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Synopsys (SNPS - Free Report) reported better-than-expected earnings for the third quarter of fiscal 2024. The company’s fiscal third-quarter non-GAAP earnings per share (EPS) of $3.43 surpassed the Zacks Consensus Estimate of $3.28. The bottom line improved 27% year over year, primarily driven by higher revenues and better cost management.
Revenues jumped 13% year over year to $1.53 billion and came in line with the Zacks Consensus Estimate. The top line was driven by growth across multiple business segments.
Synopsys' revenue growth was driven by ongoing investments from semiconductor and systems companies in its solutions to enhance its R&D capabilities.
Synopsys revealed that it has presented the Software Integrity business as a discontinued operation in its consolidated financial statements for all periods due to its ongoing divestment. Notably, the company has agreed to sell its Software Integrity business to Clearlake Capital and Francisco Partners in a deal worth $2.1 billion.
In the license-type revenue group, Time-Based Product revenues (52.6% of the total revenues) of $803.1 million were down by 2.9% year over year. Upfront Product revenues (29%) moved upward by 51.2% to $442.5 million. Maintenance and Service revenues (18.4%) increased 19.5% to $280.1 million from the year-ago quarter’s $234.3 million.
Segment-wise, Electronic Design Automation (“EDA”) revenues (66.9% of revenues) were $1.02 billion, up 4.9% year over year. Design IP revenues (30.4% of revenues) amounted to $463.1 million. Other revenues were $42.5 million, representing 2.7% of the total revenues.
Geographically, Synopsys’ revenues in North America (44% of the total) and Europe (9%) were $672.6 million and $144.6 million, respectively. Revenues from Korea (13%), China (17%) and Other (16%) were $194.8 million, $266.7 million and $247 million, respectively.
The non-GAAP operating margin was 40%, expanding 360 basis points (bps) year over year.
Synopsys’ EDA’s adjusted operating margin rose 70 bps to 41.5%. The Design IP segment’s margin showed a massive improvement to 36.7% from 23.6% in the year-ago quarter.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.99 billion as of Jul 31, 2024, compared with $1.66 billion as of Apr 30, 2024.
The total long-term debt was $15.6 million at the end of the reported quarter, which decreased from $17 million reported in the previous quarter.
The company’s cash flow from operating activities, including discontinued operations, was $844.2 million in the first nine months compared with the year-ago quarter’s cash flow of $1.37 billion.
FY24 & Q4 Guidance
For fiscal 2024, SNPS expects revenues between $6.105 billion and $6.135 billion compared with the previously announced guidance of $6.09-$6.15 billion. Non-GAAP earnings are expected in the range of $13.07-$13.12 compared with the previous guidance of $12.9-$12.98. Non-GAAP expenses are now expected in the range of $3.76-$3.77 billion compared with the previously projected range of $3.77-$3.81 billion.
For the fourth quarter of fiscal 2024, Synopsys expects revenues between $1.614 billion and $1.644 billion. Management estimates non-GAAP EPS between $3.27 and $3.32. Non-GAAP expenses are anticipated in the band of $1.027-$1.037 billion.
Zacks Rank & Stocks to Consider
Synopsys currently carries a Zacks Rank #3 (Hold). Shares of Synopsys have gained 9.7% year to date (YTD).
The Zacks Consensus Estimate for Arista Networks’ fiscal 2024 earnings has been revised upward by 31 cents to $8.24 per share in the past 30 days, suggesting year-over-year growth of 18.7%. The long-term estimated earnings growth rate is 17.2%. The stock has gained 51.1% YTD.
The consensus mark for Twilio’s 2024 earnings has been revised upward by 24 cents to $3.36 per share over the past 30 days, indicating a 31.4% increase from 2023. It has a long-term earnings growth expectation of 32.7%. The stock has plunged 22.1% YTD.
The Zacks Consensus Estimate for Datadog’s 2024 earnings has been revised upward by 8 cents to $1.62 in the past 30 days, indicating an increase of 22.73% on a year-over-year basis. The long-term estimated earnings growth rate is 9.6%. Shares of DDOG have lost 3% YTD.
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Synopsys (SNPS) Q3 Earnings Beat Estimates, Revenues Rise Y/Y
Synopsys (SNPS - Free Report) reported better-than-expected earnings for the third quarter of fiscal 2024. The company’s fiscal third-quarter non-GAAP earnings per share (EPS) of $3.43 surpassed the Zacks Consensus Estimate of $3.28. The bottom line improved 27% year over year, primarily driven by higher revenues and better cost management.
Revenues jumped 13% year over year to $1.53 billion and came in line with the Zacks Consensus Estimate. The top line was driven by growth across multiple business segments.
Synopsys' revenue growth was driven by ongoing investments from semiconductor and systems companies in its solutions to enhance its R&D capabilities.
Synopsys revealed that it has presented the Software Integrity business as a discontinued operation in its consolidated financial statements for all periods due to its ongoing divestment. Notably, the company has agreed to sell its Software Integrity business to Clearlake Capital and Francisco Partners in a deal worth $2.1 billion.
Synopsys, Inc. Price, Consensus and EPS Surprise
Synopsys, Inc. price-consensus-eps-surprise-chart | Synopsys, Inc. Quote
Quarter in Detail
In the license-type revenue group, Time-Based Product revenues (52.6% of the total revenues) of $803.1 million were down by 2.9% year over year. Upfront Product revenues (29%) moved upward by 51.2% to $442.5 million. Maintenance and Service revenues (18.4%) increased 19.5% to $280.1 million from the year-ago quarter’s $234.3 million.
Segment-wise, Electronic Design Automation (“EDA”) revenues (66.9% of revenues) were $1.02 billion, up 4.9% year over year. Design IP revenues (30.4% of revenues) amounted to $463.1 million. Other revenues were $42.5 million, representing 2.7% of the total revenues.
Geographically, Synopsys’ revenues in North America (44% of the total) and Europe (9%) were $672.6 million and $144.6 million, respectively. Revenues from Korea (13%), China (17%) and Other (16%) were $194.8 million, $266.7 million and $247 million, respectively.
The non-GAAP operating margin was 40%, expanding 360 basis points (bps) year over year.
Synopsys’ EDA’s adjusted operating margin rose 70 bps to 41.5%. The Design IP segment’s margin showed a massive improvement to 36.7% from 23.6% in the year-ago quarter.
Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $1.99 billion as of Jul 31, 2024, compared with $1.66 billion as of Apr 30, 2024.
The total long-term debt was $15.6 million at the end of the reported quarter, which decreased from $17 million reported in the previous quarter.
The company’s cash flow from operating activities, including discontinued operations, was $844.2 million in the first nine months compared with the year-ago quarter’s cash flow of $1.37 billion.
FY24 & Q4 Guidance
For fiscal 2024, SNPS expects revenues between $6.105 billion and $6.135 billion compared with the previously announced guidance of $6.09-$6.15 billion. Non-GAAP earnings are expected in the range of $13.07-$13.12 compared with the previous guidance of $12.9-$12.98. Non-GAAP expenses are now expected in the range of $3.76-$3.77 billion compared with the previously projected range of $3.77-$3.81 billion.
For the fourth quarter of fiscal 2024, Synopsys expects revenues between $1.614 billion and $1.644 billion. Management estimates non-GAAP EPS between $3.27 and $3.32. Non-GAAP expenses are anticipated in the band of $1.027-$1.037 billion.
Zacks Rank & Stocks to Consider
Synopsys currently carries a Zacks Rank #3 (Hold). Shares of Synopsys have gained 9.7% year to date (YTD).
Some better-ranked stocks in the broader technology sector are Arista Networks (ANET - Free Report) , Twilio (TWLO - Free Report) and Datadog (DDOG - Free Report) . While ANET sports a Zacks Rank #1 (Strong Buy), TWLO and DDOG carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Arista Networks’ fiscal 2024 earnings has been revised upward by 31 cents to $8.24 per share in the past 30 days, suggesting year-over-year growth of 18.7%. The long-term estimated earnings growth rate is 17.2%. The stock has gained 51.1% YTD.
The consensus mark for Twilio’s 2024 earnings has been revised upward by 24 cents to $3.36 per share over the past 30 days, indicating a 31.4% increase from 2023. It has a long-term earnings growth expectation of 32.7%. The stock has plunged 22.1% YTD.
The Zacks Consensus Estimate for Datadog’s 2024 earnings has been revised upward by 8 cents to $1.62 in the past 30 days, indicating an increase of 22.73% on a year-over-year basis. The long-term estimated earnings growth rate is 9.6%. Shares of DDOG have lost 3% YTD.