Is Sonos Stock Worth Buying as Growth Improves but Margin Risks Rise?

Sonos Revenue Growth Is Reaccelerating

Third-quarter fiscal 2026 revenues rose 9% year over year to $375 million after 2% growth in the first half. Sonos Play and Era 100 SL contributed meaningfully in their first full quarter of availability.

For fiscal 2026, management expects revenue growth of 6% to 8%, or 4% to 6% excluding the extra week. Amp Multi, scheduled to ship Aug. 25, adds another product aimed at professional installers and larger multi-zone projects.

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SONO Valuation Looks Reasonable but Not Cheap

SONO trades at 1.11X forward 12-month sales compared with 1.69X for the Zacks sub-industry and 2.29X for the Zacks Consumer Discretionary sector. The stock is also exactly at its three-year median multiple of 1.11X.

A forward price-to-earnings ratio of 12.36 and price/earnings-to-growth ratio of 0.43 add context. Still, the shares are not clearly inexpensive relative to their own recent history.

Sonos Faces a Sharp Memory-Cost Margin Squeeze

Higher memory costs reduced third-quarter gross margin by roughly 380 basis points and adjusted EBITDA by $14 million year over year. Sonos still generated adjusted EBITDA of $44 million, up 24%, but the cost pressure is accelerating.

Management expects higher memory prices to reduce fourth-quarter gross profit by about $35 million, equal to roughly 1,000 basis points of gross-margin pressure. For fiscal 2027, the lower end of the 39% to 41% fourth-quarter GAAP gross-margin range is a reasonable starting point as mitigation actions phase in.

SONO Still Has Balance Sheet Room to Invest

Sonos ended the third quarter with $206.9 million in cash and $54.1 million of marketable securities, or $261 million combined. Free cash flow reached $127.5 million through the first nine months of fiscal 2026.

That liquidity supports product development and expansion while preserving room for capital returns. Sonos repurchased $95.3 million of shares through the first nine months, but inventory of $158 million was up 37% year over year.

Sonos Growth Channels Raise the Execution Stakes

Europe, the Middle East and Africa (EMEA) revenues increased 17.4% and Asia-Pacific sales advanced 27.2% in the third quarter, well ahead of the Americas' 3.8% growth. Sonos also has more than 17 million households and more than 53 million connected devices, supporting repeat-purchase potential.

Apple Inc. AAPL markets HomePod as a smart-home speaker, adding a major technology platform to the connected-audio landscape. Amazon.com, Inc. AMZN is extending Alexa+ across Echo devices as Sonos moves toward conversational computing. That raises the execution burden across hardware, software and marketing.

SONO Signals Point to Patience, Not a Clear Buy

The improving revenue trend, product cadence and liquidity argue against a bearish view, but the near-term margin reset makes the risk-reward balance less decisive. Investors may want clearer evidence that memory-cost mitigation can stabilize profitability without slowing household growth.

SONO currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Its VGM Score of A and Growth Score of A are favorable, while the Value Score of B is also supportive. The Momentum Score of C is less compelling for near-term timing. Because the Style Scores complement rather than override the Zacks Rank, the current setup favors patience over an aggressive buy stance.

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

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