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]