Synopsys (SNPS) 4 Dec 242024 Q4 Earnings call transcript

Ladies and gentlemen, welcome to the Synopsys Earnings Conference Call for the Fourth quarter and Fiscal Year 2024. [Operator Instructions] As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Trey Campbell, Senior Vice President, Investor Relations. Please go ahead.

Good afternoon, everyone. Sassine CFO. and are and of today Glaser, Shelagh us Ghazi, CEO President Synopsys; With

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

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

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

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

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

addition, call the the turn remarks I'll our on that, call. With conclusion posted the at be the to website of Sassine. In over will prepared

acquisition over targets, transformational afternoon. growing was year the caps achieve partners at a also year years. FY We to a EPS 'XX bottom with XX guidance for finish the us year, another the it X years expanded to This to billion. We've last took a XX% CAGR we also line, mark, $X our Good the focus Synopsys X midpoint mark. big pending down QX the growth after strategy our doubled Ansys. record Integrity strong the big on exceeding only and business, successful revenue a thank sale company. billion with and years FY with billion silicon the our A team. the for 'XX, In crossed of of we of customers, the systems achievement, our Software to We segments sharpened on and Synopsys. the you delivered $X entire which our is year-over-year grew revenue considering XX% crossing $X

minutes and to more Let some Technology silicon strategic will point Synopsys a for highlights, from share financials opportunity in a is discuss inflection at unprecedented me systems. few that business detail. take presents Shelagh to then the

in which momentum era is success systems. Unlike and are electronics semiconductor systemic software-defined industrial, our of underpinned The technology AI-driven to technology design industries are R&D, of relentless and pervasive turn recovering drivers: AI, fuels and at starts broader growth be intelligence, end proliferation slowly. the a nature, more of We innovation demand scale in pace, reinvention multiple mega Synopsys' which which secular in cycles. an trend market, tied opportunity. expands in cyclical operating and auto can and while our by the like compute silicon pace, complexity the is is of AI accelerating HPC chip continue consumer

However, AI be Synopsys realize all industries are their future, will them and in partner a ambitions. investing helping for their strategic

other progress proposed has which waiting and remedies. competitive electronics can to and towards announce investigation the of continue first expired, review expected. marks further XXXX. We're to into strong pro engineering planned are the remain customers and in conclude and regulatory the under our the as new their I'm we agencies, this milestone the with making important with to overwhelmingly cooperatively half into close, also R&D fuse week, solutions insights staff we design an regulatory need supportive FTC deal. unprecedented working expect This process our of period of HSR of adjacent we AI-powered for on physics, proceeding is products will Ansys Together, areas. the Our pleased acquisition that new that review deliver giving teams this growth development. The

revenue double-digit high XXXX, to operating the level, growth we expect deliver ahead to and Looking margin. at XX%

balancing uncertainties with in while some discipline manage operating largest macro pragmatism, readying and to history company we guidance our excellence are given acquisition more continue execution, on our in our the and focused will guidance geographies. Shelagh remain will detail. for in the We discuss

highlights, revenue full with year to was Design QX starting year-over-year, segment up XXXX. Design and XX% Automation Automation. up Let's revenue versus XX% business move was

solutions improvement We now XX with and turnaround to up and faster Our hosted a of SoC this unparalleled LLMs. copilot traditional provides results. leveraged HPC using in deliver of capability Xx customers Design includes seeing our to faster open are on EDA NX. and and the insight optimize been portfolio essential rescaling XXXX, with Compiler. Fusion another power coverage leading We've also the adding and production to products on-prem Fusion blocks tape-outs design our of expanded to LLMs assistance we that taped have across beginning. XXX versus source across an evolving DSO.ai AI. But seeing the a deployments Xx do. engines achieving to AI time. We're extraordinary the their are the ubiquitous over Automation XX% pioneers a Since our bringing Compiler and flow tape-out, the augmenting as commercial we've with our evident on of on part NX both leading Compiler used XX% DSO.ai in TSMC to optimization Synopsys.ai only time flow TSMC knowledge approaches and novel U.S. AI becoming AI our leadership XX% to new everything Synopsys.ai was hyperscaler some discrete up first chips. deployed holistic by out results customer platform. now industry-leading flagship capability QX to is cumulative of are customer and workflow now Customers customers also from delivering hardware the in SoC have utilization products. We have our customer in accelerating, to products, DSO.ai Fusion is generative X redefining with to deployments

architecture, deployed on comprising and for power be simulation HAPS design that UCIe this XDSO.ai for In AI so another designs will multiphysics part improve CoWoS out but on to multi-physics multi-die that of integration is Acceleration solve. Today, adoption packaging. The and also only chip designs real for design the exceptional ecosystem in transaction. address integrity XX% platform. group a are multi-die a Closing use solution in of ushers demonstrating architectural and chip is multi-die. will Test complexities the Solutions, customers a partnering XX% game and of fuses automation hardware Management, HPC supportive case, industry's that estimate to customers, interposer massive in proposition of record Synopsys Automation, by the predictability revolution in thermal tape-out, for of and the multi-die XD with QX, increasing semiconductors: advanced but our design third the Synopsys. new we challenges leaders environment also trend like TSMC the We that a multi-die Compiler, positive key a yield daunting the Synopsys.ai. of unified and why PC ZeBu analysis lines. to had product end-to-end using in was of opens Lifecycle We're and of frontier of completed a domain unified That's also momentum TSMC parties year of Ansys small on are a both designs cusp Silicon be a multi-die Design with require value Multi-die nodes, manufacturing XXXX, for and designs. In business, IC test changer our multi-die. AI-driven

compare. with and HAPS enable HAPS continued, AI over new wins, EP XX XX also prototyping unique to and use with hyperscaler those reconfigurability large ZeBu of was momentum quarter, we strong software which deployed IP of flat value the IP, and we X customers of QX, prior X Notable repeat key repeat deploying ZeBu customer a QX system for saw ZeBu new During that platform. Onto than EP, for PCIe the among roughly had in customers very workloads. a in emulation customers reconfigurability X more our In all U.S. against customers. customers the a cases. because implementation for bring-up Design a seeing year

and delivered over CXL encryption robust over wins X. and X interfaces wins adjusted integrity activity we accretion. and full customers, security another design PCIe with of be operating semiconductor growth, and for high-performance in to continues points critical QX, computing with high-speed XX% X hyperscalers Design IP PCIe the spanning X For X for to data be margin need, accounts. Protecting data revenue saw a Design continued X year,

QX, We and robustness also products. achieved the continue demonstration In first to we industry's the Ethernet at multi-vendor XXX-gig Ethernet push our technology in differentiation IP. proving our XXXX, interoperability ECOC of

this of the X or there and the significant quarter, year XX-gig we UCIe design higher with spec, XX% multi-die wins. increased energy, With We rapid quarter, that IP. UCIe and complete more the industry's than controller, PHY And ended wins no solution XX throughput. the XX-gig offers announced the IP This our only area. acceleration demand than design in UCIe secured verification includes die-to-die efficiency impact with for bandwidth on is designs,

title also saw achieved of for quarter We leading third-party strong with to SoC for manufacturing, IP automotive vendors. were automotive in features our Synopsys IP, markets. Switching the which TSMC's drive IP IP interface ramp automotive Partner demand the to advanced Award comprehensive IP, Interface at of an the as on for proud the most mobile continue USBX In as first, electrification, role world's receive for automotive wins great infotainment foundries. XX in we multiple an technology to and our to vital strengths second in fourth portfolio, industry we IP ADAS collaborative processes. We gigabit certification where our and the take on success acknowledging is TSMC's XXXX pride per Year

with company-wide design want to portfolio out, closing I the Before key power our win. a of technology highlight

decades-long maps Arm, our needs This to quarter, our aligning customers. of our we mutual the strengthened partnership road with

industry-leading Total SoCs before verification solutions subsystems generation As HPC, of systems EDA we delivering IP, delivered AI Together, IoT. A comments hardware and a accelerated transition automotive, partner Arm the mobile, solutions. and in Shelagh's with our key next few chiplets, integrating Arm are Synopsys we compute AI-driven PC Design, remarks. differentiated to closing and industry-leading across solutions and Arm

multiple business We across secular have by drivers. the growth strong momentum supported

resilient model to and mission-critical We customers' are business have our a very innovation.

our portfolio XXXX. beyond. With a I'll forward and greatest Thank in it customers' are igniting and We our our to to you XXXX the potential aligning employees over that, partners our investment accelerate ingenuity turn aligning transformative our for to to growth. Shelagh. with look operations and return We

operating non-GAAP record record an margin Thank by XXXX and excellent highlighted you, year, was earnings. record revenue, Sassine.

our with of heading We continue resilient discipline driven is backlog our are to technology $X.X business, model business confident noncancelable momentum mission-critical with and leading into billion. that across and a financial the business by our XXXX, strong execution and strong stable customers in our

XX-week had we $XX.X approximately or As million XX-, a to to each filed XXXX, few XXXX, mentioned week, a ending we Saturday X-K last on compared XX the revenue. extra In period in end our changing benefit highlight of XXXX. the fiscal from to are as October week XX October look an in to want changes into on we I the of Also, year nearest year.

a activity remains view given of macro design view fiscal robust, we of are China. taking balanced the uncertainty in impact While and pragmatic a periods, XXXX,

XX.X%, XX.X% drive non-GAAP approximately EPS by For to XX.X% expect change; impact to and or operating year week non-GAAP revenue approximately XX.X% XXX the growth XXXX, basis of calendar we XX%. margin extra grow to the and of expand excluding points;

margin billion, some me Let Total double-digit which per $X.XX full billion, resulting $XX.XX, generated year-over-year. total and expenses of share $X.XX across share XX.X%. GAAP year-over-year, and were XX% continuing were products XX% results, presented GAAP of a year were provide We on and with of and earnings are our billion, non-GAAP $X.XX, geographies. total $X.XX costs operations operating up all growth earnings non-GAAP highlights and in revenue per up non-GAAP costs were basis. expenses XXXX

segment $X.XX XX%, Design up Design XX.X%. our in Design was up Automation revenue Now driven broad-based segments. was and segment revenue Automation $X.XX XX%, adjusted margin by software IP was strength. operating by on to hardware. IP driven adjusted operating Design was strength billion, EDA margin XX.X%. billion,

of with $XX.X the We of to cash and short-term cash. Operating cash billion cash flow billion. investments the ended for Turning million. $X.XX year total was $X.X free year $X.XX and flow was debt billion, and

Now targets. to our

first in expect an impact fiscal $XXX current driver and and extra timing half expenses. In is half of XXXX, revenue, XXXX's roughly fewer half of which rate between of half/second billion; $XX.XX days We second the higher calendar split XXXX the flow IP the the of in between rate mix GAAP to based expenses $XX.XX second half approximately to $X.XX for driver billion to more from XX%, deliveries. expenses and XX%-XX% of current costs for versus first is than X per and first $X.XXX total drivers: due non-GAAP versus expect of is our to per margin XX-XX billion share; tax EPS on in operating split non-GAAP of the $X.XX first full and week non-GAAP $XX.XX the at GAAP billion; year free approximately the hardware of change, $X.XX the XX% the XX%-XX% XXXX of be XXXX; of we targets assessment weighted $X.XXX billion Similarly, half/second XX costs $X.X $X.XX $XX.XX to revenue billion; of resulting in operations and are based point our non-GAAP earnings billion, on the flow million; assumption midpoint; approximately X $X.X cash cash share; earnings non-GAAP billion. and of total of

Software cash million the our costs of taxes for guidance business. cash includes approximately for million the Our from $XXX of approximately of $XXX and Integrity sale deal-related flow impact

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

to to it our innovation and include release additional model. With position questions. XXXX, segments, and well press to resilient execution targets record across leadership a products XXXX, business non-GAAP turn are a supplement by reconciliations. mission-critical I'll Building on for relentless and we operator and customers' and enable GAAP driven Our positioned stable our that, over our the financial entering

question Vruwink, Baird. Joe today first We'll from take our Instructions] [Operator

I start, of to just growth underlying to XX.X%. XX.X% wanted the

prudent into starting I think the it I specifically below planning assumptions maybe for Ansys Is been to How is your close. any related went that's a your to recent know you history. updated just be mentioned possible 'XX? And creates? maybe you've and using just reconcile that ranges point change over be disruption deal FY transaction wanting budgeting the that around approach may much may the the potentially that to

thank Really, you 'XX, account taking for a FY the it balanced way the is Joe, for question. factors. looked we view into at few

board et And cohort, that it. These serving that chips, logic, the ways, refresh one hardware, delivering is still, the not one to The we're Synopsys The accelerator, like that be on IP, a products cycle memory in we of which in are have and tale the is are markets. They that's the trying cetera. think it first CPU, the they're companies semiconductor automotive, of X doing GPU, infrastructure But well, mobile, one the portfolio, et we're in as EDA, and rest industrial. the across they're and the benefiting the helping I'd our are build-out, let's AI market cetera. another out of incredibly market, serving. they're are a advanced their customers forget, serving beautifully PC, of to leverage many devices. there's for AI the it

still doing their given similar growth of that we're cohort. as R&D, level us, the fine, not to delivering to For but first cohort, tied for we're it's

a view. of point from market that's So

took And is on The China into uncertainties. in account if you we economy in on second particular, double-click macro decelerate. the continue here, the factor

layer that on top take the needed restrictions of You into we it expansion of account. to

the to Lastly, first taking half need massive into acquisition, industry. largest we're excited Ansys software but not the of we and engineering only for Synopsys, absolutely that closing company 'XX, our for this account the largest in prepare about so for

on with we factors XX.X% of a So still delivered last the decided you XX% and to guide we growth take into mentioned, FY that XX.X% all just year. as guiding, you tail these to account, pragmatism, they're 'XX growth

detail. great That's Okay.

It may mentioned anticipate given backlog, doesn't been on performance, some like strong seem briefly terms XQ you the what changes bookings, You based events XX how on another them. of what current $X.X would investments, the your really of in visibility you any next bookings and in high on outlook geopolitics. might guess various just it progress? have quarters on Based on year. question But around? views, quarter but backlog have period the Second touched come in ahead swirling up bring. I of next months very billion the that to may all foundry in seem just like your

backlog. When for because the the roughly was year-over-year. a pointing Joe, that's out another you, at FY Thank of business it's it the factor health we Because 'XX, $X.X billion. Yes. flat of entered

you So business on the that XX% the tells from call I it, another sign health 'XX. is executed we of the FY in that our without, to backlog ability want of deliver to burning

regarding foundries. to Now don't we're the want that comments doing various speculate cetera, build-out et your various regarding foundries, I to for the

comes they this of of every from and given are continue et bring them, these of Rapidus, majority across building designing IP on the do customers in go the the stage. -- and around TSMC. out GF, on a our how we we know, Samsung, TSMC foundry, foundries. it's But of business beyond, some 'XX Intel, board course, for IP in you on-ramp cetera, uncertainty As at customers the our fast speculation investing and But including

next Jason Markets. The from will Celino, come Capital KeyBanc question

guide. clarification a just on Maybe QX the

So of that the maybe the X that year-over-year you're coming down hardware fiscal maybe dynamics change. X I sounds pretty based extra just QX. you kind can quarter with like you couple a then X had It the it's in less an still, week QX, But seeing of like understand from sequentially quarter? strong explain but year first the for for seasonality on and days or less less

Sure.

QX impact the X fiscal days. So Jason, year got it you the right is and change, in

million. So $XX about that's

looking would I because our up X tough business, to Then of a really XX%. QX 'XX, fewer in just we have the with to QX account say 'XX. So compare is, days was actually thing obviously, back IP it's ratable actually, other of

about then have always IP, as we're and where you have we're building down. IP, lower have means about down building business quarter we we QX where be of where think lot going quarters the And but course, to lumpy, talk pull that pull you but and is lumpy, a -- If of a quarters we IP pull lower down. customers

QX for and IP. second and building stronger be half for we So to us, have then quarter much is going a a low we're

So happening QX. effects in it's X really those

guide to taken maybe Just for that Okay. group, Great. Solutions follow-up impact have any then out. And about divestiture and think a the Optical of what quick revenue could trying been just Shelagh. was there then divested The there? here

this. effect have So that doesn't on any

that business As part close announced, of we be Ansys will transaction. we our continuing until the

still included that's So in forecast. our

And next from JPMorgan. up is Harlan Sur

ago, the impact BIS Department put and restrictions. days to of on Two rules Bureau There Is there an Commerce EDA value on the 'XX U.S. any and of rules new were some updates out your fiscal outlook? software. on chain these rules semiconductor update

quick ruling as the the yes. Harlan, customers added entity is some are latest list technology and in There answer some -- that to got restrictions well.

I our all But Harlan, in guidance. incorporated would that's say,

incorporated So restrictions all of most those recent the are guide. into fully

Yes. my Design design your activity No, chip adoption follow-up, IP see to the your good 'XX. appears mentioned, be design measured all for by quite And to growth in you increasing then strong and businesses Automation fiscal a it's bit. double-digit businesses in I IP as appreciate that. as Sassine, starts,

of sector, would the your Design the relative new you see like how entrants more profile one businesses growth the to outlook? Automation We chip being continue recent. growth Like year qualitatively so OpenAI describe full year within and sort the guide, IP to of full your into of design

Yes.

So on XD. The we of most our a do the road continues investments verification the we making customer Harlan, our to -- needs That's it to software, increased road are map at that with that have base X.X X they're and a 'XX or of a pace Fusion they're guiding with as achieve, IP serving part map is is we advanced needing at look anything investment, accelerating. delivering, the when years, growth, infrastructure that actually that are a every hardware-assisted them customers offer at they is what growth FY first coming complexity, that design us EDA because AI dealing adopt increased that it at they one with of are to they're that automation, last to helped to the XX% designs that today across we from deal in we're are and where have for to lot over they revenue look the CAGR. And designing confidence and a excitement those tame those multi-die the order our either with customers with. that with is AI, cetera, Compiler, complexity be et almost that

cohort board, customers. the across adoption Harlan, seeing it's with the we're of that So

Arya question. Bank next of has from Vivek the America

I Sassine, the you is forecasting metrics you is starts, the design this you've curious, mentioned important look growth that seen the you I'm And AI. strong was design starts what imagine at in last that very business? more what overall year? in one your of especially in saw assumption?

Yes.

-- with only if So hyperscalers. last if semiconductors in and year, not the I years, last X at serving let's zoom look the we X hyperscalers to at look and

they're question mark with to there to investing their organically the With each hyperscalers, we investments are on silicon I'm and as one making middle of their and investments, lot chips these of you are as the proud workload a of hyperscalers. how listen sure, they these broadening building was every with they're one silicon. And investments. in much of optimize that by these they increased And can hyperscalers, so their almost increasing these continue around of own differentiate initially,

to serve market, to ASIC revenue with it that be that that see companies, at customers. delivery have greatly you're customers the into to trying that road if of don't directly years, we look of witnessed. accelerators and is that cohort growth our growth I 'XX slowing down map silicon that they're year-over-year customers, group delivering as in semiconductor to it or again, from increasing you from, doing companies, going mentioned, last AI our X Now X I contributed FY custom

much turmoil. how we largest going want in that 'XX? trying I activity restructuring kind they to customer, for outlook, fiscal your you don't specific look deal were at but level that through much And you a with customer, a at Synopsys to of restructuring contemplated your that appreciate are some headwind big that? And but you that I And of and when it. be how How they customer? a Got how you headwind assuming largest becomes are have your assume are to of year? in is next

profile you The X are a ratable pull that commitments. customers they there and they large is in contracts. our with committed the top we which of on know, customers, Synopsys, as meaning IP to one across customers, buy down and the board. generalizing, their similar, When comes have years, I'm of that very hardware. is and one, One layer And depending the agreements and those buy contracts timing have. the on the They IP road applies that but other hardware, to have. Then that's, multiyear map. the each related it to from and EDA it's depends we And over other X-plus customer

shifting pull pausing, some right. their of the the right, consumption, impact Synopsys projects, shift revenue does view, for from they're IP if hardware So their to down, their point to of a

pull you customer-by-customer see the shape our will a of down. that is at account dynamics 'XX you and lumpiness the So across board year guide taking the some XX%-XX% of FY and And timing these of on basis. the when into look

next question Capital. Gary Loop is Mobley, The from

more lot despite year income margin dollar you last guidance year the incremental each slowdown Based on revenue 'XX for line the a down it the of operating bringing to operating did in you're looks than revenue. projected fiscal XX%, like

my done is the Ansys or largely Shelagh, question read function proper in of annualizing of Is pace deals anticipation a acquisition? so last that the of year And through? a that activity the some M&A that is, of were slower

multiyear think on driving it's the I focus a in leverage company. Well,

more So you year. do about XXX like just to we're us our we development how basis And more across allow efficiently last the points thinking things inside R&D by it's board, X X walls, really our improve points their to customers improvement. them do saw efficiently. servicing We're getting

we on We've transformation, we're that in invested it software, benefit on journey getting think is so see as R&D. like sure we're across making have. driving heavily in, And building in a work that getting synergy. of across then bring that how some also that we'll leverage then it's are as digital AI, a of our strong multiyear commit how the as the you the modernizing driving we've that of benefit So we -- of that in then be core and then will things been so terms of Ansys and we're business. This work things I we terms do we we run jointly we towards modernizing mentioned,

Got it.

Okay.

Sassine, Integrity? was Just year that fiscal you Is a fiscal backlog billion. quick for clarification. Integrity? mentioned Software backlog $X.X excluding ending it adjusted of Software 'XX -- ending sorry, year lower for Or

that's Yes, adjusted.

Griffin We'll to go next Jay Vleeschhouwer, Securities.

of And the beyond." of just Sassine, are Could by specific done have would the you some of year you've Ansys? You taken? to how grew steps things anyway mentioned that headcount and you for 'XX you that be more you were "aligning about operations prepare irrespective for that for much your growth XX%.

number largest had in You also openings the of have X years. you've R&D

that your talk So internal growth more to those place follow-up. about you're AI initiatives for and putting prepare -- of maybe in just some

cetera. and billion, Jay, $X talking scaling and product and solutions Yes. We've that's of the to to 'XX, huge to it our our et company When Thank scale solutions the customers have for to structure comes our in pace comes which we deliver evolve in place development you, scaling, customers. And just how while scale to for we way part our it the innovation, about deliver FY well. continuing crosses market-leading milestone, effort need driving as our in as put we a IP order question. to did and and the business, to drive of EDA to around solutions as the company been

years that workflow we both do putting we're we have early some put amazing R&D, the X about structure, the investing our technologies some way benefits build our engineering we we is around how and do been efficiency, how company? There there we productivity the we evolve emphasis for So software. as leverage some that effort continue seeing second part technology out and the for as well and inside that on EDA IP and modernize on of focus are

Okay.

follow-up, might you on like, interesting and third call, made comments AI AI. on EDA the use that some a more with see customer-by-customer basis a and quarter for specificity As cases models about you that customer-specific more the

other vendors you and and and also Cadence the the domain-specific EDA for design. number of talked hand, other On more last about years, the more have,

long of there about newer those of the in phenomenon any so need So effect might to the customer packaging, your you to product do trend forth? could play Or is together? together, X maybe customers development, now have domain and apparently, it terms come specificity. services how those And your talk you How towards specificity. provide

AI, the of to to for With software that of delivering it's every customers of say, in unique want technology AI company to how monetization not learning as engage is their is only part Synopsys, technology. I Yes. and adopting that product, rapidly that

they customers, a where AI that once They you great quality in by is in. XSO.ai. customer-specific that the going This believe use data. They by AI is their and they AI workflow. where application, can moving their AI products for know, are complete and of say, family to And that own well. going the leverage their start workflow? all insert can better to the XSO.ai the AI models have use product deliver ourselves comes results, et assistant-type flexibility of have you want something own mentioned, you As delivering you customers expecting to better the new we've customers, was acceptance to adoption the a sits cases the The AI cetera? And inside not and looking what following achieve first come come therefore, to we that job in not at time or is inside I our portfolio Synopsys They pretrained. data took XSO.ai on step a the train our in done there. results, where to is the products. their the customers So asking very and that's capability based knowledge with

with investing customers and level technology. the that's in around optimization workflow are investing and our So our next a course, of of that

in generative that's you conferences, one, that drive The we're which is to going starting a customers to think window third matter. what and we back approach is is our an opportunity it which it AI think the AI. that to talking EDA context. And of years in going we and talk view, that et to cetera, drive, of in we that about deliver absolutely But at or completely deliver it we to when in sell that some business to I for software our different wave AI, any time our about don't disruptive to look ago, where were model about what in company, agentic the agentic X

cases knowledge that's XSO.ai, evolution use one is workflow, based assistant rapid and on the or agentic the third the and the the generative AI-specific from with use So optimization.ai customer cases AI.

next go Ruben Stifel. We'll to Roy,

guess, had I Sassine, a talk wanted bit I markets haves, tail the the versus have-nots. a little the about of the couple to I in of X longer-term questions.

up just love I'm leveraging now, some is been tools in this the cloud-based I any working your coming for EDA hear cloud-based concept of something changes in sort to just that over wondering, talked your IP is couple been that's direction, you're next that years, tools way? that the thoughts themes in know of designs, on you've for business or recurring about thinking providers model was wondering on I week. And the but leading AI of some ASIC inflection time quite that that. the the would more context of about of of of in recent One and how acceleration of silicon one times

Yes. talking while. for when more to, not talking a to about, compute, EDA, effective, been something we've and only about accelerated deliver Two delivering that's it efficient a comes things. to One,

at one it the may delivering accelerated that other their many you applies remember, prefer our for, of areas was Jensen's it's If flavor. slides various GTC, in compute from NVIDIA. And of that accelerated case, or X-step. GPU There, own a customers have Synopsys EDA to

factors compute, preferred your go optimization. can so you can percentages. can We're their the next it is for then performance And and It not be talking benefit. which into of that's Xx, phase, port you where software, XXx You Xx, performance. deliver you use

does everything for want our able be be EDA to of use that on-prem, on cloud. some available to referring customer to not our cloud, capability available you're they That customers, for that to burst capability. Now

and use the on-prem. if that it. a they burst, So because use CSP, which software are they flexibility when way contractual to they a they flexibility software, rate they our their bursting, that preferred monetize have we And burn customer, to decide our we to burst sell good to have on gives software us more on

quick and of deliverables. for recently PCI X remaining specific you design interfaces that some of looking interview And and that where a at that that IP. -- or with. I on very activity areas I around think models you interface you're about That's IP would should follow-up you on read potentially out the And The then to sooner and Is rather an CXL of be specific talked you're comments or the whatnot? play on it than can your later? helpful. technologies, like made good. working working something these Express you're robust, Very some some royalty say,

always we we to order change way point Yes, at in the look monetize. really inflection

On don't base It's and continue. we're we change say, I now see right up business and interface -- IP, existence, change royalty. the the will introduce the customer where to at use we since model monetization, a that and its been traditional going show

the meaning the model IP, new delivery. We does IP the going thinking you a chiplet and business standard you that that have a beyond a continue. the can start moment parts other will point beyond next start our or as introduce that of about loyalty, subsystem But delivery have inflection and is interface to

to very bring want are customers back but to I it receptive to it, scaling. Our

IP, as today, opportunities model. interface at our the and as future something the a looking investment we're and business our For And we described. toward I trends, us with look have just absolutely we the that's testing significant in investing in customers

is And Shi, Company. & next Charles Needham up

first China go of back letting question. questions. the for Maybe me ask want the Thanks to couple one, I to a

an stance said as beginning impact? impact looks but China the actual fiscal of you -- outlook. But grew maybe impact, corporate, related still line? a current you do like maybe very 'XX the more amount Or said on 'XX at average? the of have said you control China, it quite doesn't China it on something well fiscal do Or the Is kind expectation want in material? similar. the of Wondering in so 'XX? is the but how I material line that dollar-wise, cautious you what's question, despite FY with below is to Is going a in think think there still not corporate going characterize fiscal -- in is year. it's for higher you you it impact, more for the next And but be I grow to that wonder if the think year-to-year to some 'XX, take I it's

Thank to growth has absolutely China the X we restrictions. continue decelerated sell Yes. you, to you serve look years. X, it shrinking reason last if pool in the the due of And due One, to and is decelerated Charles. has our at and revenue X, can customers the on

factor. a that's So

continues is that decelerating shrinking to which the economy overall as well. pool is and no there in on due ignore So China the way customers restrictions. There's factor, is of to another opportunities

start-ups quarter not days So popping that That's in every China, up dozens anymore. changed. of there the of

year. approach up because pragmatic say factors are don't we're the as it what we we ourselves; will And it's into we year, in it but provide honestly, around on 'XX, ahead of be don't that's saying that, taking our So China. wrapped we to China being something comes to those when want last average. I we continue corporate guiding two, account why are on the one,

-- maybe Got is it. for Maybe Shelagh. question this a

more looks was XX-XX In second a I a but half this half. little in much investors little you've least skepticism loaded incrementally it to weaker, this, they been like XX-XX, was but loaded 'XX, they the in little -- bit of was bit terms this hasn't at exactly loaded, was impression the peer split, like deliver I whether because the lot half can don't a recent lead think stronger. Synopsys profile was bit tend your it it second half it like that like second to have slightly among a of this. There has years, the more under had because but had years, maybe about half the second first skepticism

what a those little bit pretty So you say say skeptical? from but be do uptick? folks would we what trust a hockey I think little to to more you guys, kind who dependable, investors? to are second the half, that, do I stick into do How of put you want hear guys may you

Charles, question. the thanks for

about, one So XXXX mechanical of there's first that are which the the less talked The half I'd is effects really first XX say driving that effect this. there's we of XXXX. half that in really X days versus

businesses, Sassine for we And bat with can about so businesses about more upfront headwind that's when second We on are. And to the half weighted, upfront IP. and our you for think the right our the talked business, seeing, the less XX based lumpy. about, X off ratable we're IP that million talk customer $XXX as it's being days. And have really then pull-downs

about is reporting, if in but a lumpy, actually got can see well, think and double-digit that then by it segment ingest to I growth really quarter, which ready manage quarter now we're every put what can to that think mean our are you titles can the IP, their where, we a can we we've going you very into decline. And be next I day, have when always titles customers those design. building we will, they're the

year we second to weighted. And second upfront similarly, the an case, is hardware for then so about a people get half to in And are half this, with about with haven't and one we talked center. us, that work our much had we We is -- power about weighted. And ready. anticipate need another their space we of the hardware record that's ability things problem But lot more talking this same downs for hardware we've And the as of business XXXX, pull customer but their hardware, in is and 'XX. be record think more a in are again year data customers it's 'XX.

space got but customers they've hardware power the be available them, and that. for that to is able So we power our need able to not plan to with only to be so

that we leading they that able building our they capability. actually that Cloud course, to that's for are is design. designs. very the I very install. But so of of some so customers of can and to give one the won't out meantime of limited the hardware only are half a timing servers that would of them into going that and IP. weighing. What appreciate a X then for won't their question, is them they're effects, mechanical on-prem one But we're ZeBu $XXX that which I actually be the tap million, the say other It really real-time just really so Charles. for, some And And in to It has ZeBu is can feedback those run an give second look piece, doing sort scale puzzle

And Charles, one to add, help comments. to point I myself, like I cannot Shelagh's would

You're we are saying be there and dependable skepticism that some. might some from

and have we that a do We that deliver we and -- what company proved to say. commit are we

that and we've successes the If shifted you our upfront look at in IP ratable. the versus have had of hardware, profile

will you was continue look was upfront; FY increasing. XX% of FY our 'XX, on upfront; at If 'XX, 'XX, XX% revenue that FY

to the to that to lumpiness due some fact we're to having the need get be the quarter-over-quarter, but used across successes we that's portfolio. there's So going

Research. That from will come Joshua Tilton, Wolfe

assumptions appreciate really beating Is conservatism walk Thank for just than Just around year? us is business the a for that just a tell conservative China? for lower especially growth? is sneaking take guidance China. Can more it. I'm embedded that feels first message just for But how it's contribution, to China by your more I you around dead us lower you end. for going preface it next usual, the horse. apologizing me further bit step at maybe in through how it some and the you the question, revenue it little X My conservative

way. on mentioned factor, other at looking and is from we're we is predict, which it is of to is China locally, then the difficult That of that the We deceleration -- there balanced really real, China. restrictions the is it have seeing the terms a we really engagements constant Josh, are expansion earlier. This in I

are the average there China But to mentioned we the the above in are taking So I 'XX. growth at be corporate is not factors FY China looking factor. line we earlier with into other that corporate that performance. as we're China besides anticipate do And there account but

remarks, just helpful. was maybe follow-up unless about a you of it but you then of prepared talked the Very Shelagh really I quick. Okay. interesting, some thought And misheard at it, your for I end confidence the is, better Synopsys have software. And heading I and the how of mission-critical software next nature is its into customers? is around pricing guess my how question next for year year mission-critical into you the are translating your

in Sassine benefits Well, sit with them. about, EDA. got on when renewals as down we contracts long-term mean, are go always align what them we've I with talked made to and And we've all to we the improvements customers, with the that

we with it, that's, renewal so call And of have conversation that regular kind customers. a would I

We you engagement pull with that AI, benefits operating the AI about, of and would we're us on And the talked ongoing an IP, improved say, having see is margin. I titles. commitment a too driving we've then hardware, that's overall obviously, haven't obviously, talked AI. much as the is about on people too. The big And that but conversation part

year, So XXX points operating you after basis XXXX. where that's really you after through. year driving again And year coming see and see we've that margin improvement been us in doing

up. close can you Operator, everyone. Thanks,

conclude does for all like Ladies sir. you, to today. would you your Thank thank and participation. our We gentlemen, conference for that

disconnect. now may You