Audio and video technology company Dolby Laboratories (NYSE: DLB) reported revenue ahead of Wall Streets expectations in Q4 CY2025, but sales fell by 2.9% year on year to $346.7 million. Guidance for next quarter’s revenue was optimistic at $390 million at the midpoint, 2.4% above analysts’ estimates. Its non-GAAP profit of $1.06 per share was 6.7% above analysts’ consensus estimates.
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Dolby Laboratories (DLB) Q4 CY2025 Highlights:
- Revenue: $346.7 million vs analyst estimates of $331.9 million (2.9% year-on-year decline, 4.5% beat)
- Adjusted EPS: $1.06 vs analyst estimates of $0.99 (6.7% beat)
- Adjusted EBITDA: $123.5 million vs analyst estimates of $113.4 million (35.6% margin, 8.9% beat)
- The company slightly lifted its revenue guidance for the full year to $1.43 billion at the midpoint from $1.42 billion
- Management raised its full-year Adjusted EPS guidance to $4.38 at the midpoint, a 2.6% increase
- Operating Margin: 17.9%, down from 22.4% in the same quarter last year
- Free Cash Flow Margin: 14.5%, down from 34.7% in the previous quarter
- Market Capitalization: $5.83 billion
"With a good start to the fiscal year, we are optimistic about our position in the market and confident in our growth opportunities," 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
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Dolby Laboratories’s 1.2% annualized revenue growth over the last five years was weak. This was below our standards and is a poor baseline for our analysis.
Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Dolby Laboratories’s annualized revenue growth of 2.3% over the last two years is above its five-year trend, but we were still disappointed by the results. 
This quarter, Dolby Laboratories’s revenue fell by 2.9% year on year to $346.7 million but beat Wall Street’s estimates by 4.5%. Company management is currently guiding for a 5.5% year-on-year increase in sales next quarter.
Looking further ahead, sell-side analysts expect revenue to grow 6.1% over the next 12 months. Although this projection implies its newer products and services will spur 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 Q4 Results
We were impressed by how significantly Dolby Laboratories blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EPS guidance exceeded Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The market seemed to be hoping for more, and the stock traded down 2.8% to $61.25 immediately following the results.
So do we think Dolby Laboratories is an attractive buy at the current price? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).
