It has been about a month since the last earnings report for Synopsys (SNPS Quick QuoteSNPS - Free Report) . Shares have added about 3.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Synopsys due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Synopsys Q1 Earnings Beat Estimates, Revenues In-Line

Synopsys reported first-quarter fiscal 2024 non-GAAP earnings per share (EPS) of $3.56 beat the Zacks Consensus Estimate of $3.43. The bottom line improved 35.9% year over year, primarily driven by higher revenues and better cost management.

Revenues jumped 21% year over year to $1.65 billion, driven by growth across its business segments. The top line was in line with the Zacks Consensus Estimate.

Synopsys’ top-line results benefited from momentum across the 3DIC Compiler platform, digital EDA, 2nm and 3nm projects and analog/mixed-signal customers. SNPS’ fiscal first quarter accounted for an extra week, contributing to its revenues and non-GAAP EPS by $70.5 million and 11 cents, respectively.

Quarter in Detail

In the license-type revenue group, Time-Based Product revenues (58.8% of the total revenues) of $904.4 million were up 15.6% year over year. Upfront Product revenues (27.1%) moved upward by 33% to $447.9 million. Maintenance and Service revenues (18%) increased 22.5% to $297 million from the year-ago quarter’s $242.4 million.

Segment-wise, Electronic Design Automation (EDA) revenues (58.9% of revenues) were $970.7 million, up 11% year over year. Design IP revenues (31.9% of revenues) amounted to $525.7 million, while Software Integrity revenues totaled $138.2 million, contributing approximately 8.4% to the top line in the reported quarter. Other revenues were $14.6 million, representing 0.8% of the total revenues.

Geographically, Synopsys’ revenues in North America (50% of the total) and Europe (10%) were $819 million and $159.1 million, respectively. Revenues from Korea (11%), China (15%) and Other (14%) were $184.6 million, $250 million and $236.6 million, respectively.

The non-GAAP operating margin was 38.7%, expanding 350 basis points (bps) year over year.

Software Integrity’s adjusted operating margin expanded 520 bps year over year to 17.3%, while EDA’s adjusted operating margin declined 190 bps to 37%. The Design IP segment margin showed a massive improvement to 47.5% from 34.2% in the year-ago quarter.

Balance Sheet & Cash Flow

Synopsys had cash and short-term investments of $1.27 billion as of Jan 31, 2023 compared with $1.59 billion as of Oct 31, 2023.

The total long-term debt was $17 million at the end of the reported quarter, down from $18.1 million as of Oct 31, 2023.

The company’s cash utilization was $88 million in the first quarter compared with the year-ago quarter’s cash flow generation of $115 million.

Guidance Update

For fiscal 2024, SNPS expects revenues between $6.57 billion and $6.63 billion. Non-GAAP earnings have been revised to $13.47-$13.55 per share, up from the previous guidance of $13.33-$13.41 per share. Non-GAAP expenses are expected in the range of $4.14-$4.18 billion.

For the second quarter of fiscal 2024, Synopsys expects revenues between $1.56 billion and $1.59 billion. Management estimates non-GAAP earnings per share between $3.09 and $3.14. Non-GAAP expenses are anticipated in the band of $1.005-$1.015 billion.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

The consensus estimate has shifted 6.15% due to these changes.

VGM Scores

At this time, Synopsys has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Synopsys has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Synopsys belongs to the Zacks Computer - Software industry. Another stock from the same industry, Blackbaud (BLKB Quick QuoteBLKB - Free Report) , has gained 5.9% over the past month. More than a month has passed since the company reported results for the quarter ended December 2023.

Blackbaud reported revenues of $295.01 million in the last reported quarter, representing a year-over-year change of +7.4%. EPS of $1.14 for the same period compares with $0.68 a year ago.

Blackbaud is expected to post earnings of $0.89 per share for the current quarter, representing a year-over-year change of +23.6%. Over the last 30 days, the Zacks Consensus Estimate has changed -7.4%.

Blackbaud has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.