Synopsys (SNPS) to Report Q3 Earnings: What's in Store?
Synopsys SNPS is slated to report third-quarter fiscal 2023 results on Aug 16.
The company anticipates revenues between $1.465 billion and $1.495 billion for the fiscal third quarter. The Zacks Consensus Estimate for the same is pegged at $1.48 billion, suggesting growth of 18.8% from the year-ago period.
Synopsys expects non-GAAP earnings between $2.70 and $2.75 per share. The Zacks Consensus Estimate of $2.73 per share indicates growth of 30% year over year.
The software company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.6%.
Let’s see how things have shaped up before the upcoming announcement.
Synopsys, Inc. Price and EPS Surprise
Synopsys, Inc. price-eps-surprise | Synopsys, Inc. Quote
Factors to Consider
Synopsys’ third-quarter performance is likely to have benefited from the growing demand for its solid product portfolio. The continuous shift to high-performance cloud computing due to the growing hybrid working environment is expected to have aided the demand for the company’s Intellectual Property (“IP”) solutions, such as Peripheral Component Interconnect Express 5.0 & 6.0, 800G Ethernet and DDR5 memory.
The growing impact of artificial intelligence (AI), 5G, the Internet of Things, high-performance computing, the Cloud and automotive is anticipated to have boosted the demand for Synopsys’ advanced solutions in the third quarter. The company is likely to have gained from growth in Fusion Compiler, which is fueled by large deal wins in the 5G, AI and server chip markets.
In the fiscal third quarter, the increasing global design activity and customer engagements are likely to have been Synopsys’ growth drivers. The strong adoption of interface and foundation IP solutions is likely to have boosted revenues for SNPS’ interface portfolio. Additionally, widespread contract wins and the increasing deployment of the Fusion Platform, including Fusion Compiler, might drive the company’s fiscal third-quarter results. Our estimate for the Design IP product segment’s third-quarter revenues is pegged at $360.4 million.
Synopsys’ partnership with industry leaders like Microsoft and Taiwan Semiconductor Manufacturing Company is expected to have accelerated the deployment of its cloud solutions. This might have aided the company’s top line during the quarter under review.
SNPS’ solid electronic design automation software partner base, which includes Advanced Micro Devices, Juniper Networks, Realtek, Toshiba and Wolfson, is likely to have served as a major revenue driver. Increased design investments in Synopsys’ ARC processors by automotive companies are also an upside. Further, the strong adoption of security solutions for interfaces, such as PCI Express, CXL and DDR, with more than 30 design wins across all market segments, is positive. Our estimates for the Electronic Design Automation and Software Integrity product categories are pegged at $953.1 million and $141.5 million.
However, the heightened competition from the likes of Cadence Design Systems might have played a spoilsport for Synopsys. The tightening corporate budget amid ongoing macroeconomic challenges and unfavorable currency exchange rates are likely to have partially offset the benefits of the aforementioned factors.
What Our Model Says
Our proven model does not conclusively predict an earnings beat for SNPS this season. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. However, that’s not the case here.
Though Synopsys currently carries a Zacks Rank of 2, it has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks With the Favorable Combination
Per our model, NVIDIA NVDA, Workday WDAY and PagSeguro Digital PAGS have the right combination of elements to post an earnings beat in their upcoming releases.
NVIDIA is slated to report second-quarter fiscal 2024 results on Aug 23. The company sports a Zacks Rank #1 and has an Earnings ESP of +5.56% at present. NVDA’s earnings beat the Zacks Consensus Estimate twice in the trailing four quarters while missing the same on two occasions, the average surprise being 0.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for second-quarter earnings is pegged at $2.06 per share, suggesting a whopping increase of 303.9% from the year-ago quarter’s earnings of 51 cents. NVIDIA’s quarterly revenues are estimated to increase 64.4% year over year to $11.02 billion.
Workday sports a Zacks Rank #1 and has an Earnings ESP of +2.01%. The company is scheduled to report second-quarter fiscal 2024 results on Aug 24. Its earnings beat the Zacks Consensus Estimate in the preceding four quarters, with the average surprise being 13.1%.
The Zacks Consensus Estimate for Workday’s second-quarter earnings stands at $1.25 per share, 50.6% higher than the year-ago quarter. It is estimated to report revenues of $1.77 billion, which suggests an increase of approximately 15.5% from the year-ago quarter.
PagSeguro carries a Zacks Rank #2 and has an Earnings ESP of +2.97%. The company is anticipated to report second-quarter 2023 results on Aug 24. Its earnings surpassed the Zacks Consensus Estimate in the trailing four quarters, the average surprise being 36.7%.
The Zacks Consensus Estimate for PAGS’ second-quarter earnings is pegged at 25 cents per share, indicating a year-over-year decline of 46.8%. The consensus mark for revenues stands at $689.4 million, suggesting a year-over-year decrease of 13.2%.
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