,499) Cash Flows from Operating Activities Net cash provided by operating activities of $136.9 million for fiscal 2025 consisted of a net loss of $61.1 million, non-cash adjustments of $170.1 million, and a favorable impact of net changes in operating assets and liabilities of $27.9 million.
If we were to incur 31 Table of conten ts additional debt financing it would result in increased debt service obligations and the instruments governing such debt could require additional operating and financing covenants that would restrict our operations. Debt Obligations On October 13, 2021, we entered into the Revolving Credit Agreement.
If we were to incur additional debt financing it would result in increased debt service obligations and the instruments governing such debt could require additional operating and financing covenants that would restrict our operations.
We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates. Interest income for fiscal 2024, compared to fiscal 2023, increased primarily due to the allocation of some excess cash into marketable securities and higher yields on our cash and cash equivalents.
We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates. Interest income for fiscal 2025 compared to fiscal 2024 decreased primarily due to lower yields on our cash and cash equivalents combined with lower average cash balances.
Our contracts generally include a combination of products and related software, and services. Products and related software primarily constitute Sonos speakers and Sonos system products and include software that enables our products to operate over a customer’s wireless network as well as connect to various third-party services, including music and voice.
Products and related software primarily constitute Sonos speakers and Sonos system products and include software that enables our products to operate over a customer’s wireless network as well as connect to various third-party services, including music and voice. Additionally, module revenue includes hardware and embedded software that is integrated into final products that are manufactured and sold by our partners.
Provision for Income Taxes Fiscal Year Ended Change from Prior Fiscal Year September 28, 2024 September 30, 2023 $ % (Dollars in thousands) Provision for income taxes $ 10,995 $ 14,668 $ (3,673) (25.0) % Provision for income taxes for fiscal 2024, compared to fiscal 2023, decreased due to a favorable tax ruling on a Dutch Innovation Box application resulting in a revaluation of certain Dutch deferred tax liabilities, a reduction in the amount of net expense subject to capitalization under Section 174 of the U.S.
Provision for Income Taxes Fiscal Year Ended Change from Prior Fiscal Year September 27, 2025 September 28, 2024 $ % (Dollars in thousands) Provision for income taxes $ 10,647 $ 10,995 $ (348) (3.2) % Provision for income taxes for fiscal 2025, compared to fiscal 2024, decreased slightly primarily due to a reduction in the amount of net expense subject to capitalization under Section 174 of the U.S.
Internal Revenue Code, and a reduction in operating income, partially offset by income tax expense in the Netherlands related to an intercompany sale of intellectual property to the U.S.
Internal Revenue Code and a reduction in operating income. The decrease was partially offset by the non-recurrence of favorable tax impacts recognized in fiscal 2024 related to a Dutch Innovation Box ruling and the revaluation of certain Dutch deferred tax liabilities related to an intercompany sale of intellectual property to the U.S.
Comparison of Fiscal Years 2024 and 2023 Revenue Fiscal Year Ended Change from Prior Fiscal Year September 28, 2024 September 30, 2023 $ % (Dollars in thousands) $ % $ % Sonos speakers $ 1,169,604 77.0 % $ 1,293,440 78.1 % $ (123,836) (9.6) % Sonos system products 267,744 17.6 285,064 17.2 (17,320) (6.1) Partner products and other revenue 80,708 5.3 76,751 4.6 3,957 5.2 Total revenue $ 1,518,056 100.0 % $ 1,655,255 100.0 % $ (137,199) (8.3) % Volume data (products sold in thousands) Units % Total products sold 5,000 5,725 (725) (12.7) % Total revenue decreased $137.2 million, or 8.3% for fiscal 2024 compared to fiscal 2023, primarily due to softer demand across all regions due to market conditions and challenges resulting from our recent app rollout, partially offset by the introduction of Ace in June 2024, and the impact of favorable foreign exchange rates.
Comparison of Fiscal Years 2025 and 2024 Revenue Fiscal Year Ended Change from Prior Fiscal Year September 27, 2025 September 28, 2024 $ % (Dollars in thousands) $ $ Sonos speakers $ 1,121,808 $ 1,169,604 $ (47,796) (4.1) % % of total revenue 77.7 % 77.0 % Sonos system products 249,237 267,744 (18,507) (6.9) % of total revenue 17.3 % 17.6 % Partner products and other revenue 72,231 80,708 (8,477) (10.5) % of total revenue 5.0 % 5.3 % Total revenue $ 1,443,276 $ 1,518,056 $ (74,780) (4.9) % Volume data (products sold in thousands) Units % Total products sold 4,625 5,000 (375) (7.5) % Total revenue decreased $74.8 million, or 4.9% for fiscal 2025 compared to fiscal 2024, driven by challenges resulting from our app rollout in May 2024 and softer demand due to market conditions, partially offset by the introduction of Arc Ultra in October 2024.
The net increase in cash from the change in operating assets and liabilities was primarily due to a decrease in inventories of $106.1 million as the result of measures taken to more efficiently manage inventory and the implementation of new payment terms with suppliers, and a decrease in accounts receivable of $23.0 million.
The net increase in cash from the change in operating assets and liabilities was primarily due to a decrease in inventories of 32 Table of contents $51.7 million as the result of measures taken to more efficiently manage inventory, a decrease in other assets of $10.5 million, and an increase in accrued compensation of $5.2 million.
Unspecified software upgrades have historically included updates and enhancements such as bug fixes, feature enhancements and updates to the ability to connect to third-party music or voice assistant platforms. Performance Obligations Determining whether products and services are considered distinct performance obligations that should be accounted for separately requires significant judgment.
Service revenue includes revenue allocated to (i) unspecified software upgrades and (ii) cloud-based services that enable products to access third-party music and voice assistant platforms. Unspecified software upgrades have historically included updates and enhancements such as bug fixes, feature enhancements and updates to the ability to connect to third-party music or voice assistant platforms.
Interest expense for fiscal 2024, compared to fiscal 2023, decreased primarily due to reduced expenses associated with our Revolving Credit Agreement. The decrease in other income, net for fiscal 2024, compared to fiscal 2023, was primarily due to foreign currency exchange fluctuations.
Interest expense for fiscal 2025, compared to fiscal 2024, increased primarily due to increased bank fees. The increase in other income (expense), net for fiscal 2025, compared to fiscal 2024, was primarily due to non-cash foreign currency exchange fluctuations.
Restructuring and abandonment costs also include nominal remaining costs incurred related to the restructuring plan incurred on June 14, 2023. See Note 14. Restructuring Plan of the notes to our consolidated financial statements for further discussion related to our 2024 restructuring plan.
See Note 13. Restructuring and Other Charges in the notes to our consolidated financial statements for further information. Restructuring and other charges fiscal 2023, are primarily related to our 2023 restructuring plan and also costs incurred in March 2023 related to the abandonment of portions of our office spaces.
Research and Development Research and development expenses consist primarily of personnel-related expenses, consulting and contractor expenses, tooling, test equipment, prototype materials, and related overhead costs. To date, software development costs have been expensed as incurred because the period between achieving technological feasibility and the release of the software has been short and development costs qualifying for capitalization have been insignificant.
To date, software development costs have been expensed as incurred because the period between achieving technological feasibility and the release of the software has been short and development costs qualifying for capitalization have been insignificant. Research and development expenses excluding restructuring and other charges decreased $31.4 million, or 10.5%, for fiscal 2025 compared to fiscal 2024.
The net increase in cash from the change in operating assets and liabilities was partially offset by an increase in other assets of $28.8 million due to timing of prepaid contracts.
The net increase in cash from the change in operating assets and liabilities was partially offset by an increase in accounts receivable of $21.9 million, and a decrease in accounts payable and accrued expenses of $14.4 million due to lower inventory purchases.
Cash Flows from Financing Activities Cash used in financing activities of $137.3 million for fiscal 2024, primarily consisted of payments for repurchase of common stock of $129.0 million and payments for repurchase of common stock related to shares withheld for tax in connection with vesting of stock awards of $25.3 million, partially offset by proceeds from the exercise of options of $17.1 million. 32 Table of conten ts Fiscal 2023 Changes in Cash Flows For the comparison of fiscal 2023 to fiscal 2022, refer to Part II, Item 7 "Management's discussion and analysis of financial condition and results of operations" of our Form 10-K for our fiscal year ended September 30, 2023, filed with the SEC on November 20, 2023, under the subheading "Liquidity and capital resources." Contractual obligations See Note 7.
Fiscal 2024 Changes in Cash Flows For the comparison of fiscal 2024 to fiscal 2023, refer to Part II, Item 7 "Management's discussion and analysis of financial condition and results of operations" of our Form 10-K for fiscal 2024, filed with the SEC on November 15, 2024, under the subheading "Liquidity and capital resources." Contractual obligations See Note 6.
This was primarily driven by a decrease in legal fees related to our IP litigation. 30 Table of conten ts Interest Income, Interest Expense, and Other Income, Net Fiscal Year Ended Change from Prior Fiscal Year September 28, 2024 September 30, 2023 $ % (Dollars in thousands) Interest income $ 11,965 $ 10,201 $ 1,764 17.3 % Interest expense (441) (733) 292 (39.8) Other income, net 9,371 15,473 (6,102) (39.4) Total other income, net $ 20,895 $ 24,941 $ (4,046) (16.2) % Interest income consists primarily of interest income earned on our cash, cash equivalents, and marketable securities balances.
Interest Income, Interest Expense, and Other Income (Expense), Net Fiscal Year Ended Change from Prior Fiscal Year September 27, 2025 September 28, 2024 $ % (Dollars in thousands) Interest income $ 6,934 $ 11,965 $ (5,031) (42.0 %) Interest expense (465) (441) (24) 5.4 Other income (expense), net (6,498) 9,371 (15,869) (169.3) Total other income (expense), net $ (29) $ 20,895 $ (20,924) (100.1) % Interest income consists primarily of interest income earned on our cash, cash equivalents, and marketable securities balances.
The decrease in volume of products sold outpaced that of revenue due to the impact of product mix. 28 Table of conten ts Revenue by Region Fiscal Year Ended Change from Prior Fiscal Year September 28, 2024 September 30, 2023 $ % Constant Currency Change (1) (Dollars in thousands) Americas $ 1,004,770 $ 1,048,245 $ (43,475) (4.1 %) (4.2) % Europe, Middle East and Africa 430,428 518,179 (87,751) (16.9) (19.2) Asia Pacific 82,858 88,831 (5,973) (6.7) (5.5) Total revenue $ 1,518,056 $ 1,655,255 $ (137,199) (8.3) % (9.0) % (1) Constant currency is a financial measure that is not calculated in accordance with U.S.
Revenue by Region Fiscal Year Ended September 27, 2025 Change (%) Constant Currency Change (%) (1) Americas (8.1 %) (7.7 %) Europe, Middle East and Africa 2.5 % 0.4 % Asia Pacific (4.5 %) (3.4 %) (1) Constant currency is a financial measure that is not calculated in accordance with U.S. GAAP.
Partner products and other revenue represented 5.3% of total revenue for fiscal 2024, and increased 5.2% compared to the twelve months ended September 30, 2023. The volume of products sold decreased 12.7% for fiscal 2024, compared to fiscal 2023, primarily driven by expected declines in units of Sonos One, and softer demand, particularly in our home theater products.
Sonos system products represented 17.3% of total revenue for fiscal 2025 and decreased 6.9% compared fiscal 2024. Partner products and other revenue represented 5.0% of total revenue for fiscal 2025, and decreased 10.5% compared to fiscal 2024. The volume of products sold decreased 7.5% for fiscal 2025, compared to fiscal 2024.
These declines were partially offset by sales of Era 100 and Era 300 which were introduced in March 2023, and by the introduction of Ace in June 2024. Sonos system products represented 17.6% of total revenue for fiscal 2024 and decreased 6.1% compared fiscal 2023.
Sonos speakers represented 77.7% of total revenue for fiscal 2025 and decreased 4.1% compared to fiscal 2024, primarily driven by expected declines in Arc and Sonos One, as well as Beam, Move, and Sub Mini. These declines were partially offset by the 28 Table of contents introduction of Arc Ultra, as well as Era 100.
Cost of revenue and gross profit decreased for fiscal 2024 compared to fiscal 2023, primarily due to a decrease in products sold. Gross margin increased 210 basis points for fiscal 2024 compared to fiscal 2023.
Gross margin decreased approximately 170 basis points for fiscal 2025 compared to fiscal 2024.
Non-cash adjustments primarily consisted of stock-based compensation expense and depreciation and amortization, partially offset by deferred income taxes as a result of a benefit from income taxes from the reversal of a deferred tax liability related to an intercompany sale of intellectual property.
Non-cash adjustments primarily consisted of stock-based compensation expense, depreciation and amortization, and non-cash restructuring charges.
Removed
Adjusted EBITDA and Adjusted EBITDA Margin We define Adjusted EBITDA as net income (loss) adjusted to exclude the impact of stock-based compensation expense, depreciation and amortization, interest, other income (expense), taxes, and other items that we do not consider representative of our underlying operating performance. 26 Table of conten ts We define Adjusted EBITDA margin as Adjusted EBITDA divided by revenue.
Added
(2) Restructuring and other charges for fiscal 2025 and fiscal 2024, primarily reflect costs associated with our cost transformation initiative including the 2024 restructuring plan, 2025 restructuring plan, rationalization of our product roadmap, and non-recurring costs related to write-offs of assets no longer in use, as well as non-recurring Chief Executive Officer ("CEO") transition costs related to modifications to equity awards.
Removed
(2) See Note 14. Restructuring Plan of the notes to our consolidated financial statement for further discussion related to our 2024 restructuring plan.
Added
Cost of revenue decreased $15.9 million, or 1.9%, for fiscal 2025 compared to fiscal 2024, primarily due to a decrease in product and material costs as well as decrease in products sold, partially offset by the impact of reorganization efforts, and increased amortization primarily related to the completion of our Mayht in-process research and development project and related reclassification into finite-lived intangible assets.
Removed
Sonos speakers represented 77.0% of total revenue for fiscal 2024 and decreased 9.6% compared to fiscal 2023, primarily driven by expected declines in Sonos One and softer demand across the category, particularly in our home theater products.
Added
See Note 13. Restructuring and Other Charges in the notes to our consolidated financial statement for further information. Research and Development Research and development expenses consist primarily of personnel-related expenses, third-party resources expenses, tooling, test equipment, prototype materials, and related overhead costs.
Removed
These declines were partially offset by sales of Era 100 and Era 300, as well as the introduction of Ace in June 2024.
Added
This decrease was primarily driven by lower personnel-related costs due to lower headcount and our reorganization efforts, partially offset by higher variable compensation costs.
Removed
Our gross margin has fluctuated and may, in the future, fluctuate from period to period based on a number of factors, including the mix of products we sell, the mix of channels through which we sell our products, fluctuations of our product and material cost saving initiatives, fluctuations in our product and material markets, promotional activity, the foreign currency in which our products are sold, and tariffs and duty costs implemented by governmental authorities.
Added
Sales and marketing expenses excluding restructuring and other charges decreased $16.4 million, or 5.7%, for fiscal 2025 compared to fiscal 2024.
Removed
Research and development expenses increased $3.6 million, or 1.2%, for fiscal 2024 compared to fiscal 2023. This increase was primarily driven by product development program spend.
Added
This decrease was primarily driven by lower marketing costs compared to prior year when we incurred significant costs associated with our launch of Sonos Ace in June 2024 marking our entry into the headphones market, partially offset by increased depreciation costs associated with our product displays.
Removed
Sales and marketing expenses increased $23.1 million, or 8.6%, for fiscal 2024 compared to fiscal 2023. This was primarily driven by an increase in our advertising and marketing activity, and an increase in depreciation mainly for our product displays.
Added
This decrease was primarily driven by lower personnel-related costs, professional fees and information technology costs as a result of lower headcount and our cost transformation efforts.
Removed
Additionally, module revenue includes hardware and embedded software that is integrated into final products that are manufactured and sold by our partners. Service revenue includes revenue allocated to (i) unspecified software upgrades and (ii) cloud-based services that enable products to access third-party music and voice assistant platforms.
Added
On July 4, 2025, H.R. 1, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), was enacted. The legislation includes provisions such as accelerated cost recovery of qualified property, immediate expensing of U.S.-based research and development costs, and changes to the U.S. international taxation regime.
Added
We are continuing to assess the potential impacts of the OBBBA on our future operations and effective tax rate. Based on preliminary analyses, certain provisions are expected to significantly reduce our U.S. income tax expense in fiscal 2026. Actual impacts will depend on future regulatory guidance our ongoing evaluation of the legislation.
Added
In October 2025, we amended the Revolving Credit Agreement. See Note 14. Subsequent Event of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.
Added
Debt Obligations On October 13, 2021, we entered into a Revolving Credit Agreement with JPMorgan Chase Bank, N.A., as the administrative agent, and Bank of America N.A., Morgan Stanley Senior Funding, Inc., and Goldman Sachs Bank USA as the other lenders party thereto (the "Revolving Credit Agreement").
Added
In October 2025, we amended the Revolving Credit Agreement. See Note 14. Subsequent Event of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details.
Added
Cash Flows from Financing Activities Cash used in financing activities of $102.3 million for fiscal 2025, primarily consisted of payments for repurchase of common stock of $81.0 million and payments for repurchase of common stock related to shares withheld for tax in connection with vesting of stock awards of $25.9 million, partially offset by proceeds from the exercise of options of $4.5 million.
Added
Performance Obligations Determining whether products and services are considered distinct performance obligations that should be accounted for separately requires significant judgment. We have determined that products and related software represent a single performance obligation.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed7 unchanged
Biggest changeWe recognized net gains from foreign currency of $9.1 million, and $13.7 million, in fiscal 2024 and 2023, respectively, and a net loss from foreign currency of $21.9 million in fiscal 2022.
Biggest changeWe recognized a net loss from foreign currency of $6.5 million in fiscal 2025, and net gains from foreign currency of $9.1 million and $13.7 million in fiscal 2024 and 2023, respectively.
Summary of Significant Accounting Policies of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements. 35 Table of conten ts
Summary of Significant Accounting Policies of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements. 35 Table of contents
These risks primarily include interest rate and foreign currency risks as follows: Interest Rate Risk As of September 28, 2024, we had cash and cash equivalents of $169.7 million, which consisted primarily of cash on hand, money market fund investments, and bank deposits. Additionally, we held $51.4 million in marketable securities, consisting of U.S. Treasury securities.
These risks primarily include interest rate and foreign currency risks as follows: Interest Rate Risk As of September 27, 2025, we had cash and cash equivalents of $174.7 million, which consisted primarily of cash on hand, money market fund investments, and bank deposits. Additionally, we held $52.9 million in marketable securities, consisting of U.S. Treasury securities.
Based on transactions denominated in currencies other than respective functional currencies as of September 28, 2024, a hypothetical adverse change of 10% would have resulted in an adverse impact on loss before provision for income taxes of approximately $19.5 million for the fiscal year ended 2024. Recent Accounting Pronouncements See Note 2.
Based on transactions denominated in currencies other than respective functional currencies as of September 27, 2025, a hypothetical adverse change of 10% would have resulted in an adverse impact on loss before provision for income taxes of approximately $17.6 million for fiscal 2025. Recent Accounting Pronouncements See Note 2.

Other SONO 10-K year-over-year comparisons