Why Is Dolby Laboratories (DLB) Down 7.2% Since Last Earnings Report?

Core Insights - Dolby Laboratories reported a strong first-quarter fiscal 2025 performance, with non-GAAP EPS of $1.14, surpassing the prior year's $1.01 and exceeding the Zacks Consensus Estimate by 6.5% [2] - Total revenues reached $357 million, up from $315.6 million year-over-year, and also beat the Zacks Consensus Estimate by 3.1% [3] - The company expects growth in Dolby Atmos and Dolby Vision, projecting a 15% increase, while foundational audio technology revenues are anticipated to remain flat year-over-year [3][6] Financial Performance - Licensing revenues were $330.5 million, a 12% increase year-over-year, bolstered by a $70 million favorable true-up related to fiscal fourth quarter shipments [4] - Products and Services revenues rose 22% year-over-year to $26.5 million [4] - Gross profit for the quarter was $316.2 million, compared to $283.5 million in the previous year, with operating income increasing to $79.9 million from $66.2 million [7] Cash Flow and Liquidity - Dolby generated $107 million in net cash from operating activities for the fiscal quarter ending December 27, 2024 [8] - The company had $520.8 million in cash and cash equivalents and total liabilities of $641.6 million as of December 27, 2024 [8] - A share repurchase of 186,000 shares was executed for $15 million, leaving $387 million available under repurchase authorization [9] Future Outlook - For Q2 fiscal 2025, Dolby estimates revenues between $355 million and $385 million, with GAAP EPS projected at 77-92 cents and non-GAAP EPS between $1.19 and $1.34 [11] - For the full fiscal 2025, revenues are expected to be in the range of $1.33 billion to $1.39 billion, with licensing revenues forecasted between $1.22 billion and $1.28 billion [12] - The company anticipates GAAP operating margin of 20% and non-GAAP operating margin of nearly 33% for fiscal 2025 [12][13] Market Sentiment - Estimates for Dolby have trended downward over the past month, with a consensus estimate shift of -8.18% [14] - The stock currently holds a Zacks Rank 2 (Buy), indicating expectations for above-average returns in the coming months [16]