What happened

Shares of Dolby Laboratories Inc. (NYSE:DLB) popped as much as 10.8% on Wednesday following multiple analyst upgrades driven by the inclusion of Dolby Vision technology in new Apple (NASDAQ:AAPL) products. As of 3:04 p.m. EDT, the stock was up 9%.

Dolby enjoyed positive notes from analysts including Piper Jaffray's Michael Olson, who maintained his neutral rating on Dolby stock but increased his per-share price target from $49 to $52, and B. Riley's Eric Wold, who reiterated his buy rating and price target of $61.50 per share. Dolby stock closed on Tuesday at $53.94 per share.

Dolby Vision logo over a photo of the Northern Lights, subtext "Dramatic Imaging"

Image source: Dolby.

So what

At its product launch event yesterday, Apple unveiled a number of notable new products including the Apple Watch Series 3, iPhone 8 and 8 Plus, the long-awaited iPhone X, and a new Apple TV unit capable of streaming 4K and HDR video content. With the exception of the new Apple Watch, Dolby Vision -- which focuses on improving users' visual experience by enhancing color, contrast, and brightness of displays -- will be incorporated into each of those products.

Wold, for his part, had previously suggested that Apple was unlikely to support Dolby Vision if it wasn't implemented across every product line. He elaborated today, stating, "[T]his news provides an upward bias to estimates potentially including [fiscal year 2017] depending on revenue recognition timing, and clearly boosts the importance of Dolby Vision technology so soon after its launch."

Now what

The financial terms of Dolby's new deal with Apple weren't released, so it's unclear exactly how much this will contribute to Dolby's top and bottom lines. However, Olson believes incremental revenue from iPhone sales could be as much as $30 million per year, while Apple TV could add another $5 million. Similar to Wold, Olson further suggested that investors should be most excited for the longer-term implications of Dolby Vision's first design wins in Apple's ecosystem, especially as it pertains to other tech leaders following suit.

That's not to say Dolby Vision hasn't enjoyed plenty of traction since it was introduced in 2014. The first televisions to incorporate the technology launched just over a year later, and a plethora of entertainment leaders -- from Warner Bros. to Disney, Universal Pictures, Lionsgate, Sony Pictures, Netflix, MGM Studios, and AMC Entertainment -- have already committed to rolling out steady new streams of Dolby Vision content in the coming years.

In retrospect, perhaps that early adoption was exactly what Apple needed before it finally brought Dolby Vision into its own fold. But now that it's actually happened, it should be no surprise to see Dolby investors cheering in response.