Synopsys Stock Gains 4% as Q2 Earnings and Revenues Beat Estimates

Synopsys SNPS shares rose 3.7% during Wednesday’s extended trading session after the company reported better-than-expected results for the second quarter of fiscal 2025. The company reported non-GAAP earnings of $3.67 per share for the second quarter, surpassing the Zacks Consensus Estimate of $3.39 and the guided range of $3.37-$3.42. The bottom line increased 22.3% due to a year-over-year increase in revenues.

SNPS’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters the average surprise being 6%.

Synopsys’ second-quarter revenues jumped 10.3% year over year to $1.604 billion, which marginally surpassed the Zacks Consensus Estimate of $1.602 billion. The top line was primarily driven by an increase in revenues of Time-Based Product and Upfront Product businesses.

Synopsys’ Q2 Details

In the license-type revenue group, Time-Based Product revenues (51.6% of the total revenues) of $828.3 million were up 6% year over year. Upfront Product revenues (31.8%) increased 28.7% to $510.7 million. Maintenance and Service revenues (16.5%) decreased 4.1% to $265.3 million from the year-ago quarter’s $276.6 million.

Synopsys, Inc. Price, Consensus and EPS Surprise

Synopsys, Inc. price-consensus-eps-surprise-chart | Synopsys, Inc. Quote

Segment-wise, Electronic Design Automation (EDA) revenues (66.9% of revenues) were $1073.1 million, up 6.5% year over year. Design IP revenues (30% of revenues) amounted to $482 million, up from the year-ago quarter’s $399.8. million. Other revenues were $49.2 million, which represented 3.1% of the total revenues and increased 4% year over year.

Geographically, Synopsys’ revenues in North America (41% of the total) and Europe (12%) were $655.1 million and $194.8 million, respectively. Revenues from Korea (16%), China (10%) and Other (21%) were $257.6 million, $157.5 million and $339.2 million, respectively.

The non-GAAP operating margin was 38%, up 70 basis points (bps) year over year.

Synopsys’ EDA’s adjusted operating margin showed improvement of 130 bps to 40.9%. The Design IP segment’s margin remained unchanged at 31.2% on a year-over-year basis.

Synopsys’ Balance Sheet & Cash Flow

Synopsys had cash and short-term investments of $14.26 billion as of April 30, 2025, compared with $3.81 billion as of Jan. 31, 2025.

The total long-term debt was $10.03 billion at the end of the reported quarter, higher than $14 million reported in the previous quarter.

During the second quarter, Synopsys generated operating cash flow of $275 million. In the first half of fiscal 2025, it generated operating cash flow of $210 million.

SNPS’ Guidance for Q3 and FY25

For fiscal 2025, SNPS still expects revenues between $6.745 billion and $6.805 billion. Non-GAAP earnings are still expected in the range of $15.11-$15.19. The Zacks Consensus Estimate for revenues is pegged at $6.77 billion and the consensus mark for earnings is pinned at $14.88 per share.

Non-GAAP expenses are expected in the range of $4.045-$4.085 billion.

For the third quarter of fiscal 2025, Synopsys expects revenues between $1.755 billion and $1.785 billion. The Zacks Consensus Estimate for revenues is pegged at $1.77 billion. Management estimates non-GAAP earnings per share between $3.82 and $3.87. The consensus mark for earnings is pegged at $3.90. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Zacks Rank and Stocks to Consider

Currently, SNPS carries a Zacks Rank #4 (Sell).

Paylocity Holding PCTY, StoneCo STNE and BlackBerry BB are some better-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector.

PCTY, STNE and BB sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

PCTY shares have declined 2.8% year to date. The Zacks Consensus Estimate for PCTY’s full-year 2025 earnings is pegged at $6.95 per share, up by 4.51% over the past 30 days, indicating an increase of 0.99% from the year-ago quarter’s reported figure.

STNE shares have surged 67.4% year to date. The Zacks Consensus Estimate for STNE’s full-year 2025 earnings is pegged at $1.43 per share, up by 3.62% over the past 30 days, indicating a gain of 5.93% from the year-ago quarter’s reported figure.

BB shares have gained 8.2% year to date. The Zacks Consensus Estimate for BB’s full-year 2025 earnings per share is pegged at 10 cents, unchanged over the past 30 days, indicating a gain of 400% from the year-ago quarter’s reported figure.

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This article originally published on Zacks Investment Research (zacks.com).

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