SNPS · Q2 2025 Earnings
BullishSynopsys
Reported May 28, 2025
30-second summary
Synopsys delivered $1.604B in Q2 revenue (+10.3% YoY), with Design IP up 20.5% offsetting a softer 6.4% in Design Automation and an acknowledged China decline. Management reaffirmed FY25 revenue ($6.745–6.805B) and 40% non-GAAP operating margin midpoint, and pushed the narrative beyond "AI as tailwind" to agentic AI as a re-architecting of engineering workflows. The Emsys (Ansys) deal still hinges on China SAMR clearance; management says H1 close remains the plan with no Plan B.
Headline numbers
EPS
Q2 FY2025
$3.67
Revenue
Q2 FY2025
$1.60B
+10.3% YoY
Gross margin
Q2 FY2025
80.2%
Operating margin
Q2 FY2025
23.5%
Key financials
Q2 FY2025| Metric | Q2 FY2025 | YoY |
|---|---|---|
| Revenue | $1.60B | +10.3% |
| EPS | $3.67 | — |
| Gross margin | 80.2% | — |
| Operating margin | 23.5% | — |
Guidance
Prior quarter data unavailable — comparison not possible.
Segment performance
Q2 FY2025| Segment | Q2 FY2025 | YoY |
|---|---|---|
| Design Automation | $1.122B | +6.4% |
| Design IP | $0.482B | +20.5% |
Platform metrics
Q2 FY2025| Segment | Q2 FY2025 |
|---|---|
| Subscription Products Mix (Time-based + Upfront) | $1,339.0M (83.5% of total revenue) |
| Time-based Products Revenue | $828.3M |
| Upfront Products Revenue | $510.7M |
| Maintenance and Service Revenue | $265.3M |
Profitability
Q2 FY2025| Segment | Q2 FY2025 |
|---|---|
| Design Automation Operating Margin | 40.9% |
| Design IP Operating Margin | 31.2% |
| Total Adjusted Segment Operating Income | $609.3M |
| Non-GAAP Operating Income | $609.3M (37.9% margin) |
Management tone
The call reads more assertive and visionary than recent Synopsys cadence — management has stopped describing AI as a tailwind and started positioning Synopsys as the architect of a workflow paradigm shift, while keeping discipline around China and Emsys-deal language.
The framing on AI has moved from optimization tooling to agentic engineering. Management explicitly described a transition where "R&D teams focus on important architecture and design decisions while tasking agent engineer technology with implementation details" — and added that "Synopsys is seizing the opportunity to re-engineer engineering." The signal is that management sees a chance to shift EDA's monetization model from per-seat licensing toward agent orchestration, which would be a structural TAM expansion rather than cyclical growth.
The China commentary turned more direct. Management acknowledged "the tale of two markets persisted in Q2" with AI/HPC robust and China softening, and confirmed in Q&A that China revenue will decline year-over-year in FY25 versus FY24. Analyst Lee Simpson characterized China as roughly 10% of mix (and ~12% in Q1) in framing his question; management did not confirm a specific percentage. The notable point is that the FY guide was reaffirmed anyway — management is signaling enough strength elsewhere to absorb a known regional headwind without flexing the full-year number.
On the pending Emsys (Ansys) acquisition, the language stayed firm but conditional. Phase-one approvals are in across all jurisdictions; SAMR in China remains the lone open approval and is "in active negotiation." Management said there is no Plan B — they are managing only to the completion scenario. The confidence in H1 close, despite SAMR uncertainty that has historically dragged on (analysts referenced the SPI precedent), is the load-bearing assertion for the year's strategic narrative.
On competitive positioning, management used "first mover" and "clear leader" language across emerging interconnect standards — PCIe 7.0, UA-Link, NVLink Fusion — more aggressive than the typical "leading EDA vendor" framing.
Recurring themes management leaned on this quarter:
Risks management surfaced:
Q&A highlights
Lee Simpson · Morgan Stanley
China sales declining to high single-digit percent of mix; question on whether China business carries group average margins and what bottom-line impact potential BIS export control changes could have.
Management confirmed China will decline year-over-year in FY25 vs FY24 but reiterated full-year guidance due to strength in other regions and portfolio. Cannot speculate on margin impact from unconfirmed BIS notices. Clarified bond coupon timing with catch-up payment.
Gianni Conti · Deutsche Bank
Color on next Intel renewal opportunity/risk given R&D spend concerns; confidence level on ANSYS deal closing in H1 given only China roadblock and potential for prolonged negotiations like SPI.
Opportunities arise when customers push roadmaps and design complex chips; Intel renewal creates opportunity if they invest in new nodes/markets. ANSYS deal confidence based on merits, phase-one approvals across jurisdictions, and active SAMR negotiations. Focused only on completion scenario, not contingency plans.
C.T. Panagrahi · Mizuho
Design activity trends outside AI; stabilization signals in industrial/automotive. When will AI/agentic companies building custom chips reach hyperscaler levels of design spending and become significant opportunity?
Non-AI semiconductor market showing pickup in automotive/industrial after prior declines, evidenced first in IP portfolio. Three customer categories: merchant chip buyers, ASIC-model builders, and custom AI system designers. All three represent significant opportunities for EDA, IP, and hardware, particularly verification tools (HAPS 200, Zebu 200) even for ASIC-model builders.
Jay Vlischauer · Griffin Securities
Reference to 'six areas' of engineering workflow change needed; relationship to AI adoption. Distinction between optimization AI (classical EDA) vs. agentic AI and workflow transformation opportunity/risk.
Re-engineering of engineering applies across markets: multi-die systems require thermal/fluid integration; automotive/robotics require multi-physics integration. First AI wave focused on optimization (DSO, VSO, ASO adoption); current agentic phase enables specific task automation (RTL, formal verification) with agent orchestration representing next monetization opportunity. Agents at L2-L3 maturity levels; continuing L2 task-agent development while advancing orchestration.
Joe Brewink · Baird
Has Synopsys typically had foresight on commerce deliberations; skepticism about lack of advance warning on potential China restrictions. Non-China R&D landscape improvement: is it approaching 2021-2022 strength levels?
No advance notice received from BIS; cannot speculate on why. Non-AI semiconductor showing pickup in automotive/industrial with customers contemplating AI integration into next-gen chips. Customers investing in R&D modification/increases to build sophisticated chips with AI capability for new markets. Not same-chip derivatives but more complex designs.
What to watch into next quarter
SAMR clearance for Emsys/Ansys — management committed to H1 FY25 close with no Plan B. Failure to close by the end of Q3 would force a narrative reset; watch for any change in deal-confidence language.
Design IP growth rate — IP grew 20.5% YoY this quarter and is carrying the consolidated growth rate. Watch whether IP holds above ~15% YoY in Q3 as PCIe 7.0 and UA-Link wins convert to revenue.
China revenue magnitude — management confirmed YoY decline in FY25. Watch for explicit dollar-impact disclosure or any BIS notice that would force a guide change.
Design Automation reacceleration — DA grew only 6.4% YoY versus IP's 20.5%. Watch whether agentic AI commentary translates into a measurable DA growth inflection rather than remaining a forward narrative.
FY25 non-GAAP operating margin trajectory — Q2 came in at 37.9% against a 40% FY midpoint target. The back half needs material margin expansion to hit the reaffirmed guide.
Sources
- Synopsys Q2 FY2025 press release (Exhibit 99.1), filed with the SEC: https://www.sec.gov/Archives/edgar/data/883241/000119312525129525/d815632dex991.htm
- Company-provided Synopsys Q2 FY2025 earnings call transcript (prepared remarks and Q&A), May 28, 2025.
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