Do You Believe in the Growth Potential of Dolby Laboratories (DLB)?

Aristotle Capital Boston, LLC, an investment advisor, released its “Small Cap Equity Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the third quarter, the small-cap equities delivered strong results with the Russell 2000 Index reaching its first all-time high since November 2021. A favorable macroeconomic backdrop led the rally. In the quarter, the fund (Class I-2) delivered a return of 3.16% underperforming the 12.39% total return of the Russell 2000 Index. For more information on the fund’s best picks in 2025, please check its top five holdings.

In its third-quarter 2025 investor letter, Aristotle Small Cap Equity Fund 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 -1.07%, and its shares lost 13.62% of their value over the last 52 weeks.  On December 18, 2025, Dolby Laboratories, Inc. (NYSE:DLB) stock closed at $66.76 per share, with a market capitalization of $6.376 billion.

Aristotle Small Cap Equity Fund stated the following regarding Dolby Laboratories, Inc. (NYSE:DLB) in its third quarter 2025 investor letter:

"Dolby Laboratories, Inc. (NYSE:DLB) develops and licenses proprietary audio-video technology to content creators, consumer electronics manufacturers, video streaming platforms, and automotive manufacturers. Deeper market penetration of its Atmos and Vision technologies with more consumer electronics devices and increasing adoption by auto manufacturers are expected to drive higher margins over the next several years. The company’s capital efficient operating model yields attractive cash flow generation and returns on capital."

Dolby Laboratories, Inc. (NYSE:DLB) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 23 hedge fund portfolios held Dolby Laboratories, Inc. (NYSE:DLB) at the end of the third quarter, compared to 25 in the previous quarter. Dolby Laboratories, Inc. (NYSE:DLB) reported revenue of $307 million in the fourth quarter of 2025, which was above the mid-point of guidance. 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 Q3 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.