Synopsys (SNPS) 16 Aug 232023 Q3 Earnings call transcript

Ladies and gentlemen, welcome to the Synopsys Earnings Conference Call for the Third Quarter of Fiscal year 2023. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Today’s call will last 1 hour. And as a reminder, today’s call is being recorded.

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

Thanks, of With Geus, everyone. Glaser, CFO. and Lisa. are Shelagh Good De Aart COO; us and Chair Sassine Synopsys; today CEO Ghazi, President and afternoon,

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

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

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

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

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

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

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

flow, target with earnings $XXX at backlog generated at ended share guidance $X.XXX margin $X.XX. operating outstanding GAAP of Good non-GAAP billion guidance our cash $X.X share midpoint of billion. was targets, third the a afternoon. all of with We results while earnings XX.X%. Revenue range quarter, in delivered end QX our operating revenue quarterly while the of in million per exceeding our of record. the reaching $X.XX, per was high above another was non-GAAP We

news. have you our seen now, By other all

Synopsys named Sassine So to has call. before for of the take same and the we I'm the Board Ghazi transition role I welcome absolutely time. Chair role let results warmly this Synopsys address starting announced Board as thrilled of Sassine. Executive and will CEO outlook, Sassine that Synopsys CEO that with I at January Today, and XXXX, the me the into President segment our

He a technology innovator trusted more so results embodies Sassine, customers friends, a uniquely and but and than proven culture, is operational is he your of our first Synopsys ecosystem is our his to that. and leadership. much me, Sassine including qualified. earnings and partner values with our inspires calls. He welcome to focused a many company, leader,

your honored, I'm the trust in grateful humbled me. Thanks, and unwavering profoundly Aart. to for Board Aart, and placing incredibly you,

innovation disruptive even foundation, build ecosystem leadership all a you the start-up organization. of colleagues drive across so one into essential to that strong greater to with our forward I'm team many working from moving Synopsys the the for and you, success. been propel to of upon our world's and Synopsys to years built last semiconductor part Aart. continuing proud engaging of the partnership I You have with of the journey XX with forward companies. look a heights determined and I'm to

Thanks, Sassine.

support. full my have You

the Smart R&D in Despite more. to trends to The challenges, seeing is strength. market. our Everything design economic we're are what to starts semiconductor AI-driven industry continue deliver Technology pressure turn positive let's Now semi-conductor the putting and unabated. industry on era playing investments

era our innovation a this customers' drive success for catalyst growth made for semiconductors. Synopsys relentless Our in has new

planned much we when as we year is In we executing the are expected fact, playing the out market and accordingly.

year raising strong our our business, on design full we activity, billion are to confidence Based high between $X.XX range billion. guidance our and revenue in continued $X.XX

up is versus XXX to approximately point our margin increasing ops are basis X.X year-over-year non-GAAP This We guidance. expectation prior improvement points.

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

our further results, all on to and progress. understand color and you segment AI that unlock By has that hope me can giving we does our potential let gains. update now, to on massive I AI Prior productivity new

So do, monetize one surprisingly, while points. you question some is our embed of asking the on business how most through differentiation Let lens will of in address early framework we techonomic not question are AI consistent everything AI continue me we and to leadership? head product including proof that model

distinct For AI monetization, we stream. value see three

AI our design demand explosive for and through First, chips. in the growth participation

which by pervasively automate through Second, and our we pioneering efficiency AI-driven transformations, workflows. third, we call our And stack, across full Synopsis.ai. optimize our embedding AI EDA as internal own

rapidly, are application. Use for stimulated designing all are companies cases vertical for AI of number by architectures Let's AI chips. optimized specific Novel multiplying, markets, as wanting start chips. the their AI solutions proliferating with are

that estimate parties will market $XX for exceed by chips to today's billion $XXX AI billion $XX Third XXXX. billion

the trillion this $X growth sensing, Smart Growth connectivity, and are storage, thus entire to surrounding market new In these quite of Everything, era AtoD in converters, turn, chips by for for credible. semiconductors drive power pass management, semi cetera. in et XXXX predictions DtoA

We are benefit. to uniquely positioned

basis of In advanced is design throughout already In chips They a the Synopsys unmatched trailing data, chip accounting continuing this. banking and core ecosystem, Synopsys, our protocol. driving growth leading need a as also well lower tools, see process Designers $X.X value in IP Synopsys faster the new, nodes. stream AI for semi requiring are designers. at decade. portfolio leading excels at particularly summary, interface billion. this AI for We XX-month EDA to enormous on provider over AI capabilities on the the are power chips amounts most interconnect

in chip This and the state-of-the-art reductions Let's achieving automate relentlessly is terms from design area advance have led starting flows, sub move to and weeks we simultaneously schedule design, in months Synopsys, ever Sassine, power since. chips. Using by XXXX, incidentally AI-driven our our report pioneered customers to entire speed, of value our second synopsys.ai. stream, AI of results also the to while where better

out using the of commercial vendors top the and our already is passed production, AI. continues as Today, February, tally our XXX rapidly. reported solution. XX tape-outs customers semiconductor that Synopsys.ai the XXX in are testing crossed In one we our of Nine using tenth had adoption

semi doubly that is industry a the worldwide resource shortage. relevant this significant makes What has

Usage parties full flows a AI-driven gap of XX% be in in. engineering XX% Chip first recognizes to Initially will multiplicity verification bridge National test and stunning EDA Synopsis.ai, in optimization, the XXXX. in to rapidly design is seeing AI-driven design Third comes commercial for Acts automation results. help between expanding industry's suite, estimate we since as That's AI and XXXX customers the critical of the Even this, added design where gap. have are now adoption. launched by

quarter, for to and time double-digit are Customers cost verification in up faster Recently, XXx last our In custom also demonstrated reporting XX% have and turnaround design. we than improvements the analog Synopsys.ai test customers engaged reduction. silicon coverage. more

more top completing custom of manually stack, One our used Synopsys.ai extensions our circuits. soon. our manufacturing achieve X% are AI Custom optimized crafted Compiler customers coming Further to flow improvement over performance AI-driven a

But used digital growth points adding driven confidence back its implementation but in has moved us early leveraging tools renewals, prospects. in long-term by Synopsys.ai. just Synopsys.ai increases high ramp, proof more XX% to We've to economics. Synopsys.ai starting revenue subscription. from underlying recent growth significant give is core now customers several value for the Synopsys.ai than often experimentations to project-based

to competition, generative which we AI. quarter, up brings full-flow the Synopsys.ai, XXx displacements versus multiple driven me by saw differentiation to This to productivity

harness in technologies to key assets AI leaps a Anchored for disruptive capabilities in Gen history, Over AI is productivity. in developing deliver generation. to in years and exploration catalyzed Gen technology. have design innovation we with of intend advances Synopsys see model-based solutions this portfolio, data further design opportunities design Synopsys.ai. XX-plus We now such experience delivering into assistance, our unparalleled

broaden On error-free flow tape-outs, augment architectures in words, other the our Gen value, in Synopsys.ai. These highly accelerate choices the opening intelligence in monetization new generation. will dimensions tuned This automate design from spectrum optimality, many some new AI to techniques additional multiple the options to capabilities opportunities. exploration, design from optionality design customer and early represent moving will further

elaborate stream, me our quarters, more map road which efficiency monetization transformation. on coming the our We value operational in brings to third will

significant opportunity an our eat ourselves, customers. tasks. ROI focus and higher can our intend processes so own to for that potential across see We, our employees company efficiency automation AI isn't AI We truly on operational the Gen restaurant, to so speak. just at and

is are is strategy the experimentation we AI learning on progress is fast and strength Overall, in monetization. on and approaches. call AI new full he great business the rapidly our swing, our Sassine it and Q&A these on and Our very focused as have challenging journey, of to for

at a strong of and and give out now Automation IP Samsung momentum roughly at Software Compiler me continues on manufacturing at momentum and Synopsys-enabled segment XX% with billion XX% increased Design of number our around first business, of Automation, delivered share taping Design grow some the Fusion NXA, XX%. and to customer Starting revenue customers Let saw and segments about $X our Design Integrity we including nodes, quarter. its TSMC XXA. NX to Intel with leading SFX first color

the core Compiler at deployment chip advanced design, semiconductor leadership and across multi-die first stacked Fusion at translated HPC Transitioning smartphone. on node XD wins into key IC companies. achieving also design to industry's XD advanced both hyperscale momentum verticals, has platform our heterogeneous for continued

processes. accelerate our ecosystem key Foundry and our including design collaboration standards. Of leading XD multi-die for for qualification latest foundries, We design system also multi-die Samsung enablement, advanced deepened support we flows to multi-die expanded for note, with

large to need our QX, for time-to-market deliver and for Cloud verification where AI AI the HPC In a provider we company. for deployments chip gains verification, acceleration prototyping at move Synopsys a RISC-V engagement a a paramount. Let's differentiation HAPS with won hardware-assisted large Zebu continues customers. is substantial chips to and and hyperscaler saw

AI accounts new adoption our chip leading continued which for of with multiple users, to gain solution, SaaS Cloud strong deployments. start-ups, XX% SaaS Our

We design which to excellent partners with closely our of Design in IP, of revenue. enable our most is process nodes quarter to ecosystem. turning some advanced an had XX% the roughly working Now the

of and this manufacturing a multi-die systems long-standing and our week, IP Synopsys partnership and Intel design SoCs for and advanced the announced speed EDA very Intel in strategic expansion of to significant Just processes.

customers ecosystem. NXE or also well Intel's Synopsys to customers developed and X key teams Further IP as design Samsung portfolio is multibillion Synopsys comprehensive XXA for node external This portfolio QX, IP enables and as technology. a wafer with for this now X.X the their of the foundry choice manufacturing portfolio dollar the ramping essential processes. Foundry's we IP process internal advanced announced an of chip supporting IP proven as filling of agreement by of powerful and IP extensive and accelerate system fabs IDM silicon industry's Intel to all of and in for process broadest supplier TSMC's advanced

In drive IP. driving strong our automotive, autonomous for demand ADAS continues to systems

all, in we in we design won ADAS on X-nanometer quarter, design XXX X-nanometer at exceeded IP first XX sockets a have our than All This chips. won automotive marquee more wins and OEM.

Third, results. generated business our are XX% new Gen imperative macro environment has Integrity innovative originate automatically software, been code for submit code segment, our code, analysis AI quality from offering continued delivered develop challenging always rise our the instant Racing code whether AI open GitHub to the ChatGPT platform. risks to software and AI as enables on represents with projects. code the The the source for critical. solid code like in security Software forward, analysis which snippets SaaS feedback of from may API such new to continue Polaris revenue. assistance big emerging. API And the in copilot Against we solutions risky and receive on enterprise developers

outstanding had our execution results are QX year. strong confident we summary, and In to in the close financial and operational

for raising non-GAAP margin share op our are earnings per full We year year-over-year expectations. and as revenue guidance well as

the model chips resilient customers that and a growth. business investments position future and have in continue to our them We systems for prioritize

leadership, And edge products. partners We and least, our invest commitment. their catalyze this new multi-die and last, certainly just secure state-of-the-art decade the in employees CEO. suite to and solutions, and welcome thank as of to IP not but continue our Sassine like AI-driven EDA to I technology am smart, passion would design help our for leading to delighted safe I

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

continuing congratulations, scale company and Sassine. to you to of transition And forward Aart. I CEO as you growth. look Thank the next you, partner to with level to the

EPS earnings. range. to was high revenue above of end results. our On another quarter the and QX outstanding with record was

with by EPS. across With operating non-cancelable leadership We who raising robust continue through in and our our resilience billion semiconductor of continued execution well, our model. $X.X business, backlog, and revenue, non-GAAP we and improvement our stability which confidence to our invest testament a activity segment, to design continue system and position execute business year the and customers, targets to chip our in is the cycles margin full for are time-based

third generated were earnings stated. resulting are share non-GAAP Total I'll All revenue GAAP comparisons otherwise now margin Total per and $X.XX costs $X.XX of non-GAAP operating We non-GAAP year-over-year were unless $X.XX, $XXX XX.X%. billion. were earnings billion. total were expenses costs of million, expenses review per and share our quarter and results. non-GAAP $X.XX. in

segment Now was Automation was Adjusted XX%, Design up onto our up revenue revenue $XXX Design driven million, operating by strength. margin billion, IP XX%. was segment adjusted Design Automation was segment. $X broad-based operating XX.X%. margin XX.X%.

to Integrity was Due now in Integrity margin up our XX% this below $XXX XX%. on segment, XXXX Software to operating to million, impact we be revenue expect XX.X%. continued and long-term adjusted macro revenue XX%, of Software was guidance growth

for million buyback. generated cash. cash in We million and stock for to operating Turning cash $XXX flow used $XXX

the of $XX and We billion cash total and quarter balance ended with $X.X debt is Our of very investments sheet short-term strong. million.

guidance. to Now

expected communicated, had half. we previously a As strong second have we

We earnings. margin revenue, our year raising non-GAAP and again improvement are for outlook full operating

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

$X.XX $X.XX prior to when non-GAAP costs fourth $X.XXX next comments and total billion; between $X.XXX total report quarter: between GAAP with earnings earnings to quarter. billion and non-GAAP years, costs and and between will provide billion; Now $X.XXX of $X.XX billion guidance $X.XXX share; GAAP Consistent per for of billion to billion; targets expenses and additional expenses $X.XXX per and $X.XX the for $X.XXX we we and share. revenue XXXX

and conclusion, raising and record Based outlook, for strong delivered are year. we full revenue year-to-date In we quarterly on again our targets earnings. the outstanding results our

robust We strong our of cycles our leadership through see the model. position reflecting invest and time-based and the activity our continue stability to business by design segments, continue to our business, momentum in customers who semiconductor resiliency across

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

take our Jason with Thank you. Markets. [Operator We'll first Capital from question Instructions] KeyBanc Celino

Great. maybe AI and Thanks can the and sorry you've Frankly, spot to my Sassine, your Aart, don't where well put run I for frame with well deserved. know And how on but taking you question. to around been closely Sassine, begin. the you vision here, working AI strategy?

Sure.

design started it. And quarters First, cetera. mentioned using into point. and you about Synopsys the was stages. And analog point have buying see Synopsys.ai, frame, EDA test, we And in of no couple stage many, the value us that's time at had talk mentioned, And as to does the using actually applications. Around as in production that at verification, the solution number, customers AI about already in Aart customers early XXXX it as journey of that, the customer high they're the at we expanding pay we're last subscription our And we're actually, and of this time, as a have where impact with and tape-outs. And with now thank our willing stage in seen you At impact his we manufacturing, you, Aart custom, started many in for part impact license. the their when the the this et saw remarks AI. they was space Jason. early XXXX the the the as AI the time, AI XXXX. talking I of business one around Manager industry General EDA for for our

that's it themselves then No, renewals, I great. because from the my was Thanks. mainly compute? that driven follow-up, increase more to is brief seeing you're mentioned a this think the upsell tools XX% some this the Okay. Is because in AI. And or related core the of of of

I missed increase XX% the the first sorry, of part what? I'm in the question.

mentioned I it? in heard was curious you renewals, maybe of were Aart some or on missed seeing that in think XX% the I increases value. I that drivers just

there’s the absolutely adding Compiler, selling that yes, customer cetera, on system money new money, agreement them. seeing, system two factors. et technology Time, Prime et Fusion the AI based we the is are in pull-through of uses, And that our the We One, a AI are cetera.

an a only incremental not and upsell Synopsys. are their it’s So renewal license, of pull-through customers it’s the that the adding value to with

Okay. Great. Thank you very much.

you, Thank Jason.

Mobley our Wells take with question next Gary from We'll Fargo.

questions and to and you and for both Aart Good the taking Sassine thank the afternoon, on congrats transition. everybody

you. Thank

into since renewals left renewals license on baseline including these where probe rolling want point of sense into many up per And many AI discussion how for to up last wanted I went want a AI? just a pick have get maybe maybe I tools just to from subscription off. design of to the how renewals. you now I to license come are

As about you know, EBA average three an years. is contract

So started those customers XXXX, a it of renewals. customers in with we number included have and their we

in it already a So contract. that including first three-year with of stage their customers, we're number in

Okay. the you we to that IP past, quarters. I segments. business, quarter-to-quarter for move margin called topics in the to trend business trends a the out in change wanted margins the the different now downwards past you op in but for the for have volatility Thanks the I the for know different that. and with two trend operating

nice that seemingly IP So revenue the with conversely, showing gains specific you in then maybe business the Integrity business. can if And much to not to speak Software you're ramp.

to So it integrity to occurrence and maybe soft or can relates OpEx there the in side? controls as under speak you the

Sure.

Sassine and in Aart the this drove think I So organization. that it -- is is change the

got what is on going reporting, you're able our segments. see we've and more that's segment comprehensive three in large to So why this

a portfolio about on design And business building for we customer. really for each about an different as specifically, Aart IP each think talk different prepared each foundry, his I for if new remarks, we're node, that talked in long-term. IP out So

So And specific we're in think when an a of dollars us as IP. of with specific a agreement for with investing term. customers, signing we're signing constantly contracts amount

And when IP IP the is the integrate pull when to customers is design down their that on into design. the needing based

with op reporting. And segment we always time, corporate you're seeing slightly you're that is, we've what what our looks expect like called lumpy lumpy, our IP below see over margin. to now what new able So is margin

So the we're be the we seeing IP out, down. into we customers and expectation their understand deep hasn't of are changed. designs, And as timing looking pulled would

plus So business, we for decide. about so deeply incredible involved asset our in feel that to strongly it’s us an customers strategic and be engaged

on we’ve view a strong op So got margin. positive of that view

For scale business pull-through we’ve and the of the that seeing we that on you’re we’ve been about Software the frame. for talked QX improving some as in Integrity, focused in margins business, time

Thank you..

Thank you.

We'll Tilton Wolfe. Joshua take next our from question with

questions. Hey, Thanks taking my guys. for

guess, I role. you'll a new but guess, congrats the be Aart, missed, on not First definitely Sassine and

I'm Not like disappearing, Just clear. right? completely to be

some that model of bit could earnings expansion voice next question going meaningful or that as is will the seems of to like just on drive guess place. what margin More I a levers come calls, just we're first you January, of my a have do you feel your these Maybe to pull either regime are definitely. differently of in maybe it like can you in it year? things the new some some

we start Aart then set for of out this for of the journey vectors was three What what company and forward. like part continue COO been company. years, appointed really when years, and we I later call a we'll as priority three of the really I and pace moving momentum journey, that been to President, and last it's the I've XX the Josh,

how efficiently ambition; second is one growth technology the first innovation. scale and scaling focused the one a The as do is three, leadership and company; we on

tools, margin EPS. grow in we they're while cetera, And XX% et solutions both all and results, really to this et XXX that that CAGR and CAGR, about, if you revenue a design doing points the talking look are like Over of of IT from period at IC the amazing. non-GAAP we're time, basis XX% XD industry-first And cetera. operating pioneering technologies plus AI able multi-die

look the demand So ahead, cetera. chip smart, at edge just the in everything it's home, as as activity, market, we car, AI everything compute, driven a in X, well in as a where cloud you going either as January that the requires commented, semiconductor by time the the smart or exciting, data industry, continuity et pace more is the so center of

created So on it's really vectors. all continuing that pace of we three momentum

committed year. least guide That's guide the short We've, add half improvement the would but I of basis And point XX the is a year. second the seeing in will that to operating of improvement course, and what improvement. long-term margin at XXX you're long-term next quarter, in a we're

to So that. committed we're

total effect a average? pie. piece out of follow-up about perspective, Super the SIG buying of business the investor a as helpful. that of bigger faster SIG the just was growth track. I Like, and we the how you do guess, expect And have we color should from think be little on we than shift just core When I up us EDA, these above bullish portion think guys an think back quick kind there. started corporate with that's to help could assets, we I lot all mix a take the see maybe a becomes this nice But this when, SIG growing

AI-generated remains which is need and software SIG with and behind you as its thesis that actually, developer enterprise industry, unique strong or their really can And the over not last at XX that is now. software the is seeing right you’re code strong, are to and and argue right a is so for it ensure in or stronger is quality in slowdown that headwind months industry, products. now, any The security. you’re Synopsys to is what future very using the happened What especially seeing software the the secure

it’s any though we the part at last you guidance even XX% headwind due now Shelagh it of lower said truly mentioned, be about facing we number, we’ll we’re slightly XX%, quarter, are not it’s or as portfolio recall, end the and be but – and will that the market. the the but And the the not below for if we’re speaking projection execution, to business, long-term of to in

Makes guys. Thanks sense.

you. Thank

Vruwink take Joe our Baird. next with We'll question from

congrats sources AI maybe comments, the wanted and opening big monetizing market and three Aart, that's customers. Sassine and of more to to market Great for chips start your I that Aart. just opportunity in growth

maybe share AI products, wallet Your Synopsys that's internally? then you employ influence or comment when the together, because first I I things days add long-term as on and early how take lot it how present meaning could guess your things framework margins. XXXX back can a framework of you just AI as debuted? we're these you for higher that can financial all of those start to certainly was in not when

users, want going exciting because growth financial there's focusing against and fantastically way have more AI, of that this with that mean ops power, all Well, continued we that basic that way margin. on companies have data. way have our faster, communicated end is is wave number backdrop have and to you a I gradual be to in to are one lower improvement a many we're of because wants chips that outlook systems all And ways,

that all and not before exactly out going it's opening because right has nothing generations limited? together, suddenly stacking What difficult, in words, want them expensive. the it. But no, the close is And unhappy nowhere this other days drove may technology that than entered. will semiconductors around but not on XX immensely the ability of think Well, feel us Moore's is better changed more. whole say, architectures with there there now. the of now a And In then that's And what Law still were over have is that because FinFETs changing industry you similar up. what vertically including the the space that were high and is at to is entire we've to are early be super that I And well, bring suddenly the growth. chips is they we Still

so not engineers world the to way because of the all is are more is And engineers solve smart more is automation XXXXs we this. only relevant. going limited, somewhat as Again, drive that the And has this become notion answer that's the saying given to of of another supply 'XXs, feel in and difference everything needed. design shown any itself more 'XXs, complex, than

smart a goes that lot there's well, can point line little on how portion or inside? we that Now the at a can accelerate the in anything time. And that automate are in is, directly of that processes bottom we learn. to And we our obviously,

of figure to is So directly job Sassine that to is line money out right? So circle bottom much AI how active. research, that into the goes back very

renewal go I great. and the all Jason That's Okay. about asked back, wanted anecdote. to

for customers What more our evolving verification, suite? things full seeing Synopsys.ai so experience, And new it mean you AI think emblematic could I route a kind pretty been guess or far? I typical analog pretty of as what if renewal? do on the maybe the placement that's proof of interesting a typical see one. has is, is more test, my question points renewals how XX%, get like is that that

of may early have struggling not enough Yeah. the and the licenses, AI, were compute; were with One, not I customers In what EDA may stages licenses. things. have two, two I enough

given see. compute . out our ways multiple On but value there to able be of they customers that that can figure the most that invested, the were side, are

individual combination number the started is the really that -- under with the engineer an licenses customers, the out side, hood for AI reason pulling licenses to job technology On engineering EDA because compared what's the of AI the were trying is an of of needed figure we project-based, to with effort. more we far

that to for adoption order providing in, XXXX the part it easier So and to around with to that we after customer. in started of broader subscription enable experiment the and it, license it came comers we let's up, learned And as wanting from scale monetization call Synopsys.

As I well. as two AI selling plus technology the on the sites, said, selling of monetization licenses incremental more

remember, renewals, have renewing actually though, have many. Synopsys stages, Still are subscription pulling corner license say of many the terms cycle. around We that a I and terms through renewal was of license. But and in gone renewals AI those their we have with customers XXXX and of they when now early that’s technology X-year more cycles just in added many

you Great. Thank all.

Thank you, Joe.

question Vivek of next America. our take from Bank Arya with We’ll

and Aart new to best Sassine roles. wishes Thank your you on and both

you. Thank

had a near a I and longer-term question. So

IP, maybe think your this design flattish near-term I sales look the up so right, on So I are year-to-date, the X%. far model if when basically is year,

is when your see why we curious, a I'm target, to of I then at can basis? it think this So annual which And business below is well growth kind in expectations? get your mid-teens long-term grow towards

it a a we customers, those term with business, pull the really the is I based the lumpy described design. dollar So and a customer of is on and downs then signed amount have before, as contracts timing we

growth refreshing have really over the chip schedule pull are based blocks. the in it's it's and contracts we we IP the our customer confident we're So downs near-term horizon. robust because long-term on and the signed But downs with new and pull we activity, then IP of that customers dependent. in lumpy is customers. And design delivering delivering really see expect constantly time, Vivek, business it because all We're

center, to Will decelerate, accelerate? for And the years? of have pace? your way will to it's Synopsys follow-up, digit, really of next really traditional All what a the of at whether it Because it three consumer grow Because semis, parts a AI your for of but sales right think that it think other trying low enough data industrial, Can to my help when to is growing, that's continue stay Is right, of XX% at the sales. to to about lot slowed I they I'm down. look double is this right. two or mid-teens? mid-teens right, growth parts only

curious, this I'm the of is Thank help mid-teens So this sales AI you. three to two continue grow to Synopsys enough at years? space over its to kind next

early that we we you perceive for comment, the of in overall, that strong coming you're business a year guidance time, of At That's said us. year. that as a should course, is the same see course, right? very one a too shows for a ask have degree end year, we momentum variability. Just fundamentally, talk strong we at But that. we're in as asking, good market From we about Vivek, gave any preamble of big really out we what question QX, the mentioned, But there's don't fundamentally, time. are a We that to why in of that at changes. to

And are that declining same out far the at so we're too major changes, I guidance again, time, wouldn't any think here. there

in two I'm AI excluding the I $X.X giving insights number Without what months. growth curious Right. is because guess your billion business, the the on over last gave guidance, you about

Your total...

Yeah.

good A Okay. point.

you fundamentally to have These as successful. for Sorry, are of foundry I that very us powerful a quarter course, for earlier across IP. that talked That’s We didn't catch board. of the they foundries last we period about it provider strong and a necessity to is the that. four their the One, long agreements AI, new for just be with over establish of is things. a technology. Outside one takes business job. made of Remember, time, the have, node, be to successful

you need to Secondly, the have capacity.

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Thank you.

next question from Stifel. Ruben with We'll our take Roy

Aart, you more congrats you going my as hope forward well plan I and Thank And here. to see from to Aart we get Sassine. and to

I see gig. the at wait to you

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I think that? better the for of on market. or how the complicated of of wanted the can now, is market? Clearly, around about do right you pervasiveness the do slated across it decade it very for semiconductor I $X well this is trillion of than talked would pervasive as end days, but viewing be of think of tools design AI, think $XXX ask I to about design embedded AI that sort place the Sassine, think. potentially Early the XX% you're the generative large chips in that way But AI the kind with certain a entire designs AI pervasive by for of helper more you market route and will game be to mechanism So billion semiconductor, portion semiconductor in are now

it will It the than in be that. definitely But be more design. will pervasive stages of

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So in on chip of opportunity definitely AI design. in terms of is overall impact the the stages early

Very helpful.

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but opportunity correct do of our it really pioneering broadens chips Sassine and can as So was we said, our space, core out. the get it

challenging. is that Now

a guys. Yes, hope follow-up. the it's interesting could is very Thanks ask all what discussion. detail I for a quick I

standard overall accelerated feeling EDA. EDA platforms of new obviously, the demonstrations Some get show days, started put place your productivity customers your on Do tools? your faster for to early semiconductor server could in for than have farms use semiconductor EDA some in current these that, running and to those more tools of you compute we additional their activity design view own What's out as there as systems as platforms that? as or but efficient accelerants

CPU, use tool we a simulation other of functions number workload. You're some it introduced It's right. the verification that you a to We and right can acceleration and some another of as observation. GPU methods. accelerate then were Think in primarily

yes, you think it Ruben, that can of So way.

it. Got much. Thank very you

you. Thank

Griffin Instructions] question take We'll Jay Securities. next our Vleeschhouwer [Operator with from

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Thank Charles our take from And Needham. with we'll question you. next Shi

Hi. in the Also industry to are. It's as you semiconductor to great EDA Thank been Aart. and squeezing me and Sassine. of honor the you for actually congrats, really pleasure with work congrats my and luminary

blushing. I'm

Yes. And congrats Sassine well. to as

next in big QX? Or my bump kind the should in guidance. somewhat expecting mid-teens. are long-term will to Unless we of long-term below year. sound get we I Thank doesn't of you. first on too wanted Maybe that be But in like you guidance question. we going expect this kind guidance above so growth? future. the forward That a year, is the your Looking this been question. with my year, the seems a to to again it's growth to It because be single-digit long-term IP like are maybe It revenue. ask tracking working like you right far tracking

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XX and year IP. strong full we a the in at and it do months, expect managing We’re QX

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taking macro to division but bearing some Sassine, Sassine you Thanks and can explain so I fruits. new actually, little the quarter. and SIG, happened for the before, is bit mentioned go exactly I the questions maybe have right some aged Is for on this higher Aart, slowdown. know for previously marginal this Shelagh. a you've whether the more could you. strong go-to-market congrats with you conversely, starting what the Hi, regards strategy mix? And another margin Yes. driving this now? And this that of with is into demand what part quarter perhaps Thank

analysis the two SIG cloud-ready One which priorities an X.X Yeah. and years is is SaaS, cloud-native building dynamic and for system. is out static software set its platform, two ago. Polaris composition We years, out which about integrated our

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value enterprise So cetera customers. seeing, we're just particular, et that's tighter, really for a from budget the et not standpoint. in It's share, impact our the market cetera, is

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more Operator, we question. will take one

We'll take our Rosenblatt. from Abernethy question final with Blair

much. very thanks Well,

Let me offer on congratulations my as gentleman. well, the transition

are seeing interconnects? IP if of where XD it just in you it us of give multi-die sense your wondering, the a the can years? biggest five how over thinking and say, next, Is three investments -- Just sort the are you're on this you about to business, segment? IP where opportunity I'm Is design you chip

individual On of demand. for constant with one speeds, above, therefore, meaning technology of And chips. all new development those that would fast, questionnaires, still continuation the and even the come very new is I'm bandwidth feel new

spin decade switch absolutely a my connectivity, it You’re of counts the a the of the both to of on the that fact for energy is of and dramatically aspects XD that, in right of in decrease pins perspective that the throw number XD because terms precisely the improved to one in domain pin success. speed that and has opens on actually

– Now the the that car that while midst is of data the the many enormous what’s just cases, fact in is of constantly bandwidth AI is treated dynamically bit a to amount speak. needs the that little be so about and driving, different It’s to processes. in AI

wonderful customers that that end do know means many new more And because more themselves. a lot of And these variations, well, chips, among better. design we the things our field while course, that among the so as there’s says, are world better, all differentiation happening for all more of

are words And sure. these our field so positive for in

so coming call. with you much Look Thank talking you for over the the days. forward to

you close for Thank With attention. your that, call. I we the guess

to have good talk you. you on later For those to of rest a of we're today, that will with day. again, the connect us ready And

you. Thank

presentation. your Thank disconnect. and you And you now may concludes for participation, today's that