Synopsys Misses Revenue Estimates, Shares Plunge Nearly 18.5%

Sunnyvale, California — Synopsys Inc., a provider of chip design software, reported third-quarter revenue that fell short of Wall Street expectations on Tuesday, leading to a nearly 18.5% drop in its shares after market hours.

The company’s revenue for the quarter ended July 31 was $1.74 billion, below the analysts’ forecast of $1.77 billion, according to data from LSEG. On an adjusted basis, Synopsys reported earnings of $3.39 per share, also missing the expected $3.74 per share.

CEO Sassine Ghazi attributed the shortfall to weaker performance in its Design IP segment, which includes Synopsys’ interface, security, and embedded processor intellectual property. He noted that the segment suffered from deals that did not come through, significantly impacted by new export restrictions affecting design starts in China.

Earlier in July, the U.S. government lifted previous restrictions on exports to China for chip design software, which had been enacted in late May. Despite this lifting, challenges faced with a major foundry customer hindered progress. Ghazi said, “The customer withdrew due to market and client-related reasons, despite our major investments in their IP.”

Synopsys has partnerships with notable companies including Nvidia, Intel, and Qualcomm. The company completed a $35 billion acquisition of engineering design firm Ansys in July, which was approved by China’s market regulator after facing significant antitrust scrutiny.

Looking ahead, Synopsys projected current-quarter revenue between $2.23 billion and $2.26 billion, surpassing analysts’ expectations of $2.09 billion but casting doubt on future performance amidst ongoing market challenges.