Synopsys Shares Dip Amid Sales Outlook Disappointment

Synopsys, a leading provider of electronic design automation (EDA) software, has seen its shares fall following a sales outlook that missed analysts' estimates. The company's forecast for fiscal 2025 revenue came in below expectations, with a range of $6.75 billion to $6.8 billion, compared to estimates of $6.91 billion. This disappointing outlook contributed to a 6.6% drop in Synopsys' share price in extended trading.

The miss in sales outlook can be attributed to several factors, including geopolitical tensions and a change in Synopsys' fiscal calendar. The U.S. tightening of controls on chip technology exports to China has led to a continued drop in Synopsys' sales in the region. The company's Chief Financial Officer, Shelagh Glaser, noted that the list of companies Synopsys can no longer sell to in China has grown, and some Chinese customers are hesitant to plan for new chips due to uncertainty around manufacturing.



Additionally, a change in Synopsys' fiscal calendar, aimed at aligning with Ansys' reporting, reduced its full-year revenue forecast by about $80 million. Despite this, Chief Financial Officer Glaser reaffirmed the company's commitment to closing the $35 billion Ansys acquisition in the first half of 2025.



Synopsys' earnings per share (EPS) forecasts for the next quarter and the full year also fell short of analysts' expectations. The company expects EPS to be between $2.77 and $2.82 per share for the first quarter, compared to estimates of $3.53 per share. For the full year, Synopsys forecasts EPS between $14.88 and $14.96 per share, while analysts expected $14.88 per share.

Investors should monitor the evolving U.S.-China trade dynamics and their impact on Synopsys' China sales for a clearer picture of its future EPS performance. While the company still expects to close the Ansys deal in 2025, the continued drop in China sales may negatively impact its earnings.

In conclusion, Synopsys' shares have fallen following a disappointing sales outlook, driven by geopolitical tensions and a change in the company's fiscal calendar. Investors should remain vigilant and monitor the situation as it unfolds, considering the potential impact of U.S.-China trade tensions and export restrictions on Synopsys' future EPS performance.