Synopsys, Inc. Q4 FY2025 earnings call

• ANSYS integration well underway with divestitures of Optical Solutions and PowerArtist businesses, and restructuring actions for efficiency. • New Chief Revenue Officer Mike Aloe welcomed. • Q4 revenue in line with guidance, EPS slightly ahead. • Design automation saw strong demand in hardware-assisted verification and virtual prototyping. • ANSYS business showed robust growth in key industries like industrial. • IP business performed in line with revised Q3 expectations but had muted growth outlook for 2026. • Strong free cash flow in 2025, with cash and short-term investments at $2.96B and debt management noted.

Full-year 2025 design automation segment revenue, including EDA, ANSYS, and other, was $5.3 billion, up 26%. Excluding ANSYS, design automation revenue grew ~8%. Full-year Design IP segment revenue was $1.75 billion, down 8% due to challenging second half. Design automation adjusted operating margin was ~42% in 2025, and Design IP adjusted operating margin was 24% in 2025.

• FY 2026 revenue guidance: midpoint $9.61B, including ANSYS revenue contribution of $2.9B at midpoint. • Excludes revenue from Optical Solutions Group and PowerArtist, impacting ~$110M. • Revenue split expected 48-52% first half to second half. • ANSYS revenue strongest in Q1 historically. • Total GAAP costs and expenses $8.47-$8.61B, non-GAAP costs and expenses $5.69-$5.75B, non-GAAP operating margin midpoint 40.5%, up ~320 basis points. • GAAP EPS $2.49-$2.90, non-GAAP EPS $14.32-$14.40. • Adopted normalized non-GAAP tax rate of 18% through 2028.

• China market broadly subdued, with China revenue down 18% in 2025 excluding ANSYS. • Semiconductor market variations with some markets like industrial subdued. • Integration risks related to combining Synopsys and ANSYS, including go-to-market and operational challenges. • Uncertainties in monetizing IP business and achieving expected growth rates.

Q: Jason Celino asked about embedded organic growth rate and IP growth.

A: Shelagh Glaser said it's in the ballpark, with muted growth for IP and ANSYS contributing double-digit growth.

Q: Harlan Sur asked about EDA growth and expense run rate.

A: Sassine Ghazi and Shelagh Glaser discussed EDA growth factors including China and divestitures, and expense structure related to synergies.

Q: James Schneider asked about IP business headwinds and NVIDIA partnership.

A: Sassine Ghazi and Shelagh Glaser provided updates on IP business transition and rationale for NVIDIA investment.

Q: Kelsey Chia asked about EDA growth in China and IP operating margin.

A: Sassine Ghazi and Shelagh Glaser addressed China share shift and IP operating margin implications.

Q: Sitikantha Panigrahi asked about ANSYS growth and IP royalty model.

A: Sassine Ghazi discussed ANSYS growth drivers and IP royalty model discussions.

Q: Vivek Arya asked about IP sequential recovery and China sales.

A: Sassine Ghazi and Shelagh Glaser talked about IP sequential recovery and China market challenges.

Q: Joe Vruwink asked about IP midyear commitments and cash flow.

A: Shelagh Glaser and Sassine Ghazi discussed IP midyear progress and cash flow outlook.

Q: Charles Shi asked about EDA monetization and IP opportunities.

A: Sassine Ghazi addressed EDA monetization and IP engagement opportunities.

Q: Ruben Roy asked about China revenue mix and risks.

A: Sassine Ghazi provided insights on China revenue mix and associated risks