Chip Design Software Firm Synopsys Faces Headwinds in China
Forecast Falls Short of Expectations
Synopsys, a leading chip design software company, has announced a fiscal 2025 revenue forecast that falls below Wall Street expectations. The company’s shares plummeted 6.6% in extended trading following the announcement. This downward revision is attributed to a slump in China sales, largely due to the tightening of US controls on chip technology exports to the country.
Acquisition Plans Remain Unchanged
Despite the revenue forecast, Synopsys remains committed to closing its $35 billion deal to acquire engineering software firm Ansys in the first half of 2025. According to Chief Financial Officer Shelagh Glaser, the company’s fiscal calendar change will result in a revenue reduction of around $80 million. However, the primary driver of the revenue decline is the continued sales drop in China.
China Sales Slump Amidst Tightening US Controls
The US recently imposed new limits on chip technology exports to China, leading to a growth in the list of companies Synopsys can no longer sell to in the region. Additionally, some Chinese customers are hesitant to invest in new chip plans due to uncertainty surrounding manufacturing capabilities. Glaser described this as a “cumulative impact of restrictions.”
Election Outcome Does Not Affect Acquisition Outlook
The election of Donald Trump as US president, who has promised to impose new tariffs on Chinese imports, has not altered Synopsys’ outlook for closing the Ansys deal. According to Glaser, each jurisdiction has its own criteria and review process, and the company had always anticipated an election.
Financial Projections
Synopsys forecast adjusted earnings per share for the full year to be between $14.88 and $14.96 per share, in line with analyst expectations. The company’s first-quarter revenue forecast ranges from $1.44 billion to $1.47 billion, below estimates of $1.64 billion. Adjusted EPS for the first quarter is expected to be between $2.77 and $2.82 per share, short of estimates of $3.53 per share.
Fourth-Quarter Results
Revenue for the fourth quarter ended November 2 was $1.63 billion, in line with estimates. On an adjusted basis, the company earned $3.40 per share, surpassing estimates of $3.30 per share.
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