Synopsys (SNPS.US) “AI shift” strategy paid off: teaming up with Nvidia, performance guidelines exceeded expectations

The Zhitong Finance App learned that chip design software provider Synopsys (SNPS.US) announced results for the fourth fiscal quarter. Q4 revenue was $2.26 billion, up 38% year over year, higher than the forecast of $2.24 billion. Adjusted earnings per share were $2.90 compared to the general market expectation of $2.88.

Among them, the design automation business contributed 1.85 billion US dollars, and the design intellectual property business contributed 407 million US dollars. Adjusted operating profit increased 36% year over year to reach US$822.6 million, higher than the forecast of US$803 million.

Looking ahead, the company expects revenue of 9.56 billion to 9.66 billion US dollars for the 2026 fiscal year, and analysts expect 9.63 billion US dollars. Revenue for the first fiscal quarter is estimated at US$2.37 billion to US$2.42 billion, and analysts expect US$2.36 billion; the adjusted earnings per share for the first fiscal quarter are expected to be between US$3.52 and US$3.58, which is also higher than the forecast of US$3.46.

The California-based provider of electronic design automation software and semiconductor intellectual property products reached a record high of full-year revenue for fiscal year 2025, reaching $7.1 billion, an increase of approximately 15% over FY2024's $6.1 billion.

Synopsys chief financial officer Sherag Glaser said that the company's backlog of orders reached $11.4 billion at the end of the year. “We expect to set another revenue record in 2026 while fully integrating Ansys to further improve operational efficiency and take full advantage of our expanding opportunities.”

Synopsys' software is used by semiconductor companies to design and verify chips. The company is benefiting from a surge in investment in artificial intelligence and advanced computing, which require increasingly complex chip architectures. The company also benefits from partnerships with Nvidia (NVDA.US), Intel (INTC.US), and Qualcomm (QCOM.US).

Synopsys announced earlier this month that Nvidia has spent $2 billion to acquire shares in the company, and the two parties will jointly develop tools for product development. Nvidia CEO Wong In-hoon said in an interview on December 1: “This will expand the computing market to design and engineering for the first time.”

Last month, Synopsys announced plans to cut around 10% of its workforce, saying the move would enable it to reinvest in growth areas such as AI-driven design and system-level solutions. The company completed its acquisition of simulation software manufacturer Ansys in July, and the deal contributed $667.7 million in revenue for the company's fiscal fourth quarter. The deal was announced early last year, and several markets, including the UK, are facing strict antitrust scrutiny.

The company competes with Cadence Design Systems and Siemens in the electronic design automation market, which is expected to grow as chipmakers compete to develop artificial intelligence and high-performance computing processors.

Following the announcement of the results, Mizuho Securities described Synopsys' fourth quarter results for FY2025 as “better than expected” and stated that its full-year results guidance for FY2026 was in line with market expectations. Mizuho pointed out that general market expectations may include the impact of asset divestment, which means that if adjusted according to comparable indicators, the company's performance guidelines have actually met or exceeded market expectations. Mizuho emphasized that Synopsys' “strong backlog of orders of up to $11.4 billion” is a positive indicator of the company's future results. Meanwhile, Goldman Sachs reaffirmed Synopsys' “buy” rating and gave it a target price of $560.