Core Insights - Synopsys reported revenue of $1.6 billion for the quarter ended April 2025, reflecting a year-over-year increase of 10.3% and an EPS of $3.67, up from $3.00 in the same quarter last year [1] - The reported revenue met the Zacks Consensus Estimate, with a slight surprise of +0.16%, while the EPS exceeded expectations by +8.26% [1] Revenue Breakdown - Maintenance and service revenue was $265.26 million, below the estimated $279.24 million, representing a year-over-year decline of -4.1% [4] - Total products revenue reached $1.34 billion, slightly above the $1.32 billion estimate, marking a year-over-year increase of +13.7% [4] - Design IP revenue was $482 million, surpassing the average estimate of $443.37 million, with a year-over-year growth of +20.6% [4] - Design Automation revenue was $1.12 billion, below the estimated $1.16 billion, showing a year-over-year increase of +6.4% [4] - Upfront products revenue was $510.68 million, exceeding the estimate of $415.15 million, with a significant year-over-year increase of +28.8% [4] - Time-based products revenue was $828.33 million, falling short of the $904.12 million estimate, but still reflecting a year-over-year growth of +6% [4] Stock Performance - Synopsys shares have returned +11.1% over the past month, outperforming the Zacks S&P 500 composite's +7.4% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Viewpoint - Synopsys reported quarterly earnings of $3.67 per share, exceeding the Zacks Consensus Estimate of $3.39 per share, and showing an increase from $3 per share a year ago, indicating strong performance in the software industry for chip development and testing [1][2]. Financial Performance - The company achieved revenues of $1.6 billion for the quarter ended April 2025, surpassing the Zacks Consensus Estimate by 0.16% and up from $1.45 billion in the same quarter last year [2]. - Over the last four quarters, Synopsys has consistently exceeded consensus EPS estimates, demonstrating a strong track record in financial performance [2]. Stock Performance - Synopsys shares have increased approximately 5.5% since the beginning of the year, significantly outperforming the S&P 500, which gained only 0.7% during the same period [3]. - The current Zacks Rank for Synopsys is 3 (Hold), indicating that the stock is expected to perform in line with the market in the near future [6]. Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $3.90, with expected revenues of $1.77 billion, while the estimate for the current fiscal year is $14.88 on revenues of $6.77 billion [7]. - The trend of estimate revisions for Synopsys is currently mixed, which may change following the recent earnings report [6]. Industry Context - The Computer - Software industry, to which Synopsys belongs, is currently ranked in the top 30% of over 250 Zacks industries, suggesting a favorable outlook for companies within this sector [8]. - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, highlighting the importance of monitoring these revisions for investment decisions [5].

Financial Data and Key Metrics Changes - The company reported a strong second quarter with revenue of $1.6 billion, up 10% year over year, exceeding the midpoint of guidance [5][14] - Non-GAAP operating margin was 38%, and non-GAAP EPS was $3.67, reflecting strong execution and leadership position [14][16] - Backlog increased to $8.1 billion, up $400 million quarter on quarter [14][16] Business Line Data and Key Metrics Changes - Design Automation segment revenue was $1.12 billion, up 6% year over year, with an adjusted operating margin of 40.9% [17] - Design IP segment revenue increased by 21% year over year to $482 million, with an adjusted operating margin of 31.2% [17][10] Market Data and Key Metrics Changes - The company experienced strong demand in Europe and South Korea, which offset headwinds from China [16] - The AI and HPC sectors remained robust, while non-AI end market demand was subdued [6][16] Company Strategy and Development Direction - The company is focused on leveraging megatrends in AI, software-defined systems, and silicon proliferation to drive growth [6][13] - The pending acquisition of Ensys is aimed at enhancing AI-powered silicon design solutions [7][12] - The company is investing to maintain and extend its leadership position in AI for chip design [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a slowdown in China but reiterated confidence in full-year guidance due to strong execution in other regions [22][26] - The company is optimistic about the second half of the year, expecting to capitalize on secular megatrends driving the semiconductor industry [20][19] Other Important Information - Non-GAAP EPS targets were increased to reflect Q2 outperformance, partly offset by net interest expenses from a $10 billion bond issuance [19] - The company is experiencing a shift towards GPU-based compute for EDA tools, which is expected to enhance pricing power [90][92] Q&A Session Summary Question: Impact of China sales on overall revenue - Management confirmed that China sales now represent 10% of the mix, down from 12% in Q1, and acknowledged a year-over-year decline in China revenue [24][26] Question: Clarification on bond payment structure - Management clarified that the first bond payment would include a catch-up for the first half month due to the bond's settlement date [27][28] Question: Revenue mix in China - Management stated that they do not split revenue by region but indicated that the mix in China is similar to the rest of the world [33] Question: R&D spending by largest customer - Management noted that while there may be fluctuations in hardware spending, committed agreements with customers like Intel remain stable [40][41] Question: Status of the ANSYS acquisition - Management expressed confidence in closing the ANSYS deal in the first half of the year, citing positive negotiations with regulators [42][61] Question: Changes in design activity for non-AI customers - Management observed stabilization and renewed activity in industrial and automotive sectors, indicating a positive trend [46][47] Question: Recurring revenue development - Management acknowledged fluctuations in recurring revenue but emphasized strong performance in the IP business, which was up 21% [78] Question: Overall R&D landscape - Management indicated a pickup in R&D spending in automotive and industrial sectors, suggesting a return to stronger growth similar to previous years [85][87] Question: Pricing power and GPU-based compute - Management confirmed that the shift to GPU-based compute has allowed for better pricing models, enhancing overall value for customers [90][92]

Financial Data and Key Metrics Changes - The company reported a strong second quarter with revenue of $1.6 billion, up 10% year over year, exceeding the midpoint of guidance [5][14][16] - Non-GAAP operating margin was 38%, and non-GAAP EPS was $3.67, reflecting strong execution and a resilient business model [14][16] - Backlog increased to $8.1 billion, up $400 million quarter on quarter [14][16] Business Line Data and Key Metrics Changes - Design Automation segment revenue was $1.12 billion, up 6% year over year, with an adjusted operating margin of 40.9% [17] - Design IP segment revenue increased by 21% year over year to $482 million, with an adjusted operating margin of 31.2% [17][10] Market Data and Key Metrics Changes - The company observed strength in Europe and South Korea, which offset headwinds from China [16] - The AI and HPC sectors remained robust, while non-AI end market demand was subdued [6][16] Company Strategy and Development Direction - The company is focused on addressing challenges in design complexity and costs driven by megatrends in AI, software-defined systems, and silicon proliferation [6][12] - The pending acquisition of Ensys is aimed at enhancing AI-powered silicon to systems design solutions [7][12] - The company is investing to maintain and extend its leadership position in AI for chip design [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a slowdown in China but reiterated confidence in full-year guidance due to strong execution in other regions [22][28] - The company is optimistic about the second half of the year, supported by strong demand in AI and HPC sectors [20][19] Other Important Information - The company is actively negotiating with SAMR for regulatory clearance in China regarding the Ensys acquisition [7][45] - Non-GAAP EPS targets have been increased to reflect Q2 outperformance, partly offset by net interest expenses from bond issuance [19] Q&A Session Summary Question: What is the expected impact of declining sales in China? - Management confirmed that they are anticipating a decline in China year over year but reiterated full-year guidance based on strong performance in other regions [26][28] Question: Can you clarify the bond payment structure? - The CFO confirmed that the first payment will include a catch-up for the first half month due to the bond's settlement timing [29] Question: What is the revenue mix in China? - Management stated that they do not split revenue by region but indicated it is similar to the rest of the world [35] Question: How is the largest customer’s R&D spend affecting growth? - Management noted that while there may be fluctuations, committed agreements generally protect EDA software revenue [42] Question: What is the plan if the ANSYS deal does not close? - Management emphasized that they are focused on completing the transaction and are confident based on received approvals [45][66] Question: What is the outlook for design activity in non-AI markets? - Management indicated signs of stabilization and new energy in industrial and automotive markets, with increased design activity expected [50] Question: How is pricing power being affected? - Management stated that pricing is based on the value delivered to customers, and they see opportunities to improve pricing as challenges increase for chip design [81] Question: What is the confidence level for achieving double-digit revenue growth? - Management expressed confidence in achieving industry-leading double-digit revenue growth, even with potential challenges in China [107]

Financial Data and Key Metrics Changes - The company reported revenue of $1.6 billion, representing a 10% year-over-year increase, exceeding the midpoint of guidance [4][14][15] - Non-GAAP operating margin was 38%, and non-GAAP EPS was $3.67, which was above the guided range [14][15] - Backlog increased by $400 million quarter-over-quarter to $8.1 billion [14][15] Business Line Data and Key Metrics Changes - Design Automation segment revenue was $1.12 billion, up 6% year-over-year, with an adjusted operating margin of 40.9% [16] - Design IP segment revenue increased by 21% year-over-year to $482 million, with an adjusted operating margin of 31.2% [16][10] Market Data and Key Metrics Changes - Strong demand was noted in Europe and South Korea, which offset headwinds from China [15] - The company observed a slowdown in China, which is expected to decline year-over-year, while other regions showed resilience [5][15][27] Company Strategy and Development Direction - The company is focused on leveraging megatrends in AI, software-defined systems, and silicon proliferation to drive growth [5][14] - The pending acquisition of Ensys is aimed at enhancing AI-powered silicon design solutions [6][12] - The company is investing to maintain its leadership position in AI for chip design [13] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a "tale of two markets," with robust demand in AI and HPC sectors, while non-AI end market demand remains subdued [5][4] - The company reiterated its full-year guidance despite challenges in China, citing strong execution in other regions [27][78] Other Important Information - Free cash flow was approximately $220 million, with cash and short-term investments totaling $14.3 billion and debt of $10.1 billion [16][17] - The company is confident in achieving industry-leading double-digit revenue growth despite potential challenges in China [102] Q&A Session Summary Question: What is the expected impact of declining sales in China? - Management confirmed that they are anticipating a decline in China year-over-year but reiterated full-year guidance based on strong performance in other regions [27][78] Question: Can you clarify the bond payment structure? - Management indicated that the first bond payment would include a catch-up for the first half month, transitioning to a regular semiannual payment schedule [28][29] Question: How is the revenue mix in China divided among software, IP, and hardware? - The company does not disclose revenue by region but indicated that the mix is similar to that of other regions [32] Question: What is the outlook for R&D spending among major customers? - Management noted that while there may be fluctuations, committed agreements generally remain stable, and opportunities arise when customers push their roadmaps [40][60] Question: What is the status of the pending ANSYS acquisition? - Management expressed confidence in closing the acquisition in the first half of the year, citing positive negotiations with regulators [42][63] Question: How is the company addressing the need for more system design capabilities? - The company is focused on completing the ANSYS acquisition, which is seen as essential for enhancing system design capabilities [42] Question: What are the expectations for R&D investment in the semiconductor industry? - Management observed a pickup in R&D investment in automotive and industrial sectors, indicating a positive trend for future growth [88][89] Question: How does the company view pricing power in the current environment? - Management stated that pricing is based on the value delivered to customers, and there is an opportunity to improve pricing as challenges in chip design increase [79][80]

Core Viewpoint - Synopsys's stock experienced a significant decline of 10% following the announcement from the Trump administration to halt its services to China, impacting the company's revenue and market position [1][2]. Group 1: Company Impact - The Bureau of Industry and Security instructed Synopsys to cease its business with Chinese chipmakers, which is expected to negatively affect the company's financial performance [2]. - In 2024, 16% of Synopsys's total revenue, amounting to approximately $978 million (16% of $6.1 billion), was derived from China, indicating the importance of this market to the company's overall revenue [2]. - Synopsys has previously engaged with Huawei, a major Chinese chipmaker, which has drawn scrutiny from U.S. authorities [2][3]. Group 2: Industry Context - The ongoing U.S.-China trade tensions, particularly concerning semiconductors, highlight the fragility of trade relations despite recent de-escalation efforts [5]. - The Chinese Ministry of Commerce criticized the U.S. actions, claiming they undermine the preliminary trade agreement established last month and called for corrections from the White House [5].

Financial Performance - Revenue for Q2 FY 2025 was $1.604 billion, a 10.2% increase from $1.455 billion in Q2 FY 2024[2] - GAAP net income for Q2 FY 2025 was $349.2 million, or $2.24 per diluted share, compared to $299.1 million, or $1.92 per diluted share in Q2 FY 2024[6] - Non-GAAP net income for Q2 FY 2025 was $572.7 million, or $3.67 per diluted share, up from $466.9 million, or $3.00 per diluted share in Q2 FY 2024[7] - The company reported a net income of $345,110,000 for the three months ended April 30, 2025, compared to $289,089,000 for the same period in 2024, marking a year-over-year increase of 19.4%[35] - Net income for the six months ended April 30, 2025, was $642.5 million, a decrease of 12.6% compared to $735.3 million for the same period in 2024[40] Revenue Guidance - The company reaffirmed its full-year 2025 revenue guidance, projecting revenue between $6.745 billion and $6.805 billion[12] - For Q3 FY 2025, revenue is expected to range from $1.755 billion to $1.785 billion[12] Operating Performance - Non-GAAP operating margin guidance for FY 2025 remains unchanged, reflecting confidence in business demand[5] - Operating income for the six months ended April 30, 2025, was $628,265,000, a decrease from $684,698,000 in the same period of 2024[35] - Revenue from the Design Automation segment for the six months ended April 30, 2025, was $2.14 billion, representing a 5.0% increase from $2.04 billion in the same period of 2024[46] - Adjusted operating income for the Design IP segment was $277.1 million for the six months ended April 30, 2025, down 25.2% from $370.5 million in the prior year[46] - The adjusted operating margin for the Design Automation segment improved to 40.3% from 38.1% year-over-year[46] Cash and Assets - Cash and cash equivalents increased significantly to $14,119,095,000 as of April 30, 2025, compared to $3,896,532,000 on October 31, 2024[38] - Total current assets rose to $16,879,029,000 as of April 30, 2025, up from $6,469,666,000 on October 31, 2024[38] - Cash, cash equivalents, and restricted cash at the end of the period totaled $14.12 billion, significantly up from $1.51 billion at the end of the previous year[42] Expenses and Liabilities - Research and development expenses for the three months ended April 30, 2025, were $553,979,000, compared to $493,136,000 in the same period of 2024, reflecting an increase of 12.3%[35] - Total liabilities as of April 30, 2025, were $13,840,912,000, significantly higher than $4,050,355,000 on October 31, 2024[38] - Cash flows from operating activities provided $207.9 million, down 46.5% from $388.8 million in the prior year[42] Strategic Focus - The company continues to focus on AI and software-defined systems as key growth drivers in a complex design environment[3] - The company anticipates the completion of the acquisition of ANSYS, Inc., which is expected to impact future financial results positively[31] - Synopsys delivers comprehensive silicon to systems design solutions, partnering with semiconductor and systems customers to enhance R&D capabilities[63] Tax and Non-GAAP Measures - The effective tax rate for Q2 FY 2025 was 11.9% on a GAAP basis, while the non-GAAP effective tax rate was 16.0%[24] - The company adopts a non-GAAP tax rate of 16% for fiscal year 2025 to provide consistency across reporting periods and align with expected geographic earnings mix[61] - The company continues to focus on non-GAAP financial measures to provide a clearer view of its core business operations and future performance expectations[50] Acquisitions and Divestitures - The company completed the sale of its Software Integrity business on September 30, 2024, which is now classified as a discontinued operation[5] - The company incurs significant expenses related to acquisitions and divestitures, including compensation expenses and professional fees, which are excluded from core operations for consistent comparison across periods[57] - Restructuring charges include severance and termination benefits, aimed at aligning costs with business strategies, and are not considered part of core operations[59] - Gains and losses from the sale of strategic investments in privately held companies are excluded as they do not reflect core business results[60] Financing Activities - Proceeds from debt issuance amounted to $10.03 billion, indicating significant financing activity during the period[42]

Corporate Overview for Investors May 2025 Forward-Looking Statements This presentation contains forward-looking statements, including, but not limited to, statements regarding Synopsys, Inc.'s (Synopsys, we or our) short-term and long-term financial targets, expectations and objectives including, among others, our long-term financial objectives, which include the anticipated effects of our pending acquisition of ANSYS, Inc. (the Ansys Merger); our products, technology and services; business and market outlo ...

Results Summary Quarterly revenue of $1.604 billion, exceeding midpoint of guidance. Quarterly GAAP earnings per diluted share of $2.24; non-GAAP earnings per diluted share of $3.67, exceeding guidance. Reaffirming full-year 2025 revenue guidance, and non-GAAP operating margin guidance. SUNNYVALE, Calif., May 28, 2025 /PRNewswire/ -- Synopsys, Inc. (Nasdaq: SNPS) today reported results for its second quarter of fiscal year 2025. Revenue for the second quarter of fiscal year 2025 was $1.604 billion, compared ...

Core Viewpoint - Synopsys is expected to report strong fiscal second-quarter results driven by robust demand in AI and high-performance computing, despite some macroeconomic challenges impacting corporate budgets and currency exchange rates [3][7]. Financial Expectations - Non-GAAP earnings per share are anticipated to be between $3.37 and $3.42, with the Zacks Consensus Estimate at $3.39, indicating a 13% year-over-year increase [1]. - Revenue projections for the fiscal second quarter are between $1.585 billion and $1.615 billion, with the Zacks Consensus Estimate at $1.60 billion, reflecting a 10.10% increase from the previous year [2]. Growth Drivers - The performance is likely to benefit from strong demand in AI and high-performance computing markets, along with the momentum from Synopsys' expanded hardware-assisted verification (HAV) portfolio [3]. - The launch of next-generation HAPS 200 and ZeBu 200 systems, which offer up to 2x better performance, has reinforced Synopsys' leadership in HAV, with major customers like AMD, ARM, NVIDIA, and SiFive adopting these technologies [4]. - Advancements in agent AI are expected to enhance productivity across the industry, with continued adoption of Synopsys.ai driving significant growth [5]. - Development of IP for the global foundry ecosystem, particularly in security and encryption solutions, is also anticipated to positively impact results [6]. Challenges - Ongoing macroeconomic challenges and tightening corporate budgets are expected to partially offset the positive impacts of growth drivers [7]. Earnings Prediction Model - The current model does not predict a definitive earnings beat for Synopsys, as it holds a Zacks Rank 3 and an Earnings ESP of 0.00% [8].