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Synopsys (SNPS) Q4 Earnings and Revenues Top Estimates, Up Y/Y

Synopsys SNPS reported fourth-quarter fiscal 2023 non-GAAP earnings of $3.17 per share, beating the Zacks Consensus Estimate of $3.04. The bottom line improved 65.9% year over year, mainly driven by higher revenues and better cost management.

Revenues jumped 25% year over year to $1.6 billion, driven by growth across its business segments. The top line surpassed the Zacks Consensus Estimate of $1.58 billion.

Synopsys’ top-line results benefited from the increasing demand for its products amid the rapid adoption of generative AI technology. In the automotive segment, advanced driver assistance systems continue to drive the demand for the company’s Intellectual Property (IP) product.

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 (54.4% of the total revenues) of $870.2 million were up 7.7% year over year. Upfront Product revenues (28.1%) moved upward by 77.4% to $449.2 million. Maintenance and Service revenues (17.5%) increased 25.5% to $279.7 million from the year-ago quarter’s $222.9 million.

Our fourth-quarter revenue estimates for the Time-Based Product, Upfront Product, and Maintenance and Services categories were pegged at $973.9 million, $327.5 million and $273.4 million, respectively.

Segment-wise, Electronic Design Automation (EDA) revenues (58.2% of revenues) were $931.4 million, up 11.7% year over year. Design IP revenues (32.1% of revenues) amounted to $513.7 million, while Software Integrity revenues totaled $131.7 million, contributing approximately 8.2% to the top line in the reported quarter. Other revenues were $22.3 million, representing 1.4% of the total revenues.

Our estimates for the EDA, Design IP, Software Integrity and Other segment third-quarter revenues were pegged at $1.02 billion, $377.2 million, $148.4 million and $29.2 million, respectively.

Geographically, Synopsys’ revenues in North America (52% of the total) and Europe (10%) were $832.8 million and $158 million, respectively. Revenues from Korea (11%), China (12%) and Other (16%) were $168.3 million, $188 million and $252 million, respectively.

The non-GAAP operating margin was 36.2%, expanding 870 basis points (bps) year over year.

Software Integrity’s adjusted operating margin expanded 680 bps year over year to 15.2%, while EDA’s adjusted operating margin declined 90 bps to 33.3%. The Design IP segment margin showed a massive improvement to 47% from 16.3% in the year-ago quarter.

Balance Sheet & Cash Flow

Synopsys had cash and short-term investments of $1.59 billion as of Oct 31, 2023 compared with $1.83 billion as of Jul 31, 2023.

The total long-term debt was $18.07 million at the end of the reported quarter, slightly down from $18.16 million as of Jul 31, 2023.

The company generated an operating cash flow of $326 million in the fourth quarter and $1.7 billion in fiscal 2023.

Guidance Update

For fiscal 2024, SNPS expects revenues between $6.57 billion and $6.63 billion. Non-GAAP earnings are estimated in the range of $13.33-$13.41 per share. Non-GAAP expenses are expected in the range of $4.14-$4.18 billion.

For the first quarter of fiscal 2024, Synopsys expects revenues between $1.63 billion and $1.66 billion. Management estimates non-GAAP earnings per share between $3.40 and $3.45. Non-GAAP expenses are anticipated in the band of $1.017-$1.027 billion.

Zacks Rank and Other Stocks to Consider

Currently, Synopsys carries a Zacks Rank #2 (Buy). Shares of SNPS have surged 76.6% year to date.

Some other top-ranked stocks from the broader technology sector are NVIDIA NVDA, NetEase NTES and Dropbox DBX, each flaunting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for NVDA’s fourth-quarter fiscal 2024 earnings has been revised by 5 cents northward to $3.87 per share in the past seven days. For fiscal 2024, earnings estimates have increased by 10 cents to $11.11 in the past seven days.

NVIDIA's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 18.99%. Shares of NVDA have rallied 229.4% year to date.

The Zacks Consensus Estimate for NetEase's fourth-quarter 2023 earnings has been revised upward by 10 cents to $1.73 per share in the past 60 days. For fiscal 2023, earnings estimates have increased by 42 cents to $6.96 per share in the past 60 days.

NTES' earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, while missing the same on one occasion, the average surprise being 16.63%. Shares of NTES have gained 56.4% year to date.

The Zacks Consensus Estimate for Dropbox's fourth-quarter 2023 earnings has remained unchanged for the past 90 days at 48 cents per share. For fiscal 2023, earnings estimates have been revised 7 cents upward to $1.96 per share in the past 30 days.

DBX’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 13.14%. Shares of DBX have climbed 25.7% year to date.

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