Synopsys expects strong second quarter on AI-powered chip design demand

By Thomson Reuters Feb 21, 2024 | 4:35 PM

(Reuters) – Synopsys forecast second-quarter revenue and profit above Wall Street estimates on Wednesday, anticipating a surge in demand for its software to design complex and artificial intelligence-compatible chips.

The Sunnyvale, California-based company’s shares were up more than 3% in extended trading.

The results come more than a month after Synopsys, the largest maker of software used in the chip designing process, said it would buy Ansys in a $35-billion cash-and-stock deal.

Synopsys, which partners with chipmakers including Taiwan Semiconductor Manufacturing Co, Intel, and Samsung Electronics, expects second-quarter revenue to be in a range of $1.56 billion to $1.59 billion, the mid-point of which is above analysts’ average estimate of $1.55 billion, according to LSEG data.

The AI boom has elevated demand for companies such as Synopsys, as its electronic design automation (EDA) tools are used by chip firms for custom semiconductor design in diverse sectors such as aerospace, automotive and industrial.

Chip firms are spending heavily on research and design initiatives to make robust chips with innovative design, which is one of the hardest tasks because billions of transistors – tiny on-off switches – must be precisely arranged on a piece of silicon just a few centimeters wide. It sparks demand for software provided by Synopsys even as the economic uncertainty looms.

Synopsys forecast adjusted earnings per share between $3.09 and $3.14 for the second quarter ending April 30, also above estimate of $3.02 per share.

The company reiterated its outlook for full-year revenue but raised its annual adjusted earnings per share forecast to a range of $13.47 to $13.55, from $13.33 to $13.41.

Revenue in the first quarter ended Jan. 31 rose about 21% to $1.65 billion, in line with estimate. Excluding items, it earned $3.56 per share, beating estimate of $3.43.

(Reporting by Jaspreet Singh in Bengaluru; Editing by Maju Samuel)