Synopsys, Inc. (SNPS) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call summary shows strong financial performance with a 21% revenue growth and robust cash flow. Despite some uncertainty in China, the company maintains strong liquidity and a significant backlog. The Q&A section reveals management's confidence in AI-driven opportunities and the ANSYS acquisition. Although there are concerns about China, management's optimistic outlook and strategic initiatives suggest a positive sentiment. Given the strong financials and growth prospects, the stock is likely to see a positive movement in the next two weeks.

Key Financial Performance

Revenue $1.6 billion, up 10% year-over-year, driven by strong growth in Design IP and regional strength in Europe and South Korea, offsetting headwinds from China.

Non-GAAP Operating Margin 38%, reflecting consistent execution and resilient business model despite a dynamic macroeconomic environment.

Non-GAAP EPS $3.67, which includes a $0.28 benefit from the sale of a building and approximately $0.06 of net charges associated with a $10 billion bond issuance.

Design Automation Revenue $1.12 billion, up 6% year-over-year, against a strong compare, with an adjusted operating margin of 40.9%.

Design IP Revenue $482 million, up 21% year-over-year, driven by strong performance from interface IP, with an adjusted operating margin of 31.2%.

Free Cash Flow Approximately $220 million, reflecting the company's strong cash generation capabilities.

Cash and Short-term Investments $14.3 billion, indicating a strong liquidity position.

Debt $10.1 billion, reflecting the company's financing activities.

Backlog $8.1 billion, up $400 million quarter-on-quarter, indicating strong future revenue visibility.

You have reached the limit Upgrade to access full content

Get started

Operating Highlights

New Hardware Products: New hardware assisted verification products, HAPS-200 and ZeBu-200 are off to a strong start, offering high performance and flexibility.

AI Capabilities: Synopsys' DSO.ai momentum continued, driving multiple design wins for flagship CPU and GPU cores.

Design IP: Revenue increased 21% year-over-year as customers rely on Synopsys IP to minimize integration risk and speed time to market.

Market Expansion: Strong demand from customers in regions outside of China, particularly in Europe and South Korea.

AI and HPC Sectors: The AI and HPC sectors remained robust despite market fluctuations.

Revenue Growth: Revenue up 10% year-over-year, with total revenue of $1.6 billion.

Backlog: Backlog increased to $8.1 billion, up $400 million quarter-on-quarter.

Free Cash Flow: Free cash flow was approximately $220 million.

Acquisition of Ansys: Pending acquisition of Ansys to enhance AI-powered silicon to system design solutions.

Investment in AI: Synopsys is investing to maintain and extend its leadership position in AI for chip design.

You have reached the limit Upgrade to access full content

Get started

Risk or Challenges

Regulatory Issues: The pending acquisition of Ansys is subject to regulatory clearances, with all jurisdictions cleared except for China. The company is actively negotiating with SAMR to secure this clearance.

Market Demand Fluctuations: There are signs of stabilization in industrial and automotive sectors, but non-AI end market demand remains subdued, indicating potential risks in revenue generation from these segments.

Supply Chain Challenges: The slowdown in China has been noted, which could impact supply chain dynamics and customer demand in that region.

Economic Factors: The macroeconomic environment is described as dynamic, which could introduce uncertainties affecting future performance.

Competitive Pressures: The company faces competitive pressures in the semiconductor industry, particularly in the areas of AI and high-performance computing, where rapid advancements are necessary to maintain market leadership.

You have reached the limit Upgrade to access full content

Get started

Guidance & Outlook

Pending Acquisition of Ansys: The acquisition aims to address the need for new AI-powered silicon to system design solutions, integrating electronics and multi-physics. Regulatory clearances are in progress, with expectations to close in the first half of the year.

AI and HPC Sector Growth: Despite market fluctuations, the AI and HPC sectors remain robust, driving demand for Synopsys' products.

Design Automation Revenue Growth: Design Automation revenue increased by 6% year-over-year, supported by new hardware-assisted verification products.

Design IP Revenue Growth: Design IP revenue increased by 21% year-over-year, driven by strong demand for high-speed SerDes IP and interface IP.

Generative AI Capabilities: Synopsys is leveraging generative AI to enhance design and verification cycle times, showcasing significant efficiency improvements.

Full Year Revenue Guidance: Reaffirmed revenue guidance for fiscal year 2025 is between $6.745 billion and $6.805 billion.

Operating Margin Guidance: Non-GAAP operating margin target for fiscal year 2025 is 40% at the midpoint.

Earnings Per Share Guidance: GAAP earnings per share guidance is between $10.14 and $10.34, while non-GAAP earnings per share guidance is between $15.11 and $15.19.

Third Quarter Revenue Guidance: Expected revenue for Q3 is between $1.755 billion and $1.785 billion.

Free Cash Flow Guidance: Free cash flow for fiscal year 2025 is projected at approximately $1.3 billion.

You have reached the limit Upgrade to access full content

Get started

Shareholder Return Plan

Share Repurchase Program: None

You have reached the limit Upgrade to access full content

Get started

Key Q&A

Q:Are we to see this as probably a high-single digit percent in the mix?

A:Recall, as we started sometimes in FY '24 communicating that we are seeing both a cumulative impact of the restrictions in China as well as the macro situation inside China have caused us to continue on communicating that this deceleration will continue.

Q:If that's the sales portion do we think there's a group average similar margin for the China business?

A:As far as the other part of your question regarding impact on operating margin, etc., etc., we cannot speculate about any potential impact to notice that we have not received.

Q:Are you able to speak to the mix? How much is software? How much is IP and how much is hardware?

A:It's -- we don't split per region the revenue, but you can say, it's similar to what we have in the rest of the world.

Q:Is that still a growth area for you? And how do you see market share evolve at that largest customer versus peers?

A:As we have communicated again that Intel has a mix of EDA software, IP and hardware. These are multi-year committed agreements.

Q:If in the scenario that the deal gets pushed out or doesn't close, what's the plan B?

A:This transaction, as we have communicated, is so-called sequential, not only for Synopsys and Ansys, but also for the industry.

Q:What kind of design activity you're seeing on the AI customer base, especially, have we seen any kind of changes there?

A:On one hand, you have and I'm talking in particular semiconductor customers, the AI, HPC infrastructure build-out remains very strong.

Q:When do you think all the AI customer that's slowly looking at building their custom chips, when do you think they will come to the level of what do you say, hyperscaler?

A:Yes. Absolutely. It's been a fantastic opportunity, actually, because there are -- think of them as three categories.

Q:Could you share any color at this stage looking ahead to the next renewal date on whether you're seeing more of an increased opportunity or a potential risk from the Intel overweight?

A:Remember, where does Synopsys see an opportunity? We see an opportunity when customer is pushing their road map, designing more complex systems and chips.

Q:I wonder if you could share a few more words on what exactly has given the confidence in closing the Ansys deal in H1 given that your only roadblock is China?

A:The best way to answer it is because we're in the middle of it, meaning, we're in the middle of the discussions, the negotiations.

Q:Does that sound reasonable? And do you think that high-single digit current RPO growth is sustainable or perhaps something we can even improve further upon?

A:We do see a strong business environment that we're operating in.

Q:What the implications would therefore be for you?

A:The challenge becomes how do you take into account the thermal structure fluid to cooler off, etc., during the design phase.

Q:If the Commerce Department was nearing a point of restricting a broader swath of your sales into China, do you think you would have heard about it by now or received evidence before today?

A:The reason I wanted to address that point upfront because I saw the reporting and the swirling of the speculations and all I can say at this stage is we have not received anything from BIS.

Q:Do you think the overall R&D landscape is maybe getting close to what you saw in the 2021, 2022 time frame?

A:In the non-AI part of the semiconductor, what is -- what we're clearly observing in the last quarter, quarter plus is a pickup in automotive industrial.

Q:What is the pricing benefit? And do you feel like you're pricing that product correctly?

A:The one product actually that has been -- was introduced first and has been talked about regarding the GPU acceleration is Proteus.

Q:Do you have any sense of time line that you'd like to share with us in terms of rolling out a Agentic EDA?

A:Today we have a number of engagements with the limited set of partners to provide feedback on the application.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the potential impact on operating margin due to the uncertainty surrounding BIS export restrictions. Additionally, they did not provide specific details on the revenue mix from China, stating it is similar to the rest of the world without elaborating further.

You have reached the limit Upgrade to access full content

Get started

Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

SNPS Transcript

Synopsys, Inc. (SNPS) Q4 2025 Earnings Call Transcript

Positive12-10

Synopsys reported strong financial performance with a significant EPS beat and robust cash flow. Despite challenges in the IP segment, the company shows promising growth in EDA and strategic partnerships, notably with NVIDIA. The strategic focus on AI-driven innovation and the Ansys integration are positive indicators. The Q&A reveals a cautious but optimistic outlook, with management addressing headwinds and emphasizing long-term growth. The partnership with NVIDIA and strategic cost management further bolster the positive sentiment, suggesting a positive stock price movement in the short term.

Synopsys, Inc. (SNPS) Presents At Goldman Sachs Communacopia + Technology Conference 2025 Prepared Remarks Transcript

Neutral9-10

Synopsys, Inc. (SNPS) Q3 2025 Earnings Call Transcript

Unknown9-9

The earnings call indicates several challenges: underperformance in the IP business, lower free cash flow, and a slight decline in operating margins. Although there are positive developments like AI and HPC growth, the persistent issues in the Design IP business and cautious outlook for Q4 margins suggest a negative sentiment. The reluctance to provide specific guidance on the backlog and revenue contribution from Ansys further adds to uncertainty, leading to a likely negative stock price movement.

Synopsys, Inc. (NASDAQ:SNPS) Q2 2025 Earnings Call Transcript

Positive5-29

The earnings call summary shows strong financial performance with a 10% YoY revenue increase and EPS exceeding expectations. While there are concerns about geopolitical risks and non-AI market demand, the positive outlook from AI and HPC sectors, a $500 million share repurchase program, and optimistic guidance suggest a positive stock price movement. The Q&A section highlighted management's confidence in overcoming challenges, despite some regulatory uncertainties with the ANSYS acquisition. Overall, the positive elements outweigh the negatives, indicating a likely stock price increase in the next two weeks.

SNPS Slides

Synopsys FY25 presentation slides: Ansys acquisition fuels 15% revenue growth target

2025-09-09

Synopsys Q4 2025 slides: Ansys acquisition powers ambitious growth targets

2025-12-10

SNPS Report

Frequently Asked Questions

Where does this earnings call transcript come from?

All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.

How soon is the transcript available after the earnings call ends?

Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.

Is the transcript edited or altered in any way?

No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.

Why do some answers appear as “Unclear” or “Inaudible”?

When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.

Who creates the AI Summary and Key Q&A highlights shown above the transcript?

They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.