Synopsys Q3 Preview: EDA and Simulation Strengthening in HPC AI Chips

Synopsys Q3 Preview: The company is expected to strengthen its EDA and simulation capabilities in HPC AI chips. Despite a Sell rating assigned in December 2024 due to potential revenue deceleration, the stock price rose following the acquisition of Ansys.

Title: Synopsys Q3 Preview: Strengthening EDA and Simulation Capabilities in HPC AI Chips

Synopsys Inc. (NASDAQ: SNPS) is set to release its Q3 FY25 results on September 9, 2025, with investors and financial professionals closely monitoring the company's performance. Despite a Sell rating assigned in December 2024 due to potential revenue deceleration, the stock price rose following the acquisition of Ansys, indicating a positive market sentiment [2].

The acquisition of Ansys, a leading simulation software provider, has been a key milestone for Synopsys, integrating both EDA and simulation platforms to expand its business solutions into other markets such as industrial and aerospace [2]. This strategic move aims to bolster Synopsys's position in the semiconductor market, particularly in the high-performance computing (HPC) and artificial intelligence (AI) sectors.

Synopsys reported its Q2 FY25 results on May 28, beating market expectations with 10.3% revenue growth and 12.2% operating profit growth. The company's strong market position in HPC AI chips was highlighted during the earnings call, with management noting the critical role of Synopsys's EDA software in the chip design process [2].

The upcoming Q3 results are anticipated to guide for $1.755-$1.785 billion in revenue and $3.82-$3.97 in adjusted EPS. Several factors could influence these results, including the impact of geopolitical tensions and tariff uncertainties between the US and China, which represent around 10% of Synopsys's total revenue. However, the recent easing of China's export restrictions could potentially lead to better-than-expected financial results for FY25 [2].

Synopsys's investment in R&D for AI and HPC markets is expected to drive future growth, as seen in the company's strong revenue growth in Q2. The company's automated 3DIC Compiler and technology used in advanced chiplets packaging processes are crucial for AI chips, indicating a significant focus on cutting-edge technologies [2].

Looking ahead, Synopsys is projected to deliver 12% revenue growth for FY25, reaching $6.86 billion in revenue. From FY26 onwards, revenue growth is anticipated to normalize to 15% annually, aligning with the long-term average for semiconductor designing activity growth [2].

Despite the positive outlook, Synopsys faces challenges such as potential supply chain risks and the need to support both standard and semi-custom memory solutions. The company must also navigate the complexities of 3D packaging, which is crucial for AI chips, and collaborate more deeply with SoC architects, EDA tool providers, and packaging experts to unlock the full potential of custom High Bandwidth Memory (cHBM) [1].

In summary, Synopsys's Q3 results and future growth prospects are closely tied to its ability to leverage the acquisition of Ansys and strengthen its EDA and simulation capabilities in HPC AI chips. The company's strategic focus on these areas, combined with its strong market position, positions it well for continued success in the semiconductor market.

References:
[1] https://semiwiki.com/eda/synopsys/359550-chbm-for-ai-capabilities-challenges-and-opportunities/
[2] https://seekingalpha.com/article/4810292-synopsys-q3-preview-strengthening-eda-and-simulation-in-hpc-ai-chips