Despite chip design automation (EDA) giant Synopsys (SNPS) posting second-fiscal-quarter results and guidance that both exceeded Wall Street expectations, the company’s stock fell 2.2% in after-hours trading on Wednesday. In the quarter ended April 30, Synopsys reported adjusted earnings per share of $3.35, with revenue surging 42.5% year-over-year to $2.28 billion. Analysts had expected adjusted earnings per share of $3.16 on revenue of $2.25 billion. Within this, design automation revenue jumped 62% to $1.62 billion, while design IP revenue declined 5.8% year-over-year to $439.5 million.
Looking ahead to the third quarter, Synopsys expects adjusted earnings per share to be between $3.63 and $3.69, with revenue projected between $2.41 billion and $2.46 billion. Analysts had anticipated adjusted earnings per share of $3.62 on revenue of $2.39 billion. The company also raised its full-year guidance, now expecting adjusted earnings per share for the full year to be between $14.72 and $14.80, up from the previously forecast range of $14.38 to $14.46. Full-year sales are now expected to be between $9.63 billion and $9.71 billion, up from the prior range of $9.56 billion to $9.66 billion. Analysts had previously expected full-year adjusted earnings per share of $14.45 on revenue of $9.63 billion.
In addition to the earnings report, Synopsys announced that it has reached an agreement with Elliott Investment Management and will appoint a representative of the activist investment firm, Jesse Cohn, to its board of directors, effective June 1. Under the terms of the settlement, Elliott has agreed to abide by a standstill commitment and a voting agreement. Cohn will also serve on the Corporate Governance and Nominating Committee, and his appointment will expand Synopsys’ board to 11 members. Aart de Geus, Executive Chair and founder of Synopsys, stated that Cohn, as an experienced board member, brings a unique and differentiated perspective.
Elliott disclosed in March that it had made an investment of several hundred million dollars in Synopsys and planned to push for changes at the company. Although Synopsys holds a leading market position in electronic design automation, a critical segment of chip development, the company’s revenue growth had previously lagged market expectations. In a statement, Cohn said that Synopsys is vital to the global chip industry and is well-positioned to benefit from the transformation in chip complexity and capital investment driven by artificial intelligence.
