Wall St futures flat amid US-China trade jitters; bank earnings in focus
Investing.com -- Synopsys reported Tuesday third-quarter results that fell short of analysts’ forecasts and soft earnings guidance as U.S. restrictions on chipmaking equipment to China weighed on demand.
Synopsys Inc (NASDAQ:SNPS) tumbled nearly 20% premarket trading Wednesday on the report.
For the three months ended Jul. 31, Synopsys announced adjusted earnings per share of $3.39 on revenue of $1.74B. Analysts polled by Investing.com anticipated EPS of $3.8 on revenue of $1.77B.
Growth in design automation remained strong, up 23% year-on-year, supported by electronic design automation tools and a $77 million contribution from Ansys.
However, the IP segment declined 8% from last year due to U.S. export restrictions on China, lower-than-expected fees at a large customer, and internal resource allocation issues.
Management said these challenges are likely to persist in the near term as the company works to align its roadmap and investments with market demand.
During the quarter, Synopsys faced U.S. restrictions on sales of chipmaking equipment to China in late May, though the ban on these restrictions was rescinded on Jul. 2.
Commenting on the report, Mizuho analysts said the results "were a mixed bag as strength in design automation was offset by weakness in IP segment."
Still, "while SNPS shares may remain pressured near term due to IP-related weakness, we believe GenAI is a long-term secular tailwind, and as a solid growth compounder with transformative Ansys acquisition, we view SNPS as an attractive investment opportunity," they added.
Meanwhile, Baird analysts downgraded Synopsys’ stock to Neutral after the results, arguing that "this update and lack of forward visibility create overhang that likely takes time to clear."
For Q4, the company guided adjusted EPS in a range of $2.76 to $2.80 and revenue of $2.23B to $2.26B, compared with expectations for $4.14 and $2.59B respectively.
For fiscal year 2025, the company guided adjusted EPS in a range of $12.76 to $12.80 and revenue of $7.03B to $7.06B, compared with expectations for $14.58 and $7.45B respectively.
"While I’m proud of how our team navigated external challenges in the quarter, our IP business underperformed expectations," the company said.
(Yasin Ebrahim contributed to this report.)