Core Insights - Synopsys reported stronger-than-expected fourth-quarter results and provided an optimistic earnings forecast for fiscal 2026, driven by increased demand for semiconductor design software supporting AI architectures [1] Financial Performance - Fourth-quarter adjusted earnings were $2.90 per share, surpassing expectations of $2.78, while revenue reached $2.26 billion, slightly above the forecast of $2.25 billion [2] - Revenue increased by 37.8% year-over-year, with Ansys contributing $667.7 million to the total [2] - For fiscal 2025, Synopsys achieved a record revenue of $7.05 billion, reflecting a growth of approximately 15%, and ended the year with a backlog of $11.4 billion [2] Future Guidance - For fiscal 2026, Synopsys guided earnings of $14.32 to $14.40 per share, exceeding the consensus estimate of $14.05 [3] - The company anticipates revenue between $9.56 billion and $9.66 billion, with approximately $2.9 billion expected from Ansys [3] - For the fiscal first quarter, Synopsys projected adjusted earnings of $3.52 to $3.58 per share and revenue of $2.36 billion to $2.42 billion, both above analyst expectations [3]

Core Insights - Nvidia has purchased $2 billion of Synopsys stock and plans to enhance their existing partnership to improve product upgrades and cloud utilization [1][2] - The partnership aims to revolutionize the design and engineering industry, which is highly compute-intensive [3] Company Performance - Synopsys shares rose 2.01% in the five days ending December 10, but have dropped 1.96% year-to-date [4] - Synopsys has a market capitalization of $86.5 billion, with a trailing price-to-sales ratio of 48.3x and a price-to-book ratio of 2.6x [5] Financial Results - For the year ending in July, Synopsys reported earnings per share (EPS) of $9.60 [6] - In the fiscal third quarter, revenue was $892.36 million, an increase from $803.15 million year-over-year, but operating income fell to $165.27 million from $360.2 million due to rising costs [6] - The weaker performance of Synopsys's IP business was attributed to new export restrictions in China and challenges with a major foundry customer [7] - Despite these challenges, the company anticipates record revenue for the current fiscal year, partly due to the acquisition of Ansys, which closed in July [7][8]

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Financial Data and Key Metrics Changes - The company achieved record annual revenue of $7.05 billion, up approximately 15% year-over-year, with Q4 revenue of $2.25 billion, at the high end of guidance [5][14]. - The total backlog increased to $11.4 billion, up from $10.1 billion in the previous quarter [13]. - Non-GAAP operating margin for FY25 was 37.3%, with Q4 non-GAAP operating margin at 36.5% [14][15]. - GAAP earnings per share for Q4 and FY25 were $2.39 and $8.07 respectively, while non-GAAP earnings per share were $2.90 and $12.91, exceeding guidance [14][15]. Business Line Data and Key Metrics Changes - The design automation segment revenue, including EDA and Ansys, was $5.3 billion, up 26%, while excluding Ansys, it grew approximately 8% [15]. - The design IP segment revenue was $1.75 billion, down 8% due to challenges in the second half of the year [15]. - The hardware-assisted verification (HAV) business saw a record year with 12 competitive wins in Q4 [8]. Market Data and Key Metrics Changes - China faced significant challenges, with revenue down 18% for FY25, and down 22% excluding Ansys [14]. - The company noted stronger semiconductor demand in mobile and automotive sectors, while industrial markets remained subdued [6]. Company Strategy and Development Direction - The integration of Ansys is a key focus, with the company aiming to deliver joint solutions in the first half of 2026 [11][62]. - The company is targeting double-digit growth for Ansys revenue in FY26, driven by increased R&D investments in various industries [60]. - A strategic partnership with NVIDIA is expected to enhance design and engineering capabilities with AI and accelerated computing [7]. Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential despite current challenges, particularly in the IP business [41][76]. - The company is adopting a pragmatic approach to forecasting, particularly regarding the ongoing challenges in China [76]. - Management emphasized the importance of AI in driving future demand for engineering solutions, indicating a shift in how engineering is approached [6][48]. Other Important Information - The company plans to prepay $2.55 billion of its term loans in the first half of 2026, which is expected to be accretive to EPS [16][19]. - The guidance for FY26 includes total revenue of $9.56-$9.66 billion, with Ansys contributing approximately $2.9 billion at the midpoint [17]. Q&A Session Summary Question: What is the embedded organic growth rate in the 2026 guide? - Management indicated it is around 8%, factoring in the divestitures and muted growth expectations for the IP business [22][23]. Question: What are the expectations for EDA and IP growth in the guidance? - Management acknowledged that EDA growth is impacted by the China environment and a muted roadmap for certain customers, while IP is expected to have a transitional year [31][32]. Question: Can the IP business achieve mid-teens growth in FY27? - Management expressed confidence in the IP portfolio and ongoing customer engagements, indicating that growth could return to mid-teens in the future [82]. Question: What is the rationale behind the NVIDIA investment? - The investment was made to accelerate computational capabilities and modernize engineering solutions, leveraging the strengths of both companies [44][45]. Question: How is the integration of Ansys progressing? - Integration efforts are underway, with R&D teams working together to deliver joint solutions, while maintaining separate go-to-market strategies for different customer segments [61][62].

Financial Data and Key Metrics Changes - Synopsys achieved record annual revenue of $7.05 billion in FY25, up approximately 15% year-over-year, with Q4 revenue of $2.25 billion, aligning with guidance [12][13] - The company ended FY25 with a backlog of $11.4 billion, up from $10.1 billion in the previous quarter [12] - Non-GAAP operating margin for FY25 was 37.3%, with Q4 non-GAAP operating margin at 36.5% [14] - GAAP earnings per share for FY25 were $8.07, while non-GAAP EPS was $12.91, exceeding guidance due to lower expenses [14][15] Business Line Data and Key Metrics Changes - The design automation segment, including EDA and Ansys, generated $5.3 billion in revenue for FY25, up 26%, while excluding Ansys, it grew approximately 8% [15] - The design IP segment revenue was $1.75 billion, down 8% due to challenges in the second half of the year [15] - Ansys contributed $757 million to total revenue in FY25, with Q4 revenue of $668 million [13][14] Market Data and Key Metrics Changes - China faced significant challenges, with revenue down 18% in FY25, and excluding Ansys, down 22% [13][14] - The semiconductor demand is strong in mobile and automotive sectors, while industrial markets remain subdued [5][12] Company Strategy and Development Direction - Synopsys aims to leverage the Ansys acquisition to enhance its engineering solutions from silicon to systems, focusing on AI-driven design and multi-domain integration [4][6] - The company plans to deliver its first joint solutions with Ansys in the first half of 2026, targeting double-digit growth for Ansys revenue [11][56] - Strategic partnerships, such as with NVIDIA, are expected to enhance design and engineering capabilities [6][40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the AI infrastructure build-out driving semiconductor demand, despite challenges in certain markets like China [5][12] - The company anticipates a transitional year for the IP business in FY26, with muted growth expected due to ongoing adjustments and market conditions [10][36] - Management emphasized a focus on operational excellence and financial discipline to drive sustainable growth and margin expansion [11][19] Other Important Information - Synopsys plans to prepay $2.55 billion of its term loans in the first half of 2026, which is expected to be accretive to EPS [16][18] - The company is adopting a normalized non-GAAP tax rate of 18% projected through 2028 [17] Q&A Session Summary Question: What is the embedded organic growth rate in the 2026 guide? - Management indicated that the organic growth rate is around 8%, factoring in the divestitures and muted growth for the IP business [22][23] Question: What are the growth expectations for EDA and IP in the guidance? - Management confirmed that EDA growth is impacted by the China environment and ongoing market dynamics, with IP expected to grow modestly [28][29] Question: Can you provide an update on the IP business and headwinds? - Management acknowledged challenges in the IP business but expressed confidence in long-term growth, emphasizing ongoing customer engagement and portfolio strength [35][36] Question: What is the rationale behind the NVIDIA investment? - The investment was driven by the potential for accelerated computational capabilities and modernization of engineering solutions, enhancing market reach [40][41] Question: How does the company plan to address the monetization challenges in EDA? - Management recognized the need for better monetization strategies and highlighted the importance of joint solutions with Ansys to capture value [78][80]

Core Insights - Synopsys, Inc. reported a strong financial performance for the fourth quarter and fiscal year 2025, with fourth-quarter revenue reaching $2.255 billion, a significant increase from $1.636 billion in the same quarter of the previous year [2][9] - The company achieved a full-year revenue of $7.054 billion, marking a 15% increase from $6.127 billion in fiscal year 2024 [2][9] - The integration of Ansys is expected to drive further operational efficiency and revenue growth, with a projected revenue of $9.610 billion for fiscal year 2026 [3][9] Financial Performance - For the fourth quarter of fiscal year 2025, GAAP net income was $448.7 million, or $2.39 per diluted share, compared to $279.3 million, or $1.79 per diluted share, in the fourth quarter of fiscal year 2024 [4][5] - Non-GAAP net income for the fourth quarter was $543.1 million, or $2.90 per diluted share, slightly down from $529.9 million, or $3.40 per diluted share, in the same quarter of the previous year [5][4] - Full-year GAAP net income for 2025 was $1.336 billion, or $8.07 per diluted share, compared to $1.442 billion, or $9.25 per diluted share, in fiscal year 2024 [4][5] Business Segments - Synopsys operates in two main segments: Design Automation and Design IP. In the fourth quarter, Design Automation generated $1.847 billion in revenue, while Design IP contributed $407.2 million [7][32] - For the full fiscal year 2025, Design Automation accounted for approximately 75.2% of total revenue, while Design IP represented 24.8% [32] Future Outlook - The company anticipates setting another revenue record in 2026, with a strong backlog of $11.4 billion, indicating robust demand for its products and services [3][9] - Synopsys expects fiscal year 2026 revenue to be in the range of $9.560 billion to $9.660 billion, including $2.9 billion from Ansys [10][11]

Core Viewpoint - BofA Securities upgraded Synopsys to Neutral from Underperform, lowering the price target to $500 from $525, citing the upcoming earnings call as a potential clarifier for concerns regarding China-related weakness and integration costs from the Ansys acquisition [1] Group 1: Revenue and Earnings Forecasts - Revenue expectations for FY26 and FY27 remain largely intact, but EPS forecasts were trimmed by 4% for both years due to uncertainties surrounding cost synergies from the Ansys acquisition [2] - Sentiment catalysts are building, including Nvidia's proposed $2 billion equity investment and Intel's potential traction at its 18A and 14A nodes [2] Group 2: Valuation and Market Position - Synopsys is highlighted as having a valuation discount relative to peer Cadence, with a current 10-turn PE gap exceeding the historical 6-turn spread [3] - The revised price target of $500 reflects a 34x CY26 earnings multiple, consistent with the historical range of 24x to 46x [3] - Shares of Synopsys show catch-up potential after underperforming year-to-date [3] Group 3: Risks - Risks include heavy exposure to China IP and integration challenges with Ansys [3]

Core Insights - An expanded partnership with Nvidia and a $2 billion investment have boosted confidence in Synopsys' long-term growth prospects [1] - Synopsys' growth strategy focuses on a silicon-to-systems approach, integrating electronic design automation (EDA) solutions with engineering simulation software [2] - The partnership with Nvidia presents significant opportunities for Synopsys to expand its market reach and enhance its offerings through AI and accelerated computing technology [4] Company Overview - Synopsys shares rose by 11.7% following the announcement of the Nvidia partnership [1] - The current market capitalization of Synopsys is $87 billion, with a gross margin of 75.18% [3] - The acquisition of Ansys earlier in the year allows Synopsys to broaden its total addressable market (TAM) beyond traditional semiconductor companies [3] Strategic Partnerships - The partnership with Nvidia aligns with Synopsys' goal to expand across multiple industries, enhancing its customer base [4] - Nvidia's investment in Intel, a major customer of Synopsys, may stabilize Intel's foundry business, potentially leading to increased orders for Synopsys [5]

Close-up of sign with logo at Silicon Valley headquarters of technology company Synopsys, Mountain View, California, May 3, 2019. (Photo by Smith Collection/Gado/Getty Images)Getty ImagesSynopsys (SNPS) stock ought to be on your radar. Here is why – it is presently trading in the support realm ($416.38 – $460.20), levels from which it has bounced significantly before. Over the past 10 years, Synopsys stock attracted buying interest at this level 5 times and subsequently achieved an average peak return of 28 ...

Core Insights - The UK Competition and Markets Authority (CMA) has concluded its investigation into Synopsys' acquisition of Ansys, marking the end of the merger review process [1] - Synopsys completed the acquisition of Ansys on July 17, 2025, for approximately $35 billion, aiming to create a comprehensive solution provider from chip design to system design [1] - To address antitrust concerns in markets like the UK, Synopsys and Ansys agreed to divest certain businesses, including Synopsys' optical software tools and photonics software, and Ansys' PowerArtist power analysis tool [1] - The divested assets were sold to Keysight Technologies, which completed the acquisition on October 17, 2025 [1]