To The Moon

$Synopsys(SNPS)$ is expected to report its fiscal Q3 2025 earnings after the market closes on Tuesday, September 9, 2025.

In this article I will be sharing the analysis of what investors should watch for and potential short-term trading opportunities.

Revenue: The consensus estimate is around $1.77 billion, representing a significant increase of approximately 15.9% from the same quarter last year. The company's own guidance range is between $1.755 billion and $1.785 billion.

Non-GAAP EPS: The consensus is for a non-GAAP EPS of around $3.84, which would be a 12% increase year-over-year. The company's guidance is slightly lower, ranging from $3.82 to $3.87 per diluted share.

Based on Synopsys's fiscal Q2 2025 earnings report, here is a summary of the results and the key lessons to be learned from the company's guidance.

Summary of Q2 2025 Earnings

Synopsys reported a strong quarter that exceeded both its own guidance and analyst expectations. Key highlights include:

Financial Performance:

Revenue: The company posted revenue of $1.604 billion, surpassing the midpoint of its guidance and marking a solid year-over-year increase from $1.455 billion in Q2 2024.

Non-GAAP EPS: Synopsys's non-GAAP earnings per diluted share were $3.67, significantly beating the analyst consensus of $3.39 and the company's guidance range. This represents a substantial increase from $3.00 per diluted share in the same quarter last year.

Segment Strength:

Design IP: This segment was a major growth driver, with revenue of $482 million, a 21% year-over-year increase. This surpassed analyst estimates, demonstrating strong demand for the company's IP solutions in high-growth areas.

Design Automation (EDA): The larger EDA segment also showed solid performance, with revenue of $1.12 billion, up 6% year-over-year. This growth was attributed to continued strong demand for its design tools, particularly those leveraging AI.

Backlog and Financial Health:

The company's backlog grew by $400 million to $8.1 billion, providing strong visibility and confidence in future revenue.

Synopsys also completed the sale of its Software Integrity business, with all reported financials now on a "continuing operations" basis.

The balance sheet saw a significant change, with cash and short-term investments increasing to over $14 billion, but also long-term debt rising to over $10 billion, primarily related to the pending acquisition of Ansys.

Lessons Learned from the Guidance

The most important takeaway from Synopsys's Q2 earnings report was the company's guidance for the rest of the fiscal year.

Confidence in the Long-Term Outlook: Despite a dynamic macroeconomic environment, Synopsys reaffirmed its full-year 2025 revenue guidance of $6.745 billion to $6.805 billion. This is a critical lesson for investors: management is highly confident in its ability to deliver a strong second half of the fiscal year. This stability in guidance, following a strong beat in the prior quarter, suggests that the underlying business drivers are robust and not subject to short-term market fluctuations.

AI as a Core Growth Engine: The company's commentary throughout the earnings call reinforced the lesson that AI is not just a trend but a fundamental driver of its business. The success of its AI-powered design tools, such as DSO.ai and VSO.ai, and the deployment of its technology for complex, multi-chiplet designs for leading AI and HPC customers, show that Synopsys is directly benefiting from the massive investments in AI infrastructure. The guidance implicitly reflects this continued strength.

Strategic Acquisition Strategy: The increase in long-term debt and the discussion of the Ansys acquisition highlight a clear strategic direction. Synopsys is not only focused on organic growth but also on expanding its portfolio through major acquisitions to dominate the "silicon-to-systems" design market. The guidance for the second half of the year doesn't yet fully incorporate the financial impact of the Ansys deal, but it signals to investors that the company is actively making long-term strategic moves to solidify its market leadership.

In short, the key lesson from the Q2 guidance is that Synopsys's business is resilient and well-positioned to capitalize on mega-trends like AI and advanced chip design. The company's decision to maintain its full-year guidance after a strong beat suggests that its growth is consistent and predictable, a quality highly valued by long-term investors.

Key Metrics to Watch

Based on analyst consensus and company guidance from the Q2 2025 earnings report, here are the key metrics and trends to monitor:

Revenue and EPS: The most direct indicators of performance. Analysts are generally forecasting strong year-over-year growth.

Segment Performance: Synopsys's business is split into two primary segments. Investors should pay close attention to the growth rates of each.

Design Automation (EDA): This is the company's largest segment. Analysts are projecting this segment's revenue to reach approximately $1.23 billion, a 16.2% increase year-over-year. Strong demand for its AI-powered design tools, such as DSO.ai and VSO.ai, and hardware-assisted verification (HAV) systems are expected to be the key drivers.

Design IP: This segment has been a strong growth engine. Analysts anticipate revenue of around $539.28 million, an impressive 16.5% increase year-over-year. The continued adoption of its IP for emerging technologies like PCIe 7.0 and its partnerships with major foundries are crucial to this segment's success.

Guidance for Q4 and Full Fiscal Year 2025: The company's forward-looking statements are often more impactful than the reported numbers for the past quarter.

Reaffirmed Guidance: Synopsys has a history of providing guidance and then reaffirming or exceeding it. In its Q2 report, the company reaffirmed its full-year revenue guidance of $6.745 billion to $6.805 billion. Any change to this outlook will be a major factor in how the stock moves.

AI and HPC Commentary: Given the strong market tailwinds from artificial intelligence and high-performance computing, any specific commentary on customer demand, design wins, and new product adoptions in these areas will be highly scrutinized. The company's support for complex, multi-chiplet designs is a key competitive advantage.

Financial Health:

Gross Margins: The company has historically maintained impressive gross profit margins. Any changes could signal shifts in pricing power or cost of revenue.

Backlog: The company's backlog provides visibility into future revenue. A growing backlog indicates strong, long-term customer demand. In Q2, the backlog increased by $400 million to $8.1 billion, a positive sign.

Balance Sheet: While a stable company, investors should note the recent increase in long-term debt to over $10 billion, compared to just $14 million in the prior quarter. This is related to the pending acquisition of Ansys, which is a major long-term strategic move for the company.

Synopsys (SNPS) Price Target

Based on 20 analysts from Tiger Brokers offering 12 month price targets for Synopsys in the last 3 months. The average price target is $644.53 with a high forecast of $715.00 and a low forecast of $548.45. The average price target represents a 7.76% change from the last price of $598.14.

Short-Term Trading Opportunities

Synopsys's stock has a history of reacting to earnings reports, but predicting the exact direction is difficult. Here are some factors to consider for short-term trading:

Earnings Beat/Miss: The most common driver of post-earnings price action is the difference between reported numbers and analyst expectations.

A significant beat on both revenue and EPS, especially if accompanied by a raised outlook, could lead to a strong rally.

A miss on either key metric, particularly if it signals a slowdown in a specific segment like AI-related EDA or Design IP, could trigger a sharp sell-off.

It is worth noting that analysts are often very close to the company's own guidance, so a surprise might be less likely.

Guidance: As mentioned above, the outlook for Q4 and the full fiscal year is often the most critical factor. A bullish outlook, even with an in-line Q3 report, could lead to a positive stock reaction. Conversely, a conservative or lowered guidance could weigh on the stock, regardless of a good Q3 beat.

Technical Analysis: As of recent reports, SNPS has a high technical rating from sources like Nasdaq Dorsey Wright. The stock has been trading in a 52-week range of approximately $365 to $651. Traders could look at key support and resistance levels. A strong earnings report could see the stock test its 52-week high, while a disappointing report could see it fall toward its 50-day and 200-day moving averages.

We are seeing a good positive momentum and the bulls have taken control and it is trading above the 26-EMA level, and with the earnings coming, we could be seeing the stock trying to break through the 12-EMA level if there is a strong earnings on the daily chart, but a weak report could give a sell off.

Market Sentiment: The broader semiconductor and tech sectors, especially those related to AI, will influence the stock. Given the high valuation of many of these companies, any negative news could be amplified. The recent insider stock sales by the CFO and CRO may also be a point of concern for some investors, although these are common and don't necessarily signal a negative outlook.

Summary

Synopsys (SNPS) is set to report its fiscal Q3 2025 earnings after the market closes on Tuesday, September 9, 2025. Analysts anticipate strong year-over-year growth, driven by continued robust demand in the AI and high-performance computing markets. Key metrics to watch include:

Revenue: Consensus is around $1.77 billion, representing a 15.9% increase. The company's guidance range is $1.755 billion to $1.785 billion.

Non-GAAP EPS: The consensus is for $3.84 per share, a 12% rise.

Segment Performance: Investors will focus on the growth of the Design Automation (EDA) and Design IP segments, especially the adoption of its AI-powered tools and hardware-assisted verification systems.

Forward-Looking Guidance: Any changes to the company's full-year outlook for 2025 will be a major stock mover.

The company's strong Q2 performance and reaffirmation of full-year guidance suggest a high degree of confidence in its business, which is a key lesson from past reports. A beat on Q3 expectations or a raised outlook could lead to a short-term rally, while a miss could trigger a sell-off.

Appreciate if you could share your thoughts in the comment section whether you think SNPS could provide a strong earnings with a positive outlook to trigger a short-term rally.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.