Synopsys Delivers Strong Financial Performance in Fiscal 2024

Synopsys, a leading provider of electronic design automation (EDA) solutions and semiconductor intellectual property (IP), has reported impressive financial results for fiscal year 2024. The company’s revenue grew 15% year-over-year to $6.1 billion, driven by strong performance across all its product groups and geographies.

Revenue Growth Across the Board

Synopsys’ revenue growth was broad-based, with both its Design Automation and Design IP segments contributing to the strong performance. The Design Automation segment, which includes the company’s EDA solutions, saw a 12% increase in revenue to $4.2 billion. This was primarily due to growth in time-based product revenue, as customers continued to renew and expand their licenses for Synopsys’ industry-leading design and verification tools.

The Design IP segment, which provides high-quality, silicon-proven IP solutions for system-on-chips (SoCs), experienced an even more impressive 24% revenue increase to $1.9 billion. This was driven by strong demand for Synopsys’ IP offerings, particularly in the mobile, automotive, and data center markets.

Synopsys also saw growth in its maintenance and service revenue, which increased by 22% to $1.1 billion. This reflects the company’s focus on providing comprehensive support and customization services to its customers.

Profitability and Margin Expansion

The company’s strong revenue growth translated into improved profitability. Operating income increased by 6% to $1.4 billion, and the operating margin expanded to 22.1%, up from 23.9% in the prior year. This margin expansion was achieved despite increases in cost of revenue and operating expenses, as Synopsys continued to invest in its workforce and research and development capabilities.

Net income from continuing operations attributed to Synopsys grew by 17% to $1.4 billion, or $9.25 per diluted share. The company also reported a significant increase in net income from discontinued operations, primarily due to the gain on the divestiture of its Software Integrity business.

Pending Acquisition of Ansys

One of the key highlights of the fiscal year was Synopsys’ announcement of its plans to acquire Ansys, a provider of engineering simulation and analysis software, in a cash-and-stock transaction valued at approximately $35 billion. This transformative acquisition, which is expected to close in the first half of calendar year 2025, will significantly expand Synopsys’ addressable market and strengthen its position as a comprehensive provider of design, verification, and simulation solutions for the semiconductor and electronics industries.

To finance the Ansys acquisition, Synopsys has secured a $10.6 billion bridge commitment and a $4.3 billion term loan facility. The company has also suspended its $1.5 billion stock repurchase program until it reduces its expected debt levels following the completion of the Ansys Merger.

Navigating Macroeconomic Challenges

While Synopsys has demonstrated resilience in the face of global economic uncertainty, the company acknowledges that the current macroeconomic environment, including factors such as sustained inflationary pressures, potential economic slowdowns, and geopolitical tensions, could pose challenges in the near term. The company expects growth across its geographies in fiscal 2025, but anticipates a more challenging environment, particularly in China, due to these macroeconomic factors as well as potential export control regulations.

Synopsys has been actively monitoring the impact of these external factors on its business and has taken steps to mitigate risks, such as closely managing its expenses and working capital. The company’s time-based business model, which generates revenue over the course of multi-year license agreements, has also provided stability and helped to offset the potential short-term effects of economic volatility.

Outlook and Strategic Priorities

Looking ahead, Synopsys remains focused on executing its growth strategy, which is centered on maintaining its leadership in EDA, expanding its Design IP offerings, and continuing to broaden its product portfolio and total addressable market. The company believes that its strong customer relationships, innovative technologies, and disciplined financial management will enable it to navigate the current challenges and capitalize on the long-term growth opportunities in the semiconductor and electronics industries.

The pending acquisition of Ansys is a significant strategic move that is expected to further strengthen Synopsys’ position as a trusted partner to its customers. By combining Synopsys’ design and verification solutions with Ansys’ engineering simulation and analysis capabilities, the company aims to provide a more comprehensive suite of tools and services to help its customers optimize system performance at the silicon level.

Conclusion

Synopsys’ fiscal 2024 results demonstrate the company’s ability to deliver consistent growth and profitability, even in the face of macroeconomic and geopolitical uncertainties. The company’s diversified product portfolio, strong customer relationships, and disciplined financial management have been key drivers of its success.

The pending acquisition of Ansys represents a transformative opportunity for Synopsys to expand its reach and solidify its position as a leading provider of comprehensive design, verification, and simulation solutions for the semiconductor and electronics industries. As the company navigates the integration process and the current macroeconomic challenges, investors can expect Synopsys to remain focused on executing its long-term growth strategy and delivering value to its customers and shareholders.