Synopsys (SNPS) Q1 2025 earnings summary

Executive summary

• Q1 FY2025 revenue was $1.46 billion, down 4% year-over-year due to one less work week and lower IP/hardware sales, but exceeded the midpoint of guidance; non-GAAP EPS was $3.03, above guidance, while GAAP EPS was $1.89.

• The company reaffirmed FY2025 guidance, targeting double-digit revenue growth and a non-GAAP operating margin of 40%.

• The Software Integrity business was divested for $1.65 billion and is now reported as discontinued operations.

• The pending Ansys acquisition received key regulatory approvals in Europe and the UK, with closure expected in the first half of 2025 and $14.9 billion in committed debt financing.

• Operating income decreased 29% to $251.8 million, reflecting higher legal and professional fees related to the Ansys acquisition and increased employee-related costs.

Financial highlights

• Q1 FY2025 revenue was $1.46 billion; non-GAAP operating margin was 36.5%; GAAP operating margin was 17.3%.

• GAAP EPS was $1.89; non-GAAP EPS was $3.03; non-GAAP net income was $473.2 million.

• Design automation segment Q1 revenue was $1.02 billion (70.1% of total), up 4% year-over-year; design IP segment revenue was $435 million (29.9% of total), down 17%.

• Free cash flow was an outflow of $108.2 million; cash and short-term investments totaled $3.81 billion at quarter end.

• Backlog exiting Q1 was $7.7 billion, with 42% expected to be recognized as revenue over the next 12 months.

Outlook and guidance

• FY2025 revenue guidance: $6.745–$6.805 billion; non-GAAP operating margin target: 40%; non-GAAP EPS guidance: $14.88–$14.96; GAAP EPS: $10.09–$10.31.

• Q2 FY2025 revenue guidance: $1.585–$1.615 billion; non-GAAP EPS: $3.37–$3.42.

• FY2025 revenue growth expected at 10.1%–11.1%, with non-GAAP EPS growth of approximately 13%.

• Free cash flow for FY2025 is projected at $1.6–$1.8 billion; capital expenditures at $170 million.

• China is expected to grow below the corporate average for FY2025, with this headwind already factored into guidance.