Synopsys 2025 Q2 Earnings Beats Expectations as Net Income Rises 19.4%

Synopsys (SNPS), ranking 197th by market capitalization, reported its fiscal 2025 Q2 earnings on May 28th, 2025. The company exceeded expectations, with revenue reaching $1.604 billion and non-GAAP EPS at $3.67, surpassing guidance. Synopsys raised its full-year EPS outlook, reflecting confidence in its growth prospects. Fiscal year 2025 revenue guidance was reaffirmed, and the acquisition of Ansys is progressing, albeit awaiting Chinese regulatory approval. Overall, Synopsys demonstrated strong performance driven by demand in AI and HPC sectors, despite challenges in non-AI markets.

Revenue

Synopsys reported a 10.3% increase in total revenue, reaching $1.60 billion in Q2 2025, compared to $1.45 billion in Q2 2024. Within its segments, the total products revenue amounted to $1.34 billion. The time-based products segment contributed $828.33 million, while the upfront products segment saw revenue of $510.68 million. Additionally, the maintenance and service segment generated $265.26 million, with no amortization of acquired intangible assets recorded for the quarter.

Earnings/Net Income

Synopsys's EPS rose 16.8% to $2.23 in 2025 Q2 from $1.91 in 2024 Q2, indicating robust earnings growth. The company's net income reached $345.11 million in the quarter, a 19.4% increase from $289.09 million in the prior year quarter. The earnings report reflects positive performance and continued profitability improvements.

Price Action

The stock price of Synopsys has tumbled 9.51% during the latest trading day, has tumbled 10.31% during the most recent full trading week, and has climbed 3.54% month-to-date.

Post-Earnings Price Action Review

The strategy of buying SNPS when revenue exceeds expectations and holding for 30 days delivered impressive results, yielding a 147.33% return, significantly outperforming the benchmark. However, this strategy also comes with risks, as evidenced by a high maximum drawdown of -40.35%. The Sharpe ratio of 0.58 suggests moderate risk and returns. Investors who adopted this approach benefited from substantial gains, but they should remain mindful of the potential volatility associated with this investment strategy. While the revenue beat indicates strong company performance, the associated risks underscore the importance of a well-balanced investment strategy that accounts for market fluctuations.

CEO Commentary

Sassine Ghazi, CEO, President & Director, expressed optimism about Synopsys' strong second-quarter performance, with revenue up 10% year-over-year, driven by robust demand in AI and HPC sectors, while challenges persisted in non-AI markets. He highlighted key growth drivers, including the adoption of innovative products and the successful launch of new hardware-assisted verification systems. Ghazi reaffirmed Synopsys' position as a vital partner in addressing increasing design complexities, underscoring the strategic importance of their pending acquisition of Ansys to enhance AI-powered design solutions. He emphasized a resilient business model, stating, "Synopsys is leading AI for chip design," and acknowledged the company's commitment to maintaining this leadership.

Guidance

For fiscal year 2025, Synopsys reiterated revenue guidance between $6.745 billion and $6.805 billion, maintaining total GAAP costs and expenses between $5.01 billion and $5.07 billion. The non-GAAP operating margin target remains at 40% at the midpoint. Non-GAAP earnings per share have been updated to a range of $15.11 to $15.19. In the third quarter, Synopsys expects revenue between $1.755 billion and $1.785 billion, with GAAP earnings projected at $2.63 to $2.74 per share and non-GAAP earnings at $3.82 to $3.87 per share, inclusive of bond-related costs.

Additional News

Synopsys has been actively pursuing mergers and acquisitions, notably progressing in its acquisition of Ansys, a strategic move aimed at enhancing AI-powered design solutions. This acquisition is pending final approval from Chinese regulators, reflecting the company's commitment to expanding its capabilities in AI and simulation technologies. Furthermore, Synopsys has not announced any significant C-level changes or dividend/buyback news within the past three weeks from May 28th, 2025. The company's focus remains on leveraging mega trends like AI, software-defined systems, and silicon proliferation to drive growth, as emphasized by CEO Sassine Ghazi. These initiatives underscore Synopsys' strategic direction in addressing evolving market demands and enhancing its product offerings.