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Synopsys' (SNPS) Earnings and Revenues Beat Estimates in Q2

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Synopsys (SNPS - Free Report) reported second-quarter fiscal 2022 non-GAAP earnings of $2.50 per share, beating the Zacks Consensus Estimate of $2.37. The bottom line improved 47.1% year over year.

Revenues surged 24.9% year over year to $1.28 billion, driven by growth across its business segments. The top line beat the Zacks Consensus Estimate of $1.25 billion.

Synopsys benefited from the increasing demand for its products amid the rapid adoption of Big Data, faster computation and Machine Learning. Complex, connected, specialized, and secure chips and systems witnessed strong momentum and drove Synopsys’ quarterly performance.

Synopsys, Inc. Price, Consensus and EPS Surprise Synopsys, Inc. Price, Consensus and EPS Surprise

Synopsys, Inc. price-consensus-eps-surprise-chart | Synopsys, Inc. Quote

Quarter in Detail

In the license-type revenue group, Time-Based Product revenues (56.6% of total revenues) of $723.8 million were up 11.6% year over year. Upfront Product revenues (26.3%) surged 61% to $336.6 million. Maintenance and Service revenues (17.1%) increased 31.5% year over year to $218.8 million from the year-ago quarter’s $166.4 million.

Segment-wise, Semiconductor & System Design revenues (91.2% of total revenues) were $1.17 billion, up 25.4% year over year. Within the segment, Electronic Design Automation revenues (50% of revenues) were $641.8 million, while IP &Systems Integration revenues (41% of revenues) amounted to $520.6 million.

Software Integrity revenues totaled $112.9 million, contributing approximately 8.8% to the top line in the reported quarter.

Geographically, Synopsys’ revenues in North America (46% of the total) and Europe (9%) were $586.2 million and $116.2 million, respectively. Revenues from Korea (9%), China (17%) and Other (19%) were $119.2 million, $215.6 million and $242.1 million, respectively.

Non-GAAP operating margin was 36.8%, expanding 580 basis points (bps) year over year.

Semiconductor & System Design delivered an adjusted operating margin of 39.2%, expanding 600 bps on a year-over-year basis. Software Integrity margin expanded 250 bps year over year to 11.5%.

Balance Sheet & Cash Flow

Synopsys had cash and short-term investments of $1.72 billion as of Apr 30, 2022, compared with $1.27 billion as of Jan 31, 2022.

Total long-term debt was $23.8 million in the reported quarter, down from $24.4 million as of Apr 30, 2021.

During the first six months of fiscal 2022, operating cash flow was $905.7 million.

Guidance

For the third quarter of fiscal 2022, Synopsys expects revenues between $1.210 billion and $1.240 billion. Management estimates non-GAAP earnings between $2.01 and $2.06 per share. Non-GAAP expenses are anticipated in the band of $830 million to $840 million.

For fiscal 2022, Synopsys raised guidance. The company now projects revenues to be $5.000-$5.050 billion compared with the prior range of $4.775-$4.825 billion.

Non-GAAP earnings for the fiscal year is now expected to be between $8.63 and $8.70 per share, compared with the earlier guidance of $7.85 and $7.92 per share.

Non-GAAP expenses are estimated in the range of $3.350 billion to $3.380 billion compared with the previously guided range of $3.225-$3.285 billion. Synopsys now forecast an operating cash flow of $1.550-$1.600 billion, up from prior estimate of $1.450-$1.500 billion.

Zacks Rank & Key Picks

Synopsys currently carry a Zacks Rank #3 (Hold). Shares of SNPS have declined 26% in the past year.

Some better-ranked stocks from the broader Computer and Technology sector are Avnet (AVT - Free Report) , Axcelis Technologies (ACLS - Free Report) and Analog Devices (ADI - Free Report) . While Avnet sports a Zacks Rank #1 (Strong Buy), Axcelis and Analog Devices carry a Zacks Rank of 2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Avnet's fourth-quarter fiscal 2022 earnings has been revised 55 cents northward to $1.96 per share over the past 30 days. For 2022, earnings estimates have moved 20.5% north to $6.83 per share in the past 30 days.

Avnet's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 21.2%. Shares of AVT have increased 14.2% in the past year.

The Zacks Consensus Estimate for Axcelis' second-quarter 2022 earnings has been revised 3 cents upward to 99 cents per share over the past seven days. For 2022, ACLS' earnings estimates have moved 11 cents north to $4.10 per share in the past seven days.

Axcelis' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 23.5%. Shares of ACLS have declined 23.5% in the past year.

The Zacks Consensus Estimate for Analog Devices' second-quarter fiscal 2022 earnings has been revised 4 cents upward to $2.12 per share over the past 60 days. For fiscal 2022, earnings estimates have moved 11 cents north to $8.43 per share in the past 60 days.

Analog Devices' earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 6%. Shares of ADI have fallen 9% in the past year.