Dolby stock

Credit: Dolby

Thanks to a solid second-quarter earnings report Thursday after the market close, Dolby Laboratories (NYSE:DLB) shares rose 2.3% on Friday.

To be sure, Dolby just told investors its fiscal third quarter revenue rose 7.9% year over year to $223.4 million, which translated to 10.6% growth in adjusted net income per diluted share to $0.52. Analysts, on average, were only expecting adjusted earnings of $0.27 per share on sales of $210.2 million.

For the current quarter, Dolby expects total revenue in the range of $210 million to $220 million, with adjusted earnings per diluted share between $0.43 and $0.48. By comparison, Wall Street was modeling earnings of just $0.33 per share on slightly higher sales of $222.4 million. Even so, given today's beat, Dolby still expects its full fiscal year revenue to range from $945 million to $955 million, which is well above analysts' estimates for $942.5 million.

It's (still) all about the licensing
Once again driving Dolby's beat was its core licensing segment, which grew 11.3% over last year to $205.6 million for the quarter.

Within that, Broadcast revenue most notably grew 25% year over year to comprise around 43% of total licensing, driven by the steady transition to digital broadcast signals in emerging markets like China and India. Other segments were less exciting, including the 19% of licensing revenue Dolby derived from its PC segment, which unsurprisingly fell around 2% from last year. Consumer Electronics also rose slightly and made up around 14% of licensing, as supplemental devices offset continued weakness in DVD and Blu-ray player sales. 

Finally, Mobile device revenue, which grew 20% year-over-year and comprised around 13% of total licensing. For reference, that's higher than the 10% guidance Dolby provided last quarter, thanks to slightly more revenue coming in than expected from older Samsung models.

Keep an eye on mobile
You might recall mobile, for its part, remained a source of stress for shareholders last quarter given Dolby's notable exclusion from Samsung's newest flagship smartphones. The reason, Dolby stated at the time, was that they were simply working through the details of their contract with Samsung, which had "come up for its natural renewal cycle." Unfortunately, management couldn't offer an update during the subsequent earnings conference call Thursday night.

This in mind, they did highlight the fact Dolby's technology is incorporated into a number of Amazon's mobile devices, including its full line of Kindle Fire tablets and, more recently, both Amazon's Fire TV and Fire Phone. And while it remains to be seen whether the Fire Phone -- which only began shipping earlier this week -- will enjoy broad success, Amazon only just finished telling investors along with its own Q2 report that "Fire TV sales have significantly exceeded our sales forecast and we are working hard to increase our manufacturing output."

Dolby Vision could eventually prove another growth driver. Credit: Dolby Labs

On new tech
Finally, Dolby provided a quick update on two newer technologies. First is Dolby Voice, for which it recently partnered with BT Group to bring businesses more realistic audio conferencing. As it stands, there are now more than 50 organizations with active trials of BT MeetMe with Dolby Voice, and 16 customers already under contract for the service. That might not sound impressive, but you've gotta start somewhere.

Potentially more exciting, however, is Dolby Vision, which offers more realistic color, brighter highlights, and improved shadow details in visual displays. Still in its early stages, Dolby now expects to see televisions shipping with Dolby Vision by the end of 2014. That will likely include models from up-and-coming Chinese tech giant Xiaomi, whose latest TV already includes the full suite of Dolby technologies.

Foolish takeaway
So where does that leave Dolby investors today? Broadcast continues to be a source of strength, new products are coming along nicely, and Amazon's vote of confidence is helpful in Mobile. But first and foremost, continue to keep your eyes peeled for progress in renewing Dolby's mobile-centric contract with Samsung. Samsung's stamp of approval, in particular, is widely viewed as crucial to proving Dolby can look to Mobile for incremental growth as PC and other Consumer Electronics revenue lags behind.

All things considered, however, I still think shareholders are right to celebrate Dolby's solid quarter with shares near a new 52-week high. Worries still remain, but I wouldn't be surprised if the stock continues to reward patient investors from here.