Dolby Laboratories Q1 Earnings Call Highlights

Dolby Laboratories (NYSE:DLB) reported a strong start to fiscal 2026, with first-quarter revenue and non-GAAP earnings per share coming in above the high end of the company’s prior guidance. Management attributed the outperformance primarily to deal timing and a favorable shipment true-up, while also pointing to progress across several growth initiatives in automotive, television, mobile, and streaming-related programs.

First-quarter results beat guidance

For the first quarter of fiscal 2026, Dolby posted revenue of $347 million, which CFO Robert Park said was above the high end of the company’s guidance range. Park said the upside was driven “primarily” by the timing of deals arriving earlier than expected and a $7 million favorable true-up for Q4 shipments. Non-GAAP earnings per share was $1.06, also above guidance, which Park attributed to higher revenue and lower operating expenses.

Licensing revenue totaled $320 million, while product and services revenue was $27 million. The company generated approximately $55 million in operating cash flow, repurchased $70 million of common stock, and ended the quarter with about $207 million remaining on its share repurchase authorization. Dolby also declared a $0.36 dividend, which Park noted was up 9% from the dividend a year earlier, and finished the quarter with approximately $730 million in cash and investments.

Park added that GAAP operating expenses in the quarter included a $10 million restructuring charge as the company continues to streamline operations and align resources with business priorities.

Automotive and TV initiatives highlighted at CES

CEO Kevin Yeaman said the company used CES to showcase how Dolby Atmos and Dolby Vision are influencing entertainment experiences across movies, TV, music, sports, and user-generated content, with demonstrations focused “primarily” on in-car entertainment and Dolby Vision 2 for televisions.

Yeaman described automotive as a growing focus, noting in-car demonstrations spanning vehicles from a Porsche 911 to models from Mercedes, Audi, and Cadillac. He also highlighted demonstrations involving immersive multi-channel games from Smash Labs and an Audible Harry Potter audiobook series featuring Dolby Atmos. Yeaman pointed to the NIO Horizon as an example of in-car experiences extending beyond music to include movies, TV, gaming, audiobooks, and more.

Dolby also announced a partnership with Qualcomm to integrate Dolby Atmos and Dolby Vision into Qualcomm’s Gen 5 Snapdragon automotive platform. Yeaman said Dolby now has partnerships with over 35 OEMs, up from 20 at the same time last year. He also cited recent launches including Mahindra’s first SUV in India with Dolby Atmos and Dolby Vision and Hyundai’s first car with Dolby Atmos, a crossover SUV in China.

On televisions, Yeaman said Dolby Vision 2 drew enthusiasm at CES and is designed to “unlock the full potential” of modern TVs. He said Peacock announced support for Dolby Vision 2 across movies, originals, and live sports, joining Canal+ as an early launch partner, and that TP Vision (Philips brand) announced support across upcoming models, joining Hisense and TCL as launch partners. Yeaman said the first Dolby Vision 2 TVs are expected to be available by the end of the year.

Mobile, streaming, and new licensing initiatives

Yeaman outlined additional initiatives aimed at expanding Dolby’s addressable market. In mobile, he pointed to continued adoption of Dolby Vision by social media platforms. He said Meta, which had announced Dolby Vision support on Instagram in November, has now begun supporting Dolby Vision on Facebook. He also said Douyin (the Chinese version of TikTok) has supported Dolby Vision on iOS and started rolling out support for Android devices during the quarter.

In Imaging Patents, Yeaman said Roku became a licensee of Dolby’s video distribution patent pool, which he described as the first U.S.-based streamer to join. He said the pool expands the available licensees beyond device manufacturers to include content streamers.

Yeaman also discussed Dolby OptiView, highlighting work with the NFL to deliver RedZone through the NFL Plus app, which he said achieved “record levels” of streaming quality for the service. He cited new customers including Veikkaus, Finland’s national lottery and sports betting operator, and SIS (Sports Information Solutions), a provider to more than 300 sports betting companies. Yeaman said Veikkaus is using OptiView to reduce latency for live horse racing, while SIS adopted Dolby’s video player and enabled sub-second latency for its customers.

End-market commentary and quarterly volatility

Park emphasized that licensing trends are typically “smoother on an annual basis” because quarterly results can swing based on recoveries, minimum volume commitments, and true-ups. In Q1, he said mobile grew by over 20% year-over-year and broadcast revenue was down mid-teens, both driven “primarily” by timing and deals. Despite that quarterly pattern, he said Dolby still expects both mobile and broadcast to be up mid-single digits for the full year.

During Q&A, management also addressed questions about whether the earlier deal timing signaled a macro shift. Yeaman said he would not extrapolate the quarter’s timing into a broader macro conclusion, describing the results as normal adjustments and noting that the earlier deals help “de-risk” the company’s outlook for the year. Park added that the $7 million true-up was “primarily” related to gaming and broadcast.

On macro-related factors, Yeaman said Dolby made only modest revisions to its outlook and referenced potential impacts from memory pricing, particularly in mobile, where he said customer impacts can vary based on actions like forward purchasing. He said TVs appear less affected because memory is a smaller portion of the bill of materials, and he cited PCs as another market where Dolby has heard more “noise,” consistent with the company’s expectation that PC end-market performance will be down for the year.

Guidance raised for fiscal 2026

Dolby raised its outlook for the full fiscal year 2026. Park said the company now expects revenue of $1.4 billion to $1.45 billion, reflecting the Q1 true-up and deal timing that came in “earlier and stronger than forecasted,” partially offset by slight revisions, including potential memory pricing impacts.

Additional full-year targets include:

• Licensing revenue: $1.295 billion to $1.345 billion
• Non-GAAP operating expenses: $780 million to $800 million
• Non-GAAP EPS: $4.30 to $4.45
• Operating margin improvement: 50 to 100 basis points implied by guidance

Park said expectations for full-year growth rates of the company’s Foundational business and its Dolby Atmos, Dolby Vision, and Imaging Patents portfolio were “relatively unchanged,” with the Atmos/Vision/Imaging group expected to grow roughly 15% and make up nearly half of licensing revenue, while Foundational revenue is expected to be down slightly.

For the second quarter of fiscal 2026, Dolby guided to revenue of $375 million to $405 million, including licensing revenue of $350 million to $380 million. Park said Q2 licensing includes a “large recovery” that settled in the quarter. The company expects non-GAAP gross margin of approximately 91%, non-GAAP operating expenses of $195 million to $205 million, and non-GAAP EPS of $1.29 to $1.44.

Yeaman told investors the company remains confident in its ability to grow Dolby Atmos, Dolby Vision, and Imaging Patents at 15% to 20% per year over the next few years, adding that as these technologies approach 50% of licensing revenue, they are having a greater influence on Dolby’s overall growth rate.

About Dolby Laboratories (NYSE:DLB)

Dolby Laboratories, Inc is a global leader in audio and imaging technologies, specializing in the development, licensing and deployment of solutions that enhance entertainment and communications experiences. The company’s core business revolves around creating advanced audio codecs, noise reduction systems and spatial sound technologies for a wide range of applications, including cinema, broadcast, gaming, streaming and personal devices. Dolby’s licensing model enables consumer electronics manufacturers, content creators and service providers to integrate its technologies into products such as televisions, smartphones, home theater systems and set-top boxes.

Among its flagship innovations are Dolby Atmos, an immersive audio format that delivers three-dimensional soundscapes for theaters and home systems; Dolby Digital and Dolby Digital Plus, widely adopted audio compression formats for broadcast and streaming; and Dolby Vision, a high-dynamic-range imaging technology that expands color, contrast and brightness in displays.