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. 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.

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. 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. 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. 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.

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"). 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. 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.

Macroeconomic environment

Our business and financial performance depend significantly on worldwide economic conditions. 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. 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. 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. 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. 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.

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

beloved in the eyes of our customers. 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. 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.

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. 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.

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.

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. (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. (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). (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: 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:

•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. (General availability: October 2024)

•Sub (Gen 4): Our latest subwoofer, delivering the lowest frequencies in movies and music with improved processing power and a new matte finish that builds on Sub Gen 3 and continues to deliver the deep bass Sonos is known for. (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. (General availability: June 2022)

•Beam (Gen 2): Our smart, compact soundbar for TV, music, and more, with support for Dolby Atmos. Originally introduced as Beam (Gen 1) in June 2018. (General availability: October 2021)

•Arc: Our premium smart soundbar for TV, movies, music, gaming, and more, with support for Dolby Atmos. 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. (General availability: June 2024)

Sonos System Products

Our Sonos system products category includes our component products which allow customers to convert third-party wired systems, stereo systems, and home theater set-ups into our easy-to-use, wirelessly controlled streaming music system, as follows:

•Port: Our versatile streaming component for stereos or receivers. Replaced Connect which launched in January 2007. (General availability: September 2019)

•Amp: Our versatile amplifier powering all our customers' entertainment. Replaced Connect: Amp which launched in September 2012. (General availability: February 2019)

Partner Products and Other Revenue

Our partner products and other revenue category consists mainly of accessories that enable seamless home integration of our products - such as custom designed stands, mounts, shelving units - along with partnerships featuring architectural in-ceiling, in-wall and outdoor speakers, and automotive sound systems. This category also includes licensing agreements, advertising revenue, and subscription-based services.

Our Software

Our software is the connective tissue of the Sonos system, which unites every dimension of sound into one connected platform. It's what enables our customers to move sound effortlessly from room to room, switch between services, and enjoy sound that feels perfectly connected everywhere.

Our software consists of a few critical components: the Sonos App, the firmware embedded in our devices, and our cloud orchestration layer, which connects everything together. We continually innovate our software-based experiences to make listening more intuitive, easy, and engaging - whether customers are using our own control surfaces or enjoying Sonos through partner experiences. The flexible, modular architecture of this platform allows us to deliver meaningful updates faster, expand the ways people interact with their systems, and continually enhance the experience of sound in the home.

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. 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. 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,

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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 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. 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. Designed with privacy at its core, Sonos Voice Control is the simplest way to control your music, offering complete command of your Sonos system using only your voice. Sonos Voice Control works on every voice-capable Sonos speaker, processing requests entirely on the Sonos device.

•Continuous Improvement. 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.

Our Partner Ecosystem

We have built a platform that attracts partners to enable our customers to play content from their preferred services. 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. We partner with a broad range of content providers, such as streaming music services, internet radio stations, and podcast services, allowing our customers to enjoy their audio content from whichever source they desire.

•Control. We provide our customers with multiple options to control their home audio experiences, including voice control and direct control from within selected streaming music service apps. Our platform is the first to offer consumers the ability to buy a single smart speaker with more than one voice assistant choice. Our voice-enabled speaker products have Amazon Alexa and Google Assistant functionality, and in June 2022, we introduced Sonos Voice Control.

•Third-party partnerships. 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. Our research and development teams, include software and hardware engineering, user experience, product management, industrial design, and quality assurance, not only create and design new hardware, software, and services but also continually enhance existing products and user experiences to meet customer needs and emerging trends. We believe our research and development capabilities and intellectual property set us apart from competitors. Research and development investments are incurred in advance of any revenue benefits from these activities. We make substantial investments in research and development to bring new products and software to market and expand our platform and capabilities.

Sales and Marketing

Our products are distributed in more than 60 countries through retailer's traditional physical stores and their websites, online retailers, custom installers who bundle our products with their services, and directly through our website sonos.com.

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. While we maintain a base level of investment throughout the year, significant increases in spending have historically been highly correlated with the holiday shopping season, and new product launches. We intend to continue to invest in our marketing and brand development efforts.

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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. 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 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. As of September 27, 2025, our open purchase orders to contract manufacturers for finished goods were approximately $173 million, the majority of which are expected to be paid within the next six months. As of September 27, 2025, our expected commitments to suppliers for components were in the range of $131 million to $149 million, the majority of which is expected to be paid and/or utilized by our contract manufacturers in building finished goods within the next two years.

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. This approach generally allows us to reduce order fulfillment time, reduce shipping costs, and improve inventory flexibility.

Intellectual Property

Sonos is a leading innovator with one of the most recognized patent portfolios in the industry. Our intellectual property covers hardware, software, networking, accessories, and services that enable the Sonos experience, including wireless multi-room audio, integration with third-party platforms, and premium sound performance, as well as forward-looking technologies and user experiences. We continue to expand our portfolio through ongoing research, development, and design efforts. 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.

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. 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. There is no guarantee that we will prevail on any patent infringement claims against third parties. Furthermore, the laws of certain countries do not protect proprietary rights to the same extent as the laws of the United States, and we therefore may be unable to protect our proprietary technology in certain jurisdictions.

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. The ITC proceeding concluded with a determination that Google infringed all five asserted Sonos patents, which was affirmed on appeal. We are now pursuing enforcement of the same ITC patents, along with additional patents, in U.S. District Court. A second case initiated by Sonos against Google in the U.S. District Court for the Northern District of California concluded with a jury verdict in Sonos' favor, followed by a post-trial order finding the patents unenforceable and invalid. In August 2025, the U.S. Court of Appeals for the Federal Circuit reversed in part and remanded, holding that Google failed to show the requisite prejudice to support a finding of prosecution laches and that the asserted patents were adequately supported by the written description. The case has been remanded to the district court for further proceedings. See 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.

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.

Competition

We compete against established, audio-focused sellers and developers of smart speakers, headphones and sound systems. In some cases, our competitors are also our partners in our product development and resale and distribution channels.

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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.

We believe we compete favorably with our competitors on the basis of the factors described above. Our focus on exceptional sound, thoughtful design, and ease-of-use, as well as our proprietary Sonos App, open platform, and seamless access to the world's audio content, distinguish us from competitors. 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.

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. As of the end of calendar year 2024, we have obtained 1,779 issued patents in the United States. In calendar year 2024 alone, we obtained 228 U.S. patents and are on pace to obtain more than 200 U.S. patents in calendar year 2025. Additionally, since 2017, third-party patent rankings by the IEEE Spectrum's Patent Power program, which measures the quality and impact of patent portfolios, have consistently placed Sonos' portfolio among the most valuable in consumer electronics. In rankings released in 2025 for calendar year 2024, we were again recognized in the category, placing fourth behind Apple Inc., LG Electronics and Samsung Electronics.

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. 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. 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 27, 2025, we had approximately 1,404 full-time employees, with 931 in the United States and 473 in our international locations. In addition to our full-time employees, we contract with third-party resources to support our global operations. This third-party workforce includes outsourced personnel, managed service providers, staff agency workers, and call center agents, who supplement our internal capabilities and enable us to respond flexibly to fluctuating business volume needs and market demands.

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. Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders. We provide employees with compensation packages that include base salary, cash incentive bonuses, and long-term equity awards ("RSUs") tied to the value of our stock price. We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and stockholder interests, including by incentivizing business and individual performance (pay for performance), motivating based on long-term company performance and integrating compensation with our business plans. 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. 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. 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. We completed the initial public offering of our common stock in August 2018 and our common stock is listed on The Nasdaq Global

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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. The information on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K. Investors should not rely on any such information in deciding whether to purchase our common stock.

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. Solely for convenience, our trademarks, tradenames, and service marks referred to in this Annual Report on Form 10-K appear without the ®, ™ and SM symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights to these trademarks, tradenames and service marks. This Annual Report on Form 10-K contains additional trademarks, tradenames and service marks of other companies that are the property of their respective owners.

Available Information

We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, as soon as reasonably practicable after they have been electronically filed with, or furnished to, the SEC.

The SEC maintains an internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.