Does Dolby Laboratories (DLB) have an Enhanced Margin Potential?

Aristotle Capital Boston, LLC, an investment advisor, released its “Small/Mid Cap Equity Strategy” second quarter 2025 investor letter. A copy of the letter can be downloaded here. The second quarter started with a risk-off environment from the previous quarter, but later regained momentum driven by broad-based elements. In the second quarter, the strategy delivered a return of 4.64% net of fees (4.78% gross of fees), underperforming the 8.59% total return of the Russell 2500 Index. For more information on the fund’s best picks in 2025, please check its top five holdings.

In its second-quarter 2025 investor letter, Aristotle Capital Small/Mid Cap Equity Strategy highlighted stocks such as Dolby Laboratories, Inc. (NYSE:DLB). Dolby Laboratories, Inc. (NYSE:DLB) designs and manufactures audio, imaging, accessibility, and other hardware and software solutions. The one-month return of Dolby Laboratories, Inc. (NYSE:DLB) was -0.29%, and its shares lost 1.18% of their value over the last 52 weeks.  On July 31, 2025, Dolby Laboratories, Inc. (NYSE:DLB) stock closed at $75.34 per share, with a market capitalization of $7.238 billion.

Aristotle Capital Small/Mid Cap Equity Strategy stated the following regarding Dolby Laboratories, Inc. (NYSE:DLB) in its second quarter 2025 investor letter:

"Dolby Laboratories, Inc. (NYSE:DLB), designs and manufactures audio and imaging technologies for the cinema, television, automotive, broadcast, and entertainment industries. We believe the company is in the beginning stages of harvesting investments in their Atmos (spatial audio) and Vision (High Dynamic Range video) technologies in their traditional markets. They are also experiencing adoption of these technologies by automotive manufactures, providing enhanced margin potential."

Dolby Laboratories, Inc. (NYSE:DLB) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held Dolby Laboratories, Inc. (NYSE:DLB) at the end of the first quarter, which was 29 in the previous quarter. In the second quarter of 2025, Dolby Laboratories, Inc. (NYSE:DLB) reported revenue of $370 million, which aligns with the midpoint of guidance and represents a 1% increase compared to the previous year's quarter. While we acknowledge the potential of Dolby Laboratories, Inc. (NYSE:DLB) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.