Synopsys May 2025 presentation: targeting 15% EPS growth after divestiture

Introduction & Market Context

Synopsys Inc (NASDAQ:SNPS) shared its corporate overview for investors on May 28, 2025, highlighting the company’s financial performance, strategic initiatives, and long-term outlook. The presentation comes as the company’s stock experienced a significant 9.64% drop in regular trading, closing at $462.43, though it recovered slightly in after-hours trading, gaining 2.07% to reach $472.

As a leader in the $19.8 billion Electronic Design Automation (EDA) and IP market, Synopsys positions itself at the heart of the global technology value chain that extends to semiconductors ($683 billion) and electronic systems ($2.50 trillion). The company’s presentation emphasized its role in powering the era of pervasive intelligence through artificial intelligence, silicon proliferation, and software-defined systems.

As shown in the following chart of the global technology value chain:

Financial Performance Highlights

Following the divestiture of its Software (ETR:SOWGn) Integrity business on September 30, 2024, Synopsys reported strong financial results for FY2024 and provided an optimistic outlook for FY2025. The company achieved $6.127 billion in revenue for FY2024, representing a 15.2% growth rate, with a non-GAAP operating margin of 38.5% and non-GAAP diluted EPS of $13.20, up 25.2% year-over-year.

For FY2025, Synopsys is targeting revenue between $6.745 billion and $6.805 billion, projecting growth of approximately 10-11%. The company expects to improve its non-GAAP operating margin to around 40.0% and increase non-GAAP diluted EPS to $15.11-$15.19, representing approximately 15% growth.

The financial overview is illustrated in the following slide:

This positive outlook aligns with the company’s Q1 FY2025 performance, where it exceeded analyst expectations with EPS of $3.03 against a forecast of $2.79, and revenue of $1.46 billion slightly above the anticipated $1.45 billion. However, the earnings report revealed segment disparities not addressed in the presentation, with the Design Automation Segment growing 4% year-over-year while the Design IP Segment faced a 17% decline.

The reconciliation between GAAP and non-GAAP metrics shows significant adjustments, with stock-based compensation being the largest factor at 12.2% of the operating margin adjustment:

Strategic Initiatives and AI Focus

Synopsys is heavily investing in artificial intelligence capabilities, positioning itself as the first to deliver AI-powered EDA solutions. The company’s presentation highlighted its progression from AI-driven optimization since 2020 to AI-driven data analytics in 2022 and Generative AI in 2023.

The company claims its AI-powered solutions deliver significant improvements in performance, time-to-market, and efficiency, including 10% better performance per watt with DSO.ai and 4x turnaround time for the same coverage with VSO.ai.

The following slide details Synopsys’ AI-powered EDA capabilities:

This strategic focus on AI aligns with CEO Sassen Gazi’s comments during the Q1 earnings call, where he emphasized "the massive AI infrastructure build-out that’s currently underway paves the way for AI transformation across all industries."

Product Leadership and Market Position

Synopsys positions itself as the industry leader in EDA, claiming the #1 position in the market and leadership in digital design and verification. The company highlighted its comprehensive full-stack EDA solution, noting over 1,200 tape-outs at 16nm and below, leadership in GPU-accelerated analog verification, and being the "gold standard" in Signoff and TCAD.

The company’s industry-leading position is illustrated in this slide:

In the IP market, Synopsys ranks as the #2 provider worldwide after 25 years of investment and commitment. The company has a broad portfolio spanning foundation IP, interface IP, processor IP, and security IP, designed to increase productivity and reduce design risk.

The breadth of Synopsys’ IP portfolio is shown here:

Long-term Outlook and ANSYS (NASDAQ:ANSS) Acquisition

Looking beyond FY2025, Synopsys outlined ambitious long-term financial objectives on a combined company basis, including the pending acquisition of ANSYS. The company targets industry-leading double-digit revenue growth, with Design Automation growing in the double digits and Design IP in the mid-teens.

For margins, Synopsys aims to achieve non-GAAP operating margins in the mid-40s and unlevered free cash flow margins in the mid-30s over the long term. The company expects non-GAAP EPS growth in the high-teens range.

These long-term objectives are detailed in the following slide:

While the presentation portrays a positive outlook for the ANSYS acquisition, the recent earnings report identified potential regulatory hurdles as a risk factor. Additionally, the earnings call noted challenges in the China market, with growth below the corporate average, which wasn’t explicitly addressed in the investor presentation.

ESG Initiatives

Synopsys also highlighted its commitment to environmental, social, and governance (ESG) initiatives. The company is focused on reducing its carbon footprint with Science-Based Targets initiative (SBTi) targets and has been recognized for its environmental management efforts.

On the social front, Synopsys received nearly 60 awards in 14 countries in FY2024 and donated $5.6 million to charities in calendar year 2024, primarily supporting STEM education and community initiatives.

The company’s ESG highlights are presented in this slide:

Conclusion

Synopsys’ May 2025 investor presentation portrays a company with strong financial performance, strategic focus on AI-powered solutions, and ambitious long-term growth objectives. The targeted 15% EPS growth for FY2025 following the divestiture of its Software Integrity business reflects confidence in its core EDA and IP operations.

However, investors should note the challenges not fully addressed in the presentation, including segment-specific performance disparities, free cash flow challenges, and potential regulatory hurdles for the ANSYS acquisition. The significant drop in the company’s stock price on the day of the presentation suggests that investors may have concerns beyond what was presented in the corporate overview.

As Synopsys continues to navigate the evolving semiconductor landscape and the integration of AI technologies, its ability to execute on its strategic initiatives while addressing these challenges will be crucial for achieving its ambitious financial targets.

Full presentation:

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