It has been about a month since the last earnings report for Synopsys (SNPS) . Shares have added about 26.2% in that time frame, outperforming the S&P 500.But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Synopsys due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Synopsys, Inc. before we dive into how investors and analysts have reacted a ...

Core Insights - Synopsys is one of the two leading companies in the Electronic Design Automation (EDA) sector, alongside Cadence Design Systems, and both have high valuations due to their critical role in assisting semiconductor companies like NVIDIA in chip design [1][3] - The company reported a disappointing Q3 for the 2025 fiscal year, with non-GAAP earnings of $3.39 per share, missing the Zacks Consensus Estimate of $3.84 by nearly 12% and showing a year-over-year decline of 1.2% [2][4] - Q3 revenues increased by 14% year-over-year to $1.74 billion but fell short of the Zacks Consensus Estimate of $1.768 billion, driven by growth in Time-Based Product and Upfront Product businesses [3][4] Financial Performance - Synopsys expects Q4 FY'25 earnings per share to be $2.78, a significant reduction from prior analyst consensus, leading to a full-year EPS outlook decrease of 15% from $15.09 to $12.83, indicating a 2.8% annual profit drop [4][6] - The EPS consensus for FY'26 has been revised down by 15.5% from $16.71 to $14.11, reflecting analyst caution regarding future performance [6] Market Reaction - Following the disappointing earnings report, Synopsys shares plummeted nearly 36% from $600 to $380 but have since rebounded above $500 as analysts reassess their models [3][6] - The stock saw a nearly 20% increase after news of a partnership between NVIDIA and Intel, indicating renewed investor interest [6][8] Strategic Outlook - Synopsys' management cited China export restrictions and weak sales to Intel as key challenges, but there are signs of potential recovery in the Chinese market due to government cooperation [4][5] - The company has de-risked its Design IP forecasts, suggesting potential upside surprises in future quarters [5]

Core Insights - Synopsys' shares fell 22% after reporting Q3 fiscal 2025 results that missed both revenue and earnings estimates [1][8] - Non-GAAP earnings were $3.39 per share, below the Zacks Consensus Estimate of $3.84 and the guided range of $3.82-$3.87, marking a 1.2% year-over-year decline [1][8] - Revenues for the fiscal third quarter increased 14% year-over-year to $1.74 billion, but fell short of the Zacks Consensus Estimate of $1.768 billion [2][8] Financial Performance - Time-Based Product revenues, accounting for 51.3% of total revenues, rose 11.1% year-over-year to $892.4 million [5] - Upfront Product revenues increased 16.7% to $516.4 million, representing 29.7% of total revenues [5] - Maintenance and Service revenues grew 18.2% to $331 million from $280.1 million in the previous year [5] Segment Analysis - Electronic Design Automation (EDA) revenues, which comprised 68.6% of total revenues, increased 17% year-over-year to $1.19 billion [6] - Design IP revenues decreased to $427.6 million from $463.1 million year-over-year [6] - Revenues from Simulation and Analysis were $77.7 million, representing 4.5% of total revenues [6] Geographic Breakdown - North America generated $824.7 million (47% of total revenues), while Europe contributed $178.6 million (10%) [7] - Revenues from China, Korea, and Other regions were $247.3 million (14%), $202.1 million (12%), and $287 million (16%) respectively [7] Margin and Cash Flow - Non-GAAP operating margin was 38.5%, down 150 basis points year-over-year [7] - EDA's adjusted operating margin improved by 300 basis points to 44.5%, while Design IP segment's margin contracted by 1660 basis points to 20.1% [9] - Operating cash flow for Q3 was $671 million, with a total of $879 million generated in the first three quarters of fiscal 2025 [10] Guidance - For fiscal 2025, Synopsys expects revenues between $7.03 billion and $7.06 billion, up from previous guidance of $6.745 billion to $6.805 billion [11] - Non-GAAP earnings are now projected to be between $12.76 and $12.80, down from $15.11 to $15.19 [11] - For Q4 fiscal 2025, expected revenues are between $2.23 billion and $2.26 billion, with non-GAAP earnings per share estimated between $2.76 and $2.80 [12]

Core Insights - Synopsys (SNPS) shares increased by 3.7% after reporting better-than-expected Q2 fiscal 2025 results, with non-GAAP earnings of $3.67 per share, exceeding the Zacks Consensus Estimate of $3.39 and the guided range of $3.37-$3.42, reflecting a 22.3% year-over-year increase in earnings due to revenue growth [1][2] Financial Performance - Q2 revenues rose by 10.3% year-over-year to $1.604 billion, slightly above the Zacks Consensus Estimate of $1.602 billion, driven by increases in Time-Based Product and Upfront Product revenues [2] - Time-Based Product revenues accounted for 51.6% of total revenues, reaching $828.3 million, a 6% increase year-over-year, while Upfront Product revenues, making up 31.8%, surged 28.7% to $510.7 million [3] - Maintenance and Service revenues decreased by 4.1% to $265.3 million [3] - Electronic Design Automation (EDA) revenues, which comprised 66.9% of total revenues, were $1.073 billion, up 6.5% year-over-year, while Design IP revenues increased to $482 million from $399.8 million in the previous year [4] Geographic Breakdown - North America contributed 41% of total revenues, amounting to $655.1 million, while Europe accounted for 12% with revenues of $194.8 million. Revenues from Korea (16%), China (10%), and Other regions (21%) were $257.6 million, $157.5 million, and $339.2 million, respectively [5] Margins and Cash Flow - The non-GAAP operating margin improved to 38%, up 70 basis points year-over-year, with EDA's adjusted operating margin increasing by 130 basis points to 40.9% [5][6] - As of April 30, 2025, Synopsys had cash and short-term investments of $14.26 billion, a significant increase from $3.81 billion as of January 31, 2025. Total long-term debt was reported at $10.03 billion [7] Guidance - For fiscal 2025, Synopsys expects revenues between $6.745 billion and $6.805 billion, with non-GAAP earnings projected in the range of $15.11-$15.19. The Zacks Consensus Estimate for revenues is $6.77 billion, and for earnings, it is $14.88 per share [8] - For Q3 fiscal 2025, expected revenues are between $1.755 billion and $1.785 billion, with non-GAAP earnings per share estimated between $3.82 and $3.87 [9]