Synopsys ((SNPS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Synopsys’ recent earnings call presented a mixed sentiment, highlighting robust performance in the design automation segment and strategic achievements like the ANSYS acquisition. However, these positives were tempered by significant challenges in the IP business, geopolitical issues in China, and a cautious outlook for the upcoming quarter due to persistent headwinds.
Revenue Growth and ANSYS Acquisition
Synopsys reported a notable third-quarter revenue of $1.74 billion, marking a 14% increase year-over-year. This growth was primarily driven by the design automation segment and the successful acquisition of ANSYS, which has expanded Synopsys’ revenue streams and customer base.
Design Automation Segment Performance
The design automation segment, bolstered by ANSYS products, saw a 23% year-over-year revenue increase. This surge was fueled by strong hardware performance, multiple competitive wins, and record shipments of Zebu Server 5 and HAPS 200 units.
Strategic Integration and Portfolio Expansion
The acquisition of ANSYS is seen as a transformational milestone for Synopsys, positioning the company as a leader in engineering solutions from silicon to systems and expanding its long-term growth opportunities.
AI and Multi-Die Design Momentum
Synopsys continues to gain traction with its AI capabilities and multi-die design solutions. Approximately 20 customers are piloting Synopsys.ai GenAI-powered capabilities, and successful multi-die tape-outs have been achieved for leading AI semiconductor companies.
IP Business Underperformance
The IP segment experienced an 8% revenue decline year-over-year, attributed to new export restrictions affecting design starts in China, challenges with a major foundry customer, and issues with roadmap and resource allocation.
China Market Challenges
Synopsys faced ongoing geopolitical and export restriction challenges in China, which disrupted design starts and compounded existing weaknesses in the region.
Anticipated Headwinds and Conservative Outlook
Due to continued challenges in the IP business and geopolitical risks, Synopsys has adopted a conservative outlook for Q4, adjusting full-year targets for revenue, operating margin, EPS, and free cash flow.
Cost Structure and Workforce Reduction
To optimize cost structure and align resources with growth opportunities, Synopsys plans to reduce its global headcount by approximately 10% by the end of fiscal year 2026.
Forward-Looking Guidance
During the earnings call, Synopsys provided guidance for the fiscal year 2025, projecting revenue between $7.03 and $7 billion and a non-GAAP EPS between $12.76 and $12.80. Despite challenges, the company anticipates a record revenue year, driven by strong growth in design automation and the impact of the ANSYS acquisition. Synopsys aims to maintain its leadership position by leveraging its expanded portfolio and addressing immediate challenges in the IP sector.
In summary, Synopsys’ earnings call reflected a balanced sentiment with strong growth in design automation and strategic milestones like the ANSYS acquisition. However, challenges in the IP business and geopolitical issues in China have led to a conservative outlook for the upcoming quarter. The company remains committed to optimizing its cost structure and leveraging growth opportunities to maintain its leadership in engineering solutions.