Dolby Laboratories Inc.
01/29/2026 | Press release | Distributed by Public on 01/29/2026 15:58
Quarterly Report for Quarter Ending December 26, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our unaudited interim condensed consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations that are subject to risks and uncertainties, including, but not limited to statements regarding: operating results and underlying measures and the effect of acquisitions; demand and acceptance for our technologies and products; the effect of macroeconomic factors on our business; market growth opportunities and trends, including artificial intelligence and new technologies; the development and launch of new products, features, and platforms; our ability to maintain key partnership relationships; our plans, strategies and expected opportunities, including for our licensing business; future competition; our stock repurchase plan; and our dividend policy. Use of words such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential," "continue," "intend," "could," "can," "would," "target," "goal," "outlook," "project," "contemplate," "future," or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions indicates a forward-looking statement. Such forward-looking statements are based on management's reasonable and current assumptions and expectations, but such statements inherently involve substantial risks and uncertainties. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors, including but not limited to the risks set forth in Part II, Item 1A, "Risk Factors" and key challenges set forth in Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations." Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. We disclaim any duty to update any of the forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results.
Investors and others should note that we disseminate information to the public about our company, our products, services, and other matters through various channels, including our website (www.dolby.com), our investor relations website (http://investor.dolby.com), SEC filings, press releases, public conference calls, and webcasts, in order to achieve broad, non-exclusionary distribution of information to the public. We encourage investors and others to review the information we make public through these channels, as such information could be deemed to be material information.
OVERVIEW
Founded in 1965, we are in the business of improving entertainment experiences by inventing and innovating technologies that advance audio and video capture, transmission and playback. We enable highly compelling experiences in movies and TV shows, music, sports and more by meeting the needs of content creators, distributors, and consumer electronics manufacturers. We have been at the forefront of multiple audio and video revolutions over the last sixty years including the transitions from mono to stereo then surround, analog to digital, and terrestrial broadcasting to streaming. Our strength and durability stem from our ability to combine our expertise in signal processing with our close relationships with artists and other industry experts to continually bring to the creative community technology that allows them to express themselves in new and compelling ways.
Dolby is synonymous with high-quality entertainment from a consumer perspective and has become critical to makers of consumer electronic devices as our technology is an important component in the creation and delivery of audio and video content. While some of our technology represents relatively elemental functions like audio signal compression that enable playback, we also offer technology that is innovating in emerging categories including spatial audio and high contrast video. We derive the majority of our revenue from licensing audio and video technology to electronics manufacturers, and a lesser portion of our revenue by offering premium audio and video technologies to cinema exhibitors.
STRATEGY
Key elements of our strategy include:
Advancing the Science of Sight and Sound. We apply our understanding of the human senses, audio, and imaging engineering by collaborating with music, TV and movie creators, and innovating in emerging categories like user-generated content, sports and podcasts, to develop and update technologies aimed at enabling and improving how people experience and interact with entertainment content.
Delivering Superior Creative Experiences. We promote the use of our solutions as creative tools that allow filmmakers, musical artists, sound mixers, and other content creators and providers to fully express their creative intent to their audiences. Our technologies and solutions significantly improve delivery and playback so that consumers may enjoy richer, clearer, and immersive sound and sight experiences.
Building Ecosystems that Benefit from and Sustain Demand for our Solutions.We work closely with content creators, content distributors, and device makers to enable them to deliver great experiences to their audiences, creating a virtuous cycle of product development, improved experiences, and sustained demand for our solutions. We also work closely with technology developers to create and promote standardized technologies that enable content to be enjoyed any place, any time on a broad range of devices.
Expanding the Reach of our Technologies. We look for new and innovative ways to apply our expertise in the science of sight and sound to expand the reach of our technologies to new content, media, devices, and audiences.
PRODUCTS AND REVENUE GENERATION
We generate most of our revenue by licensing technology, our brand, and patents to device manufacturers, and selling cinema hardware and services to movie exhibitors.
The following table presents a summary of the composition of our revenue for all periods presented (in thousands, except percentage amounts). Refer to Note 3 "Revenue Recognition" for further detail.
| Fiscal Quarter Ended | |||||||||||||||||
| Revenue | December 26, 2025 | December 27, 2024 | |||||||||||||||
| Licensing | $ | 319,771 | 92 | % | $ | 330,479 | 93 | % | |||||||||
| Products and services | 26,935 | 8 | % | 26,520 | 7 | % | |||||||||||
| Total revenue | $ | 346,706 | 100 | % | $ | 356,999 | 100 | % | |||||||||
Licensing
The two primary components of our licensing business are Branded Technologies which include Branded Audio Codecs, Dolby Atmos & Dolby Vision, and Patents, which include Audio Patents and Imaging Patents.
We generatedover 90% of our revenue in the first quarters of fiscal 2026 and fiscal 2025 from agreements to licensebranded technology and patents that enable approximately 1,000 electronic device manufacturers to enable and enhance the audio and visual capabilities of their products by incorporating our technology. As of December 26, 2025, we had approximately 29,000 issued patents relating to technologies, that are licensed to third parties and comprise a significant portion of our licensing revenue. We have approximately 1,500 trademark registrations throughout the world for a variety of wordmarks, logos, and slogans. These trademarks are an integral part of our technology licensing program as licensees typically place them on their products that incorporate our technologies to inform consumers that they have met our quality specifications.
Branded Technology Licensing
Dolby branded technologies enable compelling audio and video experiences for consumers and offer seamless integration and reliability in devices in which they are incorporated. Dolby branded technologies enjoy widespread adoption, are occasionally mandated as standards, and are frequently considered fundamental to a wide variety of devices and types of entertainment content, including movies, TV shows, sports and music.
Our branded technology solutions are complete solutions. We provide licensees with software, patent rights, and know how to enable content creation, delivery, and playback. Our branded offerings are distinguished by a focus on ease of adoption and deployment. Additionally, our device partners derive value from the use of the Dolby brand, which is synonymous with high quality entertainment.
Dolby branded technologies are part of a unique and broad ecosystem that includes content creators, distributors (such as streaming media companies and broadcasters), and device manufacturers. Initial ecosystem adoption of these technologies yields a virtuous cycle. The more content made available using our branded technologies, the higher the likelihood that more devices embed our technology to facilitate the playback of that content. The more device manufacturers include our technology, the more content creators and distributors want to make content available in Dolby formats.
Branded Audio Codecs
A significant portion of our branded licensing is centered on audio codecs: compression and decompression technologies for audio. The most important of these are the following:
•DD+. DD+ is an advanced surround sound audio codec technology that enables the Dolby audio experience across home theaters, smartphones, operating systems, and browsers. A versatile, bandwidth efficient and scalable home theater grade audio codec for A/V content, DD+ is designed to deliver up to 7.1 channels of surround sound across multiple platforms and content types.
•Dolby AC-4. Dolby AC-4 is an audio codec that delivers equivalent experiences at half the bitrate of DD+, its predecessor. Dolby AC-4 matches the delivery method with the optimal configuration, enabling encodes tailored for broadcast or streaming and catering to headphone or speaker playback. It is also capable of delivering enhanced, user-configurable, and accessible experiences. The Dolby AC-4 coding system utilizes new aspects of object audio for features like dialogue enhancement or commentator substitution.
Dolby Atmos and Dolby Vision
Dolby Atmos and Dolby Vision are Dolby's next generation of branded licensing products. They represent significant innovations, and enable consumers to enjoy increasingly immersive audio and video experiences. Dolby Atmos and Dolby Vision include encoding technologies that artists use to create more compelling and immersive audio and video experiences, as well as a set of decoding technologies that device manufacturers include on their devices to decode the content the artists have created.
•Dolby Atmos. Dolby Atmos is the evolution of surround sound technology that creates a three-dimensional audio experience with object-based sound technology using up to 128 audio objects that can be positioned anywhere to allow for precise placement and movement of sound in a three-dimensional space. This is achieved by adding height channels and spatially encoded digital signals. Dolby Atmos can adapt to varied playback environments and devices, including stereo headphones, speakers, receivers, TVs, soundbars, AVRs, and automotive systems.
•Dolby Vision. Dolby Vision is a visual technology that uses HDR to improve the quality of images in movies, TV shows, sports, and games. Dolby Vision is designed to make images appear more realistic by enhancing details in both dark and bright areas, and by increasing brightness, increasing the range of colors, and depicting deep blacks. It includes dynamic metadata that adjusts the picture based on a display's capabilities on a per-frame or per-shot basis. Dolby Vision 2, the next generation of Dolby Vision, expands the market opportunity by enhancing picture quality with Dolby Vision 2 Max for premium televisions and Dolby Vision 2 for mainstream televisions.
A device must support Dolby Atmos and Dolby Vision to fully experience content in Dolby Atmos and Dolby Vision. Ecosystems for these products flourish because creatives appreciate that creating content using Dolby Atmos and Dolby Vision tools enables them to express their creativity in unique and compelling ways. Distributors see value in distributing this differentiated content. Device manufacturers understand that consumers want to enjoy content in the highest quality possible and will express a preference for devices with Dolby Atmos and Dolby Vision playback.
The amount of content created in Dolby Atmos and Dolby Vision is large and growing. In addition to strong momentum in music, TV shows and movies, we are also seeing strong global momentum in user-generated content, audio books, and live sports. We believe that this growing body of Dolby Atmos and Dolby Vision content provides device manufacturers with an incentive to license our technology in order to make it available to their customers.
Revenue Generation
We license our branded technologies via a direct sales force that works with approximately 1,000 consumer electronics manufacturers all over the globe. Licensing usually occurs in two stages. First, we license to
semiconductor manufacturers who incorporate our technologies in ICs that they sell to OEMs of consumer entertainment devices. These semiconductor licensees pay us a nominal initial fee for use of our technology and the services that we provide in their implementation process. Second, we license OEMs, who are then authorized to purchase chips from the chip makers, and incorporate those chips into Dolby-approved products. In addition to the two-stage model, we also license directly to integrated chip and device makers.
Our branded licensing customers typically enter into a per unit royalty arrangement whereby they pay us for each unit they sell. In accordance with U.S. GAAP, we estimate the number of units each customer sells every quarter and record it as revenue, and then true up that estimate when we get the actual unit sales data, typically one quarter in arrears. This method can lead to variability in revenue in any given quarter.
Some of our customers choose to enter into a minimum volume commitment where they commit to a certain minimum number of devices in exchange for a lower price per unit. If the customer sells more than the number of units they committed to, they pay a set per unit royalty for each incremental unit. These are annual and sometimes multiyear deals, where the value of the committed volume is generally recognized as revenue up front. These contract structures, as well as the occasional fixed fee contract whereby a licensee pays for unlimited units, are often selected by large customers and can also lead to variability in quarterly revenue.
We price our products based on value and volume, among other factors.
With respect to value, the advanced features of Dolby Atmos and Dolby Vision enhance the audio and video capabilities of our consumer electronics OEM partners' products and many of those partners can charge a premium for devices that include these technologies. Branded audio codecs can be implemented standalone but are necessary components for an effective Dolby Atmos implementation. Generally, the more technologies a customer licenses, the higher the total royalty per device.
Higher volumes generally equate to lower prices. This dynamic manifests at a market level for device families that represent significant volume. For example, in 2025, there were over one billion mobile devices, approximately 200 million TVs and, according to Wards Intelligence, an Auto Research firm, approximately 90 million cars sold. Accordingly, ARPU for cars is higher than ARPU for TVs, which is higher than ARPU for mobile phones.
Patent Licensing
We generate patent licensing revenue primarily from licensing Dolby-owned patents essential to standardized audio and video technologies. These technologies are fundamental to the capture, storage, transmission and playback of audio and video, and are embodied in billions of products sold each year throughout the world, including streaming devices, televisions, gaming consoles, automotive media consoles and security cameras.
Technology Standards
The standardized technologies at the core of our patent licenses are generally developed in an open, collaborative process under the auspices of international standard-setting organizations like ETSI, ISO, IEC and/or ITU. Active participants are leaders in the field, and often include businesses (large and small), research institutes, and universities. Participants, including Dolby, contribute specialized expertise and/or technology with the goal of creating common industry solutions to address technical challenges. Given the collaborative and meritocratic nature of the standardization process, the resulting technology solution is both state-of-the-art and designed to meet the requirements of the market, increasing the likelihood of industry adoption.
For audio and video codecs, the standardization process is centered on creating interoperable solutions that work in a uniform manner despite increasingly complex device requirements. The resulting standardized technologies are intended to connect billions of disparate devices worldwide in a way that allows for seamless communication. These technology standards have played an essential role in advancing the technology of media capture, storage, transmission and playback through multiple generations of technological development. For example, the AVC codec helped enable standard-definition streaming over the internet, while the next-generation HEVC codec optimized streaming for higher-definition formats like 4K.
Looking forward, Dolby intends to continue to actively participate (both in standards bodies and independently) in the development of next-generation standardized audio and video technologies and, in particular, we are exploring the use of artificial intelligence in the development and use of audio and video codecs.
Key Current Programs
The majority of revenue from Dolby's patent licensing comes from licensing standard essential patents associated with standardized AAC, AVC and HEVC codecs, each of which is described below.
• AAC, HE-AAC and Extended HE-AAC.The AAC family of audio codecs comprises some of the most efficient audio coding technologies available today. These codecs are designed to provide high quality audio at lower bitrates than prior coding formats. The AAC family of codecs is widely deployed across most consumer media playback devices.
• AVC. The AVC digital video codec is highly efficient and is widely implemented in video playback devices including STBs, mobile devices, cameras, and broadcast television services and other products. AVC is the most widely deployed video codec used by broadcasters and video streaming companies.
• HEVC. HEVC is a next-generation digital video codec that compresses video more efficiently than AVC, leading to an average bitrate reduction of up to 50%. HEVC enables the distribution of higher-quality video, such as 4K streaming. HEVC is especially useful for streaming video on mobile devices, where data usage and processing power are often limited.
In addition, we also license patents essential to other audio, video, and communications codec technologies, such as AV1, MPEG H, Opus, and VVC. These technologies and licensing programs are in earlier phases of technology adoption and licensing program maturity.
Revenue Generation
Given the collaborative nature of the standardization process, Dolby generally owns only a portion of the patent rights in the resulting standard. As such, patent licensing solutions are not Dolby-branded, and we can directly offer licensees only a portion of the rights necessary to practice the relevant standard.
Our preferred solution to these ownership dynamics is the patent pool.
A patent pool is a collaborative structure administered by a patent pool administrator and comprised of multiple patent owners (referred to as licensors) who agree to jointly license their patents relevant to a particular technology. There can be dozens of licensors contributing IP to a patent pool for a standardized technology.
By bringing together multiple patent owners to offer a combined solution, pools offer a number of advantages over direct licensing, including the following:
•Pools dramatically decrease transaction costs for most licensees and, to a lesser extent, for most licensors;
•Pools offer licensees relatively simple access to fundamental technology in a simplified 'one-stop shop,' enabling licensees to focus their resources on developing their own products and technologies;
•Pools enable widespread, rapid adoption of a technology, which accelerates research into subsequent technologies and catalyzes downstream competition;
•Pools allow licensors like Dolby to focus on innovation rather than sales, marketing, and licensing activities; and
•The pool structure naturally leads to more transparent and consistent licensing terms.
Patent pools employ a variety of licensing revenue models, including per-unit and fixed-fee royalties, and sometimes include royalty caps or committed volume arrangements in exchange for a lower price per unit. The fees charged for licensing pooled patents are initially determined by market forces - a careful balance of the need to compensate innovators with the desire to develop an active licensee base. This balance of licensor and licensee interests is also a core consideration in the development of non-fee licensing terms.
Licensing fees collected from companies implementing the technology are distributed to the licensors by the patent pool administrator after deducting an administration fee. Royalty share among the pool licensors is determined based on the value of the patents each licensor contributes to the pool, as governed by allocation rules negotiated among the pool licensors.
We operate as licensors in patent pools administered by several patent pool administrators including Access Advance, Sisvel, Via and Vectis. We are a majority stockholder and licensor in Via, which we co-own with Philips and Mitsubishi. We hold a minority ownership interest in Access Advance. Patent pool administration fees are paid as a
percentage of royalties collected for services rendered by the pool administrator such as royalty collection, allocation and compliance, financial reporting, and tax planning and preparation.
The vast majority of our patent licensing revenue comes from patent pools in the form of royalties, and a minority of our patent licensing revenue is generated from bilateral licensing agreements between Dolby and licensees, with licensing fees negotiated directly with the licensee. We also generate revenue from Via administration fees.
Recoveries
We also generate licensing revenue via recoveries, which is revenue attributable to unlicensed or under-reported distribution of products incorporating our technologies in prior periods. Recoveries arise in the context of both branded technology licensing and patent licensing, and usually result from a settlement following a licensee audit under an existing license agreement, or as part of back-royalties paid in connection with a license agreement with a new licensee. Within the Results of Operations section of Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations," revenue attributable to previous periods' usage including settlements are collectively referred to as "recoveries." Recoveries are a recurring element of our business and are subject to fluctuation and unpredictability.
Dolby Cinema
We leverage our universe of creative talent to bring the highest quality experiences to our exhibitor partners. Dolby Cinemas are PLF cinemas that deliver a Dolby branded premium cinema offering with Dolby Vision, Dolby Atmos, and a proprietary Dolby theater design. We typically provide Dolby Cinema exhibitors with the requisite Dolby technology at minimal or no upfront cost and generate revenue from these sites through a share of box office receipts, which we recognize as licensing revenue. Dolby Cinemas deliver a unique, high-end theatre experience, that is different from competing PLFs as well as our exhibitor partner's other theaters that use Dolby manufactured and distributed cinema hardware, including those that may utilize Dolby Atmos and/or Dolby Vision.
Products and Services
Cinema Products and Services
We design and manufacture audio, imaging, accessibility, and other hardware and software solutions primarily for the cinema, with occasional applications in the television, broadcast, and live entertainment industries.
Cinema Imaging Products include digital cinema servers used to load, store, decrypt, decode, watermark and playback digital film files for presentation on cinema projectors. It also includes software used to encrypt, encode, and package digital media files for distribution.
Cinema Audio Products include cinema processors, amplifiers and loudspeakers used to decode, render and optimally play back digital cinema soundtracks, including those using Dolby Atmos.
In addition, we offer various services to support theatrical and television production for cinema, broadcast, and home entertainment, including equipment training and maintenance, mixing room alignment, equalization, as well as audio, color, and light image calibration. We also provide PCS for products sold and equipment installed at Dolby Cinema theaters operated by exhibitor partners, and we support the implementation of our technologies into products manufactured by our licensees.
Revenue Generation
We generate revenue from Dolby Cinema Products by selling and leasing products to exhibitors, excluding Dolby Cinemas, and offering PCS to exhibitors.
Dolby OptiView
Dolby OptiView is powering immersive, interactive, and social experiences with real-time engagement for live events, especially sports. Dolby OptiView leverages Dolby's six decades of experience in the science of sight and sound to deliver video with clarity, depth and detail via our unique content delivery system which ensures a high quality, synchronized viewer experience across the globe. This enables our customers to engage viewers effectively with near real time interaction tools that will strengthen connections and drive participation.
Revenue Generation
Dolby OptiView is a software as a service (SaaS) product licensed directly to enterprises via a consumption-based revenue model.
END MARKETS
We generated 92% and 93% of our revenue in the first quarter of fiscal 2026 and fiscal 2025, respectively,through licensing our technology, brand, and patents, primarily to device manufacturers. The following table presents the end market composition of revenue from our licensing business for all periods presented:
| Fiscal Quarter Ended | |||||||||||
| Market |
December 26, 2025 |
December 27, 2024 |
Main Components of Each Category | ||||||||
| Broadcast | 31% | 35% | Televisions and STBs | ||||||||
| Mobile | 23% | 19% | Smartphones and Tablets | ||||||||
| CE | 14% | 15% | DMAs, Blu-ray Disc devices, AVRs, Soundbars, and DVDs | ||||||||
| PC | 9% | 9% | Windows and macOS operating systems and devices | ||||||||
| Other | 23% | 22% | Dolby Cinema, Gaming consoles, Automotive, Patent pool administrative fees, and VDP licensing revenue | ||||||||
| Total | 100% | 100% | |||||||||
MACROECONOMIC CONDITIONS
Our revenue can be negatively impacted by macroeconomic conditions, including but not limited to, the financial health of our licensees, inflation, heightened interest rates, foreign exchange rates, rising costs of material, increased shipping costs, tariffs and trade barriers, international conflicts, labor disputes, reduced discretionary consumer spending, and reduced new product investment by our customers. In particular, the U.S. has recently implemented tariffs on certain imports and some U.S. trading partners have implemented or announced retaliatory tariffs or other trade barriers. The situation is highly dynamic and the potential impacts are impossible to predict with certainty. For example, any increases in tariffs or other trade barriers may, directly or indirectly, increase the cost of producing or delivering our products, increase the costs to our licensees of licensing our technology, and may decrease demand for our products and services. If the costs or lead times required for our licensees to manufacture and export their products, such as consumer electronics products and cars, result in higher prices or longer lead times for end consumers, sales of those products may decrease and thus royalty payments payable to Dolby that are based on unit shipments may decrease. Any of the foregoing impacts could negatively impact our revenue from licensing and product sales.
Macroeconomic conditions also impart substantial uncertainty into our operating environment and may lead to follow-on negative economic effects like recession or heightened inflation, each of which presents additional challenges for our business. Uncertainty or an adverse economic climate may cause delays or a decrease in the adoption of our technologies into new products by partners and licensees, or lead manufacturers to discontinue including our technology in their products or to seek price reductions. These conditions may impact consumer demand for our licensees' products that incorporate our technology and for our own products and services. Further, the noted macroeconomic conditions and related uncertainty may negatively impact transaction cycles and our recovery of revenue associated with past unauthorized or unreported usage.
The future implications of these macroeconomic conditions on our business, results of operations and overall financial position remain uncertain. We continue to monitor the evolving macroeconomic environment, including the imposition of tariffs and other trade barriers, and the impact on our business. Further discussion of the potential impacts of these macroeconomic effects on our business can be found in Part II, Item 1A "Risk Factors."
LICENSING
The majority of our revenue is derived from two licensing models: Branded Technology Licensing and Patent Licensing, each of which individually comprises a substantial portion of our revenue. While each has had successes, they share certain challenges. In particular, factors such as global supply constraints or device lifecycles may impact licensing revenue. Further, in certain countries, we and other IP owners face difficulties enforcing contractual and IP rights, including instances in which our licensees fail to accurately report the shipment of products using our technologies. Finally, we face geopolitical challenges including changes in diplomatic and trade relationships, trade protection measures including the imposition of tariffs, and import or export licensing requirements. Further discussion of the potential impacts of the key challenges on our business can be found in Part II, Item 1A "Risk Factors."
Branded Technology Licensing
Dolby's branded technology licensing offers complete technology solutions to our licensees, primarily device manufacturers. Licenses include rights to software, patent rights, know-how, and the relevant Dolby brand. Our branded technologies are primarily comprised of Branded Audio Codecs (DD+ and AC-4) and Dolby Atmos and Dolby Vision (Dolby Atmos for audio, and Dolby Vision for imaging). Licensing revenue is primarily driven by the adoption of our technologies on devices and the number of devices shipped by licensees. Our branded audio codecs have broad penetration across a diverse set of devices and end markets. Revenue from these technologies is primarily driven by device shipments from licensees, and as such, is impacted by consumer spending. The remaining portion of our branded licensing revenue is derived from Dolby Vision and Dolby Atmos. Dolby Vision and Dolby Atmos have not been in the market as long as our branded audio codecs, thus revenue growth is driven by device shipments, increased adoption and the addition of new licensees.
We are focused on expanding our leadership in audio and imaging solutions for premium entertainment content by increasing the number of Dolby experiences that people can enjoy, which will drive revenue growth across the markets we serve. We work across our ecosystem of partners including creators, distributors and device manufacturers to increase the number of Dolby experiences that people can enjoy by enhancing content, including movies and TV, music and live sports, using Dolby branded technologies. Increased content in these areas increases our value proposition across our end markets. In movies and TV, thousands of movie titles and tens of thousands of
TV episodes have been created and released in Dolby Atmos and/or Dolby Vision. Major streaming services such as Netflix, Disney+, Apple TV, Amazon, HBO Max, Paramount+, and other streaming services internationally, continue to enhance content in Dolby Vision and Dolby Atmos. In January, Peacock joined Canal+ in announcing its support for Dolby Vision 2 across all of its content, including movies, original content, and live sports.
Patent Licensing
Our patents are incorporated into the AAC, HE-AAC, and Extended HE-AAC standards for audio, and the AVC and HEVC standards for imaging. The licensing of these patents forms the core of our patent licensing. Revenue generated through our patent licensing model is driven primarily by our royalty share within patent pools, licensee penetration, device shipments, and the introduction of new standardized technologies and patent programs.
We saw continued progress in the development of video programs in the first quarter of fiscal 2026. Access Advance, in which we hold a minority interest, added licensees to its HEVC, VVC, and Video Distribution programs. We generate revenue from these programs by licensing our imaging patents through them and, by virtue of our minority interest in Access Advance, generate income from administration fees. Access Advance added 28 new licensees to its HEVC device program, including Hisense, Transsion, Xiaomi, and, in the second quarter, Roku, and added 8 new licensees to its VVC video program, including Oppo, Xiaomi, and MSI. In the second quarter, Access Advance also added Roku as a licensee to its new Video Distribution Program, the first US-based licensee in the program.
In the first quarter of fiscal 2026, Via sold its HEVC/VVC patent pool to Access Advance for a total purchase price of $25 million. The transaction unifies the administration for virtually all pooled HEVC and VVC technologies under a single administrator with the goal of reducing market fragmentation and ensuring that essential video technologies remain easily accessible through clear, predictable, and efficient mechanisms.
In audio, Via added 11 new licensees to its AAC audio program, in which we are a licensor. Vectis added Shenzhen SDMC Technology to its OPUS Patent Pool, in which we are a licensor.
Revenue from our patent licensing is driven, in part, by the adoption and use of the standardized technologies in which we participate by device manufacturers. As in any technology licensing business, it is possible that changing partner preferences, consumer preferences, or other market dynamics could lead to increased or decreased adoption, or the use of alternative technologies.
Revenue derived from our patent licensing programs is also driven by the success of the patent pools in which we participate, which is driven by licensee, licensor, and program renewals. The revenue we derive from patent pools also depends significantly on the patent pool administrators' success in negotiating licenses with companies already using the relevant standard (i.e. licensee penetration). Additionally, our licensing revenue from patent pools is driven, in part, by the royalty share among pool licensors, which is determined based on the value of the patents each licensor contributes to the pool, as governed by allocation rules negotiated among the pool licensors.
The standardized technologies at the core of our patent licensing are intended for broad use across all device categories that play back audio and visual content. Device manufacturers typically negotiate and acquire the patent rights for these technologies for implementation across all their device categories and product lines in their applicable end markets.
For a discussion of certain risks related to our patent licensing model, please refer to Part II, Item 1A"Risk Factors" in this quarterly report on Form 10-Q, in particular the sections under the headings "Technology Standards" and "Intellectual Property."
Licensing End Markets
The following are highlights from our first quarter of fiscal 2026 and key challenges related to Dolby's licensing businesses, by market.
Broadcast
Highlights
We have an established global presence and broad adoption of our branded audio and patent licensing technologies in broadcast services and devices, which primarily include TVs and STBs. We work with many TV OEMs and strategic partners to enable and promote Dolby Vision and Dolby Atmos experiences within their TV lineups. We
have strong attach rates for Dolby Atmos and Dolby Vision with high end TVs and continue to grow adoption on mid-range TVs. Many partners continue to expand their support of the combined Dolby Vision and Dolby Atmos experience. At CES in January 2026, Philips, Hisense, and TCL all announced various upcoming TV models that will support Dolby Vision 2.
Key Challenges
Our pursuit of new licensees and further adoption of our technologies by existing licensees may be impacted by a number of factors. We must continue to present compelling reasons for consumers to demand our audio and video technologies, including ensuring that there is a breadth of available content in our formats and such content is being widely distributed. To the extent that OEMs do not incorporate our technologies in current and future products or our technology is not included in future broadcast industry standards, our revenue could be negatively impacted. Changing trends in the way that video content is distributed and consumed may impact our business and future growth in the broadcast market, such as the trend away from subscription-based cable and satellite television providers toward streaming services.
Mobile
Highlights
We continue to promote adoption of our technologies across major mobile ecosystems, including Apple and Android. Our patent licensing technologies are adopted broadly throughout the mobile device ecosystem. Dolby Atmos and Dolby Vision are included throughout the Apple device line-up and in Apple TV, and Dolby Atmos is included in Apple Music. Dolby Vision Capture has been supported on all iPhones since the iPhone 12. We have strong adoption of Dolby Atmos and our branded audio codecs across high-end Android mobile devices and are focused on growing our presence on low and mid-tier phones. An increasing number of Android device manufacturers have adopted Dolby Vision and Dolby Vision Capture on high end devices and we are focused on the opportunity to significantly increase our adoption. The breadth of mobile devices supporting Dolby technologies continues to increase globally. Meta began supporting Dolby Vision on Facebook, after recently announcing support for Dolby Vision on Instagram. Douyin, known in many parts of the world as TikTok, has been supporting Dolby Vision on iOS and is now supporting Dolby Vision on Android.
Key Challenges
Growth in this market is dependent on several factors. Due to short product life cycles, mobile device OEMs can readily add or remove certain of our technologies from their devices. Our success depends on our ability to address the rapid pace of change in mobile devices, and we must continuously collaborate with mobile device OEMs to incorporate our technologies. We rely on a small number of partnerships with key participants in this market. If we are unable to maintain these key relationships, we may experience a decline in mobile devices incorporating our technologies. To the extent that OEMs do not incorporate our technologies in current and future products or our technology is not included in future mobile industry standards, our revenue could be impacted. We must also continue to support the development and distribution of Dolby-enabled content via various ecosystems.
Consumer Electronics
Highlights
We have an established presence in the home entertainment market across devices such as wireless and smart speakers, soundbars, DMAs (devices that connect a home media system to the internet), and AVRs, through the inclusion of our branded audio codecs, and increasingly through the inclusion of Dolby Atmos and Dolby Vision. Our patent licensing technologies also have broad adoption in the home entertainment market. We continue to focus on expanding the availability of Dolby technologies to new devices.
Key Challenges
We must continue to present compelling reasons for consumers to demand our technologies wherever they enjoy entertainment content, while promoting creation and broad availability of content in our formats. With relatively short product life cycles for many consumer electronics, OEMs can add or remove certain of our technologies from their products which could impact our revenue. In addition, to the extent that our technology is not included in future industry standards, our revenue could be impacted.
Personal Computers
Highlights
DD+ enhances audio playback in Mac computers through the operating system with native support in the Safari browser, and Windows-based PCs through PC OEM implementations and native support in the Microsoft Edge browser. Dolby's presence in these browsers enables us to reach more users through various types of content, including streaming video entertainment. A number of PCs from partners such as Apple, Lenovo, Dell, Samsung, Microsoft, and ASUS also support Dolby Vision and/or Dolby Atmos, with continued expansion of applications through music, streaming, and gaming.
Key Challenges
Demand for PCs has fluctuated significantly in recent years. We must continuously collaborate and maintain our key partnerships with PC manufacturers to incorporate our technologies, and we must continue to support the development and distribution of Dolby-enabled content via various ecosystems. To the extent that PC manufacturers do not incorporate our technologies in current and future products, our revenue could be impacted.
Other Markets
Highlights
We generate revenue from the automotive industry primarily through the adoption of Dolby Atmos in cars. As of the end of the first quarter of fiscal 2026, we have announced partnerships with over 35 car makers that will support our technologies, up from over 20 car makers at the end of fiscal 2025. At CES in January 2026, we announced that we have partnered with Qualcomm to integrate Dolby's latest technology into Qualcomm's Gen 5 Snapdragon Automotive platform. Additionally, Mahindra in India released its first SUV that supports Dolby Atmos and Dolby Vision, and Hyundai China launched its first vehicle that supports Dolby Atmos.
Gaming consoles such as the Sony PlayStation and the Microsoft Xbox use DD+ to support gaming content and streaming for movie and television content. The PlayStation 5 supports compatible Dolby Atmos-enabled living room devices. The Xbox Series X and Series S gaming consoles support Dolby Vision and Dolby Atmos for streaming and gaming content. Additionally, our technologies continue to be incorporated into the latest headphones by various OEMs.
Key Challenges
Our automotive-related revenue growth will be impacted if OEMs do not incorporate our technologies in their latest products. The long development cycle of the automotive industry reduces the frequency of our opportunities to be incorporated into additional products. Additionally, the automotive industry is cyclical, so our revenue from the auto market is affected by the broader cycles of the industry. Consumer demand for gaming devices is impacted by anticipation of console refresh cycles, which could result in fluctuations in our revenue. In addition, the gaming console market has competition from mobile devices and gaming PCs, which have faster refresh cycles and appeal to a broader consumer base.
Included within Other Markets is also licensing revenue from audio and video technologies used to create Dolby experiences through Dolby Cinema.
Dolby Cinema
Highlights: We continue to expand our global presence for Dolby Cinema, with sites located in the U.S. and internationally. Additionally, we increased the number of Dolby Atmos and Dolby Vision theaters or exhibitors in South Korea, China, Thailand, and in the U.S.
Key Challenges: Although the PLF market for the cinema industry has been growing, Dolby Cinema competes with other existing offerings. Our success depends on our partners and their success, and our ability to differentiate our offering and deploy new sites. In addition, the success of our Dolby Cinema offering is tied to global movie production and box office performance generally.
PRODUCTS AND SERVICES
A majority of our Products and Services revenue is derived from the sale of audio and imaging products for the cinema industry. Revenue from Dolby OptiView is also included in products and services.
Cinema Products and Services
Highlights
To help enable the playback of content in Dolby formats, we offer a range of servers, which include the IMS3000 (an integrated imaging and audio server with Dolby Atmos), and audio processors, such as the CP950, to cinema exhibitors globally. Dolby Atmos has been adopted broadly across studios, content creators, post-production facilities, and exhibitors. As of the end of the first quarter of fiscal 2026, there are over 8,600 Dolby Atmos screens installed or committed and over 4,500 Dolby Atmos theatrical titles have been announced or released.
We also offer a variety of other cinema products, such as the Dolby Multichannel Amplifier and our high-power flexible line of speakers. These products allow us to offer exhibitors a more complete Dolby Atmos solution that is often more cost effective than other commercially available options.
Key Challenges
Demand for our cinema products is dependent upon our partners and their success in the market, industry and economic cycles, box office performance, and our ability to develop and introduce new technologies, further our relationships with content creators, and promote new cinematic audio and video experiences. A significant portion of our growth opportunity lies in international markets, which are subject to geopolitical risks. We may also be faced with pricing pressures or competing technologies, which would affect our revenue. In addition, supply chain constraints may impact our ability to provide cinema products and services to our customers. Long lead times and increased cost of materials due to the macroeconomic conditions, including higher interest rates have also negatively impacted the financial health of our cinema customers and partners, leading to reduced new product investment and lower demand.
Dolby OptiView
Highlights
Our strategy for Dolby OptiView is to bring Dolby's audio and video technologies to a broader range of media content and digital experiences. We are expanding our addressable market by offering solutions to companies building real-time digital experiences that increase audience engagement. For instance, our solution can provide the capability to stream high quality audiovisual content with ultra-low latency that reduces the delay between the action and the viewer. Dolby Optiview added a number of new customers during the first quarter of fiscal 2026, such as Veikkaus, Finland's national lottery and sports betting operator, and SIS, a service provider to sports betting companies.
Content being delivered with almost no delay enables our customers to create real-time interaction in their apps and services. This near instantaneous interaction is essential to the experiences companies, particularly in sports and entertainment, are creating.
Over time, we believe this way of delivering and engaging with content will be used more broadly, thereby increasing their business opportunity.
Key Challenges
Dolby OptiView is an early-stage business, and it is uncertain when or if it will be a material revenue driver. Our success in this market will depend on adoption by companies building real-time digital experiences that increase audience engagement, the volume of usage of the services and our ability to monetize our services. In addition, the development and maintenance needed to provide a reliable and scalable platform may require us to incur additional costs to develop new skills within our existing employee base or hire external specialized talent. Although the market for real-time experiences has been growing, Dolby OptiView competes with other offerings from third parties.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
There have been no material changes to the critical accounting policies from those included in our fiscal 2025 Annual Report on Form 10-K filed with the SEC, as per Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates included therein.
RESULTS OF OPERATIONS
For each line item included on our unaudited interim condensed consolidated statements of operations described and analyzed below, the significant factors identified as the leading drivers contributing to the overall fluctuation are presented in descending order of their impact on the overall change (from an absolute value perspective). This discussion and analysis highlights comparisons of material changes in the unaudited interim condensed consolidated financial statements for the quarters ended December 26, 2025 and December 27, 2024. Note that adjustments related to sales-based royalties that were misreported by licensees as well as unlicensed settlement activity, are collectively referred to as "recoveries." Amounts displayed, except percentages, are in thousands.
Revenue and Gross Margin
Licensing
Licensing revenue consists of fees earned from licensing our technologies to customers who incorporate them into their products and services to enable and enhance audio and imaging capabilities. The technologies that we license are either internally developed, acquired, or licensed from third parties. We also generate administrative fees for managing patent pools on behalf of third party patent owners through our subsidiary, Via. A significant portion of our licensing revenue pertains to customer-shipment royalties that we recognize based on estimates of our licensees' shipments. To the extent that shipment data reported by licensees differs from estimates we made and recorded, we recognize an adjustment to revenue for such difference in the period we receive the reported shipment data.
Our cost of licensing consists mainly of amortization of certain purchased intangible assets and intangible assets acquired in business combinations, depreciation, third party royalty obligations, and patent pool fees.
| Fiscal Quarter Ended | Change | ||||||||||||||||
| Licensing |
December 26, 2025 |
December 27, 2024 |
$ | % | |||||||||||||
| Revenue | $319,771 | $330,479 | $(10,708) | (3)% | |||||||||||||
| Percentage of total revenue | 92% | 93% | |||||||||||||||
| Cost of licensing | 20,762 | 21,110 | (348) | (2)% | |||||||||||||
| Gross profit | 299,009 | 309,369 | (10,360) | (3)% | |||||||||||||
| Gross margin | 94% | 94% | |||||||||||||||
| Fiscal Quarter Ended | |||||||||||||||||
| Licensing Revenue By Market | December 26, 2025 | December 27, 2024 | |||||||||||||||
| Broadcast | $ | 100,263 | 31 | % | $ | 115,762 | 35 | % | |||||||||
| Mobile | 74,949 | 23 | % | 61,524 | 19 | % | |||||||||||
| CE | 45,602 | 14 | % | 49,457 | 15 | % | |||||||||||
| PC | 28,717 | 9 | % | 31,256 | 9 | % | |||||||||||
| Other | 70,240 | 23 | % | 72,480 | 22 | % | |||||||||||
| Total licensing revenue | $ | 319,771 | 100 | % | $ | 330,479 | 100 | % | |||||||||
Q1 2026 vs. Q1 2025
| Factor | Licensing Revenue | Gross Margin | ||||||||||||
| Broadcast | â | Lower revenue due to lower true-up and timing of minimum volume commitments, partially offset by higher recoveries | ßà | No significant fluctuations | ||||||||||
| Mobile | á | Higher revenue from recoveries and Dolby Vision adoption, partially offset by timing of minimum volume commitments in our imaging patent programs | ||||||||||||
| CE | â | Lower revenue from lower unit shipments including a lower true-up, partially offset by higher recoveries | ||||||||||||
| PC | â | Lower revenue primarily from timing of minimum volume commitments in our imaging patent programs | ||||||||||||
| Other | â | Lower revenue due to lower true-up in automotive and lower gaming console unit shipments in the quarter, partially offset by higher imaging patents revenue from the Video Distribution Program and higher auto unit shipment estimates in the quarter | ||||||||||||
Products and Services
Products revenue is generated from the sale of audio and imaging hardware and software products for the cinema, television, broadcast and entertainment industries. Also included in Products revenue are amounts relating to certain Dolby Cinema arrangements that are considered sales-type leases that involve fixed or minimum fees. Cost of products includes materials, labor, manufacturing overhead, amortization of certain intangible assets, and certain third party royalty obligations.
Services revenue consists of fees charged to support theatrical and television production for cinema exhibition, broadcast, and home entertainment, including equipment training and maintenance, mixing room alignment, equalization, as well as audio, color, and light image calibration. Services revenue also includes PCS for products sold and equipment installed at Dolby Cinema theaters operated by exhibitor partners and support for the implementation of our technologies into products manufactured by our licensees. Also included in Services revenue are amounts generated through Dolby OptiView. Cost of services consists of personnel and personnel-related costs for providing our professional services, software maintenance and support, external contractors, and other direct expenses incurred on behalf of customers.
| Fiscal Quarter Ended | Change | ||||||||||||||||
| Products and Services |
December 26, 2025 |
December 27, 2024 |
$ | % | |||||||||||||
| Revenue | $26,935 | $26,520 | $415 | 2% | |||||||||||||
| Percentage of total revenue | 8% | 7% | |||||||||||||||
| Cost of products and services | 22,446 | 19,664 | 2,782 | 14% | |||||||||||||
| Gross profit | 4,489 | 6,856 | (2,367) | (35)% | |||||||||||||
| Gross margin | 17% | 26% | |||||||||||||||
Q1 2026 vs. Q1 2025
| Factor | Products and Services Revenue | Gross Margin | ||||||||||||
| Services | ßà | No significant fluctuations | ßà | Lower gross margin due to higher warranty expense | ||||||||||
Operating Expenses
Research and Development
R&D expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, external contractor costs, depreciation and amortization, facilities costs, costs for outside materials, and information technology expenses.
| Fiscal Quarter Ended | Change | ||||||||||||||||
|
December 26, 2025 |
December 27, 2024 |
$ | % | ||||||||||||||
| Research and development | $69,077 | $66,638 | $2,439 | 4% | |||||||||||||
| Percentage of total revenue | 20% | 19% | |||||||||||||||
Q1 2026 vs. Q1 2025
| Category | Key Drivers | |||||||
| Research and Development | á | Higher costs due to bonus and commissions, stock-based compensation, depreciation and amortization, and vacation expense, offset by lower facilities expense | ||||||
Sales and Marketing
S&M expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, marketing and promotional expenses for events such as trade shows and conferences, marketing campaigns, travel-related expenses, contractor fees, facilities costs, depreciation and amortization, information technology expenses, and legal costs associated with unreported and underreported use of our IP.
| Fiscal Quarter Ended | Change | ||||||||||||||||
|
December 26, 2025 |
December 27, 2024 |
$ | % | ||||||||||||||
| Sales and marketing | $91,552 | $94,399 | $(2,847) | (3)% | |||||||||||||
| Percentage of total revenue | 26% | 26% | |||||||||||||||
Q1 2026 vs. Q1 2025
| Category | Key Drivers | |||||||
| Marketing Programs | â | Lower costs of $5.6 million primarily due to timing of marketing programs | ||||||
| Legal, Professional, & Consulting | á | Higher costs of $2.3 million to support litigation-related activities | ||||||
General and Administrative
G&A expenses consist primarily of employee compensation and benefits expenses, stock-based compensation, depreciation and amortization, facilities and information technology costs, as well as professional fees and other costs associated with external contractors.
| Fiscal Quarter Ended | Change | ||||||||||||||||
|
December 26, 2025 |
December 27, 2024 |
$ | % | ||||||||||||||
| General and administrative | $70,243 | $70,092 | $151 | -% | |||||||||||||
| Percentage of total revenue | 20% | 20% | |||||||||||||||
Q1 2026 vs. Q1 2025
| Category | Key Drivers | |||||||
| Other | á | Higher costs due to taxes and insurance and payroll salaries, partially offset by a gain on the sale of Via's intangible assets related to the HEVC/VVC program and lower professional services costs | ||||||
Restructuring Charges
Restructuring charges recorded as operating expenses in our unaudited interim condensed consolidated statements of operations represent costs associated with separate individual restructuring plans implemented in various fiscal periods. The extent of our costs arising as a result of these actions, including fluctuations in related balances between fiscal periods, is based on the nature of activities under the various plans.
| Fiscal Quarter Ended | Change | ||||||||||||||||
|
December 26, 2025 |
December 27, 2024 |
$ | % | ||||||||||||||
| Restructuring charges | $10,466 | $5,216 | $5,250 | 101% | |||||||||||||
| Percentage of total revenue | 3% | 1% | |||||||||||||||
Fiscal 2025 Restructuring Events
In September 2025, we initiated restructuring actions in order to centralize teams into fewer locations, relocate certain roles to provide better access to talent pools, encourage multi-disciplinary collaboration, and simplify operations. In continuation with this plan, we recorded expense in the first quarter of fiscal 2026 of $10.5 million consisting primarily of severance and other related benefits. The majority of the remaining components of this plan are expected to be completed by the end of the second quarter of fiscal 2026, resulting in an additional charge of approximately $2 million. Cash payment of the severance and other termination benefits are expected to be substantially completed by the end of the third quarter of fiscal 2026. These activities are expected to result in estimated gross pre-tax operating income savings of approximately $20 million in fiscal 2026, due to estimated savings in compensation and benefits of impacted employees. The impact of these estimated savings on our operating expenses will be mostly offset by increased investment in our strategic priorities and the effects of inflation on our remaining expenses.
In November 2024, we initiated restructuring actions with the purpose of aligning our R&D resources, and to a lesser extent our S&M resources, with our highest strategic priorities. In connection with this plan, we recorded expense in the first quarter of fiscal 2025 of $5.8 million in severance and other related benefits. Cash payment of the severance and other termination benefits were substantially completed by the end of fiscal 2025. These activities resulted in estimated gross pre-tax operating income savings of approximately $20 million in fiscal 2025, due to estimated savings in compensation and benefits of impacted employees, which was consistent with our expectations. The impact of these estimated savings on our operating expenses was mostly offset by increased investment in our strategic priorities and the effects of inflation on our remaining expenses.
Fiscal 2024 Restructuring Event
In April 2024, we initiated restructuring actions with the purpose of focusing our resources on our highest strategic priorities. These activities resulted in gross pre-tax operating income savings of approximately $11 million within fiscal 2025, which was consistent with our expectations. The impact of these estimated savings on our operating expenses was mostly offset by increased investment in our strategic priorities and the effects of inflation on our remaining expenses.
For additional information on our Restructuring programs, see Note 13 "Restructuring" to our unaudited interim condensed consolidated financial statements.
Other Income/Expense
Other income/expense primarily consists of interest income earned on cash and investments and the net gains or losses from foreign currency transactions, derivative instruments, our proportionate share of net income or losses from our equity method investments, and gains and losses on the sales of marketable securities from our investment portfolio.
| Fiscal Quarter Ended | Change | ||||||||||||||||
|
December 26, 2025 |
December 27, 2024 |
$ | % | ||||||||||||||
| Other income | $9,442 | $6,171 | $3,271 | 53% | |||||||||||||
| Percentage of total revenue | 3% | 2% | |||||||||||||||
Q1 2026 vs. Q1 2025
| Category | Key Drivers | |||||||
| Other Income | á | Higher income from our equity method investments in the current year | ||||||
Income Taxes
Our effective tax rate is based on our projected annual fiscal year results and is affected each period-end by several factors. These factors include changes in our projected fiscal year results, recurring items such as tax rates and relative income earned in our foreign jurisdictions, as well as discrete items such as changes to our unrecognized tax benefits that may occur in but are not necessarily consistent between periods. For additional information related to effective tax rates, see Note 12 "Income Taxes"to our unaudited interim condensed consolidated financial
statements.
| Fiscal Quarter Ended | ||||||||
|
December 26, 2025 |
December 27, 2024 |
|||||||
| Provision for income taxes | $(17,921) | $(17,981) | ||||||
| Effective tax rate | 25.0% | 20.9% | ||||||
Q1 2026 vs. Q1 2025
| Factor | Impact On Effective Tax Rate | |||||||
| Foreign Operations | á |
Lower benefit from earned income in lower tax jurisdictions
|
||||||
| Stock-based Compensation | á |
Higher expense related to the settlement of stock-based awards
|
||||||
LIQUIDITY, CAPITAL RESOURCES, AND FINANCIAL CONDITION
Our principal sources of liquidity are cash, cash equivalents, and investments, as well as cash flows from operations. We also have additional access to liquidity under a revolving credit facility, as noted in our Current Report on Form 8-K filed with the SEC on November 19, 2024. We believe that these sources will be sufficient to satisfy our currently anticipated cash requirements through at least the next twelve months.
As of December 26, 2025, we had cash and cash equivalents of $643.8 million, which consisted of cash and highly liquid money market funds. In addition, we had short and long-term investments of $85.8 million, which primarily consisted of equity method investments and equity securities without a readily determinable fair value.
The following table presents selected financial information as of December 26, 2025 and September 26, 2025 (in thousands):
|
December 26, 2025 |
September 26, 2025 |
||||||||||
| Cash and cash equivalents | $ | 643,845 | $ | 701,893 | |||||||
| Short-term investments | 739 | 703 | |||||||||
| Long-term investments | 85,022 | 80,205 | |||||||||
| Accounts receivable, net | 373,091 | 331,096 | |||||||||
| Accounts payable and accrued liabilities | 384,880 | 387,096 | |||||||||
| Working capital | 964,555 | 950,471 | |||||||||
Capital Expenditures and Uses of Capital
Our capital expenditures consist of purchases of land, building, building fixtures, laboratory equipment, office equipment, computer hardware and software, leasehold improvements, and production and test equipment. Additionally, included in capital expenditures are amounts associated with Dolby Cinema locations. We continue to invest in S&M and R&D to promote the overall growth of our business and technological innovation.
We continue to retain sufficient cash holdings to support our operations and we also have historically purchased investment-grade securities diversified among security types, industries, and issuers. We have used cash generated from our operations to fund a variety of activities related to our business in addition to our ongoing operations, including business expansion and growth, acquisitions, and repurchases of our Class A common stock. We have historically generated significant cash from operations. However, these cash flows and the value of our investment portfolio could be affected by various risks and uncertainties, as described in Part II, Item 1A "Risk Factors."
Shareholder Return
We have returned cash to stockholders through both repurchases of Class A common stock under our repurchase program initiated in fiscal 2010 and our quarterly dividend program initiated in fiscal 2015. Refer to Note 9 "Stockholders' Equity and Stock-Based Compensation" to our unaudited interim condensed consolidated financial statements for a summary of dividend payments made under the program during fiscal 2026 and additional information regarding our stock repurchase program.
Stock Repurchase Program. Our stock repurchase program was approved in fiscal 2010, and since then we have completed approximately $3.1 billion of stock repurchases under the program.
Quarterly Dividend Program. During fiscal 2015, we initiated a recurring quarterly cash dividend program for our stockholders. In the first quarter of fiscal 2026, a quarterly dividend of $0.36 per share was paid on our Class A and Class B common stock to eligible stockholders of record. On January 29, 2026, Dolby announced a cash dividend of $0.36 per share of Class A and Class B common stock, payable on February 18, 2026, to stockholders of record as of the close of business on February 10, 2026.
Cash Flows Analysis
For the following comparative analysis performed for each of the sections of the unaudited interim condensed consolidated statements of cash flows, the significant factors identified as the leading drivers contributing to the fluctuation are presented in descending order of their impact relative to the overall change (in thousands).
Operating Activities
| Fiscal Quarter Ended | |||||||||||
|
December 26, 2025 |
December 27, 2024 |
||||||||||
| Net cash provided by operating activities | $ | 54,799 | $ | 106,779 | |||||||
Net cash provided by operating activities decreased $52.0 million in the fiscal quarter ended December 26, 2025 as compared to the fiscal quarter ended December 27, 2024, primarily due to the following:
| Factor | Impact On Cash Flows | |||||||
| Operating assets and liabilities | â | Lower inflows due to higher accounts receivable and prepaid expenses and other assets, partially offset by higher accounts payable and accrued liabilities | ||||||
Investing Activities
| Fiscal Quarter Ended | |||||||||||
|
December 26, 2025 |
December 27, 2024 |
||||||||||
| Net cash provided by/(used in) investing activities | $ | 1,245 | $ | (8,141) | |||||||
Net cash provided by/(used in) investing activities was $9.4 million higher in the fiscal quarter ended December 26, 2025 as compared to the fiscal quarter ended December 27, 2024, primarily due to the following:
| Factor | Impact On Cash Flows | |||||||
| Proceeds from Sale of Intangible Assets | á | Higher inflows from sale of intangible assets related to the HEVC/VVC program | ||||||
Financing Activities
| Fiscal Quarter Ended | |||||||||||
|
December 26, 2025 |
December 27, 2024 |
||||||||||
| Net cash used in financing activities | $ | (121,834) | $ | (57,571) | |||||||
Net cash used in financing activities was $64.3 million higher in the fiscal quarter ended December 26, 2025 as compared to the fiscal quarter ended December 27, 2024, primarily due to the following:
| Factor | Impact On Cash Flows | |||||||
| Share Repurchases | â | Higher outflows primarily due to higher common stock repurchases in the current year | ||||||
Contractual Obligations and Commitments
Since the end of our fiscal year ended September 26, 2025, there have been no material changes in either our off-balance sheet financing arrangements or contractual obligations outside the ordinary course of business. For additional details regarding our contractual obligations, see Note 7 "Leases" and Note 15 "Commitments and Contingencies"to our unaudited interim condensed consolidated financial statements.
In the first quarter of fiscal 2026, we did not enter into any off-balance sheet arrangements that are expected to have a material effect on Dolby's liquidity or the availability of capital resources.
Indemnification Clauses
We are party to certain contractual agreements under which we have agreed to provide indemnification of varying scope and duration to the other party relating to our licensed IP. Since the terms and conditions of the indemnification clauses do not explicitly specify our obligations, we are unable to reasonably estimate the maximum potential exposure for which we could be liable. In addition, we have entered into indemnification agreements with our officers, directors, and certain employees, and our certificate of incorporation and bylaws contain similar indemnification obligations. For additional details regarding indemnification clauses within our contractual agreements, see Note 15 "Commitments and Contingencies" to our unaudited interim condensed consolidated financial statements.
Dolby Laboratories Inc. published this content on January 29, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on January 29, 2026 at 21:58 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]