Audio and video technology company Dolby Laboratories (NYSE: DLB) reported Q3 CY2025 results beating Wall Street’s revenue expectations, but sales were flat year on year at $307 million. On the other hand, next quarter’s revenue guidance of $330 million was less impressive, coming in 9.9% below analysts’ estimates. Its non-GAAP profit of $0.99 per share was 40.4% above analysts’ consensus estimates.
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Dolby Laboratories (DLB) Q3 CY2025 Highlights:
- Revenue: $307 million vs analyst estimates of $304.9 million (flat year on year, 0.7% beat)
- Adjusted EPS: $0.99 vs analyst estimates of $0.71 (40.4% beat)
- Adjusted Operating Income: $76.53 million vs analyst estimates of $34.65 million (24.9% margin, significant beat)
- Revenue Guidance for Q4 CY2025 is $330 million at the midpoint, below analyst estimates of $366.3 million
- Adjusted EPS guidance for the upcoming financial year 2026 is $4.27 at the midpoint, in line with analyst estimates
- Operating Margin: 9.7%, down from 15.2% in the same quarter last year
- Free Cash Flow Margin: 34.7%, up from 19.4% in the previous quarter
- Market Capitalization: $6.25 billion
"We finished FY25 strong, growing Dolby Atmos, Dolby Vision and imaging patents, and expanding our addressable market with momentum in Dolby OptiView and the introduction of a new imaging patent pool for content streamers," said Kevin Yeaman, President and CEO, Dolby Laboratories.
Company Overview
Known for its iconic "D" logo that appears before countless movies and TV shows, Dolby Laboratories (NYSE: DLB) designs and licenses audio and video technologies that enhance entertainment experiences in movies, TV shows, music, and other media.
Revenue Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Dolby Laboratories’s sales grew at a weak 3% compounded annual growth rate over the last five years. This was below our standard for the software sector and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within software, a half-decade historical view may miss recent innovations or disruptive industry trends. Dolby Laboratories’s recent performance shows its demand has slowed as its annualized revenue growth of 1.9% over the last two years was below its five-year trend. 
This quarter, Dolby Laboratories’s $307 million of revenue was flat year on year but beat Wall Street’s estimates by 0.7%. Company management is currently guiding for a 7.6% year-on-year decline in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 4% over the next 12 months. While this projection suggests its newer products and services will catalyze better top-line performance, it is still below average for the sector.
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Customer Acquisition Efficiency
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Dolby Laboratories’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a highly competitive environment where there is little differentiation between Dolby Laboratories’s products and its peers.
Key Takeaways from Dolby Laboratories’s Q3 Results
We struggled to find many positives in these results. Its revenue guidance for next quarter missed and its EPS guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 1.1% to $64.69 immediately following the results.
Dolby Laboratories’s earnings report left more to be desired. Let’s look forward to see if this quarter has created an opportunity to buy the stock. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free for active Edge members.
