What is the story about?
What's Happening?
Synopsys has reported a decline in its third-quarter revenue, primarily due to challenges in its IP business. The company closed its acquisition of Ansys, which CEO Sassine Ghazi described as transformational. Despite this, revenue was reported at $1.74 billion, with non-GAAP EPS of $3.39, affected by export restrictions in China, issues with a major foundry customer, and internal resource allocation missteps. Design Automation revenue increased by 23% to $1.31 billion, while IP revenue fell by 8% to $428 million. Synopsys is redirecting resources to faster-growing areas and adopting a cautious approach for the fourth quarter. The Ansys acquisition expands Synopsys' footprint from silicon to systems, with a backlog now at $10.1 billion, including Ansys.
Why It's Important?
The decline in Synopsys' IP revenue highlights the impact of global trade restrictions and internal strategic decisions on technology companies. The acquisition of Ansys is significant as it positions Synopsys for long-term growth and diversification, moving beyond its traditional silicon focus. This shift could enhance its competitive edge in the semiconductor industry, which is crucial given the increasing demand for advanced chip design solutions. The company's cautious outlook for the fourth quarter reflects broader uncertainties in the tech sector, particularly regarding export restrictions and customer dependencies.
What's Next?
Synopsys plans to focus on faster-growing areas and leverage its Ansys acquisition to fuel long-term growth. The company has guided for fourth-quarter revenue between $2.23 billion and $2.26 billion, with non-GAAP EPS expected to be between $2.76 and $2.80. Full-year sales are projected to be between $7.03 billion and $7.06 billion. The management aims to achieve record revenue this year despite current challenges, indicating a strategic pivot to mitigate IP headwinds.
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