Core Insights - Synopsys is expanding its presence in the artificial intelligence (AI) sector through partnerships with major companies like Intel, AMD, and Microsoft, which is positively impacting its revenue growth [1][4][10] - The company launched a new multi-die reference flow that enhances the design process and is expected to strengthen its position in chip manufacturing [2][8][11] - Synopsys has introduced several AI-focused products and applications in 2024, including Synopsys ZeBu EP2 and Polaris Assist, to support AI architecture [9][10] Company Developments - In late 2023, Synopsys launched Synopsys.ai Copilot in collaboration with Microsoft, integrating Azure OpenAI Service to enhance its AI capabilities [4] - The new multi-die reference flow is designed to reduce fabrication time and improve system performance, which is crucial for the adoption by Intel [2][8] - Synopsys has seen a 15.7% increase in its shares year-to-date, outperforming the Zacks Computer-Software industry's growth of 15% [6] Market Trends - The AI market is projected to grow at a compound annual growth rate (CAGR) of 28.46% from 2024 to 2030, indicating significant opportunities for Synopsys to expand its product offerings [12] - The integration of Synopsys' products with Intel Foundry's platforms aims to minimize integration risks and reduce time-to-market for new technologies [11] Competitive Landscape - Despite advancements, Synopsys faces stiff competition in the AI space, which could impact its growth prospects [13] - The company also experiences concentration risk due to reliance on a limited number of clients that contribute significantly to its revenue [14]

Core Viewpoint - Wall Street analysts' recommendations significantly influence stock prices, but their reliability is questionable due to potential biases stemming from brokerage firms' vested interests [1][4][13]. Summary by Sections Brokerage Recommendations - Synopsys has an average brokerage recommendation (ABR) of 1.19, indicating a consensus between Strong Buy and Buy, with 14 out of 16 recommendations classified as Strong Buy [1][2]. - Strong Buy and Buy recommendations account for 87.5% and 6.3% of all recommendations, respectively [2]. Analyst Bias and Reliability - Analysts from brokerage firms tend to exhibit a strong positive bias in their ratings, issuing five Strong Buy recommendations for every Strong Sell [4]. - This bias may mislead investors, as brokerage recommendations often do not accurately reflect a stock's potential price movement [5][8][14]. Zacks Rank vs. ABR - The Zacks Rank, a proprietary stock rating tool, is based on earnings estimate revisions and is considered a more reliable indicator of near-term price performance compared to ABR [6][10]. - The Zacks Rank is displayed in whole numbers (1 to 5), while ABR is typically shown in decimals [9]. - The Zacks Consensus Estimate for Synopsys remains unchanged at $13.03, indicating stability in earnings expectations [11][16]. Investment Considerations - Despite a Buy-equivalent ABR for Synopsys, caution is advised due to the unchanged earnings estimate and the potential for analysts' overly optimistic ratings [12][16]. - The Zacks Rank for Synopsys is currently 3 (Hold), suggesting that the stock may perform in line with the broader market in the near term [16].

Core Insights - Synopsys, Inc. has launched a production-ready multi-die reference flow utilizing Synopsys.ai™ EDA suite and Synopsys IP for Intel Foundry's EMIB advanced packaging technology, aimed at enhancing the design and analysis of multi-die architectures [2][6] - The solution facilitates a comprehensive approach to address thermal, signal integrity, and interconnect challenges, enabling efficient die-package co-design and improved manufacturing reliability [3][6] - The integration of Synopsys 3DIC Compiler with Ansys® RedHawk-SC Electrothermal™ technology enhances power and thermal signoff for 2.5D/3D multi-die designs, maximizing system performance [3][6] Multi-Die Solution Features - The multi-die solution supports early architecture exploration, rapid software development, and system validation, providing a scalable framework for heterogeneous integration [3][7] - Synopsys 3DSO.ai, an AI-driven optimization engine, is integrated to improve productivity and system performance for 2.5D and 3D multi-die designs [2][3] - The solution is designed to meet the increasing bandwidth demands for AI and high-performance computing applications, allowing for the development of billion- to trillion-transistor multi-die systems [7][9] Performance Improvements - The combination of Synopsys IP and Synopsys 3DIC Compiler can lead to a 30% reduction in effort and a 15% improvement in quality of results compared to traditional manual flows, achieved through automation of routing and signal integrity analysis [9][11] - The reference flow is currently available from both Intel Foundry and Synopsys, providing immediate access to advanced design capabilities [9]

Core Viewpoint - Synopsys reported a mixed earnings performance for Q2 2024, missing revenue and earnings estimates, but showing year-over-year growth in earnings and revenues driven by strong demand in the semiconductor sector [2][12]. Financial Performance - Non-GAAP EPS for Q2 2024 was $3, slightly below the Zacks Consensus Estimate of $3.03, but improved by 26% year-over-year [2]. - Total revenues for Q2 2024 were $1.45 billion, a 15% increase year-over-year, but missed the consensus estimate of $1.51 billion [12]. - The Electronic Design Automation (EDA) segment generated revenues of $1.01 billion, accounting for 69.3% of total revenues, up 3.8% year-over-year [5]. - Design IP revenues were $399.8 million, representing 27.5% of total revenues [5]. - Non-GAAP operating margin expanded to 37.3%, an increase of 290 basis points year-over-year [6]. Segment Performance - Time-Based Product revenues (53.7% of total revenues) increased by 8.9% to $781.7 million, while Upfront Product revenues (27.2%) rose by 18.3% to $396.4 million [13]. - Maintenance and Service revenues (19%) saw a significant increase of 31.8% to $276.6 million compared to the previous year [13]. - The adjusted operating margin for the EDA segment rose by 150 basis points to 39.6%, while the Design IP segment's margin improved to 31.2% from 24.3% year-over-year [15]. Balance Sheet & Cash Flow - As of the end of the reported quarter, total long-term debt was $17 million, remaining stable compared to the previous quarter [7]. - Cash and short-term investments increased to $1.66 billion from $1.27 billion as of January 31, 2024 [16]. - Cash flows from operating activities, including discontinued operations, were $477 million in Q2, down from $703 million in the same quarter last year [17]. Guidance Update - For Q3 2024, Synopsys expects revenues between $1.51 billion and $1.54 billion, with non-GAAP EPS projected between $3.25 and $3.30 [8]. - For the full fiscal year 2024, revenue guidance has been revised to a range of $6.09 billion to $6.15 billion, down from the previous range of $6.57 billion to $6.63 billion [18]. Market Reaction - In the past month, Synopsys shares have increased by approximately 4.1%, outperforming the S&P 500 [11]. - The stock currently holds an average Growth Score of C, but lags in Momentum and Value Scores with grades of F [9][19].

Investment Rating - The report assigns a "Buy" rating with a target price of $707.78 per share, reflecting an 18x price-to-sales (P/S) valuation for the fiscal year 2024 [56][117]. Core Insights - The company is the global leader in the EDA (Electronic Design Automation) industry and the second-largest supplier of IP (Intellectual Property) [53][67]. - The EDA market is projected to grow at a compound annual growth rate (CAGR) of 12% from 2023 to 2028, with AI developments potentially increasing this growth rate to 14% [4][14]. - The company has a strong recurring revenue model, with over 80% of its total revenue coming from recurring sources [95][96]. - The company is focusing on enhancing its EDA business and has announced the sale of its Software Integrity business for $2.1 billion, expected to close in the second half of 2024 [21][78]. - The acquisition of Ansys for approximately $35 billion is anticipated to enhance the company's capabilities in physical simulation and system-level design, with completion expected in the first half of 2025 [21][26]. Summary by Sections Market Position and Growth - The company has maintained a leading market share of approximately 35.2% in the EDA sector and 21.9% in the IP sector as of fiscal year 2023 [94][95]. - The EDA industry is characterized by high concentration, with major players like Intel, TSMC, and ASML collaborating with the company on advanced technologies [4][8]. Financial Performance - For fiscal year 2023, the company reported revenues of $5.84 billion, a 15% increase year-over-year, and a net profit of $1.23 billion, reflecting a 24.9% growth [67][122]. - The company expects revenue growth of 5.0% in fiscal year 2024, with projected revenues of $6.14 billion, and further growth of 13.7% and 14.4% in fiscal years 2025 and 2026, respectively [116][122]. Product and Technology Development - The company has been integrating AI into its EDA tools, launching several AI-driven solutions that enhance design efficiency and reduce time-to-market [14][100]. - The introduction of Multi-Die design solutions is expected to significantly impact the EDA market, with projections indicating that by 2027, a substantial percentage of chips will adopt this technology [101][102]. Strategic Initiatives - The company has a history of strategic acquisitions, with over 113 acquisitions since 1994, aimed at expanding its product offerings and market reach [78][79]. - The focus on AI and Multi-Die technologies is expected to open new avenues for growth in the EDA business, aligning with industry trends towards more complex chip designs [14][101].

Core Insights - Synopsys is a leader in EDA software, crucial for the semiconductor industry and AI development, making its stock worthy of attention [1] - The company has a significant portfolio of intellectual property and patents that are foundational to modern computing systems [8] Financial Performance - Synopsys reported a total revenue of $6.19 billion for the trailing twelve months (TTM) [2] - Free cash flow for the company was $1.096 billion [2] - Net income for Synopsys was $1.427 billion [2] - Revenue growth for the current fiscal year is nearly 19% compared to the previous year [17] Strategic Moves - Synopsys announced a major acquisition of Ansys, a system design and physics simulation software giant, which is pending regulatory review [3] - The acquisition aims to enhance Synopsys' leadership in EDA software and reflects the increasing integration of electronic and mechanical designs across various industries [3] Market Position - The stock is trading near its historical high, driven by investor recognition of Synopsys' role in the AI sector and optimism regarding the potential Ansys acquisition [4] - Synopsys is considered a bet on the growth of semiconductor and AI research and development, with stable R&D expenses despite sales cycles [8] Industry Context - Synopsys plays a critical role in the AI movement, providing essential design software tools that support companies like Nvidia in advancing computing technology [12][13] - The collaboration with Nvidia and Taiwan Semiconductor Manufacturing to integrate AI algorithms into chip development highlights Synopsys' importance in the semiconductor ecosystem [9] Investment Considerations - The stock is currently valued at 64 times trailing-12-month earnings per share (EPS) and 45 times EPS based on current year expectations from analysts [10] - Investors may consider a dollar-cost averaging strategy to build a position in Synopsys over time [16]

Group 1 - Parkev Tatevosian is affiliated with The Motley Fool and may receive compensation for promoting its services [1] - The Motley Fool has positions in and recommends Synopsys [1] - Parkev Tatevosian holds no position in any of the stocks mentioned [1]

Earnings Estimates - The consensus earnings estimate for the current fiscal year is $13.03, reflecting a year-over-year change of +16.4%, with a recent adjustment of -1.3% over the last 30 days [2] - For the next fiscal year, the consensus earnings estimate is $14.97, indicating a change of +14.8% from the previous year, with a recent adjustment of -2.1% [10] Revenue Performance - Synopsys reported revenues of $1.45 billion in the last quarter, representing a year-over-year change of +4.3% [4] - The consensus sales estimate for the current quarter is $1.53 billion, indicating a year-over-year change of +2.6%, with estimates for the current and next fiscal years at $6.19 billion and $6.9 billion, reflecting changes of +5.9% and +11.5% respectively [22] Earnings Surprises - Over the last four quarters, Synopsys surpassed consensus EPS estimates three times and topped consensus revenue estimates three times [5] - The last reported revenues of $1.45 billion were a surprise of -3.83% compared to the Zacks Consensus Estimate of $1.51 billion, with an EPS surprise of -0.99% [15] Valuation Metrics - Synopsys is graded F in terms of valuation, indicating it is trading at a premium to its peers [17] - Valuation multiples such as price-to-earnings (P/E), price-to-sales (P/S), and price-to-cash flow (P/CF) are essential for determining whether the stock is fairly valued, overvalued, or undervalued [16] Stock Performance and Market Sentiment - Over the past month, shares of Synopsys have returned +1.8%, compared to the Zacks S&P 500 composite's +4% change and the Zacks Computer - Software industry's gain of 4.9% [19] - Synopsys is currently on Zacks.com's list of the most searched stocks, indicating heightened interest that could influence its performance [8] Earnings Estimate Revisions - The company’s future earnings estimates are crucial for determining its fair value, as a rise in earnings estimates typically correlates with an increase in stock price [19] - The Zacks Rank for Synopsys is 3 (Hold), suggesting it may perform in line with the broader market in the near term [20]

Core Insights - Synopsys has achieved certification for its AI-driven digital and analog design flows on Samsung Foundry's SF2 process, validated through multiple test chip tapeouts [1][2][3] - The collaboration between Synopsys and Samsung focuses on enhancing power, performance, and area (PPA) for advanced semiconductor designs, with significant improvements reported [3][5] - Synopsys' AI-driven design technology has resulted in a 12% increase in performance, a 25% reduction in power consumption, and a 5% decrease in area compared to base designs [3] Design Flows and IP - The certified design flows utilize Synopsys.ai™ full-stack EDA suite, which enhances productivity and accelerates analog design migration for Samsung's Gate-All-Around (GAA) process technologies [1][3] - Synopsys has expanded its collaboration with Samsung to include new analog design migration reference flows, facilitating the transition from FinFET to GAA processes [6][11] Multi-Die and Heterogeneous Integration - Synopsys 3DIC Compiler supports the development of multi-die designs, qualified for Samsung Foundry's SF2 process, enabling advanced packaging and heterogeneous integration [8][11] - The collaboration aims to assist customers in transitioning to 2.5D and 3D advanced packaging designs, leveraging Synopsys' expertise in design and integration [8][11] New Design Techniques - Innovative design techniques such as backside routing and nanosheet cell design are being implemented to improve transistor performance efficiency and density [5][10] - These methodologies are expected to help customers meet their design goals more effectively, particularly in the context of Samsung's advanced process technologies [10][11]

Synopsys, Inc. (SNPS) recently unveiled its complete PCIe 7.0 IP solution, a significant development aimed at tackling the demanding bandwidth and latency requirements of artificial intelligence (AI) workloads. This innovative technology is designed to enhance data transfer speeds and efficiency, addressing a critical bottleneck in AI and high-performance computing (HPC) environments. The new PCIe 7.0 IP solution from Synopsys comprises a controller, IDE security module, PHY and verification IP. This compre ...