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Dolby's Q1 Earnings & Revenues Surpass Estimates, Fall Y/Y, Stock Down
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Key Takeaways
DLB posted Q1 non-GAAP EPS of $1.06 and $346.7M in revenue, beating estimates despite year-over-year declines.
Lower licensing revenue drove the sales dip, though early deal closures and a $7M true-up aided results.
DLB guided Q2 revenue of $375-$405M and raised full-year 2026 revenue expectations, but shares fell about 3%.
Dolby Laboratories, Inc. (DLB - Free Report) reported first-quarter fiscal 2026 non-GAAP earnings per share (EPS) of $1.06, surpassing the Zacks Consensus Estimate of 90 cents. It reported $1.14 in the prior-year quarter.
Total revenues were $346.7 million, down from $357 million in the year-ago quarter but surpassed the Zacks Consensus Estimate by 4.2%. The decrease was due to lower revenues in the Licensing segment. However, the revenues came in above the high end of the previous guidance of $315 million to $345 million, primarily due to deal closures occurring earlier than expected and a favorable $7 million true-up related to fourth-quarter shipments.
Management highlighted that, with a strong start to the fiscal 2026, the company remains optimistic about its market position and confident in its growth opportunities. It stated that continued strong momentum in Dolby Atmos and Dolby Vision, alongside an expanding addressable market driven by the imaging patent program for content streamers and Dolby OptiView, will aid it.
Following the announcement, shares of the company declined around 3% in the after-market trading session yesterday. In the past year, shares have lost 23.2% against the Zacks Audio Video Production industry’s decline of 0.2%.
Image Source: Zacks Investment Research
DLB’s Segmental Performance
Revenues from Licensing were $319.8 million, down 3.2% year over year. Licensing revenue was within the company’s guidance of $290 million to $320 million.
Products and Services’ revenues were up 1.6% year over year to $26.9 million.
Our estimates were pegged at $304.8 million and $27.7 million for the Licensing and Products and Services revenues, respectively.
Broadcast Licensing contributed 31% to total licensing revenues in the quarter under review. Mobile Licensing, Consumer Electronics (CE), PC Licensing and Licensing from Other Markets accounted for 23%, 14%, 9% and 23% of licensing revenues, respectively.
Dolby Laboratories Price, Consensus and EPS Surprise
Gross profit in the fiscal first quarter was $303.5 million compared with $316.2 million in the year-ago quarter. Total operating expenses increased to $241.3 million from $236.3 million reported in the year-ago quarter.
Operating income was $62.2 million compared with $80 million in the year-ago quarter.
DLB’s Cash Flow & Liquidity
For the fiscal year ended on Dec. 26, 2025, Dolby generated $54.8 million of net cash from operating activities.
As of Dec. 26, 2025, the company had $727.6 million in cash and cash equivalents, with $589.3 million in total liabilities. It had $701.9 million in cash and cash equivalents, with $595.8 million in total liabilities, as of Sep. 26, 2025.
The company repurchased approximately 1 million shares of its common stock for about $70 million during the first quarter, and ended the quarter with roughly $207 million remaining under its stock repurchase authorization.
The company declared a cash dividend of 36 cents per share, payable on Feb. 18, 2026, to shareholders on record as of the close of business on Feb. 10, 2026.
DLB’s 2026 Outlook
For the second quarter of fiscal 2026, the company estimates revenues between $375 million and $405 million.
The company anticipates second-quarter licensing revenues to be between $350 million and $380 million.
Gross margins are expected to be around 90% on a GAAP basis and approximately 91% on a non-GAAP basis.
On a GAAP basis, operating expenses are expected to be in the range of $230-$240 million. On a non-GAAP basis, the same is anticipated to be between $195 million and $205 million.
It expects GAAP EPS of 94 cents to $1.09 and non-GAAP EPS between $1.29 to $1.44.
For fiscal 2026, the company expects revenues to be in the $1.4-$1.45 billion band compared with the prior estimate of $1.39-$1.44 billion. The company reported revenues of $1.35 billion in fiscal 2025.
Licensing revenues are projected to range from $1.295 billion to $1.345 billion compared with the previous estimate of $1.285 billion to $1.335 billion.
With Dolby Atmos, Dolby Vision and imaging patents growing at roughly 15% and accounting for nearly half of its licensing revenue, the company expects foundational revenue to decline slightly overall. By end market, the company still expects full-year revenue to grow at a high-teens rate in Other, rise mid-single digits in Broadcast and Mobile and decline by high single digits in CE and PC.
Gross margins are expected to be about 88% on a GAAP basis and approximately 90% on a non-GAAP basis.
On a GAAP basis, operating expenses are still expected to range from $930 million to $950 million. On a non-GAAP basis, it is anticipated to be $780 million to $800 million.
The company expects GAAP EPS of $2.71 to $2.86, and non-GAAP EPS is anticipated to be $4.30-$4.45. The company earlier projected GAAP EPS of $2.61 to $2.76, and non-GAAP EPS of $4.19-$4.34. Dolby reported non-GAAP EPS of $4.24 in fiscal 2025.
Recent Updates
Dolby continues to expand the adoption of its technologies across automotive, entertainment and consumer electronics, with more than 35 auto OEMs now embracing Dolby Atmos across vehicles ranging from luxury models to entry-level offerings with baseline audio systems. Mercedes-Benz is among the first automakers to enable Spatial Audio with Dolby Atmos in Apple CarPlay, with support planned across its latest lineup, including the all-new electric GLC, CLA and GLB. In India, Mahindra has announced the country’s first vehicle to support both Dolby Atmos and Dolby Vision, while Qualcomm is integrating Dolby’s latest technologies into its Gen 5 Snapdragon Automotive platform to further scale adoption.
Beyond automotive, Dolby is strengthening its presence across streaming, TV, audio and social platforms. Peacock has become the first streamer to adopt Dolby’s full suite of advanced picture and sound innovations, including Dolby Vision 2, and plans to extend Dolby Vision and Dolby Atmos to live sports over the coming year, including Sunday Night Football, the NBA and MLB. Hisense, TCL and TP Vision have announced upcoming TV models that will support Dolby Vision 2, while LG unveiled its LG Sound Suite, a modular home audio system powered by Dolby Atmos FlexConnect, featuring the world’s first soundbar with this technology. Additionally, Meta has begun supporting Dolby Vision on Facebook, following its recent announcement of Dolby Vision support on Instagram.
Seagate Technology Holdings plc (STX - Free Report) reported second-quarter fiscal 2026 non-GAAP earnings of $3.11 per share, beating the Zacks Consensus Estimate of $2.83 and exceeding the high end of management’s guidance of $2.75 per share (+/- 20 cents). The company reported earnings per share (EPS) of $2.03 in the prior-year quarter. The bottom line also expanded 19% quarter over quarter on the back of STX’s strong execution of its strategic objectives and effective use of its technology roadmap to support growing demand. Non-GAAP revenues of $2.83 billion exceeded the Zacks Consensus Estimate by 2.7%. Revenues also surpassed the guidance midpoint, increasing 22% year over year.
Simulations Plus, Inc. (SLP - Free Report) reported first-quarter fiscal 2026 adjusted earnings of 13 cents per share, lagging the Zacks Consensus Estimate by 27.8%. The bottom line also compared unfavorably with the prior-year quarter’s 17 cents. Quarterly revenues declined 3% year over year to $18.4 million, reflecting lower software revenue amid strong momentum in services. The top line beat the consensus mark by 2%. Management noted that software softness was expected due to reduced clinical operations and development activity, partially offset by increased demand for discovery-focused solutions.
Badger Meter, Inc. (BMI - Free Report) reported EPS of $1.14 for fourth-quarter 2025, which missed the Zacks Consensus Estimate by 0.9%. However, the bottom line compared favorably with the year-ago quarter’s EPS of $1.04. Quarterly net sales were $220.7 million, up 7.6% from $205.2 million in the year-ago quarter, driven by higher utility water sales. The Zacks Consensus Estimate was pegged at $230.8 million.
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Dolby's Q1 Earnings & Revenues Surpass Estimates, Fall Y/Y, Stock Down
Key Takeaways
Dolby Laboratories, Inc. (DLB - Free Report) reported first-quarter fiscal 2026 non-GAAP earnings per share (EPS) of $1.06, surpassing the Zacks Consensus Estimate of 90 cents. It reported $1.14 in the prior-year quarter.
Total revenues were $346.7 million, down from $357 million in the year-ago quarter but surpassed the Zacks Consensus Estimate by 4.2%. The decrease was due to lower revenues in the Licensing segment. However, the revenues came in above the high end of the previous guidance of $315 million to $345 million, primarily due to deal closures occurring earlier than expected and a favorable $7 million true-up related to fourth-quarter shipments.
Management highlighted that, with a strong start to the fiscal 2026, the company remains optimistic about its market position and confident in its growth opportunities. It stated that continued strong momentum in Dolby Atmos and Dolby Vision, alongside an expanding addressable market driven by the imaging patent program for content streamers and Dolby OptiView, will aid it.
Following the announcement, shares of the company declined around 3% in the after-market trading session yesterday. In the past year, shares have lost 23.2% against the Zacks Audio Video Production industry’s decline of 0.2%.
Image Source: Zacks Investment Research
DLB’s Segmental Performance
Revenues from Licensing were $319.8 million, down 3.2% year over year. Licensing revenue was within the company’s guidance of $290 million to $320 million.
Products and Services’ revenues were up 1.6% year over year to $26.9 million.
Our estimates were pegged at $304.8 million and $27.7 million for the Licensing and Products and Services revenues, respectively.
Broadcast Licensing contributed 31% to total licensing revenues in the quarter under review. Mobile Licensing, Consumer Electronics (CE), PC Licensing and Licensing from Other Markets accounted for 23%, 14%, 9% and 23% of licensing revenues, respectively.
Dolby Laboratories Price, Consensus and EPS Surprise
Dolby Laboratories price-consensus-eps-surprise-chart | Dolby Laboratories Quote
Other Details of DLB
Gross profit in the fiscal first quarter was $303.5 million compared with $316.2 million in the year-ago quarter. Total operating expenses increased to $241.3 million from $236.3 million reported in the year-ago quarter.
Operating income was $62.2 million compared with $80 million in the year-ago quarter.
DLB’s Cash Flow & Liquidity
For the fiscal year ended on Dec. 26, 2025, Dolby generated $54.8 million of net cash from operating activities.
As of Dec. 26, 2025, the company had $727.6 million in cash and cash equivalents, with $589.3 million in total liabilities. It had $701.9 million in cash and cash equivalents, with $595.8 million in total liabilities, as of Sep. 26, 2025.
The company repurchased approximately 1 million shares of its common stock for about $70 million during the first quarter, and ended the quarter with roughly $207 million remaining under its stock repurchase authorization.
The company declared a cash dividend of 36 cents per share, payable on Feb. 18, 2026, to shareholders on record as of the close of business on Feb. 10, 2026.
DLB’s 2026 Outlook
For the second quarter of fiscal 2026, the company estimates revenues between $375 million and $405 million.
The company anticipates second-quarter licensing revenues to be between $350 million and $380 million.
Gross margins are expected to be around 90% on a GAAP basis and approximately 91% on a non-GAAP basis.
On a GAAP basis, operating expenses are expected to be in the range of $230-$240 million. On a non-GAAP basis, the same is anticipated to be between $195 million and $205 million.
It expects GAAP EPS of 94 cents to $1.09 and non-GAAP EPS between $1.29 to $1.44.
For fiscal 2026, the company expects revenues to be in the $1.4-$1.45 billion band compared with the prior estimate of $1.39-$1.44 billion. The company reported revenues of $1.35 billion in fiscal 2025.
Licensing revenues are projected to range from $1.295 billion to $1.345 billion compared with the previous estimate of $1.285 billion to $1.335 billion.
With Dolby Atmos, Dolby Vision and imaging patents growing at roughly 15% and accounting for nearly half of its licensing revenue, the company expects foundational revenue to decline slightly overall. By end market, the company still expects full-year revenue to grow at a high-teens rate in Other, rise mid-single digits in Broadcast and Mobile and decline by high single digits in CE and PC.
Gross margins are expected to be about 88% on a GAAP basis and approximately 90% on a non-GAAP basis.
On a GAAP basis, operating expenses are still expected to range from $930 million to $950 million. On a non-GAAP basis, it is anticipated to be $780 million to $800 million.
The company expects GAAP EPS of $2.71 to $2.86, and non-GAAP EPS is anticipated to be $4.30-$4.45. The company earlier projected GAAP EPS of $2.61 to $2.76, and non-GAAP EPS of $4.19-$4.34. Dolby reported non-GAAP EPS of $4.24 in fiscal 2025.
Recent Updates
Dolby continues to expand the adoption of its technologies across automotive, entertainment and consumer electronics, with more than 35 auto OEMs now embracing Dolby Atmos across vehicles ranging from luxury models to entry-level offerings with baseline audio systems. Mercedes-Benz is among the first automakers to enable Spatial Audio with Dolby Atmos in Apple CarPlay, with support planned across its latest lineup, including the all-new electric GLC, CLA and GLB. In India, Mahindra has announced the country’s first vehicle to support both Dolby Atmos and Dolby Vision, while Qualcomm is integrating Dolby’s latest technologies into its Gen 5 Snapdragon Automotive platform to further scale adoption.
Beyond automotive, Dolby is strengthening its presence across streaming, TV, audio and social platforms. Peacock has become the first streamer to adopt Dolby’s full suite of advanced picture and sound innovations, including Dolby Vision 2, and plans to extend Dolby Vision and Dolby Atmos to live sports over the coming year, including Sunday Night Football, the NBA and MLB. Hisense, TCL and TP Vision have announced upcoming TV models that will support Dolby Vision 2, while LG unveiled its LG Sound Suite, a modular home audio system powered by Dolby Atmos FlexConnect, featuring the world’s first soundbar with this technology. Additionally, Meta has begun supporting Dolby Vision on Facebook, following its recent announcement of Dolby Vision support on Instagram.
DLB’s Zacks Rank
Dolby currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Performance of Other Companies
Seagate Technology Holdings plc (STX - Free Report) reported second-quarter fiscal 2026 non-GAAP earnings of $3.11 per share, beating the Zacks Consensus Estimate of $2.83 and exceeding the high end of management’s guidance of $2.75 per share (+/- 20 cents). The company reported earnings per share (EPS) of $2.03 in the prior-year quarter. The bottom line also expanded 19% quarter over quarter on the back of STX’s strong execution of its strategic objectives and effective use of its technology roadmap to support growing demand. Non-GAAP revenues of $2.83 billion exceeded the Zacks Consensus Estimate by 2.7%. Revenues also surpassed the guidance midpoint, increasing 22% year over year.
Simulations Plus, Inc. (SLP - Free Report) reported first-quarter fiscal 2026 adjusted earnings of 13 cents per share, lagging the Zacks Consensus Estimate by 27.8%. The bottom line also compared unfavorably with the prior-year quarter’s 17 cents. Quarterly revenues declined 3% year over year to $18.4 million, reflecting lower software revenue amid strong momentum in services. The top line beat the consensus mark by 2%. Management noted that software softness was expected due to reduced clinical operations and development activity, partially offset by increased demand for discovery-focused solutions.
Badger Meter, Inc. (BMI - Free Report) reported EPS of $1.14 for fourth-quarter 2025, which missed the Zacks Consensus Estimate by 0.9%. However, the bottom line compared favorably with the year-ago quarter’s EPS of $1.04.
Quarterly net sales were $220.7 million, up 7.6% from $205.2 million in the year-ago quarter, driven by higher utility water sales. The Zacks Consensus Estimate was pegged at $230.8 million.