Dolby Laboratories (DLB) opened fiscal 2026 with Q1 revenue of US$346.7 million and basic EPS of US$0.56, setting a clear marker for how the new year is starting to shape up. The company has seen quarterly revenue move from US$357.0 million and EPS of US$0.71 in Q1 2025 through US$307.0 million and US$0.52 in Q4 2025 to the latest print. This gives investors a tighter read on how the top line and per share earnings are tracking into the new fiscal year as they watch how margins hold up through the rest of 2026.

With the results on the table, the next step is to see how these numbers line up against the prevailing earnings narratives around Dolby and where those stories might need updating.

Margins Softening With 18.9% Net Level

• On a trailing basis, Dolby generated US$1.34b of revenue and US$240.5 million of net income, which translates to an 18.9% net margin compared with 20.5% a year earlier.
• What stands out for the bullish view is that forecast earnings growth of about 11.5% per year is being weighed against the recent margin drift. Investors have to balance the 18.9% margin and US$240.5 million of net income against that lower level compared with the prior year.

Five Year Earnings Trend vs Q1 Snapshot

• Q1 2026 net income of US$53.3 million and basic EPS of US$0.56 sit within a longer pattern where earnings over the past five years have declined at about 3.1% per year.
• Critics looking at the cautious angle point out that the five year earnings decline and the trailing net margin move from 20.5% to 18.9% leave Q1 2026 EPS of US$0.56 and net income of US$53.3 million as part of a broader earnings pattern that has not yet matched the forecast ~11.5% annual growth. This encourages a closer look at how consistent future quarters might need to be.

P/E Of 23.5x And DCF Fair Value Gap

• Dolby trades on a trailing P/E of 23.5x at a share price of US$64.19, compared with 30.1x for the wider US Software group and 47.9x for peers, while a DCF fair value of US$110.27 in the data set sits well above both the current price and the US$1.34b of trailing revenue.
• Supporters of the bullish take highlight that the 23.5x P/E, the 2.28% dividend yield and the DCF fair value of US$110.27 versus the current US$64.19 price all line up with the view that the stock screens as cheaper than peers. The same data also show a 3.1% per year decline in earnings over five years and an 18.9% net margin that is lower than 20.5% a year ago, so the valuation gap is set against mixed recent earnings trends.

Some investors see the mix of a 23.5x P/E, a 2.28% dividend yield and a DCF fair value above the current share price as a starting point to dig into how Dolby’s growth, margins and licensing model might justify that gap or not, and whether those earnings forecasts can hold up over time. Curious how numbers become stories that shape markets? Explore Community Narratives

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Dolby Laboratories's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Dolby’s trailing earnings decline of about 3.1% per year and softer net margins compared with last year raise questions about the consistency of its growth story.

If that uneven track record gives you pause, check out stable growth stocks screener (2168 results) to focus on companies with a history of steadier revenue and earnings that can make your watchlist feel more predictable.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.