Synopsys Shares Gain Ground on Strong Q3 Results and Upbeat Guidance

Synopsys, the leading provider of chip design software, impressed investors with its better-than-expected financial results for the fiscal third quarter ended July 31. The company reported a revenue of $1.49 billion, representing a 19% increase from the previous year and slightly surpassing the Street consensus of $1.48 billion. On an adjusted basis, Synopsys earned $2.88 per share, which exceeded the consensus estimate by 14 cents. Under generally accepted accounting principles, the company earned $2.17 per share.

Founder and CEO Aart de Geus will transition from his current role and assume the position of executive chair at the end of calendar 2023. Taking his place as CEO will be current president and COO Sassine Ghazi.

During the quarter, Synopsys experienced significant growth in semi design starts and continued to make strategic investments in research and development. This enabled the company to take full advantage of the AI-driven "Smart Everything" era. De Geus commented, "We achieved another record quarter as semi design starts and R&D investments continue, unabated, to capitalize on the AI-driven, 'Smart Everything' era."

Looking ahead to the October quarter, Synopsys provided upbeat guidance, projecting revenue in the range of $1.567 billion to $1.597 billion, with a non-GAAP profit of $3.01 to $3.06 per share. This is higher than the Street consensus estimates of $1.57 billion in revenue and an adjusted profit of $2.91 per share.

Moreover, the company has revised its revenue forecast for the October 2023 fiscal year to be between $5.81 billion and $5.84 billion, with an adjusted profit of $11.04 to $11.09 per share. The previous guidance had predicted revenue of $5.79 billion to $5.83 billion, with an adjusted profit of $10.77 to $10.84 per share.

Overall, Synopsys continues to deliver strong financial performance and remains well-positioned for growth in the evolving chip design software market.

Synopsys Sees 15% Revenue Growth Amid Chip Market Downturn

In an interview with ’s, Ghazi, Chief Operating Officer and President of Synopsys, expressed optimism about the company's expected 15% revenue growth this year, despite a predicted downturn in the chip market. While industrywide sales are likely to decline by double digits, Synopsys remains resilient due to its ties to chip industry R&D budgets. Semiconductor companies continue to invest in future products, which has helped Synopsys maintain steady business.

Benefiting from the AI Trend

Synopsys shares have experienced a 34% rally this year, thanks in part to investors recognizing the company's potential as a beneficiary of the growing AI trend. Ghazi emphasizes that there are two aspects to this story. Firstly, as chip companies design AI-related components to enhance their offerings, Synopsys gains more business. Secondly, Synopsys is incorporating AI functionality into its own software, delivering significant productivity enhancements to customers. In some cases, a single engineer can now accomplish tasks that would have previously required six or eight engineers. Ultimately, these advancements result in lower power requirements and improved performance for chip designs.

A Leader with Extensive Experience

Ghazi has been a part of the Synopsys team since 1998, initially joining as an applications engineer. His impressive career progression led to his appointment as Chief Operating Officer in August 2020 and President in November 2021. Prior to joining Synopsys, Ghazi worked as a design engineer at Intel.

At the end of trading, Synopsys shares were up 1.8% at $435.79.