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The speaker comes equipped with an O-ring for water resistance. Like everything else in this device, it's tiny.
For the spec geeks out there, IPX7 means that the Apple Watch can withstand up to 30 minutes of full submersion in up to 1 meter of water.
Apple doesn't recommend testing those limits, stating that you can "...wear and use Apple Watch during exercise, in the rain, and while washing your hands, but submerging Apple Watch is not recommended."