Dolby Laboratories Q2 2025 Earnings Results & Report

Dolby Laboratories EPS Results

• Actual EPS: $1.34
• Consensus EPS: $1.29
• Beat/Miss: Beat by +$0.05
• One Year Ago EPS: $1.27
• EPS Beat Rate: 8 of last 8 quarters

Dolby Laboratories Revenue Results

• Actual Revenue: $369.56 million
• Expected Revenue: $375.44 million
• Beat/Miss: Missed by -$5.88 million
• YoY Revenue Growth: +1.40%

Dolby Laboratories (NYSE:DLB), Inc. develops audio and imaging technologies used in entertainment and consumer electronics. Its offerings include Dolby Atmos immersive audio, Dolby Vision high-dynamic-range imaging, and technologies for encoding, delivering and reproducing sound and video.

The company licenses its technologies to manufacturers and content businesses across areas such as film, television, streaming, gaming and mobile devices. Dolby also supports cinema experiences through technologies and services including Dolby Cinema.

Founded by Ray Dolby in 1965, the company serves customers and partners worldwide. Kevin Yeaman is Dolby Laboratories’ president and chief executive officer.

Dolby Laboratories Q2 2025 Earnings Call Transcript

Key Takeaways

• Full-year revenue guidance lowered to $1.31–$1.38 billion, down from $1.33–$1.39 billion, reflecting expected macroeconomic headwinds and uncertainty.
• Q2 results hit revenue guidance midpoint and non-GAAP EPS at the high end; generated $175 million in operating cash flow, repurchased $35 million in stock, and raised the dividend by 10%.
• Automotive momentum: Porsche and Cadillac will include Dolby Atmos and Dolby Vision in select 2026 models, with NIO and Zeeker adding Dolby Vision, totaling nine models across three brands.
• Mobile ecosystem growth with Dolby Vision capture and playback expanding into Android via partners like Xiaohongshu, Kuaishou, Oppo, Realme, and Xiaomi, plus support in apps such as Filmora and CapCut.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Dolby Laboratories conference call discussing Q2 fiscal year 2025 results. During the presentation, all participants will be in a listen-only mode. Afterwards, you will be invited to participate in a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. As a reminder, this call is being recorded Thursday, May 1, 2025. I would now like to turn the call over to Mr. Peter Goldmacher, Vice President of Investor Relations. Peter, please go ahead.

[Peter Goldmacher, VP of Investor Relations at Dolby Laboratories]

Good afternoon. Welcome to Dolby Laboratories Q2 2025 earnings conference call. Joining me today are Kevin Yeaman, Dolby Laboratories CEO, and Robert Park, our CFO. As a reminder, today's discussion will include forward-looking statements, including our fiscal 2025 Q3 and full-year outlook, and our assumptions underlying that outlook. These statements are subject to risks and uncertainties that may cause actual results to differ materially from the statements made today, including, among other things, the impact of macroeconomic events, supply chain issues, tariffs, and other trade barriers, inflation rates, changes in consumer spending, and geopolitical instability on our business. A discussion of these and additional risks and uncertainties can be found in the earnings press release that we issued today under the section captioned "Forward-Looking Statements," as well as in the risk factor section of our most recent quarterly report on Form 10-Q.

[Peter Goldmacher, VP of Investor Relations at Dolby Laboratories]

Dolby assumes no obligation and does not intend to update any forward-looking statements made during this call as a result of new information or future events. During today's call, we will discuss non-GAAP financial measures, and a reconciliation between GAAP and non-GAAP financial measures is available in our earnings press release and in the Interactive Analyst Center on the Investor Relations section of our website. With that, I'd like to turn the call over to Kevin.

[Kevin Yeaman, CEO at Dolby Laboratories]

Thanks, Peter, and thanks to everyone for joining us on our Q2 FY25 earnings call. In the Q2, both licensing revenue and total revenue came in at the midpoint of the range of guidance we provided on our last earnings call, and non-GAAP earnings for the quarter came in at the high end of the range. As we approached the end of the quarter, all indications were that we were on track to be at or above the midpoint of our revenue guidance for the full year. As we speak today, there is, of course, a significant amount of uncertainty in the macroeconomic environment. We do not have the degree of visibility that we normally have as we develop our outlook for the remainder of the year.

[Kevin Yeaman, CEO at Dolby Laboratories]

Given the variability and potential outcomes, we are revising our revenue range from $1.33 billion-$1.39 billion to a range of $1.31 billion-$1.38 billion for the year. Our current assessment, based on limited data points, is that we are likely to experience slight headwinds as a result of the macroeconomic environment. This could change quickly, and there are a broad range of scenarios based on how things evolve going forward. On the one hand, if we see progress in trade deals and increasing clarity in the macro environment, we could be at the mid to high end of this range. On the other hand, if lack of certainty drags on or even escalates further, that would point to the mid to low end of our range. We are monitoring the situation closely, and Robert will walk you through the details on these numbers in a few minutes.

[Kevin Yeaman, CEO at Dolby Laboratories]

In the meantime, we are staying focused on the things that drive growth in the long term. We continue to have strong engagement across our broad ecosystem of content creators, distributors, and OEM partners, and we are performing well on the partnerships that drive growth by bringing more Dolby experiences to more people around the world. I'd like to spend a few minutes on some highlights in the quarter, starting with automotive. We continue to see high demand for raising the bar on the quality of the in-car entertainment experience. This quarter, Porsche announced that Dolby Atmos will be available in the 2026 Taycan, Panamera, Cayenne, and 911 models, and Cadillac announced that it will include Dolby Atmos throughout its entire 2026 lineup of EVs. Also, Volvo, Xiaomi, and Hyundai all announced new models coming to market.

[Kevin Yeaman, CEO at Dolby Laboratories]

Additionally, two more auto manufacturers, NIO and Zeekr, have decided to deploy Dolby Vision for a total of three brands and nine car models offering Dolby Atmos and Dolby Vision. Automotive is an increasingly important part of our business, and the momentum continues to build. In mobile, we are focusing on bringing the Dolby Atmos and Dolby Vision experience to all the ways that consumers enjoy content on their smartphones. User-generated content, primarily on social media and short-form video platforms, represents an important opportunity for us to drive further adoption of Dolby Vision into the mobile phone market. Apple has supported Dolby Vision and Dolby Vision Capture across its iPhone lineup for a while, and we continue to make progress in expanding Dolby Vision into the Android device ecosystem. In China, where we already have strong adoption across social media and video sharing services, we added two new partners.

[Kevin Yeaman, CEO at Dolby Laboratories]

Xiaohongshu, also known as Rednote, is a Chinese social media platform and an e-commerce marketplace primarily focused on lifestyle, beauty, fashion, and travel, and Kuaishou is a popular Chinese social media platform specializing in short-form video content similar to TikTok. We are also seeing increased support across popular video editing apps, reflecting increased interest in Dolby Vision for user-generated content. Filmora has announced plans to support Dolby Vision, and CapCut, which currently supports Dolby Vision for iOS, is expanding its support to include Android. This ecosystem support is an important part of the virtuous cycle that drives OEMs to adopt Dolby Vision deeper into their device lineups. Earlier this year, Oppo launched its first Android device with Dolby Vision Capture as the default mode, and about a month ago, added three more phones and a tablet with Dolby Vision Capture and playback.

[Kevin Yeaman, CEO at Dolby Laboratories]

Realme and Xiaomi also launched new models that support Dolby Vision. We are focused on working with these partners to expand Dolby Vision deeper into their lineups and on expanding our presence with global social media and video sharing platforms. Moving on to the living room and the TV ecosystem, we continue to focus on bringing Dolby to more content and more devices. This past quarter, both the Super Bowl and March Madness were available in Dolby Atmos and Dolby Vision, continuing our momentum in sports. Waipu TV, the market leader in IPTV in Germany, announced support for Dolby Atmos and Dolby Vision, and TOD, the leading streaming platform for sports and entertainment in the Middle East and North Africa, launched a 4K set-top box with Dolby Atmos and Dolby Vision.

[Kevin Yeaman, CEO at Dolby Laboratories]

More content in Dolby gives consumers a reason to upgrade their TVs and more reasons for OEMs to adopt Dolby further into their lineups. This quarter in the U.K., Sky released the popular Sky Glass Gen 2 TV with Dolby Vision and a Dolby Atmos soundbar built into the TV. Also, LG, Sharp, and Hisense all announced new TV models with Dolby Vision. A quick update on cinema. Filmmakers, studios, and moviegoers all value a premium movie experience, and exhibitors are focusing their investment dollars on rolling out more high-end theaters, which are garnering a higher share of the box office. At CinemaCon, we announced that AMC and Dolby will add an additional 40 Dolby Cinemas at AMC locations in the United States through the end of 2027.

[Kevin Yeaman, CEO at Dolby Laboratories]

We've also announced that we will be adding Dolby Vision and Dolby Atmos to theaters in India this year, beginning with six exhibitors in major cities, and we also added a handful of new Dolby Atmos and Dolby Vision theaters in South Korea. Stepping back, while there's uncertainty in the economic environment, we had a strong quarter, and we had great wins across our main focus areas. We are well prepared to operate across a wide range of scenarios, and we are in a solid financial position. We continue to have strong engagement from content creators, distributors, and our OEM partners across our ecosystems, and we will remain focused on the things that we can control and that drive long-term growth. With that, I'd like to turn the call over to Robert to discuss the financials in more detail.

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

Thanks, Kevin, and good afternoon to everyone on the call. Before we get into the details, I'd like to point out three important takeaways. First, Q2 revenue came in at the midpoint of the range, and earnings came in at the high end of the range we communicated last quarter. Second, we are adjusting the full-year revenue range to reflect the current environment, and I'll give you some color on that. Third, Dolby is a durable business. We have strong financial fundamentals, and we've successfully navigated difficult times before. With that as a backdrop, let's get into the details. Q2 revenue was $370 million, in line with the midpoint of guidance and up 1% year-over-year, and licensing revenue of $346 million was up 2% year-over-year. Product and services revenue was $24 million, slightly below the midpoint of guidance and down 10% year-over-year.

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

Detailed licensing performance by end market is on our IR website, and as a reminder, timing of recoveries, minimum volume commitments, and true-ups can drive volatility between quarters. In Q2, these timing factors contributed to an 11% decline in broadcast and a 17% increase in PC revenue on a year-over-year basis. For the full year, we still expect strong growth in mobile and other markets, broadcast and PC to be flattish, and CE to be down mid-single digits. Moving on to the bottom line. In Q2, we earned $1.34 per diluted share on a non-GAAP basis, up 5% year-over-year, and at the high end of our guidance, largely due to some OpEx spend that was pushed out to the second half. We generated $175 million in operating cash flow and finished the quarter with $701 million in cash and investments.

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

We repurchased $35 million worth of common stock and have about $352 million remaining on our repurchase plan authorization. We declared a $0.33 dividend, up 10% from our dividend a year ago. Now, I'd like to turn my comments to how we're thinking about Q3 and the full year. To reiterate some of the important context Kevin shared with you in his opening comments, the lack of visibility brought about by the current economic situation has limited our ability to forecast the business with the degree of precision we are used to. There are a wider range of scenarios in front of us than there usually are at this point in the year, so we have adjusted our revenue outlook to reflect this. Let me walk you through this in a little more detail. The outlook for consumer spending on devices is a key factor in our forecasts.

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

It is difficult to make general statements about the impact of any broad-based weakness in the economy on our overall business or how the uncertainty will affect consumer spending on devices for the remainder of the year. Even if we make high-level assumptions about potential impacts of the macro environment on device shipments, the details matter. For example, which types of devices are most impacted, which Dolby technologies are on these devices, and are high-end or low-end devices being disproportionately affected? These are just some of the many factors that could impact our revenue.

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

With that in mind, and to help you think about potential scenarios for the second half of the year, we estimate that if there were a 5% change in overall device shipments for the remainder of the year, it could have an approximate impact on our revenue of 2%-4% or $15 million-$25 million for the remainder of this year. As a reminder, most of our licensing revenue is based on unit shipments. In general, we estimate revenues from unit shipments each quarter and true it up the following quarter based on actual reported shipments from our partners. Our royaltiess here reporting is generally about one quarter in arrears because device shipment data is not real-time. I would also like to share a few more endpoint-specific factors to keep in mind as the macroeconomic situation evolves.

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

Mobile tends to have a higher concentration of minimum volume commitments, so it is less sensitive to near-term changes in device shipments relative to, say, broadcast, PC, or CEN markets. We are still in early days in the opportunity for auto, and currently, the majority of our auto revenue is from non-U.S. OEMs shipping to non-U.S. markets. The last point I'd like to make is that as you think about the impact of U.S. trade deals, we estimate that approximately 25% of our licensing revenues from consumer device shipments are from those sold into the U.S. These are some of the things to keep in mind as the environment continues to evolve. Now, moving on to our outlook for Q3 in the full year. Our outlook for Q3 is for revenue to be between $290 million and $320 million. Within that, licensing revenue ranges from $265 million-$295 million.

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

Gross margins are expected to be approximately 88% on a non-GAAP basis. Our outlook for non-GAAP operating expenses is between $190 million and $200 million. With our effective tax rate for Q2 at about 20.5% on a non-GAAP basis, non-GAAP EPS is expected to come in between $0.62 and $0.77 per diluted share. For the full year, we have widened and lowered the range of revenue to be between $1.31 billion and $1.38 billion. Our outlook for licensing revenue is to be between $1.21 billion and $1.28 billion. We see non-GAAP operating expenses between $760 million and $775 million, and non-GAAP earnings per share to be between $3.88 and $4.03. In closing, I'd like to remind you that Dolby has successfully navigated many technological and economic cycles.

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

We have a resilient business model with a diversified global revenue base, deep partner relationships, high gross margins, and a healthy balance sheet. We are well positioned to manage the business, and we will continue to focus on things that put us on a path of long-term growth. With that, I'd like to turn it back to the operator to open the line for your questions. Operator?

[Operator]

Thank you. As a reminder, to ask a question, please press star, followed by the number one on your telephone keypad. Your first question comes from the line of Ralph Schackart with William Blair. Your line is opened.

[Ralph Schackart, CFA at William Blair]

Good afternoon, and thanks for the extra color on the call today as it relates to the outlook. Just maybe first, as you're talking to your OEM partners, just curious, those that may be in less, I guess, lower tariff regions, I guess, what's sort of the ability for them to increase capacity if that should play out? That's the first question. Then I'll have a second.

[Kevin Yeaman, CEO at Dolby Laboratories]

Yeah, so thanks, Ralph. Of course, it varies by end market. One data point I would share on that note is the location of manufacture for TVs. Mexico is the largest location of manufacture, generally exempt under the exempt from tariff status. It is about 10% in China. Across the rest of our portfolio, it really varies by OEM. I think ultimately, as Robert said, when we model our forecasts about how many devices are going to ship, and it is happening in real time, people deciding whether to increase prices because of any tariffs, whether it is going to affect consumer spending, whether they are adjusting supply chains. At this point, especially given that mobile is less sensitive to unit shipments, as Robert said, in the short term, TVs are mostly in Mexico.

[Kevin Yeaman, CEO at Dolby Laboratories]

From where we sit today, we think it's likely that we'll experience some slight headwinds, but that could change quickly depending on how it evolves from here.

[Ralph Schackart, CFA at William Blair]

Great. Robert, I missed this in the comparative marks. Maybe we could just clarify. You talked about 25% of the units sold in the U.S. Was that in reference to the total volume of products that Dolby reports as revenue? Maybe can you just kind of clarify that, please? Thanks.

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

Yeah. Hey, hi, Ralph. While our ship-to and ship-from data is limited, we estimate that approximately 25% of our licensing revenue from consumer device shipments are from those sold into the US, and a large portion of that is, yeah.

[Ralph Schackart, CFA at William Blair]

Okay.

[Kevin Yeaman, CEO at Dolby Laboratories]

For mobile, I think about 25% is related to purchases in the U.S., consumer devices in the U.S.

[Ralph Schackart, CFA at William Blair]

Okay. That's helpful to kind of just maybe last one, maybe a little bit bigger picture. You know, you obviously have been getting good traction with Vision and Atmos. As it relates to some of the economic noise that's going on right now, has that stalled any conversations there or, I guess, maybe lost momentum? I'm just kind of curious the momentum you're seeing on those two growth products.

[Kevin Yeaman, CEO at Dolby Laboratories]

No, we continue to have really strong engagement with partners across the ecosystem. I talked about some of those today, automotive in particular, where we continue to see people leaning into really investing in the in-car entertainment experience. Dolby Atmos Music is leading the way. You saw us announce Porsche has announced plans to launch four of its models with Dolby Atmos. Cadillac announced its plans to expand into the entirety of its EV lineup for 2026. We also are now up to three Dolby Vision customers, so we're excited to move from Dolby Atmos Music in the car and expanding that into the entire audiovisual experience.

[Ralph Schackart, CFA at William Blair]

That's helpful. Thanks, Kevin. Thanks, Robert.

[Operator]

Our next question comes from the line of Steven Frankel with Rosenblatt. Your line is open.

[Steven Frankel, Director of Research and Senior Research Analyst at Rosenblatt]

Good afternoon. Yes, thank you for the extra insight. In terms of the overall environment, to what extent, if you see the environment continuing to deteriorate, might you adjust OpEx for the back half of the year, or is that expense level pretty much locked in at this point?

[Kevin Yeaman, CEO at Dolby Laboratories]

The first thing I would say, Steve, is given the uncertainty, we're going to stay focused on what we know to drive long-term value. We're not making any quick, we're not making any fast changes to our operating plans. On the other hand, through periods of uncertainty, we've learned to make sure and be very attuned to whether there are any changes in the environment which have any impact on any one of our individual growth opportunities, to the upside or the downside. We would make adjust, we'll look to be quick to adjust to that if and when that happens. Right now, we're staying the course. We're always, and I think you've seen us over the last couple of years, looking for opportunities to be as efficient as we can everywhere we can.

[Steven Frankel, Director of Research and Senior Research Analyst at Rosenblatt]

You continue to make great progress in the car with Atmos Music. What do you think it takes to get to the tipping point? Is it hitting a particular car brand at a mainstream price point? Is it just getting a couple more wins? What do you think the catalyst will be that will really tip this market?

[Kevin Yeaman, CEO at Dolby Laboratories]

I think we're really pleased with the momentum we have now. We continue every quarter to bring on new manufacturers. We see new and existing customers of ours expanding deeper into their lineups. They are, as you would expect from us, usually starting at the higher ends of their lineups. We are also working with them and looking forward to when we start to get into high-volume mainstream models. That would be another big milestone. In the meantime, we're very happy with the momentum.

[Steven Frankel, Director of Research and Senior Research Analyst at Rosenblatt]

Okay. Great. For Robert, what were true ups in the quarter?

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

True ups for Q2 is about $1 million.

[Steven Frankel, Director of Research and Senior Research Analyst at Rosenblatt]

Okay. Pretty small jump back into Q. Thank you.

[Peter Goldmacher, VP of Investor Relations at Dolby Laboratories]

Our next question comes from the line of Patrick Sholl with Barrington Research. Your line is opened.

[Patrick Sholl, Analyst at Barrington Research]

Hi. Thanks. Good afternoon. Just another question on auto. I'm just curious in terms of the type of vehicles that you're getting adoption from Vision as well as Atmos. Is that more focused on EV or a specific dash screen size or anything like that? On products and services, I was wondering if you could detail any tariff exposure on that side.

[Kevin Yeaman, CEO at Dolby Laboratories]

Yeah. On automotive, our first three customers are Chinese EV manufacturers. We also, on the onset of Atmos, saw China move fast. I think it's just a function of their—they move fast. I think that we also are seeing concentration in EVs because those models are designed in a way which allows for faster implementations, and people are being aggressive about investing in the in-car entertainment experience. They also tend to have more screens. This is really—there are some interesting stats about how much time people spend in their cars when the car isn't moving at all. For some parts of the world, or really anywhere in the world, whether you're waiting to pick up somebody from somewhere or you have time in that car, people are using their cars as moving entertainment centers and communication centers.

[Kevin Yeaman, CEO at Dolby Laboratories]

I think overall, that's what's driving it. It'll start with the ability to stream movies and shows and other types of content. On the second part of the question, do you want to take the impact, Robert, on?

[Robert Park, Senior Vice President and CFO at Dolby Laboratories]

Yeah. Yeah. Hi. The question on impact on our products business. Fairly small, the impact of the tariffs. Yeah, we do manufacture our products overseas, but a large portion of those products are shipped to non-U.S. markets. The impact on the tariff rates for those are pretty marginal.

[Patrick Sholl, Analyst at Barrington Research]

Okay. Thank you.

[Operator]

There are no further questions at this time. I will hand things back over to Peter for closing remarks.

[Kevin Yeaman, CEO at Dolby Laboratories]

Thanks, operator. Thanks, everyone, for joining the call. We'll talk to you next quarter.

[Operator]

Thank you for joining us. You may now disconnect.

Participants

Executives

• Peter Goldmacher, VP of Investor Relations
• Kevin Yeaman, CEO
• Robert Park, Senior Vice President and CFO

Analysts

• Ralph Schackart, CFA at William Blair
• Steven Frankel, Director of Research and Senior Research Analyst at Rosenblatt
• Patrick Sholl, Analyst at Barrington Research