Synopsys raises annual forecasts on AI-driven chip design software demand

Aug 26 : Synopsys on Wednesday raised its annual revenue and profit forecasts, as the AI boom drives investments in chips and infrastructure, boosting demand for the firm's chip design software. 

AI-related design demand has risen sharply as chipmakers invest in more advanced semiconductor systems, while tech giants, including Amazon and Alphabet, ramp up in-house chip efforts as well.

Here are more details on the results:

• Synopsys expects fiscal 2026 revenue in the range of $9.69 billion to $9.74 billion, compared with its prior forecast of between $9.63 billion and $9.71 billion.

• The forecast is higher than analysts' estimate for annual revenue of $9.68 billion, per data compiled by LSEG.

• The company's design IP business, which licenses pre-designed chip interfaces that customers can directly embed into their systems, returned to year-over-year revenue growth in the third fiscal quarter ended July 31.

• "The growth is really underpinned by the strong design environment we're seeing, and the main thing driving it is AI," CFO Shelagh Glaser said in an interview.

• "Customers are building more and more complex chips and in shorter time frames. And we offer the tools for them to simplify that complexity," Glaser said.

• Synopsys expects a further sequential increase in the design IP business in the current quarter.

• The company projected annual adjusted earnings of $15.04 to $15.10 per share, up from its prior expectation of $14.72 to $14.80 per share. Analysts were expecting a full-year profit of $14.76 per share.

• Synopsys reported revenue of $2.48 billion for the third quarter, compared with estimates of $2.44 billion. Adjusted per-share earnings of $3.91 topped estimates of $3.67.

• Shares of the company were down about 2 per cent in extended trading.