Synopsys, Inc. (NASDAQ: $SNPS) is an American electronic design automation (EDA) company headquartered in Sunnyvale, California, that provides trusted and comprehensive silicon-to-systems design solutions. From electronic design automation to silicon IP and system verification and validation, Synopsys partners closely with semiconductor and systems customers across various industries to maximize their research and development capabilities and productivity.
On Wednesday, May 22nd, 2024, Synopsys reported its second quarter of fiscal year 2024 earnings results, beating estimates.
Q2 Earnings Key Highlights
The company’s quarterly revenue reached $1.455 billion, an approximately 15% year-over-year increase and at the high end of its guidance range. On an extended breakdown, Time-based products recorded $781.7 million, Upfront products stood at $396.4 million, and Maintenance and service were $276.6 million.
Synopsys’ Impressive Earnings Growth
Synopsys’ non-GAAP earnings per diluted share for the quarter stood at $3.00, marking a substantial 26% year-over-year growth and exceeding the company’s guidance. On a GAAP basis, net income from continuing operations attributed to Synopsys was $299.1 million, $1.92 per diluted share, compared to $275.6 million, $1.78 per diluted share, in the same quarter last year.
“We continued our strong operational execution and business momentum in Q2,” said Sassine Ghazi, president and CEO of Synopsys. “Customers continue investing in Synopsys solutions to maximize their R&D and power their future innovations for this era of pervasive intelligence.”
Raised Full-Year Targets
Driven by strong execution and continued business momentum, Synopsys raised its full-year targets for revenue and non-GAAP earnings per share (EPS). The company now expects its fiscal year 2024 revenue to range between $6.09 billion and $6.15 billion and non-GAAP EPS to fall within the range of $12.90 to $12.98.
Segment Performance
The Design Automation segment, which includes advanced silicon design, verification products and services, system integration products and services and manufacturing software products, among others, continued to drive growth for the company.
The Design IP segment, encompassing the company’s Design IP products, also contributed to Synopsys’ overall strong performance.
Upcoming Acquisition and Divestiture
In a significant development, Synopsys announced on May 5, 2024, that it had entered into an agreement to sell its Software Integrity business. The company expects this divestiture to enhance its focus on its core business operations. Also, Synopsys highlighted its pending acquisition of Ansys, Inc., which was approved by Ansys shareholders on May 22, 2024. The company believes this acquisition will further its mission of empowering technology innovators worldwide with essential silicon-to-systems design solutions.
Shelagh Glaser, Synopsys CFO, expressed confidence in the company’s business, stating, “We remain confident in our business and as a result, we are again raising our full-year targets for revenue and non-GAAP EPS.”
Outlook and Guidance
For the third quarter of the fiscal year 2024, Synopsys expects revenue in the range of $1.505 billion to $1.535 billion, GAAP EPS between $2.22 and $2.35, and non-GAAP EPS between $3.25 and $3.30.
The company also provided guidance for the full fiscal year 2024. Revenue between $6.09 billion and $6.15 billion, GAAP EPS of $9.14 to $9.36, non-GAAP EPS of $12.90 to $12.98. Also, it anticipated operating cash flow of around $1.3 billion and free cash flow of approximately $1.1 billion, indicating a strong financial outlook for the upcoming fiscal year.
Synopsys’ strong financial performance and raised targets reflect the company’s leadership in the semiconductor and electronics industries, as well as its commitment to driving innovation and empowering its customers’ success.
Synopsys (SNPS) Stock Performance
Synopsys shares surged on the stock market, climbing 5.49% to $604.58 as of 12:39 PM EDT. The company’s strong Q2 results, with revenue and non-GAAP earnings exceeding expectations, coupled with raised full-year guidance, fueled investor enthusiasm. SNPS has so far hit an intraday high of $605.45 after opening at $580.32.
The strong financial performance, driven by potent demand for design solutions and operational excellence, boosted confidence in Synopsys’ ability to capitalize on industry tailwinds like pervasive intelligence and semiconductor innovation.
Should You Buy Synopsys, Inc. Shares In 2024?
If you are considering Synopsys in 2024, the company’s Q2 performance and raised full-year guidance highlight its strong market positioning. With customers continuing to invest in Synopsys’ trusted design solutions amidst the pervasive intelligence era and the pending Ansys acquisition expected to bolster its offerings further, the outlook appears promising.
However, macroeconomic headwinds and geopolitical uncertainties pose risks. Evaluate Synopsys’ future quarterly results and any impacts from the Software Integrity divestiture before making the investment decision. Overall, the semiconductor design leader deserves consideration for 2024 amid strong growth prospects.
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