Synopsys Inc Q4 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Harlan Sur - JPMorgan Chase & Co - Analyst : Hi, guys. Thanks for tasking my questions. If I exclude Ansys to the to the person that asked the question before me. The core EDA plus IP is growing about 8%, 8.5% year over year in the fiscal year guidance. Can you just help us understand what you're embedding for growth in EDA and IP. In the guidance? For example, if I assume IP is growing modestly as you guys say, let's say, 5%, then your EDA business is growing around 9%, which is still below kind of your forward target of like 12%, 13%. Is that kind of the way to think about it? And if so, like why is the EDA business still undergoing your long-term sort of forward target CAGR?

Question: Harlan Sur - JPMorgan Chase & Co - Analyst : Got it. Got it. That was insightful. And then Shelagh a question for you. Total expenses, editing Q4 was about $1.43 billion. You're guiding that to roughly about $1.41 billion in the first quarter. But if I look at your average quarterly expense run rate through the year on the full year guidance., it's still averaging about $1.43 billion per quarter. So that doesn't seem like there's much in the way of synergy unlocking in fiscal '26 or are cost synergies being offset by increased spending in other areas? And where do you expect the total expense to be run rate in sort of exiting fiscal '26?

Question: James Schneider, Ph.D. - Goldman Sachs Group Inc - Analyst : Good afternoon. Thanks for taking questions. I was wondering if you could maybe give us a bit of an update on the IP business and your expectations you laid out last quarter around some of the headwinds that you're seeing, whether that be your foundry customer, China and the execution on custom IP blocks. Can you maybe give us an update on sort of the level of progress you've had in each of those three dimensions? And how that sort of plays into the overall IP outlook for the year? Do you expect it to be sort of low single digit or you think mid-single digit as possible?

Question: James Schneider, Ph.D. - Goldman Sachs Group Inc - Analyst : That's helpful. And then maybe just as a follow-up, obviously, last week, you had your announcement of the NVIDIA partnership and the investment in the company. Can you maybe give us a little bit more color on sort of the rationale for why an investment made sense? What could have been done with an investment that couldn't have been done simply through a strategic partnership that maybe kind of walk us through the logic around that. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 10, 2025 / 10:00PM, SNPS.OQ - Q4 2025 Synopsys Inc Earnings Call

Question: Kelsey Chia - Citi Infrastructure Investments LLC - Analyst : Hi, Sassine and Shelagh. Thanks for taking my question. So I'd like to tap on the EDA growth rate again. So you mentioned that the lower EDA growth in fiscal year '26 is due to slower (inaudible) momentum in China. Is that the same reason for the lower growth rate this year as well? And are there any share dynamics happening over there? And if synergies of Ansys could drive that revenue growth back to target?

Question: Kelsey Chia - Citi Infrastructure Investments LLC - Analyst : Got it. So on the IP business, so I know that Synopsys provides several IP for a large foundry customer, including the IT advanced packaging technology, it seems that there are several customers evaluating that, using that technology from a large foundry customer. Will that be incrementally positive for Synopsis given the muted growth that you have provided? And also relating to that on the operating margin, I believe are the expenses related to those IP tests have been consistently recognized over the prior quarters despite the lack of customers. So does that imply that operating margins for that segment could come back to historical average when the revenue for that large foundry customers are being recognized?

Question: Siti Panigrahi - Mizuho Securities USA LLC - Analyst : Thanks for taking my question. I want to drill into the answer double-digit growth for next year is pretty good. So I would love to hear what's best into that in terms of (inaudible) there? It's been now more than four months since you closed Ansys. Do you expect, in terms of business model or contract, which are different? Do you expect them to convert to subscription? And if you do so, what kind of uplift or any kind of multiplier effect we should expect there. And Sassine, in terms of integration, where are you so far? Any color would be helpful. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 10, 2025 / 10:00PM, SNPS.OQ - Q4 2025 Synopsys Inc Earnings Call

Question: Siti Panigrahi - Mizuho Securities USA LLC - Analyst : Okay. And then I just want to clarify that we need the same customers now using Synopsys PD and Ansys. Would you launch your combined product. Should we expect any kind of uplift there? Or what kind of uplift should we expect? I mean, is that 1 plus 1 would be more than two or less than two there? And Sassine, quickly, any update on that royalty model for IP, you talked about traction you're seeing?

Question: Vivek Arya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : For the first one, Sassine, I'm trying to gauge whether the IP business is derisk because if I look at your Q4 IP, and I just annualize that, that's about $1.6 billion and change. But if I assume that it grows modestly, that's more like $1.8 billion, right, or so. So from a year-on-year perspective, it seems derisk, but off of Q4 levels, not as much. And I wanted to get your sense, is that a fair pushback? Just how are you thinking about the sequential recovery in your IP business? And if Shelagh, you have a number for Q1, that would be very helpful also.

Question: Vivek Arya - Bofa Merrill Lynch Asset Holdings Inc - Analyst : Understand. And for my follow-up, what are you assuming for your China sales and on an absolute dollar basis relative to the $814 million or so, that you're doing in fiscal '25. And I guess, Sassine, the broader question there is, can your EDA and IP business get back to double-digit growth if we continue to see these China restrictions or if you kind of proactively derisk your business from China engagements? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 10, 2025 / 10:00PM, SNPS.OQ - Q4 2025 Synopsys Inc Earnings Call

Question: Charles Shi - Needham & Company LLC - Analyst : Sassine, maybe a question for you, a little bit longer term, a little bit beyond fiscal '26. A lot of the pushback I'm hearing from the investment community on Synopsys and actually not just the synopsis, but in car EDA industry entire group is AI is doing very well, but the sector you're in continue to show -- I mean, continue to show deceleration, I would say, since 2022. And it's kind of hard for a lot of folks to understand given you have all the exposures to all the players there, but the business didn't really turn up. And over the past few years, is that a monetization problem? And if yes, how do you plan to solve the monetization problem?

Question: Charles Shi - Needham & Company LLC - Analyst : Yes. So Sassine, maybe I should make my question clear because I think all the trends you described, I think that's pretty well understood. But at the same time, folks. So looking at your revenue growth, especially the EDA IP part, maybe not just the synopsis, but also Cadence and some of your peers this whole EDA/IP industry seems to have quite a bit of a deceleration, a growth deceleration over the last couple of years. So this is a kind of in the opposite way of semis, which have seen the very strong AI uplift. So kind of led us to kind of think maybe you -- what the problem you have is not exposure not that you don't have exposure to AI, but you have a little bit of difficulty to monetize. And I think one of the things you mentioned about maybe opening out a third avenue of monetization for IP business, basically getting into the royalty is the right direction, but we're still kind of curious what do you do about that on the EDA side. It has been a segment that's kind of growing in the single-digit range for a couple of years. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 10, 2025 / 10:00PM, SNPS.OQ - Q4 2025 Synopsys Inc Earnings Call It looks like it's going to be another single-digit growth year again.