If relevant in your case, perhaps try switching the audio output to ‘Bitstream’, rather than using the PS5’s default LPCM audio output. Note you have to change it in the PS5 audio settings and also in the actual movie player software. Here is a YouTube video that may assist:

Also if your TV supports it, set the HDMI eARC Digital Sound Out to ‘Pass-Through’ the TV, rather than the usual ‘Auto’ setting, to ensure that the TV is not interfering/processing the PS5 audio as it passes through the TV ports.

See if that resolves your issue.

I have changed it to Bitstream (Dolby) and changed the settings to Passthrough. I have done all there is to do. Sound doesn’t cut out for 1-2 secs when streaming movies from Netflix or Disney+ - only when playing Atmos content from 4K UHD discs.

The Arc speaker will clearly only play the audio that’s sent to it by the PS5, via the TV, so it’s quite difficult to know where the interruption is in this case - have you tried powering off all three devices for 30+ seconds (not standby) and re-seating the HDMI cables to see if that resolves it? 

Is there anything else attached to the ‘other’ TV HDMI ports that perhaps has the CEC protocol enabled and is ‘possibly’ trying to gain ‘focus’ - if so, perhaps just see if disconnecting the other products (temporarily) may throw some further light on the issue.

I just don’t understand why it’s only when playing 4K UHD discs AND playing Dolby Atmos that the sound cuts out. What do the discs do differently than, say, Netflix streaming playing Dolby Atmos? 

Taken (partly) from an online site:

Dolby TrueHD uses the Meridian Lossless Packing (MLP) algorithm as the basis for its audio compression, which routinely achieves 2:1 compression rations.

A Dolby TrueHD bitstream can accommodate up to 14 discrete sound channels, but in practice will carry either 6 (5.1) or 8 (7.1) channels. The standard supports bit depth of up to 24 bits, and data sampling rates of up to 192 kHz — for an uncompressed maximum bit rate of 63 Mbps — but for Blu-ray the current maximum is 8 audio channels at 24 bits and 96 kHz (or as an alternative, 6 channels at 24 bits and 192 kHz) for a maximum encoded bit rate of 18 Mbps.

The streaming services mostly use…
Dolby Digital Plus (DD+) is compressed. In addition to supporting 5.1 sound schemes, DD+ can also support 7.1, but you’ll only see this mentioned rarely — some Blu-ray players can handle DD+ while others can’t.

Only a very few Blu-ray movies claim to include DD+ encodings. 

The Audio Channels (sound scheme) can appear as 5.1 (most typical) or 7.1 (unusual); the specification indicates it can support levels up to 13.1, but so far, 7.1 is as high as things go on commercial Blu-ray discs of any kind.

The DD+ specification indicates it can be either 16 or 24 bits deep, and can be recorded at 44.1 kHz, 48 kHz (typical for DVDs and Blu-ray discs), or 96 kHz.

Audio Bit Rate values can go as high as 6.144 Mbps for encoded data (this translates into 13.5 Mbps uncompressed), but might be either 1.5, 4.5, or 6.144 Mbps

According to Dolby Labs , DD+ achieves compression ratios of around 4:1. DD+ is also a constant bitrate (CBR) encoding, (so same bitrate at all times). DD+ uses lossy but more efficient compression algorithms to encode data. This still results in some loss of fidelity and audio quality as compared to the studio master, primarily to achieve higher bandwidth reductions.