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].

Financial Data and Key Metrics Changes - The company reported Q1 revenue of $1.46 billion, down 4% year-over-year, and non-GAAP EPS of $3.03, down 10% due to one less work week compared to Q1 '24 [6][32] - Non-GAAP operating margin was 36.5%, with total GAAP costs and expenses at $1.2 billion [32] - For fiscal year 2025, the revenue guidance is set between $6.745 billion and $6.05 billion, with non-GAAP EPS guidance of $14.88 to $14.96 per share [33][36] Business Line Data and Key Metrics Changes - Design Automation revenue increased by 4% year-over-year, despite one less week of revenue [11] - The company launched new HAPS 200 prototyping systems and ZeBu 200 emulation systems, enhancing performance significantly [12] - Design IP revenue decreased by 17% year-over-year, but opportunities are expanding due to AI customer needs [23] Market Data and Key Metrics Changes - AI and HPC markets remained robust, while industrial, automotive, and consumer electronics faced challenges [7] - China sales showed a deceleration trend, with expectations of continued decline below corporate average due to restrictions and economic slowdown [50][76] Company Strategy and Development Direction - The company is focused on AI-driven design solutions and is progressing with the acquisition of ANSYS to enhance its offerings [9] - The strategy emphasizes addressing design complexity and energy demands through innovative solutions [8] - The company aims to leverage AI capabilities to transform engineering workflows and improve productivity [18][108] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's resilient business model and strong momentum driven by AI growth [29] - The outlook for semiconductor R&D investment is positive, expected to grow from 6% to 9% of sales per year [41] - Management acknowledged challenges in the consumer electronics and automotive sectors but noted a recent acceleration in design activity [44][58] Other Important Information - The backlog exiting Q1 was reported at $7.7 billion [67] - Cash flow from operations was approximately $1.8 billion, with free cash flow around $1.6 billion [34] Q&A Session Summary Question: Growth trends in AI and non-AI segments - Management noted a bifurcation in the semiconductor market, with strong demand in AI and HPC, while consumer electronics and automotive are slower [39][41] Question: Sales performance in China - Management indicated that sales in China are expected to continue decelerating due to restrictions and economic factors [50][76] Question: Design activity for non-AI customers - Management observed a stabilization in design activity for non-AI customers, particularly in mobile and PC sectors [58] Question: Cost control and guidance for next quarter - Management highlighted that Q1 costs were lower than anticipated due to timing, but Q2 typically sees a step-up due to merit increases [112][115] Question: Backlog composition and customer engagement - Management confirmed no significant change in customer behavior regarding backlog duration, maintaining consistent contract durations [81][82]