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Item 3 — Quantitative and Qualitative Disclosures About Market Risk
Sonos, Inc. · 10-Q · Q3 FY2026 · Period ended Jun 27, 2026
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We are exposed to financial market risks, including changes in currency exchange rates and interest rates. For quantitative and qualitative disclosures about market risk, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, in our Annual Report on Form 10-K. Our exposure to market risk has not changed materially, except as follows:
Foreign Currency Risk
Our inventory purchases are primarily denominated in U.S. dollars. Our international sales are primarily denominated in foreign currencies and any movement in the exchange rate between the U.S. dollar and the currencies in which we conduct sales in foreign countries could have an impact on our revenue, principally for sales denominated in the euro and the British pound. A portion of our operating expenses are incurred outside the United States and are denominated in foreign currencies, which are also subject to foreign currency exchange rate fluctuations. In certain countries where we may invoice customers in the local currency our revenues benefit from a weaker dollar and are adversely affected by a stronger dollar. The opposite impact occurs in countries where we record expenses in local currencies. In those cases, our costs and expenses benefit from a stronger dollar and are adversely affected by a weaker dollar.
We have not entered into any material foreign exchange contracts or derivatives to hedge any foreign currency exposures. The volatility of exchange rates depends on many factors that we cannot forecast with reliable accuracy. Our continued international expansion increases our exposure to exchange rate fluctuations and, as a result, such fluctuations could have a significant impact on our future results of operations.
For the three months ended June 27, 2026 and June 28, 2025, we recognized a loss from foreign currency exchange of $1.2 million and gain of $0.6 million, respectively. For the nine months ended June 27, 2026 and June 28, 2025, we recognized losses from foreign currency exchange of $2.1 million and $5.2 million, respectively. Based on transactions denominated in currencies other than the U.S. dollar as of June 27, 2026, a hypothetical adverse change of 10% would have resulted in an adverse impact on income before provision for income taxes of approximately $5.0 million and $17.3 million for the three and nine months ended June 27, 2026.
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