Silicon chip design software maker Synopsys Inc. delivered third-quarter earnings and revenue above expectations today and then issued strong guidance, sending its stock higher in after-hours trading.
The company, one of the leaders in the electronic design automation software industry, reported earnings before certain costs such as stock compensation of $3.43 per share, well ahead of the analysts’ consensus estimate of $3.28. Revenue for the period rose 13% from a year earlier, to $1.53 billion, also beating the Street’s target of $1.52 billion.
The rising revenue provided a nice boost to Synopsys’ bottom line, as the company reported net income for the quarter of $408.1 million, up from $336.3 million in the year-ago period.
Synopsys, based in Sunnyvale, California, sells software design tools used by computer chipmakers such as Intel Corp. and Qualcomm Inc. Its software helps to automate the semiconductor design process. Chip design involves many stages, including design, verification, signoff, physical verification and more, and Synopsys’ software can aid in each of these steps. Virtually every computer chip in the world has been designed using software from Synopsys or its rival Cadence Design Systems Inc.
The growing compute requirements for artificial intelligence systems have led to companies clamoring for more powerful and complex chips, and Synopsys provides the tools chipmakers need to design that silicon. That demand likely explains why Synopsys’ revenue figure was a quarterly record for the company.
Synopsys President and Chief Executive Sassine Ghazi (pictured), who assumed the role a year ago, said the company’s expectations of a record year in terms of annual revenue demonstrate the strong resilience of its business.
“The complexity and pace of technology innovation is accelerating as silicon and systems companies race to capitalize on AI in this era of pervasive intelligence,” Ghazi said. “Synopsys is mission-critical to technology innovation and our customer set is expanding as more companies in more industries define and optimize system performance at the silicon level.”
That’s apparent from the results of its biggest business unit, the design automation group, which includes digital and custom integrated circuit design software. It delivered $1.06 billion in sales, up 6% from a year earlier.
In terms of guidance, Synopsys said it’s looking for fourth-quarter sales of between $1.61 billion and $1.64 billion, with earnings pegged at a range of $3.27 to $3.32 per share. Those numbers are better than expected, with analysts looking for revenue of $1.62 billion and earnings of $3.25 per share.
For the full year, Synopsys is guiding for revenue of $6.11 billion to $6.14 billion, with earnings of $13.07 to $13.12. Wall Street is looking for total annual sales of $6.12 billion and $12.96 in earnings.
Shares of Synopsys rose by just over a percentage point in extended trading, following a similar gain during regular market hours.
The company has been looking to refine its business of late. In January, it announced plans to acquire the engineering software firm Ansys Inc. for $35 billion, in an acquisition that is now being examined by the U.K.’s Competition and Markets Authority. If that deal goes ahead, it will see Synopsys’ EDA solutions combined with Ansys’ simulation and analyst capabilities to deliver an integrated silicon-to-systems approach to innovation.
Then in May, it said it has sold its software security business to the private equity firms Clearlake Capital Group LP and Francisco Partners Management LP for $2.1 billion.