SNPS - Earnings call transcript Q1 2025

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Operator

Ladies and gentlemen, welcome to the Synopsys Earnings Conference Call for the First Quarter Fiscal Year 2025. [Operator Instructions].

As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Trey Campbell, Senior Vice President, Investor Relations. Please go ahead.

Trey Campbell

everyone. afternoon, Good are and today President CEO and With Glaser, Sassine CFO. Synopsys; Shelagh of us Ghazi,

Before I'd will course company of and we during forward-looking and this that begin, other conference like its to financial call, regarding Synopsys statements discuss results. targets everyone forecasts, the remind the

materially future results uncertainties actual what these subject results from While about to represent to that as performance many best our and statements and could are actual cause of differ judgment risks expect. current results today, we our

In important any our today's risks are our this addition and that to release. in we factors future during highlight most described affect reports press call, recent SEC that may earnings results

most to non-GAAP measures the will financial we measures supplement can we and supplemental refer addition, today. financial that X-K In financial found released press certain release comparable earlier earnings directly in information and the GAAP to financial their be during discussion. Reconciliations

available the All website of plus items at these presentation recent on www.synopsys.com. our are investor

addition, the the the I'll remarks that, our on Sassine. With call. conclusion posted turn at be the over website of to In call will prepared

Sassine Ghazi

Good and guidance midpoint non-GAAP revenue had QX of above exceeding guidance afternoon. XXXX, the our a solid start our range. We EPS delivering to

QX revenue . As we was versus down year-over-year, in had week was we XX% one December, 'XX. outlined and in QX 'XX QX as X% down non-GAAP EPS less work

as and then remained Sheila robust end while the Despite take me consumer automotive discuss market share remained and a some Let sale will to and AI challenged. and first are in HPC few and minutes in increasing along electronics quarter, the highlights, the From trends perspective, greater more underpinned business industrial, R&D financials is the detail. an Synopsys to while AI design energy software-defined markets, opportunity driving anticipated, compute with trends we of of cost demands. These and complexity headwinds and and by mega in proliferation systems. silicon China two tied

these address to are to paradigms challenges New design racing deliver. and is essential Synopsys

who privilege for their driving. and belief meet intelligent the the to January, validate in solutions all expressed with silicon need at in the from are design, virtually to had semi optimize strong and pressing we I products to systems. They underscored automotive customers strategy

will ANSYS innovation. acquisition pending they approval. X remedies for European electronics In that accepted our way the ANSYS physics our of teams tools to design and pave giving new CMA U.K. January, the ignite Our Phase pending use provisionally the AI-powered R&D future their need Commission acquisition the and the of procompetitive approved toward solutions

Act we of half progress closing Customers And communicated, this to period previously regulatory XXXX. the support transaction agencies, making expired. continue HSR waiting we're has strong in the anticipate China. U.S. As with and other overwhelmingly including first

Xx better honored prototyping new to versus launch. AMD, SIX and and [ NVIDIA are in XXX performance ARM, customers and up a of among and emulation we deploying emulation systems their recent are systems prior week prototyping prior XXX our include technologies, our with the leader hardware-assisted less to this Moving And X% Automation revenue of strengthened HAV QX, In QX, position solutions. highlights. business HAV year-over-year new activity was industry-leading in design strong. verification expanding month, revenue remained X versus while the HAPS we up Design portfolio our ZeBu our number with our participation were to Synopsys who is new generation. ] or by

and more the which another ever flexibility integrated verify emulate performance we Synopsys our in for systems. software-defined hardware, of our and our Last customers unmatched enthusiasm to expect on portfolio. year based provides and newly HAV year, require and performance best we prototype year had expanded strong ever complex the

design implementation. industry-leading using design X-nanometer are seeing rapidly. the Fusion U.S. flow. platform with node test quarter, nodes X-nanometer exclusively a saw this Compiler projects advanced design EDA to Synopsys And strong where digital at chip we out is Turning software, accelerating hyperscaler we for a activity tape advanced

was Compiler choice SOC. U.S. mobile Fusion of X-nanometer, at Asian the X-nanometer for tape-out platform Additionally, customers a at and HPC, an CPU

used [ with with where by productivity power turnaround trusted is key to Customers the customer Headlining Synopsys multi-core we offer the prime customers. timing, signal time. portfolio improvements aware close one virtually scaling. faster time to most prime out variation essential industries and ] Moving is advanced are with time XX% our all technologies node integrity, reporting analysis. significant recent achieving which solutions release

time Our Leading time value have turnaround unleashed family IC customers physical improvements for more And product achieving is sign-off Xx design than of finish improve physical delivering tremendous cycle budget sign-off X-nanometer product are Validator to at the customers. chip full edge enabling runs verification quality teams improvements recent results. turnaround greater to below, even and verification for the time within greater and sign-off.

sign-off, nodes. of a extraction industry-leading out points which advanced few on process moving Before RC, tool for is on Star the

GPU seen the are The of cementing paves EDA major pioneered on TSMC tool and currently our that's underway build-out generative Intel but performance and productivity we're extraction from infrastructure to the position, delivering leadership XXA for only learning across massive To at and way beginning. STAR capabilities differentiation our including key AI results significant all AI gains for to innovation our transformation own. capabilities and the customers AI of being a [indiscernible] fueling date, relative and reinforcement accuracy the is AI-driven chip industries, all CPU the we using sign-off we've RC and with competition.

altered design While We coming compelling a agent paradigm productivity from Conference can at customers this first, AI where value see shift workflows. a yet unlock for AI task be value autonomous in underlying optimization our We initial business for we'll industry. Group chip. will But talk complex quarter. are and highlights executing our Which with March. our believe with massive agents engines, User this about capabilities Synopsys engineers enhanced from more realizing flow these dramatically not AI-driven have the

verification, customer In verification adoption we tools design drive QX, or VSO.ai continue utilization, time implementation, its and in saw improvement the and of design, analog. we VSO.ai, begin an realize utilization company achieved memory Synopis.ai large outperforming In hardware U.S. to to bugs in competition. HPC a test across on hyperscale our turnaround find deployment hardware Asian case a while significantly VSO.ai with improving Xx improvement Xx a corner

analog displacement migration Our build a aerospace in tool, ASO.ai company. competitive opportunities a customer to and strong QX significant leading pipeline of continues a delivered at

generative offerings to continue customers. also our We AI expand for

for the to We pilots script results prime capabilities and and demonstrating improvements for added early are recently generation time, productivity Compiler Fusion designers. average XX% customer core

a [ is engagements XX% verification key in generative formal ] in boost Verde partners. Additionally, early synopsys.ai capability with productivity up delivering to

line a IP, revenue to record in expectations, prior XX% design year down On our was with year-over-year setting versus compare.

IP watt. continues expand, IP can transitions quarter-to-quarter, customers performance particularly and opportunity set the While enhanced accelerate AI fluctuate for creative look drive to protocol per for as ways revenue to

we and scale Ultra standard or for connect UAL Link, first AI accelerator accelerator the Ethernet AI industry massive quarter, the industry's solutions solutions need Accelerator IP This Ultra to to infrastructure. open launched clusters addressing

libraries continue AI to optimize our breakthrough foundation libraries customer logic at also LLM One, AI performance memory We IP and X-nanometer. high-performance our unparalleled deliver to used to deliver performance.

watt. pace IP interface continues forward as AI per to Across additional breakneck performance portfolio, customers at protocols drive for our push

gig infrastructure Kind design a wins, secured ] player. several chip a quarter, and XXX win X.X we major PCIe ethernet we [ including an captured provider, design ecosystem a This with key AI Edge with

XXX-gig with X-nanometer PCIe European an leading [ IP provider secured leading also for auto a development advanced a telecommunications X.X We and and design. SerDes ] interface equipment deal agreement OEMs

NX ] for mission-critical technology for secure configuration memory industry. programmable IP and and networking storage auto, PCIe for ingredient X.XX ecosystem for our Also in the foundry the QX, process success NX a mobile, and QX, in TSMC SS-X development processes. repair applications. is Our is used This on and silicon NX IP storage silicon now Samsung's we SRAM we announced for enables [ in product encryption in IP. demonstrated NX success and available information onetime nonvolatile keys, and And

[ markets, universal this of automotive we interface design closed And high-quality and leading ready application as an Also with win, ARM-based UFS Moving design USB Synopsys mobile our we leading supplier for demand a but these and a activity the UFS challenging, quarter. products. next long flash A Asian of market in where is QX, PCIe MIPI due and storage AIPCs consumer or processor to IP is key including record a delivering verticals. to innovative X.X in driving adopted wave ], closed a track continues end foundation a processor. provider design customers with a IP. technology mobile key company

business transition model, for to AI to very continue to we our use protocol our are for closing demand solutions comments a resilient have innovation. also advanced Shelagh's LLM before A few cases. to remarks, the strong customers' in we Gen storage mobile We support UFS mission-critical and see

AI across momentum EDA and growth Snug business, March. we'll the tailwinds, discuss by application including We at which more bolstered AI. in of detail secular for strong beginning, broadly just more have is in engineering The

to thank employees, strong Finally, and start for XXXX. our partners a you to customers

partnership that, Shelagh. I'll over excited through With our to are turn continue We year. to you with journey it the

Shelagh Glaser

non-GAAP non-GAAP end earnings upper Thank end guided guidance the and you, high to our of in and range, of Sassine. We delivered above start operating our year, with revenue a solid range. margin of the XX.X% the

our a that is results resilient stable leading by and are driven model. technology strong and across our Our execution business QX the to business mission-critical customers

are we operating full our targets reaffirming non-GAAP margin year result, XXXX revenue non-GAAP As and a EPS. for

were cost We $X.XX. results. resulting Total GAAP and review share unless non-GAAP expenses expenses are non-GAAP year-over-year earnings per XX.X%. All and stated. of $X.XX and $X.X operating per earnings first revenue were $X.XX, generated margin now I'll otherwise share were our and $XXX non-GAAP billion, total GAAP million comparisons were billion. in costs of quarter total

adjusted $XXX.X Free million, cash our margin revenue flow Now QX broad-based was on in was billion, was compared XX% week X% $X.XX the Design Design timing segment short-term adjusted and as strength to offset Automation a by of million segment and Design Automation margin X was was and for we quarter revenue The down ended with to investments $X.XX cash was XX.X%. and compare. due QX year IP Op the record-setting tough segments. prior 'XX 'XX. IP billion. operating quarter less outflow up $XXX.X partially Design XX.X%. to

Now to guidance.

XX%; XX% expenses to margin between a of the flow approximately GAAP expenses between midpoint. earnings Cash GAAP approximately non-GAAP For share. in billion and to flow $X.XX and of the targets operating from XXXX, and at $XX.XX $X.XX of $X.XX billion per earnings billion, $X.X $XX.XX rate of operations $XX.XX non-GAAP fiscal billion, billion, cash of to of $X.XX $X.X billion of Non-tax total year and free costs $X.XX non-GAAP costs year and billion $X.XXX share. total resulting are $XX.XX full billion. revenue per

and non-GAAP billion to $X.XX and costs $X.XXX billion per between Revenue GAAP earnings between billion; $X.XX non-GAAP $XXX quarter. total total expenses second per million billion GAAP and share. earnings $X.XX the $XXX share $X.XX $X.XXX and between of and $X.XX for targets to of and $X.XX to Now and million. costs expenses

Our press non-GAAP release and and GAAP financial targets reconciliations. include to additional supplement

start delivered the to year. solid conclusion, In a we

execute We margin non-GAAP and to continue growth. XX.X% non-GAAP growth. XX% X% approximately EPS revenue are to of reiterating for operating and XXXX XX.X%

our Our turn questions. our execution to and operator With a our customers' and I'll model. it across products that, segments, mission-critical to stable for confidence reflects and innovation resilient relentless business enable over leadership the position

Operator

Instructions]. [Operator

Your first Panigrahi Sitikantha with Mizuho. question from comes

Sitikantha Panigrahi

unfold quarter, and nice long to to the you non-AI over ask when segment date to you you bps AI about your into side, strong is on XXX design growth And trends that that growth I impressive. AI-driven talked want term. a activity. short this Congrats about Sassine, expect margin and Shelagh

going general then EDA you I a do impact in DeepSeek follow-up. to And and Synopsys how particular? So in have see

Sassine Ghazi

at Yes. a of that for about of you Thank maybe AI, the in the question. if year talking developing the of HPC grouping ago. market, the you chips customers you grouping markets a is primarily reason engaged have opportunity road particular, that supporting they're look Then had started semiconductor to leverage you industrial, about semiconductor they've tale And for the We with two for and which selling the the that AI we the very healthy map are their and strong and shifting that a and demand customers, have very automotive, is consumer has right. electronics, been to and other to.

on mobile, recently to to you PC, picked AI don't to effectiveness, on opportunity affordability, the adoption an go the have provide expand of AI Now to the has like at the cetera, where on back and retrieve cloud et applications et devices, particular, this electronics, to in given information, cetera. you order is DeepSeek look And PC phone. the up in due AI will consumer it

look about you to whole X% grow R&D, of the at per X%. Now to from semiconductor a sales it's year expected

sell to remember, that's fantastic. our customers. Because us, R&D inside For we

developing we Synopsys sell given to to to Synopsys well for not to to the IT zoom them companies, for as some out sell to be system more hardware, that but semiconductor, opportunity don't opportunity. And completely we chips. chips Now developing they consume. the you sophisticated has consuming great are design chips are software of which only been sold,

how that's I hope So that the you sense we how a the gave see see landscape. we monetization. of

Sitikantha Panigrahi

Okay. seeing and think chips? AI you the do that now those the do -- you side, you non-AI of do are traditional in that trough of -- trends non -- and what the you making hit expect we outside kind see already on semi

Sassine Ghazi

road X to the automotive, customers' quarters, map building electronics industrial, I consumer mobile, the same. to acceleration In say chips. side, our it's seen yes, still want in last On we these the about in X an have over PC,

Operator

comes next Simpson of Stanley. Lee question Morgan from The

Lee Simpson

guys. Great you the discussion question just like at that think, in, quarter. is of hardware, growth shipping quite around flattening nicely Maybe on sales this China. probably But made given does quarter, last much to just Great. least And I first not off, hardwood that XX% else. here a assume seem Chinese China. in is It I

If give moving if wonder help a the did controls you for follow-on, us tease productivity And parts. sales aside I the how as we can of the should in Agentic what that we flattening China? ] couldn't a changes us the with I is the So there, driving maybe through you leave export and Sassine, [ year? we gains. think as but of and AI sense maybe And that go

to understand utilizing, you margin viewpoint would a just are And like, product operating looking an this as assume at acceleration? you deep this research have the here Synopsys Or so looking trying are that driver? I'm development at as and I

Sassine Ghazi

and China, driven by that 'XX, if factors. be And when a you pragmatic Regarding guided said recall, FY regarding China. QX deceleration to and we 'XX going absolutely saw of we reported we we're two trend

start-ups in The first economy flowing one the And which be one the restrictions. is that's ignored, is into the and money and of second cannot cumulative the slowing economy the China. effect local that overall

up China at we wrapped average. corporate roughly As FY 'XX, finished

them have to stress and 'XX will the in I our continue to As points corporate started all FY at guidance we looking the in and China, we two these, China decelerating below want I due just factors assumed call that average on mentioned.

has IP or to this the other. Now shifting hardware of you to pointed the due out of customers in part us, particular, the and one map they're do or the the still of hardware has to all buying Because when really nothing from they're the sell portfolio that customers, list. with it technology and software, either road but impact entity we cannot restrictions and buying

that's China. So

our to of workflow get maturity that such it's AI of truly truly genic the engineering to is genetic evolution an that so leading way bring AI a customers. our to of exciting with key workflow the to to change in AI, AI the And we're well will world. terms for And exciting partners In for engineering to AI reason on the from is transformation -- opportunity. point partner generative

In us company, absolutely. inside our terms of

modernize to opportunity of the are only various We the function, every of not AI. for and the company functions, engineering functions productivity the taking inside every advantage capture

Operator

Quatrochi next with comes Fargo. question Wells Joe The from

Joseph Quatrochi

for ask I kind was versus just wondering again if design I the of could on non-AI AI. activity

over quarters the outside non-AI the seen Has of customers, improved the AI PC dynamic? activity. design and you have stabilized few of like in change the smartphone of For maybe rate that terms past

Sassine Ghazi

for Thanks, question. the Joe,

engage semiconductor every on companies, road much they chip have we with pretty on the Synopsys map. For single way their engage

And from to as if months. that's of insights based classified right and to going a say, of AI two road where to observation the on down development meaning a shift our chip, months XX the when is So that the XX, is in over XX we hand months markets XX HPC, they window before you tale are are following: customer we XX the to it seeing foundry tape-out map. of within a a what get to manufacture, designing about

So it's acceleration. a significant

a For fueled as was time, not for auto the industrial, the consumer accelerate. the electronic well by period map opportunity to as being market road of

had down it that our So pull IP and road observed through they -- we next pace in project which the on to the their move map.

want when We in it comes they and not last the to I their X-ish the pace are in same so. what and road absolutely mean chips, which building seeing And and investing the auto compared they're there seen PC. not quarters pace but with say or mobile releasing, is the much it industrial, developing the are not not to we've in change X and over does to But they're and map not acceleration. pickup it's

Joseph Quatrochi

the appreciate detail. I helpful. That's

As should you a a that there, the increased quarter. month. follow-up, solutions hardware this think of you growth And trajectory inventory in context talked we pipeline. the about then just about amount the the think I launched new this decent your How

I think it's record level. a at

Sassine Ghazi

comment Yes. me like I general Sheila. the to a let in I'll to on market, turn make then it would

can on launch we're for the with in Shelagh? on use a every order that been has the where available. case expanding this excited many the use launch, continue achieve their new looking . hybrid to for use validate led of case case has And system, we before bit leadership. In that chip focused emulation the software Synopsys customers we terms this of is are And new prototyping about hardware of so performance because they years.

Shelagh Glaser

been Yes. hardware. we've investing in And

all not That's you As goods. about know, XX% quarter-on-quarter, about finished up X% year-on-year. we're

demand We much launched right the finish those new exceeds So out a now. supply to exciting weeks see a those products, We're more platforms. racing we build ago. obviously, half just loaded. as back few products Sassine mentioned,

In loaded of year fact, units. availability just hardware because new QX of those

quickly that's demand, racing can much be workloads able putting as we're we're So customers. our why so we more as fulfill to customer investment those that hardware important for to service to but in

Operator

Charles comes next & Shi question The of from Company. Needham

Yu Shi

housekeeping one, item. a exiting first 'XX? Shelagh the Maybe the what's Glaser, backlog fiscal QX

Shelagh Glaser

exiting QX $X.X backlog billion. is The

Yu Shi

Got Okay. it.

number. if But week growth So 'XX, last 'XX, in question is longer-term extra your year-on-year. QX the from some for at Last kind rooted more fiscal question. X% revenue the fiscal But out fiscal a double Synopsys in year's year, the of revenue I impact back EDA peers, maybe the digit deceleration of a sort of in are EDA I last to look around was also high rate digits when core show they year. like the single

of So have probably about wonder I guys thinking of kind back need cyclical non-AI a weigh say, still referring of recovery, EDA a you the to growth? that recover get year revenue hitting to but a the payoff terms here, it XX% double-digit thing long you to bit low feels a like let's term, EDA the you the we was think but keep about over Or term, seen markets, were for two bottom little the to last growth. you same guys to side, right, in long

Sassine Ghazi

the thanks question. Charles, for

For design both hardware. and software automation, EDA it has

can lumpiness expect you So quarter-over-quarter.

customers. signals growth That Day, different. the do If X%, that the XX%. at based you towards a the then And companies, for deliver we Remember, XX very said any we which no months will I believe and at cetera. IP benefit system R&D for The EDA, in which believe was more why grouping to growth this that, are the have communicated stage been to system and They which growing investing appropriate automation. up. And have the you commit X% companies. that's we to sell higher rate be and believe because the to that trailing The semiconductor are of companies, we XX% and and there and XX% Synopsys in continue, will a CAGR. our going are we at what look to investment earlier, et has that, we is Investor they X-year on from from for next hardware design is that is have as and semiconductor us is than because X%, good the

Yu Shi

'XX quick next reported a quarter, in last a you cautious. our quarter, quantitative fiscal a down China fiscal was maybe China look like think $XXX more 'XX. be China. QX adopted flat on pretty to last on want for the million it's fiscal year, or like a revenues million. for average And you say, the Sassine revenue contribution China, pretty first not you prior provide follow-up think I rate, to meaningful QX But fiscal little I run think actually $XXX I just you means you, can at be look when to where a be guidance But rate growth bit from percentage did even is total but catch-up on provided the step let's per meaningful year's the that for China if quarters. number, at year-on-year going X you

where you can where direction base can the percentage-wise start call are you go maybe make absolute maybe to call? revenue a So in to a 'XX. or year the even China of you this fiscal yet Are there the at China, dollar place

Sassine Ghazi

will corporate getting Charles, So last at say year, the don't the I we we China at that be average. this are believe it stronger, at average in headwinds finished corporate what and deceleration point, can

below our for and has that corporate finish in in China will average We growth been of terms guide. accounted

Operator

comes from question with Baird. Joe next The Vruwink

Joseph Vruwink

all you? customers is of there's reengage to that generally an duration in engage preferring with seen provides we've some over as I Great. over current been I are where it's that are developments, it recent notable shifting swung composition? count the in to that I'm contract engagements. Or backlog how more mind this XX-Q total changes but and true actually Hi, I just that maybe think reflecting long-term don't and strong RPO about those with backlog balances you position value, guess you the between contract? trade-off see in had customers history, quarter. at of annual contract the multiyear everyone. value kind Is wondering in that how to a you've think bit particularly opportunity backlog

Sassine Ghazi

Joe, There as change backlog, of is you and of customer the are duration. type know, terms definitely EDA behavior. the still no build on same the in they backlog you the And contracts, the average burn

hardware, two even customer at based chips. markets may on that we big these the have by it IP are the change not the customer as behavior they mentioned all. down though remarks, I So pace seen which in on be contract of a when tale the pulls varies and in building committed

no or -- we're behavior there So point customers. but market change from terms is differently . customer in of view durations or extending with driving anything of

Shelagh Glaser

a Yes. Joe, would our of backlog FSA And of When we the just XX is I do sort months report backlog, x add nuance. also next we that FSA. our

way, at contract look So as to Anyway, we just -- when really variation. with in them, what's down base much be noncancelable, customer then know, the needs it's pulled what's not contract FSA. you customer to go and the the preference and if that's it. is in again, a it sign that there's going a but when committed And FSA the as you

Joseph Vruwink

Yes.

type is that been masked that discussing. points? but either industry markets the or serve, optimization bit a have guess, XXX the your could basis makes results growth demand actually Would from lift impacts ask, generation AI, by analog ago expressed necessarily That by being how wanted changing I your that's maybe because say Or you of basis sent I view sense, current to and comments, way you you of it's more a benefit EDA tepid you all XXX points Okay. back at rates design AI product different of for your methodology. about of to that that seen to you go the products. the you've benefit not available Shelagh. about markets year the have

Sassine Ghazi

kind basis right talked Agentic be XXX was down given if a of basis at the Joe. that The offerings to different Synopsys.ai we that's it Investor you autonomous we specific it. the the ] ], necessarily we points, the during generative, are why were AI ] Gentech as we generative because two recall optimization point if monetize, point faster a XXX business point But it's having a AI on not From Yes. feel seeing result reason. thought optimization And for model talked optimization, we for Synopsys, But and will remember, it's change about our time the question, did it is itself, that will [ [ we them Excellent an to about not chip further different. is not very that answer no. from generative and for road. time we monetization AI monetization by design yes. that when view, you two workflow opportunity but And Day, ago, talked us cheaper, add we our for you the [ put coming and we when a talking When talked a line and for we the aggregate customers are of design we in things, a at about a of approach teased Igentec still from not the when year coming as time -- did technology monetizing fast view, the AI now. about give

be VSO, excitement technology, the exactly But adoption and about across is very will positive penetration from the in of thought we where et actually where what cycle. customers -- optimization about the DSO, we something we're cetera,

Operator

question comes with next The Celino Markets. from Capital KeyBanc Jason

Jason Celino

wanted to Charles' China. just on on follow some I questions of up

maybe you're your changed at true, or year I something below guidance, IP sense. in XX a have improved when set days full makes guidance if this to you since corporate the average, that understand holding the it might all? if ago. since have But initially it's is days compared ago change, So is same, your assumptions business EDA XX the implication,

clarify on and the So it's those if I wanted to see segments. that case

Sassine Ghazi

towards to changed. and go Will guiding where always internal our our we that's our corporate in based year, last in software, it changed. communication China We've we of in not changing do guidance believed have and our average. want be similar really to headwind But do that will in has corporate Or in clarifying average? And IP Yes, and the made we say, hardware, Jason, clarifying planning -- the therefore, below and it the we nuance the assumptions the our assumptions deceleration will there none believe deceleration will is What that year end regions the I EDA portfolio, ongoing forecasting further believe be. on China.

Jason Celino

we the to see upgrade iterations. your their wait just view Okay. announcements, customers I'm then XXX, if the orders in could ZeBu more demand How versus prior wonder we trying your half? as two an pocket HAPS than for And competitors. the XXX products should second you frequently air in these the

Aart de Geus

we have and advantage ability. a versus custom the FPGA with cycle That's chip much a you faster refresh an have that

with HAPS pocket. we Remember, that the actually, they and talked air reason that same the from XXX, were EP. the for the about no And XXX the is So before. EP ZeBu customers buying us

already as that and now, Now demand, purchasing with can the our Shelagh demand which And prior to they we're our the right have with plus deliver capacity to the next mentioned, are expand building it. EP the provide absolutely new ability generation, that It's is generation the ability capacity we the there. to XXX.

Shelagh Glaser

about comment not air my demand. availability, Jason, And in was Yes. about pocket more

So much QX more weighted. that is

Operator

Griffin with The Vleeschhouwer next Jay from question comes Securities.

Jay Vleeschhouwer

might markets have more perspective, seen companies seem seen good So among are concentration that good very market do even or semiconductor where you've sources those and to companies. Sassine, this about what R&D. the I continuing of of compared that that semi be like population might quarters, of broader are number growth show that And the concerned concentrated of semi previously different your is as to have with good respect the fewer. becoming fewer my already to two an over ask something is was have that to of in in last strictly semis, to and I'd we a tale the we from or the point seen Is growth follow-up. growth really Then

Sassine Ghazi

their to advanced earlier next increased with look order to very it support [ very on at investment chip. you in to MX to chip next very albeit is order great it more track more it for pull week, but competitive move customers, using more actually -- integration the us opportunity more ], investing they the [indiscernible] et the as map, package Jay, a hardware That's the and cheaper, in et or opportunity example, se intimate road with can two in software, and it the are doing a investments, chips be a three and cetera, IP we ], looking in they map, because refresh we and node, their R&D EDA to every per down, want they're latest cetera. with customers the -- going to and for if this using FinFET automotive are and multi-die industrial imagine, deal on MC very, even discussions chips, closely road that for [ aggregate, you provide or advanced

not matching to when like the to flat. we staying from the X% how growth in we're X%, growing they're are with growth, aggregate, R&D X% X% our we So it's and see seeing from in semiconductor

We with In their R&D of Yes. that's are a investment. as aggregate whole. growth growing

Jay Vleeschhouwer

Understood. Right.

more spend the largest probably productivity, than distributed of the largest employment double equally of yet like return It of say. get R&D at changes you has has investment at the how look decades return a case EDA and on probably always the And has in let's on and look percentage productivity been that the the EDA. interesting. current commercial in think, I next for point differences about can And workflow been historically, are higher that we customers we're differences a there is company a over the EDA existed. EDA on really spender your on and employ example, So never EDA last and commercial

peers the the of you alike class as is, more customers and infuse capability AI new in the and design and you question because more you your do whole So infuse of perhaps historical differentiation across of become this think that availability technology. their that, capabilities more process, capabilities changes of

Sassine Ghazi

across following. improving want the they I worry amount R&D. as faster of is catch AI make AI the -- The #X their budget because to leading about the up net productivity. to Will they answer and of and The bigger a they say, customers, democritize the will invest towards

phase enterprise workflow the automation from so been look complexity, -- is than a the AI tremendous they to companies, far, change different Agentech. other and have until moment from innovation at The has this steps not to no we same workflow. the monetize. changed tape-out has even first you and way been the you of the leading go If -- way, believe opportunity that an it point to workflow, where the through the of about workflow, talking the you increased chip though are the workflow. changes genic the The has a with then will view, amount is AI phase And there of deal opportunity software have by the moment an

the for So amazing years a EDA of provided and x innovation, number workflow couple decades same. has last has of remained technology the of or the but far, amount

terms So that's we're nuance ]. in with of that [ Agentec the opportunity highlighting

Operator

Berenberg. comes question next with Soe The from Nay Naing

Nay Soe Naing

your then as cost quarter got control I midpoint Just guiding well. expense year-on-year X% the you're in about total at my think you and math growth. guidance got on If how one, please, towards the right, quarter next I

I think the around came X%. quarter in

really outperformance about guiding nice But X.X% cost QX, you growth midpoint. for there. at the were So for

performed you also, how light in just cost QX So you about as the think in how QX, maybe we on And well, please? thoughts if should HX guide? in could the on development of

Shelagh Glaser

Sure.

we of anticipated, had timing big expense lighter came QX originally ticket and to than down bit just some of we really So little were hiring costs in that on items. and a timing

merit, kicks because We expect no budget our that's in. always performance our when year. QX change steps the annual Structurally, up for

full element. change QX, but that's the timing you lighter the just for a some year, to even that And change and between structural so QX were little due we see no though bit QX,

Operator

time have line Tilton It We Research. for of the of Wolfe one more come question. from will Joshua

Joshua Tilton

you It's Like understanding. a clarification I around really then remember if of appreciate year guidance me a I of one point for and sneaking out is coming track this here. Sassine, year. China for the maybe that feel the if the the I the corporate I'm but is that is is actually line me average that I grow with going corporate this message expectation of you And first, guys wrong, trying was a more maybe you. -- like the in to correct QX now in feel Guys. expected below to for top average. grow correctly, the China

correct. So guys this is will what of that that's the the my question my corporate gives given question my you reiterate average that guide just is, the confidence clarify follow-up China below you feel growing to guess part to part to guess now And be for I I first if like the year.

Sassine Ghazi

just FY Yes. on we 'XX, guided guide came average say to did FY corporate 'XX, corporate of FY based given be Joshua, average, 'XX, growth. it that it got we China around of When you where we decelerated the will our out correctly.

decelerating the the to Now after guided I by added given that corporate they're got that we average. customers we headwinds below be number the itself cetera, are et getting and stronger, we China believe of want even entity seeing will announced or say to list,

year. of that is we feel provided customers strengths for itself guide guide see changing. However, in that in the not a the we and good We very about the regions, technology other number

Joshua Tilton

just that could of Super helpful. way that seeing there offsetting and any step is the maybe Maybe one just unpack strengths China some that one you're further . the take deeper is into you layer weakness?

Sassine Ghazi

ZeBu great the to that us companies monetize If challenge semiconductor opportunities. and opportunity the grouping our I family. an scale scaling. It's AI, from want of talked strong demand requirement IP HAPS XXX just for we example, to opportunity. around really and a say not and lack the Today that's another for HPC with one given Yes. IP, it's opportunity and about, the and That's for system a XXX of

the that displacement, the that and and are share our guide we platform, require Fusion leadership I what plenty latest things and great in and position said provided. opportunities great given competitive to of chips position share opportunity. that's the sticking that the confidence therefore to a the being able those EDA to AI are market, earlier all and IC ICV, about These growing reemphasize advanced have very that optimization, monetize us giving ASO, Validator We I design mean, both

Operator

This concludes today's We Thank you. thank you call. joining. conference for

you. You may now disconnect. Thank

Synopsys (SNPS) 26 Feb 252025 Q1 Earnings call transcript