Dolby Laboratories, Inc. Q4 FY2025 earnings call

• Q4 highlights: Strong engagement for Dolby Atmos and Dolby Vision from ecosystem partners; announcement of Dolby Vision 2 with improved picture quality features; TV launches with device partners; Peacock streaming football and NBA games in Dolby Atmos.
• Automotive: Agreements with Maruti Suzuki, Depaul, VinFast; first in-car game with Dolby Atmos launched on Li Auto Vehicles.
• Mobile: Instagram distributing content in Dolby Vision; Douyin offering Dolby Vision in China.
• Wearables: Meta Quest and Samsung Galaxy XR with Dolby Atmos/Dolby Vision.
• Imaging patents: Launched new patent pool for content streamers with consumption-based pricing; will start recognizing revenue in FY 2026.
• Dolby OptiView: Software as a service solution for real-time, personalized streaming in sports, sports betting, iGaming; NFL using Dolby OptiView for Red Zone service.
• Expansion into consumption-based revenue models: Opportunities with content streamers and new verticals; focus on scaling Dolby OptiView and video distribution program for content distributors.
• Innovation pipeline: AI-powered innovations to enhance offerings.

In FY 2025, Dolby grew revenue by 6%, aided by the acquisition of GE Licensing, and expanded operating margins by 1.8 percentage points. Licensing revenue was $282 million, products and services revenue was $25 million. For the quarter, revenue was $307 million. Dolby Atmos, Dolby Vision, and Imaging Patents grew just over 14% in FY 2025, representing 45% of licensing revenue. Foundational Audio Technology revenue was just under negative 1%.

• FY 2026 revenue expected between $1.39 billion and $1.44 billion (3%-7% y/y).
• Licensing revenue expected $1.285 billion to $1.335 billion; Foundational Audio Technologies expected down low single digits.
• Dolby Atmos, Dolby Vision, and patents revenue expected to grow ~15%.
• Non-GAAP operating expenses targeted $780 million to $800 million; operating margin improvement of 50-100 basis points.
• Non-GAAP EPS expected $4.19 to $4.34.
• Q1 FY 2026 revenue expected $315 million to $345 million; licensing revenue $290 million to $320 million; gross margin ~90%; non-GAAP operating expenses $195 million to $205 million; EPS $0.79 to $0.94.

• Changes in customer demand.
• Law and regulation changes.
• Impact of macroeconomic events on business.
• Quarterly volatility due to timing of recoveries, minimum volume commitments, and true-ups.

Q: Ralph Schackart asked about expanding TAM on new consumption models, including video distribution for streamers and Dolby OptiView, and contribution in 2026 guidance.

A: Kevin Yeaman responded on Dolby's opportunity to add value to content streamers, scaling Dolby OptiView customers, and the video distribution program expanding addressable market by including content streamers.

Q: Steven Frankel followed up on patent pool and auto, asking about whether the pool is selling new capabilities or enforcing existing patents, and progress in auto.

A: Kevin Yeaman said the pool initially uses same patents as device licensee pool, and automotive is a fast-growing area with progress in lineups and pipeline activity.

Q: Patrick Scholl asked about three-year growth outlook for Atmos, Vision, and imaging patents, and macro impacts.

A: Kevin Yeaman mentioned law of large numbers and early growth drivers like Dolby Vision 2, Instagram partnership, and auto progress as reasons for growth outlook.

Q: Vikram Kasavabhotla asked about macro environment impacts, 2026 outlook cadence, and share repurchase authorization.

A: Robert Park and Kevin Yeaman responded on no specific tariff impact, revenue expected more evenly distributed in 2026, and share repurchase policy considering dilution, dividend, and board review.