AI-Chip play SNPS pushes above 50-day MA after beating on top and bottom line

Synopsys (SNPS) delivered a strong performance in its fiscal third quarter, exceeding both revenue and earnings expectations. The company reported adjusted earnings per share (EPS) of $3.43, surpassing the consensus estimate of $3.28. Revenue for the quarter came in at $1.53 billion, slightly ahead of the anticipated $1.52 billion. This marked a 13% year-over-year increase in revenue and a 27% growth in EPS, highlighting Synopsys' robust operational execution and demand for its products.

Key metrics for the quarter were equally impressive. The company’s largest segment, Design Automation, generated $1.06 billion in revenue, up 6% year-over-year, which was in line with expectations. Additionally, the Design IP segment saw significant growth, with revenue increasing by 32% year-over-year to $463.1 million, far exceeding the estimate of $410.8 million. Synopsys also reported a net income of $535.5 million on an adjusted basis, beating analyst expectations of $511.4 million.

Looking ahead, Synopsys provided strong guidance for the fourth quarter. The company expects revenue to be between $1.61 billion and $1.64 billion, with the midpoint slightly above Wall Street's estimate of $1.61 billion. Adjusted EPS is forecasted to range from $3.27 to $3.32, again surpassing the consensus estimate of $3.23. For the full fiscal year, Synopsys anticipates revenue growth of approximately 15% and adjusted EPS in the range of $13.07 to $13.12, up from the previous guidance of $12.90 to $12.98.

Synopsys is a critical player in the semiconductor industry, providing electronic design automation (EDA) software, silicon intellectual property, and system verification solutions. The company’s tools are essential for designing complex and AI-compatible chips, which are increasingly in demand as businesses race to adopt advanced technologies. Synopsys' solutions are widely used by major chipmakers, including Nvidia, Qualcomm, and Intel, underscoring its importance in the tech industry.

The company’s focus on artificial intelligence is particularly noteworthy. CEO Sassine Ghazi emphasized that the complexity and pace of technology innovation are accelerating, with AI driving significant demand for more powerful and intricate chip designs. Synopsys is well-positioned to capitalize on this trend, having launched its first AI product in 2020 and continuing to expand its AI capabilities. This strategic focus on AI is expected to be a key growth driver for the company moving forward.

Despite the strong results and positive outlook, Synopsys shares dipped slightly, down 0.5% following the earnings release. However, the company’s robust performance and its strategic positioning in the rapidly evolving tech landscape suggest that it remains a solid player in the market. With its ongoing expansion in AI and the anticipated acquisition of Ansys, Synopsys is poised for continued growth and success in the coming years.