Dolby Laboratories, Inc. (DLB) is a global leader in immersive entertainment. The company specializes in noise reduction, encoding/compression, spatial audio, and HDR imaging.

Dolby has revolutionized audio technologies through the years and is well-known for its wide offerings across the globe. The company’s products and innovations are a preferred choice of various leading companies worldwide. DLB’s innovations are actively incorporated into devices and equipment to enhance their features, creating unprecedented avenues.

DLB concluded a successful and prosperous financial year on September 27, 2024, with remarkable revenue and net income growth in the fourth quarter. During the year, Dolby emphasized operational efficiency and expansion. It closed the acquisition of GE Licensing and expects gradual margin and non-GAAP earning growth in fiscal 2025, along with a strengthened position in imaging patents.

The company also acquired THEO Technologies, expanding Dolby.io’s ability to offer customers the best solutions for real-time streaming experiences. This acquisition also resulted in the launch of a comprehensive range of cloud video products and solutions. Such capability expansion will contribute to its future prospects and accelerate new developments.

Further, the company’s strategic collaboration and technology incorporation with leaders like Apple and Xiaomi continue solidifying its market position. Recently, Dolby also added two new automotive partners, WEY, a Chinese car company, and Smart, a JV between Mercedes and Geely, bringing its automotive OEM partners to over 20 supporting Dolby Atmos, which was 10 partners one year ago.

For fiscal 2025, Dolby’s prospects appear promising, with strong momentum in Dolby Atmos and Dolby Vision, its imaging patent portfolio. The recent acquisitions will accelerate its opportunities in diverse segments and will cater to a wider audience with its continuous investment in audio technology.

Given its strong financial health and ongoing expansion, DLB appears poised for continued growth. Shares of DLB gained 2.3% over the past month and 9.4% over the past three months to close the last trading session at $80.99.

Let’s look at factors that could influence DLB’s performance in the upcoming months.

Positive Recent Developments

On September 13, 2024, DLB launched a comprehensive range of cloud video products and solutions supporting real-time interactive streaming in association with THEO Technologies, a leading provider of high-quality video streaming tools. THEO Technologies was acquired by DLB in 2024, expanding its ability to deliver more interactive and personalized live experiences with extremely low latency.

The company’s new capabilities include THEOads, introduced on the same day. THEOads is a pioneering ad insertion capability that enhances the quality, flexibility, and targeting of advertising within THEOplayer.

Further, in June 2024, DLB also acquired GE Licensing, which owns, maintains, and licenses an extensive portfolio of IP primarily targeting the consumer digital media and electronics sectors. The strategic acquisition strengthened DLB’s licensing businesses and is likely to create further growth opportunities.

Solid Financials

For the fourth quarter ended on September 27, 2024, DLB’s total revenue increased 4.9% year-over-year to $304.81 million, of which its Licensing revenue rose 6.6% year-over-year to $282.71 million. The company reported a gross profit of $270.81 million, indicating a 6.2% increase from the prior year’s quarter.

Furthermore, non-GAAP net income attributable to DLB totaled $78.44 million, up 22.7% year-over-year. The company’s non-GAAP EPS grew 24.6% from the year-ago value to $0.81. Also, as of September 27, 2024, the company’s total assets stood at $3.11 billion versus $2.98 billion as of September 29, 2023.

Buoyed by its strong financial performance in 2024, Dolby provided estimates for the first quarter and full fiscal year 2025. It expects total revenue to range from $330 million to $360 million, and its licensing revenue is estimated to range from $305 million to $335 million for the first quarter. The company also projects non-GAAP EPS of $0.96 – $1.11 over the same quarter.

For the full year 2025, Dolby’s total revenue is estimated at $1.33 billion to $1.39 billion. Further, it also expects EPS between $3.99 and $4.14 on a non-GAAP basis.

Favorable Analyst Estimates

Analysts expect DLB’s revenue for the first quarter (ended December 2024) to come in at $346.15 million, indicating an increase of 9.7% year-over-year. The consensus EPS estimate of $1.05 for the same period reflects a 4.3% year-over-year improvement. Moreover, the company topped consensus EPS estimates in all four trailing quarters, which is remarkable.

For the fiscal year (ending September 2025), the company’s revenue and EPS are anticipated to grow 6.4% and 7.1% year-over-year to $1.36 billion and $4.06, respectively. In addition, Street expects its revenue and EPS for the fiscal year 2026 to grow 4.5% and 7% from the prior year to $1.42 billion and $4.35, respectively.

High Profitability

DLB’s trailing-12-month EBIT margin of 20.78% is 288.5% higher than the 5.35% industry average. Its trailing-12-month net income margin of 20.56% is significantly higher than the industry average of 3.80%. Likewise, the stock’s trailing-12-month gross profit margin of 88.97% is 76% higher than the industry average of 50.55%.

Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 10.84%, 6.68%, and 8.42% are higher than the 4.22%, 3.14%, and 1.98% industry averages, respectively.

POWR Ratings Reflect Promise

DLB’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. DLB has an A grade for Sentiment, which is consistent with its optimistic analyst estimates. The stock also has an A grade for Quality, which is in sync with its higher profitability relative to its peers.

DLB is ranked #2 among the 40 stocks in the Technology – Electronics industry.

Beyond what I have stated above, we have also given DLB grades for Stability, Growth, Momentum, and Value. Get access to all the DLB ratings here.

Bottom Line

DLB is a leader in the audio technology segment, dominating the global market. The company’s diverse, innovative solutions, strategic acquisitions, and new developments are driving its growth and solid expansion.

Also, increasing investments in cutting-edge technology solutions and rapid technological advances like 4K, 8K, and immersive audio formats are boosting demand for new devices. Such industry evolution will benefit DLB, strengthening the company’s future profitability and opportunities.

Thus, it could be prudent to invest in this stock amid favorable industry trends, strong financial performance, accelerating profitability, and dominating market position.

How Does Dolby Laboratories, Inc. (DLB) Stack Up Against Its Peers?

While DLB has an overall POWR Rating of A, investors could also check out these other stocks within the Technology – Electronics industry with A (Strong Buy) or B (Buy) ratings: Fuji Electric Co., Ltd. (FELTY), Brother Industries, Ltd. (BRTHY), and Universal Electronics Inc. (UEIC).

For exploring more A and B-rated technology stocks, click here.

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DLB shares were unchanged in after-hours trading Friday. Year-to-date, DLB has gained 4.06%, versus a 1.96% rise in the benchmark S&P 500 index during the same period.

About the Author: Rjkumari Saxena

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions. More...

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