Synopsys (SNPS) 17 May 232023 Q2 Earnings call transcript

Ladies and gentlemen, welcome to the Synopsys Earnings Conference Call for the Second Quarter of Fiscal Year 2023. At this time, all participants are in a listen-only mode. After the speakers' remarks, we will conduct a question-and-answer session. [Operator Instructions] Today's call will last one hour.

As a reminder, today's call is being recorded.

would Senior turn Relations. Vice I to conference time, Campbell, Trey President this like the to over At and Investor go ahead. Please

de Financial Officer. Thank today of everyone. afternoon, and Geus, Aart Synopsys; Chief you. CEO Chair Glaser, With Shelagh and Good are us

conference I'd other this forward-looking financial the and Synopsys we information course begin, that results. the forecasts, its to regarding like Before will everyone discuss remind during of call, and targets company

performance judgment While and today, as these actual and represent materially future statements expect. subject uncertainties risks what differ from cause of current actual many about are best could results results our to we results our to that

described today's any to important that our addition in risk earnings In recent factors are affect our reports SEC press that this most we release. and highlight during may call, results risks future

will the during we release, GAAP information today. we earnings in financial addition, directly discussion. released measures the Reconciliations refer can and to non-GAAP comparable X-K their that supplemental supplement financial and most found financial certain measures earlier In be financial to press

recent of our presentation plus items, the investor these at most synopsys.com. are website available All on

the be In conclusion addition, the our of will website the at on posted prepared remarks call.

Aart turn de I'll over the that, call With Geus. to

end the at our afternoon. revenue margin while high all reaching was guidance Good record. billion operating second another range, non-GAAP XX.X%. Revenue results delivered of We our excellent the in above quarterly exceeding with quarter guidance targets of $X.XXX

increased at to high of We $X.XX, billion. million was our of generated share per earnings and range share X.X cash above earnings non-GAAP $X.XX. flow backlog operating end GAAP per was our target while the XXX

new Demand the conditions, with semiconductors most overall Despite accelerates. emerge consumer weaker to for we The chip macroeconomic expected market as for designs out so is they when is demand stronger continue that R&D choppy when we impacted. prioritize markets planned customers playing year. much

Against this Smart accordingly. semiconductors outsized are and backdrop, significant drive us. executing to contribution long-term we underway well Everything and transition growth for for planned The is and will

we our are range $X.XX margin year-over-year and Based X.X strong increasing points, activity basis approximately continued guidance. guidance full on billion XXX our design billion. between prior raising in to business, and We're up $X.XX non-GAAP ops versus year our expectation improvement revenue high confidence to

our We range Shelagh in will and raising full year are between more $XX.XX EPS the to non-GAAP discuss $XX.XX. detail. financials

common Let innovation we held our design yearly me together quarter. passionate in in March, Users driving road Valley, bring our XX,XXX we give Synopsys and on Group color of for some system chip its including over In focus the Silicon follow design. Conference shows around engineers SNUG

three after conference was Life years of COVID, fantastically the engaging.

how designs. Our and requirements and have audience the complex interwoven, fully more by become breakthroughs recognized accelerated exponentially product of design parameters multi-die

hunger And of market performance-per-watt security customers now smart, company. mission pressure for safety top opportunities and secure of and for great are mandatory becoming Everything on and Smart the on end thus the and increasing puts a high our Simultaneously, limit. foreshadows sets Synopsys' both our to bar huge everywhere. that, and safe vision

approach. Design in productivity this complexities though, requires catalytic exponentially, from design change thus while function me, are are not. told Users To growing comes a system AI. our that step resources inflection us,

in do. We we embedding everything are AI

synopsis in a class design AI automation We customers and rate. flow now are production advances world our have made adopting remarkable at designs on

Space stands Smart harness decided ML for of where in In and applied we ago, to for learning. Since big intersection XX DSO.ai XXXX, years by This machine is we began on Everything our of out the unleashed Optimization. design accident. data subflows and AI by entire we called product investing not a everywhere Design vision DSO offering. then,

The slew Product AI roadmap by AI remarkable to by Electronics the following in a Award recognized ASPENCORE the IEEE for year, and prototype We customer Innovative XXXX. at progressed HOT pioneering validation showcased Achievement our CHIPS results Conference, unveiled of World we the XXXX, from driven journey results. of rapidly in XXXX Year of

it DSO.ai in so less been fraction while an only DSO.ai. complex delivered meaning a down designers. driven as the by tapeout of specialized it earlier go not better announcing the time weeks, month speed did but design on to large with partner power AI weeks did first unnoticed not requiring early and and commercial fewer, validated This had blocks, Samsung, world's

had great AI end commercial tapeouts. for adoption, with of fast Synopsys. a including clip XXX the at design from speed ten AI XXX the moved top and XXXX, vendors, of continues Today, tally industry at By nine the increase the to well very as over semiconductor driven forward adopts is broadly

first we Space Optimization and SNUG, TSO.ai, suite industry's full At EDA for second stack in generation parallel in we announced stands still. DSO.ai, Synopsys.ai But have AI VSO.ai Space we Verification driven not Specifically advances the which unveiled Optimization. to sat Test

design analog of the In Partners stunning progress deliver their MediaTek, and are stack in Research, to design rapid AI TSMC, the results. Synopsys.ai Nvidia, included cases and addition, IBM all we providing breakthrough extending criticality announcement and use to Renesas the manufacturing. include of across

the to wide functional journey. coverage breakthroughs roadmap is deliver for As and of an of it's progress. cases optimizing, generative substantial improvement to in open This example, our and Yet is productivity productivity. holes AI use still up Renesas years to to in AI verification reducing XXX beginning achieved come. XX% The only automating up increase

very which for Design our now of me with revenue. XX% automation, robust accounts growth. Synopsys results, a segment order roughly had and Turning revenue to quarter with let automation design strong start

and the a anniversary optimized compute provides browser-based customers experience, of lead with one Cloud, industry's me flows. and that preconfigured EDA Let off completely by the solution recognizing first only SaaS year Synopsys

for advantages accounting business XX% model have cloud quarter this demand the the customer the excellent We're past significant to year, scale only optimized with with gain In of on our customers momentum we as time market with elasticity. seeing providing pay-per-use base tool access doubled industry's users. cloud year model SaaS every

manufacturing continues segments Market across fusion nodes. adoption compiler of our to and vertical grow

designs, leading node exclusively nanometer semiconductor won top computing Asian tapeout wins compiler including using performance with two Synopsys at roughly major and three This quarter many of flows. leading advanced designs two-thirds a companies is high company. Fusion we a

drive leadership. their collaboration We advanced design our TSMC deliver continue on with and design announced EDA to flows automation we nanometer custom process a In two digital most to QX, node.

full to nanometer EDA time allows jumpstart SOCs timeliness Our and two offering, stack differentiate with accelerate the of timeless their their IP complemented designers their to market. designs,

displace from in eight QX, continue the year-to-date. and competition design custom XX design us earned market. to wins digital, new wins Expanding in We we grow giving

of Synopsys benefit using pipeline also from retargeting. for growing a top customers We advanced node

chip at transformation multi-die to systems solution scalable deployed customer, comprehensive a industry's monolithic time. multi-die from multi-die design performance Transitioning US for the fast, In leading leading SoCs high VCS integration. with to a than verification turnaround computing we delivering we're more XX functional our QX, and faster heterogeneous

manufacturing, our TSMC unbounded most solutions design multi-die talked for technologies. about We've the advanced and providing collaboration with EDA We Ansys comprehensive demands and for IP verification. the often system and announced also industry's on TSMC's process

need unrelenting. verification is for acceleration The

Our more ownership. customers and more lower want cost more, with throughput, more total all energy capacity of efficiency,

digital unmatched first Server X, advanced we capacity announced of enable system with emulation twins industry's ZeBu quarter to electronic SoCs. the This

XX compared previous higher with to X and generation. energy throughput our Server delivers ZeBu XX this lower usage

a large a compile multiple system results. Server range pull semiconductor X companies saw on deliver reduction of seeing large times ZeBu XX% exceptional broad are from company hyperscaler semiconductor and We in One designs. with adoption

want possible. Currently I its that highlight the physics to conference. limits on Finally, a at front Nvidia is nearing March manufacturing makes the breakthrough announced GTC what lithography of

Optical Proximity Synopsys with OPC, Nvidia running named this platform lithography computational Correction by remedies collaboration Our Nvidia's on software cuLitho.

weeks literally days. compute Our from collaboration massively reduces to time

let's design Now IP, which move our is roughly revenue. XX% to of

smart, quarter, provide blocks entire have interfaces, XX business. Starting over imperative. IP IP we IP supporting secure and innovation driven the safe now by process years This the we're in technologies, subsystems. of Today, celebrating simple then XXXX components with building all XXX and being we same

the rapidly very increasingly high business systems. automotive with and connectivity for strong Interconnect need demand high Universal is fuelled or performance and standard. in is becoming drive Express, the speed die-to-die where speed Everything secure by computing, systems the architected which led by applications state-of-the-art industry need These for high Chiplet Devices interfaces Smart mobile multi-die UCIe Momentum

leadership silicon QX, nanometer achieving and demonstrated excellent multiple the XXXG on advanced silicon build products, results multiple also speed our We're engagements results across and PHY three interfaces already continue including In We at outstanding technical nodes. high advanced received process to conferences. IP Foundation on we IP in customer IP. our

Third, the XX% which segment, our around revenue. Integrity Software of represents

trailing passed $XXX software the well milestone in for mark imperative month Today, million quality is here a in security Another software revenue. business XX every business. meaningful and is The we vital. as just as

our of including the financials, a and environment. vertical this manage business solutions security affected Our solid notable most end of markets. the across delivered companies technology, broad wins set challenging and across growth Well, segments, part telecommunications. vertical help and vectors is with macro We healthcare improve by quality

We continue delivering our privilege report. see last changing have One technology. XXXX to adopting point. driven consolidate week more segments Throughout as most of this call, we released revenue of by and the solutions economics. the or for customers our providers closing world two efficiency highlighted of also they I This ESG

in results with our had change. QX synopsys.com. second half the our use summary, execution, starts to we of impact full year. a encourage read growing influence at commitment our this operational you report and Synopsys excellent broad-based confidence maximize to to and to For financial drive I the In positive an

versus raising We year basis our margin points to and are to billion. full between by improve revenue $X.XX guidance now non-GAAP We ops billion expect $X.XX for full XXX year. last year

to per We share earnings growth our XX% non-GAAP expectation are raising to year-over-year XX%.

that in the prioritize customers resilient We will chips, security business headwinds a have and continue macroeconomic Despite systems throughout the position growth. software in most investments them our to expected model companies. future year, for uncommon

we products design to IP suite edge leading driven in advanced and As AI solutions, make continue decade and secure smart, to happen. you EDA of state-of-the-art invest technologies, safe multi-die the heard, this

their would and and possible. dedication like to that our thank employees this our makes passion for partners I

Shelagh. that, I'll it over With turn to

record our Aart. high revenue EPS above you, was and guidance of range. the a and revenue quarter we delivered Thank QX end

by chip strong billion leadership system and segments, resilient, non-cancelable design choppiness backlog. a in Our business results with $X.X model robust execution and and our position our stable activity across macro driven despite are time-based

I'll stated. results. revenue We now result, billion. billion. EPS. non-GAAP were our expenses non-GAAP raising and operating a improvement and full as and unless XX.X%. Total We and GAAP total resulting in margin million remain $XXX are business, $X.XXX second are costs year generated for were targets All review in revenue, non-GAAP of quarter our $X.XXX comparisons our of expenses operating we costs otherwise confident Total year-over-year margin

per and GAAP $X.XX. share were were per $X.XX earnings non-GAAP share earnings

was margin Now quarter. segment software 'XX, segment continued operating both strong and which up XX%, driven $XXX due XX.X%. on QX million, down Design revenue was IP revenue X% to was Design a $XXX our an Automation million was to in tough segments. EDA exceptionally Automation IP hardware. by Design to strength adjusted compare

margin operating XX.X%. was Adjusted

XX% to Integrity XX% expanding and expect XX.X%. for macro this was $XXX impact operating operating Software of Software adjusted growth Integrity XX% margin million, Despite segment, revenue revenue some up we to margin XXXX. continue on with adjusted was

cash. $XXX We in million to We with $XX flow cash of our short-term operating ended and used million $XXX we of generated of Turning and total cash buybacks. and $X.X cash billion debt the stock investments quarter million. for

Now guidance. to

are, billion. margin XXX billion non-GAAP Total to $X.XX resulting operations earnings Cash and XX%. points. per flow billion, $X.XXX non-GAAP per billion. year expenses full of from $X.XX targets to share. fiscal of between and tax $XX.XX of Non-GAAP For to $X.XX revenue billion. $X.XX per of improvement $X.XXX costs the between in expenses share earnings billion share Total Non-GAAP and $X.XX of and year $XX.XX share. $X.XX GAAP $X.XX per billion costs GAAP rate approximately of XXXX, basis

earnings and targets share billion Now million. and $X.XXX and per third per $X.XXX $X.XXX non-GAAP costs Total share $XXX and share. and $X.XX earnings of between costs Total expenses GAAP and $X.XX expenses of billion. share non-GAAP per $X.XX between $X.XXX Revenue to GAAP quarter. the billion per million to billion. $XXX between and for $X.XX

achieving in XX% margin XX% XX%, confident growth improvement XXXX. In XXX basis XX% points and to conclusion, are operating of growth earnings non-GAAP of revenue we in non-GAAP to

business our customers Our execution by reflects to of our activity continue time-based our position model. strong across cycles invest through and segments, resiliency semiconductor leadership our the who stability and robust design

I'll With turn questions. for to operator that, the over it

first Your of Harlan line question from Instructions] the JPMorgan. with [Operator Sur comes

line Your open. is

quarter. well-executed afternoon Hi. Good a and on congratulations

you. Thank

chip chips primarily you. of helping try track Thank because best leading-edge the and activity custom the hyperscalers. given chip just the among overall companies We do over sort to few we they're sort have companies race past of that with large the overall design AI this hyperscalers cloud activity, good starts our And ASIC tell, a for their and semiconductor design large systems proxy arms codesign months, can are right? from accelerated chip what design and

they acceleration And in their renewals? outlook terms the to this just sooner So on And bring to in next full later. itself step all as upcoming growth into is solutions Are strong market up year acceleration well? confidence manifesting silicon seeing of how guys and you rather design your want than year? continued in the activity

because differentiation is Well, that's first, even tends money worst design strongly surprise. the yes. downturn have the the absolutely, because to downturns, semiconductor is so answer when where a that the economic industry when is to miss general, there the of it's fades not made. are in And upturn they most invest In away, an chip

And case, hype absolutely will this and excitement, the now would say, all every Everything. with what seen of the where an you've driver. great In world, the XX%, impact this vertical to Smart it have substantial X% on additional is committed I market of understanding there's

Now how quickly can they is the become question smart?

the fantastic, computation fantastic, is that the software requirements quickly software discover that, they are And of too. well,

on so power. can more faster low the race for chips, high at importantly, you where compute most and chips is And chips get

there core because top on have And designers, bring shortage is we AI so that enhancements material has. of simultaneously, the the competencies And our into with a own that about this plays that. Synopsys impact can productivity a

call, then you're half. step-up with strong it you've on last in And guide that. this your second a on demonstrating anticipated call, for the right, the you earnings had team Thank seen the as

step also roughly basis, to about about on weighting I half think going it's and a renewal I on And be like XX% I XX% the growth. is half-on-half team year-over-year plus. some the activity second think was up your second know anticipating and half more talked IP IP year-over-year half-to-half customers' slightly consumption Is of down IP given timing of half? half. year-over-year programs. the still in design for second the team first in the up

Yes.

have out at by I map exceptional year, mapped we have which out pretty always the to also other in think in directivity. hindsight, year looking think I its the was you And previous well. it

then It less had the big very growth and half. early growth in on second

on coming, Now reasonable because needs the is able to left what of an of a we're we but year move well of the basis. right normal will have pretty And one where understanding to back designs ongoing reasons to what renewals, IP essentially the to it you bottom that projects. are were we and up pulled also a what be during the year different from map

on can been But the we you future think and and that we actually high exactly, may of we're well, a we had mapped have so you quite careful. never forecast degree numbers I have confidence the So to. pretty guiding

in the Harlan, Yes. And I deeply embedded add, just our would are design I teams mean team.

us, side, is which their like specifically which set in needs traditional from for a a half, we of So said. the of on is have where good are second they strong really Aart understanding terms IP

you perfect. Yeah, Thank much. very

you. Thank

from Your comes Vruwink next Baird. with the Joe of question line

open. Your is line

the stronger you're peers guess, new Great. renewals might kind all? of are Hi, products point, guess embedded your the that half everyone. is software the question what that? the being renewal in increasingly would seeing through for maybe mentioned sequentially, a you're just the of whether business of come representative some the in I'll given this if I coming looking I'm backlog two second nature be of conversation, year the the wondering if for is I through. have of some year. related of the bigger at just start, commentary industry to seeing larger And are environment changing in and expectation renewals AI your second And in the for customers at good incorporated what the I increased Is then renewals? imagine the half

more or prominent absolutely implement use good in Yes, one. from it. just racing have on it more let experience either they work are look AI backwards heard because on now use very at racing how they transactions to or Well, already others that many many many chips in me and it is have chips people to can in

time, one I the renewals industry. for to the They across no individual design there companies. were same are evolutions happen happen in in would the that be going important because the big say it of whenever that they was evolutions in in At And that industry. in say there's investing would I felt alignment each But are chip companies past of the sort future. the they that

have impact because they their things decisions, realizing are that have data they because of discovering make big future do has with. on suddenly a to Now lot architectural certainly to they're do it

hyperscalers more same have from talking And I'm system power give or their challenging, design about companies those compute are but the And the that and companies less cost. then also semiconductor this are or nonstop customers, big pressure pressures roughly maybe design exciting. that way me for

that volumes think the and and So of overall of at opportunities actually software notwithstanding decade looking is coming industry state-of-the-art I great given the healthy the downs would of ups demand. the quite is

question then business. Okay. And That's verification your great. a on hardware

growth demand out And about that over CAGR that your just revenues As in for you've I high think are chain. there a I yet geos semiconductor supply very verification, business. and I it's when mean sustained time. sometimes a about building the been think the nonrecurring in

grew. looked China year-on-year like new it about it's hardware Sometimes and your down like business being companies I yet think

So maybe sources past? is might verification from in years in the than coming have case the different been your nature of business growth

use and few But or essentially very now Well, functionality assistance One verification are which very two actually, of verify hardware it companies there to it the they that. say that number are companies that years use I used only many the would of is reasons. A use massively. systems to do, doing hardware would the accelerate tasks different ago, would verification, broadened. quite And has is to chips.

long is entered machine so between different to not the with intersection software hardware a importantly, there, essentially mimic have the run if software. machine the And hardware the and the is Synopsys, partially people can just only that objective as a the check being at of We space or on the on good but heart by works, hardware. to how software

optimize use hardware you software, between interaction the the computational interestingly you is computation. to other And In a optimize is the and actual there's even can software energy an great words, that so in more that costs. less place

And so software on is running the mimic real very as you that can yet imagine, chips complex. machines you don't very have

be with all And X And space another on which around it twinning, will piece, what we're of an call well able to to of electronic would the look announced digital that. doing a exercise computer just that the we is and big on world real see we yet artificial is what very Server like. the example a world results created the

Yes. a was we had would XXXX And shared year. record share, that just I hardware

another to 'XX expect We record hardware year. be

customer is our said, demand strong So Aart very base. the as across

great. you Thank That's very much.

Thank you, Joe.

Your next with from Jason of question comes line Celino the KeyBanc.

line open. Your is

must strength saw than the and year at planned. better I you about the beat for expected. Can the pattern Aart, upside? suggest question. in mapping the still that Great. is look the you comments and have appreciate bidding seeing had my just you appropriately Thanks. the elaborate Thanks I when where and come something nice exactly taking quarter, But your all that

Well, say better think I executed than it's But the of if expected fact we -- well. is it. worked at to harder just we which always it's hard

people new work management number the year, of to scaling been of are in this have progress company making for ability in that excellent last to have the really level. and Synopsys at we a our We key the team

last and think bodes customers simultaneously, really built that I the up the But forward. and well the that trust breakthroughs technologies with going had years the in we've few

the in think, plenty the preamble. I've I so AI And highlighted,

so with exponential complex chips. engaged answer mention that. multi-die well also multiple Law, are still call that is complexity systemic with deliver. what do. are things I'd we of fact Sys the to more ambition, decades like to an the for I'd these to us And many technology but Moore's in And Moore, few complex is for But really additional quite like a very to It much good ways,

have code developers your for examples did question, I you being How even then to do forward? it's actually for may an think going some And and write We've Perfect. debug this augment security Okay. evolve AI of AI used but or and it. business. seen processes

AI it we're what think I seeing that everything. will augment with

Now different fields many at the to or everything the use equal, the to of created advances. many need data different are any you kinds not of look opens of ability understanding So well, the and have disciplines AI to from perspectives right? the but to all door all interconnections

the well it we've be degree explorations. surprising it's we that the different includes the have see Synopsys so includes area aspect to also taken high And shouldn't But of And very that accuracy, that SIG every been with in that company. that successful. approaches that invested many require a of is exciting

just so distinction, but necessarily wonders amount whole make can cannot doesn't generative AI single to enormous the with transistor is data, always A We system doesn't do that. it afford a work, correct. work. of not And

And this AI is we're wide rigorous that open. in class of requires -- computation. And actually very all a but so of

So it's an exciting time.

Perfect.

Okay. Thank you.

you. Thank

Wells of next line the Your comes Mobley Gary Fargo. from question with

open. is Your line

perspective, core market? of the automation on and with angle of sense EDA that chip Hi, on magnitude us the everyone. basis of growth my sort license that you the be seat tailwind give for Thanks driven a the inflationary clearly, AI the has And AI just question really customer design? to maybe for, here and ask rate EDA EDA savings Could the grown it transformational enhance the per what How is designers. does do faster is how how I'm right? core That's that? wanted or EDA the chip the question. about stands your share And you than different taking for I transforms of by the market core how can taking is, so a AI from efficiency. market. further And a

to only because at for And transforms the the very of It impact the early how it's it decade that you impact. clarify beginning I has. of of a market to it actually Well, started beginning. was of remember synthesis in And era designers at of in to just an out automation we many, the a that where was do many the took that to hours few beginning is the weeks of think, not already time able certainly say do. Synopsys, we matter something are, nowhere

many have time ways, I that does the on in And taking you're same. entire at And AI reaction away. the we designers, of exactly right me stop. want X% by job it other subflows my said, demand now I do say, the so by, the the was that many now It will oh, double. enormous. But the give And oh, That gates for way, the new can because things. not XX% will faster to to

this gets design Many the that many to things designers today. how and exactly capability many same data all where But words ingenuity this matters. the impacts and complex see companies same with greatly time, be enormous same amount dimensions of You they own very multiplied could the use will at able time. to at see their

So think is it transformational. I profoundly

capabilities. chain much itself our complete seeing a of And benefit the tend the tool of we have And manifest people through precisely to to these want are solution benefit from Synopsys because for that.

are and may IP to the excuse your Shelagh. margin. fact facing factoring degradation that half op question minor mix for the driving thus If And the appreciate what's be decrease there? in But is business some not Aart. point first the that, headwind? percentage profitability factors other that But tough mistaken, I revenue. year in a the Is XX I'm Or in me more or related? increase the you. XX a ago there's for Thanks Thank comp there

So question, for the thanks Gary.

is about XXX business way new always about IPs process the than IP the nodes. business on IPs. talked And of X,XXX having greater us I IP super Our building think lumpy. is Aart we're kind

So we're customer innovating then schedules when IPs, based constantly new the is building pull and design but down their are. on

quarter-on-quarter to that the design because the based to on is because going to changing see really are those managing way continue below pull lumpy is. we've we're that blocks, deliver downs resourcing slightly to some operating our the That's race Over when margin operating customer variations we'll margin. their got but So time, But tend not we're a need you're on average. IP really see corporate it.

you. Thank

comes Your line America. Arya next question of from the of Vivek with Bank

is line Your open.

my what Thanks where design you think you the I'm of Synopsys Aart, the curious, chip that to And architecture? you that this for multi-die adoption in mentioned starts are taking do of a question. to see percentage do in quantify there going? And is way multi-die transition? designs. And benefit

is because beginning We're the the just design. the at track just -- at at designs multi-die and not we simple beginning same time, over XXX

parties accelerating, very clear the the where these is future with adoption some more move sophisticated of move And notion what going. is So that are is is this aggressively. changes, is as but the the importantly investments. and these that invested first any of But is most

better. the And But i.e., that way more that have a movement an is specifically AI-related people from forward. when more others the becomes capabilities, very equation the do of then chips together. very understanding follow is only fast if moving of needs, declines, want And understand they cost lot computation risk closely well the possible the to things we in working

to let's for say, that Level example by are looking order at in architecture the a end roughly companies X supply, is great actually the of need decade. that automotive what they driving A number autonomous where is of this

looking reasons brand. substantial to do the dedicated all for of that one or of it few amount a that to takes And own power also solutions with that it's computation. is their up car doing substantial. at do teaming a companies And many their And solutions are

one Shelgah margin maybe follow-up, on my expansion. for for And operating

points the the model average, by been on you're the for points. years, mentioned expand is I So XXX my points. basis look right. target last over basis I it over basis But target former raising is it's to I if your XXX When years, several XXX think you an last few know

this the the under first it keeps is of what the the helping sales able years? you question year? -- have costs expansion way expanding then the been So part expand driver? last is So what them better, what's control? And are few to Is doing over are from

would very we're expansion. in short-term, committed start to driving more And and with both margin control. we're what's long-term some is I rigorous financial short-term it Well, putting

we properly through for make opportunities we we that as scale So great do how work Aart that painted sure ourselves. these us,

greater and long-term So continuing forward that's than improve we're really margin. points, the basis XXX improvement committed to that the we're to putting

Thank you.

next from Charles with comes of Your Shi question line the Needham.

open. is line Your

ask Hey, a thank me you letting of questions. couple for

for I AI Aart, want long-term maybe your question with has GPUs. off, quarter, to to a converging innovating accelerated AI, EDA. hardware the all on It news last products. ask accelerators, related mean, Nvidia to now to be generative customers' of the looks to few past AI big over remember, been products, designing flows to industry, like own So least first driver your system the AI but hardware not I seems EDA in the years, for at start-ups, But a right I companies their

in trend not specific is think hardware question it accelerators the but continue? here, about but likely going my towards reversing? do picking on trend customer -- I'm is just one reversing, the what's there? we is and AI So Or very accelerator maybe quite will How

to ability above. all and the fact And such the do At others to have themselves and themselves an for do that positioned unbelievably very yet up, will Nvidia. AI will race of is well kudos technically so an Others and interest on competent. Nvidia team some have a that It's really acceleration be time, same to many there work of well such develop so the ambition absolutely well, with the will so. parties to

So you a field new of general, of new in a when new have you that get a attention, lot also and innovation gets lot investments.

high. we see I forward rapid foresee continue the And to clip because at demand that pretty moving so a so that will is

underneath this, Now are there problems. of challenging some very all

you that that exciting, intellectual can while the the the the truly actually we've property. figuring make are out actually results are software some results so And truthful, protect to seen that solutions sure of

what's also compute. What lot the was will these very security mean a touch the safety obviously SIG the multiple systems We used, demand be there's what's touch will that via open, are even and like of questions top-down the technical company, the paramount. software Software because at illegal, to I'd powerful, that through highlight our what's of this places. Simultaneously, side we it Group. And I more because available, Integrity

built into also the that IP of help the flows. it unique chips we virtue provide in design and by cetera. root a up And encrypt putting trust, the But of et identification, bottom that's data, mechanism touch

part there's Moore's there's a lot the well. exponential very opportunity. opportunity. of a is rapid and of it Whenever And changes, Moore that's there's And So world very Law pace. Sys much why changes at alive

follow-up. the Maybe Aart. you, Thank next

is the expect on the that kind acceleration, Because think go mark. in the actually IP into -- that. half On half? that revenue of drivers? Thank second that drivers? fiscal on the into But of so higher congratulations second you. revenue EDA the about the trend of I I bit mentioned way, broke second rate that quarter, we -- visibility By in majority your kind but second run can little half? what you provide we expect half, million to noted drawdowns color shall the do the more higher you And what the into EDA second $XXX the you the a better are

the to growth see I I And is think that IP And in is, to, ratable. course, versus contribute numbers. But lumpy. deliver to to very the definitely of IP contribute and half the second Shelagh to order EDA get but guiding really Well, stated to has we're exact the in need a everywhere. already will more that you year forget results you ago, truly comparison

so And have good we assessment there, of the a situation.

will think the cylinders fundamentally, all well So half. second I in do

first balanced and half, business. growth expect we Yes. Last expect and obviously, what was second trend half. the But unusual more mean, is very particular IP little do And growth bit our half and I businesses, then half first traditionally the in second we across a year see. of do we a

Thank you.

You're welcome.

line Your with comes next question of Jay Vleeschhouwer from Griffin. the

is open. line Your

The what point, you to had extent or in investing it terms have AI But the fact this of terms sequential hear implementation been in to Aart, in you conservative might unusually terms the flat production speak other your adopt new more the for you. in or of revenue? conservative you piloting what effect how substantially ad are customers historically, in AE services you is deployments compared software so the an quickly for about of question since You interesting of comp technology. of they occurring, capacity. as is first, your as are on you perhaps been, was to far have that services. somewhat seeing expect what EDA of hoc Thank you terms hand, or

a And maybe have follow-up. So then I relationship? that talk about

Well, products, the have to opportunity of products. think, rate, the result for is need adoption space to come with our faster a) a new the great customers I out

that to results early five-year results. gave of for would that, flow our And imperative. equivalent line in sort was the I you time an development to the and facts get very Secondly, design do. what the sort Good able good human-driven that's traditional on of more we're

of move do And has If the probably not like most productivity And were angle this they we that it to to able then competitive. singular the that, forward. And accelerate you like don't came to very in ability would be the that, substantially. automation, angle don't impressive after I the in. argue activity people but terms been

of of thermal us challenges ability service so complexity customers and impact, to But work, it is view, Obviously, our and to what make to is clear multiple is from own use specifically chips, point software, technologies of have what don't many others. service these count between in-house certain versus tools. I discuss the the speak. have energy teaching, Now dimensions We like all all between they so business. of that which multiple the hardware on teams utilization our a call, of between to of

where the are customer. all with team we things are a These

a in a kitchen, integral here, oven, be of It's advanced to And customers. so it many speak, Synopsys, be the the in our design of hopefully, AI people the privilege right? sort to the using job, have good in so of kitchen. teams We to including doing service they're most are or in our support, oven that

the And teamwork a -- term to And heard companies. that the gets So it but ago. applies we zero. of have teams, predicted between many It's plotting you wave And individual privileged everybody our that of not. while this that's in use new the me this for it's efforts. the sum success quite applies of exciting component of to also to zero, has part It's entirely our the we say be the part is why And grown. horizons industry and relationship product, be single be that to in of often English, it. themselves companies

record you've about pipeline of follow-up, been prototyping I billion. your able a a inventory level When As got you'll have there shipment? we substantial was number emulation to which second number. How be into substantial half. think you assume behind to just now the there inventories, over and a pretty that of do sequential that look quickly $X.XX for at business, convert questions to related is a a hardware course to your increase

thereby you that are So revenue? second in convert the to half and is -- hardware drive expecting

this line inventory grateful build expect be to some able we record destruction. be build considerable because to some of inventory with to and the been do we actually another hadn't we're supply So year, to revenue able

to customers, we're about service that. really So excited we're going to our and be able

And big So XX%. demand. we our build really yes, so a you can see of satisfy about customers' that's did

you, Thank both.

you. Thank

you. Thank

Your next with comes Wolfe the question of Tilton Research. from line Joshua

open. is line Your

guys. Hey, taking question. Thanks for my

You're welcome.

bit, benefits to it they tools it have capabilities talking new or flow want vendors? maybe you're to might you you AI, from clearly. where past more to customer numerous from that products flow of kind from Aart, it one, in but Outside productivity a Synopsys versus to these more a of that a likely put I just to full first do to alluded have expect AI make choose little My numerous want the ask together all for might from the

which the now have to Absolutely. that very in And tools there's is other. reason optimized for a work that, good concert each with been

that useful. alluded to the right? musician, in This We ballpark. in fact some is So together the ballpark sing AI not and is choir has that a other individual the applications be tune. cannot where to And be very the to many can outcome earlier this be I contrast in in

correct. meticulously be to have We

ability, And and so correctness. are of our verifying in many specialized tools actually layout best-in-class power, timing,

broader make levels more more to different absolute is of to and are of we this And tasks designs, be think set work. true going a this at obstruction. and necessity in to move these I so And as

a is, areas. way, essentially working in so Synopsys.ai, created the different which have is tools by suite And this why of we

supposed stream as as to And create verification, design. so is as make it's function say actually highlighted power is it it low just and terms which you And know the in important even possible, is do But more that is would we've possible some small simple that it does as the possible. important, fast design as as do. as

You can Does go it whole, well. work manufacture yet well aspect it after it is be work? multiply that correct. two test And to is a and does things but right? it have three of And another as and still number because there six, not get the absolutely get then wrong five, you does

also capabilities I these we're of a of broadening I reasons set on team, so so top well. that one continually And key call of is optimize why it if a as the but tools doing can individually, think that,

the bookings that kind today talk Super a so fantastic throughout in but seeing maybe helpful. how my what gives pure-play of year? confidence you has follow-up, a you for go far. pretty been revenue of security just in some obviously it indicator. kind have quarter SIG continue sustain And lagging then maybe of growth just you're that just Can SIG quarter, can growth is rest this that And trending? of the for it's the SIG been names to the the to tough you

that always Well, having we did that seen we don't delaying but people can security, that a that you not they're there surprise some of disclose that super is mostly bookings, by business, headwind have argue we because until day. like a virtue purchases next viewed rarely more or things the important, say are in signature level And be urgent needed. of but should are

security of to highly that security of the still, business, time, the our while in would rest expect the us the OEMs the software where dependent of on so itself very I compared entire for hardware automotive, security for high seen down sort from say, And for actually sum as of is and base us every over coming of rectify to interesting the the up. product we level total fairly the And such is because the buying SIG some obstruction areas are layer. recently, we've moving

crucial have it in, that in an we point it invest I and to becomes at areas so clear in the that think for particularly will time. been is is continue sense, the strong it area and IP EDA that And this future. But

of probably that long-term the to headwinds add Aart of would to is that XX% We to due the that, our XX% we're this I closer lower And closer the year. business XX% of end Yes. that to think view mentioned. some

guys. Thanks, Very helpful.

Thanks.

You're welcome.

Your comes Ruben of Roy with next question Stifel. the from line

Your open. line is

and questions. Aart, the ask follow-up. of both a couple AI I'll them I the you. had question Thank

type either think have of maybe reluctant take companies FPGAs were future? towards starts As think or seeing the XXX from I tools may semiconductor your do shape you in the of historically that right, family might customers AI Are because companies push sweet spot kind productivity you in been production tape-outs tape-outs, guess, AI that expense semiconductors, you product a in as being kind the those is to that where AI of think to said. to design or or custom you you, and AI implemented follow-up the know, develop, is that non-traditional don't gate it AI? kind guess, have I longer if to broad-based semiconductor designs either of Thank ships you invested custom of if I a merchant you. I what went of was improvement And semi or or that of term, that, wondering usage terms design, count the

through looking years feedback you I notion economic the we of and impact. at shortest-term time, as technology are would as point were that at many, that the the this the technology many figuring or opposite, any Techonomics indeed judging feverishly loop you done? term we economics have coined what out those great which was questions have really okay, are And because then asking the may possible advances in ago, them, of Well, thinking, know the

the gradually And way, accident of for actually, point by first diminishes we was because sort the an while these DSO. that of are almost so DSO really not human focused it it's extraordinary architecture can that advanced And to on really designs And you by really, view feel see for hard. the from ability all details.

in corrupt design, the with but many better. weird And so of dealing very small that handle design automation decisions, certainly when a trillions are really decision decisions a can small literally you're can in ways,

that to economic We is we broaden where impact. then have so that high areas other to decided started. And

beginning you of verification, question can since verifying. in price category for the much for you same if as how because it. And was were go would all so done It least the it get that electronic time, never at And you falls could, absolutely afford? much, you twice

same test, test every tester the do a you And ways, a manufacturing positive feedback. machine where was money for people. that in very the on many so benefit And costs for the

an which interesting And same tests design this there that viable. things so your XX,XXX could is impacted. and quality XX,XXX of is question But you the results get tests -- in of can instead custom of are ramification, be do certain is whole economically question that second

And in And a customers have to of become things of well. retargeting one examples the are node number but technology customer results very anything, great design we that will number have for really from already relevant we and here other much absolutely good as of another. not these a announced formally

the but speak, the into put in vector, raced so that's substantially we have mechanisms broadened. reason investments on we hottest suite, And So many forward so to common have a Synopsys.ai that the also we

had. that Thank all I That's details, I appreciate you. Aart.

Thank you, Ruben.

Gianmarco Conti Bank. from will Deutsche last with Our question come

is line Your open.

emulation deliveries? little to I this. on computational bit about HX, would a in the was term ultimately Thanks sorry a a are have trends a development the here, just harder to and the we're near think then for Given challenge on fiscal XXXX a do questions. environment given Hi, there be taking about hardware the record we ask I'll a And you. share comments into full year indeed more beyond XXXX both have could I'm trying maybe after. XXXX I'm And wondering there. will your prototyping? on companies should here, hardware. detail you follow-up year to I from on until be – Thank demand appreciate time the record my for visibility think touch expected how hardware sitting big if on emulation and up you the where power is point year year comes? or next XXXX two caught also was a in again perspective.

to particularly have a of hardware, and years do right? XX with a every bit Okay. few Well, little there years, months you're a some are changing record some a you're or record chains lumpy The COVID years or do world. for company, If variety growing to some reasons, record scale to been directly and hopefully, with on trailing with the quarter. so, linear last supply do

get. but have the can intersection. need On verification top worthwhile hardware-accelerated And that and Synopsys virtual software positioned only well bit that more little also of complex is for so because with and is verification more that's at combination absolutely that hardware two. into you the so And is you in that premise aggregate, there not if though, the intersection that, more why a than fast buy verification my of will we be verification, because of speed

to it as available to things increase are from continue to all in technologies us. keep our those that going the to And up But just be a) job is importance. are of it may,

something of Now on be the we're spot state-of-the-art. to delivering that has

we on. fashion economically, customers our Techonomics will to i.e. such make that to more. Secondly, viable that in they And it's that have for fact deliver need a and so the

this so while. there's a for quite but continue business that that will no opportunity, And doubt self-regulating is a whatsoever

today. call the CEO, to back now like I for Q&A This our to Aart de session would Geus. Synopsys' concludes

for sense participation technology-wise be you again business-wise. I a it the hope very for we And in your rest we're participating. we're you day. the good a event. thank Have got quarter of strong future, cases, thankful always that this the in and had about and Well, all that that enthusiastic

conference you today's Thank concludes call. This attending. for

You may disconnect. now