Q1 2026 Synopsys Inc Earnings Call

February 25, 2026

Ladies and gentlemen, welcome to the synopsis earnings conference call for the first quarter of fiscal year 2026. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question at that time, please press star 1 on your telephone keypad and to remove yourself from that queue. It is star 1 again.

If you require assistance during the call, please press star zero and an operator will assist you.

Today's call will last 1 hour as a reminder, today's call is being recorded.

At this time, I would like to turn the conference over to toar Jane head of investor relations. Please go ahead.

Good afternoon, everyone.

With us today, our cein gazi president and CEO of synopsis and Sheila Glaser CFO.

Before we begin, I'd like to remind everyone that during the course of this conference call, synopsys will discuss forecast targets and other forward-looking statements regarding the company and its Financial results.

While these statements represent our best current judgment about future results and performance. As of today,

our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect.

In addition to any risks that we highlight during this call, important factors, that may affect our future results are described in our most recent SEC reports and today's earnings press release.

Discussion.

Reconciliations to their most directly comparable gaap Financial measures and supplemental. Financial information can be found in the earnings press release financial supplement and 8K that we released earlier today.

All of these items. Plus the most recent, investor presentation are available on our website at www.synopsys.com.

In addition, the prepared remarks will be posted on our website at the conclusion of the call.

With that, I'll turn the call over to cein gazi.

Good afternoon.

We're off to a strong start. As we enter our 40th anniversary year, with an expended portfolio leadership positions across the business and the most compelling road map in our history.

In q1, we achieved Revenue at the high end of our guidance and non-gaap EPS, exceeded guidance.

2025 was a year that transformed the company.

2026 is the year. We begin delivering on the technology promise of synopsis, Plus answers. Let me take a few minutes to address market, trends shaping, our opportunity.

Speaker #1: In addition, the prepared remarks will be posted on our website at the conclusion of the call. With that, I'll turn the call over to Sassine Ghazi.

Operator: In addition, the prepared remarks will be posted on our website at the conclusion of the call. With that, I'll turn the call over to Sassine Ghazi.

And provide some highlights from the quarter.

After that, Sheila will take you through the financials in more detail. First the market trends.

Speaker #2: Good afternoon. We're off to a strong start as we enter our 40th anniversary year with an expanded portfolio, leadership positions across the business, and the most compelling roadmap in our history.

Sassine Ghazi: Good afternoon. We're off to a strong start as we enter our 40th anniversary year with an expanded portfolio, leadership positions across the business, and the most compelling roadmap in our history. In Q1, we achieved revenue at the high end of our guidance, and non-GAAP EPS exceeded guidance. 2025 was a year that transformed the company. 2026 is the year we begin delivering on the technology promise of Synopsys plus Ansys. Let me take a few minutes to address market trends shaping our opportunity and provide some highlights from the quarter. After that, Sheila will take you through the financials in more detail. First, the market trends. Starting with AI, we continue to see a tale of two markets. On the one hand, the multi-trillion dollar AI infrastructure build-out continues unabated. That's driving system-level and semiconductor R&D with continued robust design start activity for AI compute.

Starting with AI.

We continue to see a tale of 2 markets.

On the 1 hand, the multi trillion dollar, AI infrastructure, buildout continues unabated.

Speaker #2: In Q1, we achieved revenue at the high end of our guidance and non-GAAP EPS exceeded guidance. 2025 was company. 2026 is the year we begin delivering on the technology promise of Synopsys plus Ansys.

That's driving system level and semiconductor R&D with continued. Robust design start activity for AI compute.

At the same time, design starts in markets, like consumer automotive and Industrial remain subdued despite signals of modest recovery.

Speaker #2: Let me take a few minutes to address market trends shaping our opportunity. And provide some highlights from the quarter. After that, Sheila will take you through the financials in more detail.

Ai's rapid progress is also prompting healthy debate about whether it will disrupt established software companies.

Speaker #2: First, the market trends. Starting with AI. We continue to see a tail of two markets. On the one hand, the multi-trillion-dollar AI infrastructure buildout continues, unabated.

Let me explain why we're different. Our deep Tech Solutions. Powered the world's most complex engineering efforts.

Speaker #2: That's driving system-level and semiconductor R&D with continued robust design start activity for AI compute. At the same time, design starts in markets like consumer, automotive, and industrial remain subdued despite signals of modest recovery.

Sassine Ghazi: At the same time, design starts in markets like consumer, automotive, and industrial remain subdued despite signals of modest recovery. AI's rapid progress is also prompting healthy debate about whether it will disrupt established software companies. Let me explain why we're different. Our deep tech solutions power the world's most complex engineering efforts. Synopsys' decades of deep domain expertise, proprietary code bases and solvers, and native foundry design technology co-optimizations deliver optimal, deterministic, silicon-proven results that probabilistic AI models do not replicate. While AI will transform engineering software, Synopsys is already leading that transformation. We're pioneering AI-driven design capabilities in our products that deliver orders of magnitude productivity gains for our customers and pave the way for agent engineers with increasing levels of autonomy. One highlight among many this quarter was receiving World Economic Forum honors for our work with AMD to advance AI-accelerated chip design.

Synopsis Decades of deep domain, expertise, proprietary, code basis and solvers. And Native Foundry, Design Technology, co-optim seos deliver, optimal deterministic, silicon proven results that probabilistic AI models. Do not replicate while AI will transform engineering software. Synopsis is already

The leading the transformation.

Speaker #2: AI's rapid progress is also prompting healthy debate about whether it will disrupt established software companies. Let me explain why we're different. Our deep tech solutions power the world's most complex engineering efforts.

Where pioneering AI driven design capabilities in our products that deliver orders of magnitude productivity gains for our customers.

And paved the way for agent Engineers with increasing levels of autonomy.

Speaker #2: Synopsys' decades of deep domain expertise, proprietary code basis and solvers, and native foundry design technology co-optimizations deliver optimal deterministic silicon-proven results that probabilistic AI models do not replicate.

1 highlight among many this quarter was receiving World, economic Forum honors for our work. With AMD to Advanced AI accelerated chip. Design AI isn't disrupting our business, it's amplifying our strategic advantage.

Speaker #2: While AI will transform engineering software, Synopsys is already leading that transformation. We're pioneering AI-driven design capabilities in our products that deliver orders of magnitude productivity gains for our customers.

Another Market Trend and Tailwind for synopsis is the engineering transformation away from physical testing towards digital twins.

To build spinner, more connected products at PACE and at scale companies are investing in advanced design automation.

Speaker #2: And pave the way for agent engineers with increasing levels of autonomy. One highlight, among many this quarter, was receiving world economic forum honors for our work with AMD to advance AI accelerated chip design.

Simulation and digital twins as a competitive imperative.

There is incredible demand for silicon to system solutions that can enable holistic, software, Hardware, co-design to accelerate de-risk and reduce the cost of building AI powered products.

Speaker #2: AI isn't disrupting our business. It's amplifying our strategic advantage. Another market trend and tailwind for Synopsys is the engineering transformation away from physical testing towards digital twins.

Sassine Ghazi: AI isn't disrupting our business. It's amplifying our strategic advantage. Another market trend and tailwind for Synopsys is the engineering transformation away from physical testing towards digital twins. To build smarter, more connected products at pace and at scale, companies are investing in advanced design automation, simulation, and digital twins as a competitive imperative. There is incredible demand for silicon-to-system solutions that can enable holistic software, hardware co-design to accelerate, de-risk, and reduce the cost of building AI-powered products. Our combined Synopsys plus Ansys portfolio is increasingly mission-critical to the innovation of industries spanning semiconductors, aerospace, mobility, energy, and advanced manufacturing. We'll have a lot more to say about this in a couple of weeks at our Synopsys Converge conference. Turning to Q1 business highlights. The global Synopsys team executed well against the backdrop of continued geopolitical and macro uncertainty as China headwinds persist.

Our combined synopsis plus ansys portfolio is increasingly Mission critical to the innovation of Industries spanning semiconductors Aerospace, Mobility energy and advanced Manufacturing.

Speaker #2: To build smarter, more connected products at pace and at scale, companies are investing in advanced design automation, simulation, and digital twins as a competitive imperative.

We'll have a lot more to say about this in a couple weeks at our synopsis converge conference.

Turning to q1 business highlights.

The global synopsis team executed well against the backdrop of continued geopolitical and macro uncertainty as China. Headwinds persist.

Speaker #2: There is incredible demand for silicon-to-system solutions that can enable holistic software-hardware co-design to accelerate de-risk, and reduce the cost of building AI-powered products. Our combined Synopsys plus Ansys portfolio is increasingly mission-critical to the innovation of industries spanning semiconductors, aerospace, mobility, energy, and advanced manufacturing.

Let me share some segments highlights from the quarter.

First design automation.

Thanks in Hardware with major competitive wins at both new and existing customers including a marquee emulation win versus the incumbent at a leading AI HBC customer.

Speaker #2: We'll have a lot more to say about this in a couple of weeks at our Synopsys Converge conference. Turning to Q1 business highlights. The global Synopsys team executed well.

With growing demand for software-defined configurable systems supporting both emulation and prototyping as well as a strong 2026 road map.

We're well positioned to capture the expanding digital twin opportunity across Industries.

Speaker #2: Against the backdrop of continued geopolitical and macro uncertainty, as China headwinds persist. Let me share some segment highlights from the quarter. First, design automation.

In Eda we also saw sustained momentum across 3 trends.

First.

Sassine Ghazi: Let me share some segment highlights from the quarter. First, Design Automation. We saw continued strength in hardware, with major competitive wins at both new and existing customers, including a marquee emulation win versus the incumbent at a leading AI HPC customer. With growing demand for software-defined, configurable systems supporting both emulation and prototyping, as well as a strong 2026 roadmap, we're well-positioned to capture the expanding digital twin opportunity across industries. In EDA, we also saw sustained momentum across three trends. First, the application of AI across the stack. Major semi and hyperscale customers using Synopsys.ai have seen up to 50% faster knowledge assistance, up to 70% faster workflow assistance, and up to 5x faster formal test bench generation. Our AgentEngineer technology is advancing rapidly, and we have several customer engagements underway with agents across design and verification. Second, leadership in multi-die.

the application of AI across the stack,

Speaker #2: We saw continued strength in hardware, with major competitive wins at both new and existing customers, including a marquee emulation win versus the incumbent at a leading AI HPC customer.

Major semi and hyperscale customers using synopsis AI have seen up to 50%.

Faster, knowledge assistance.

Up to 70% faster. Workflow assistance.

And up to 5x, faster, formal test bench generation.

Speaker #2: With growing demand for software-defined configurable systems supporting both emulation and prototyping, as well as a strong 2026 roadmap, we're well positioned to capture the expanding digital twin opportunity across industries.

Our agent engineer technology is advancing rapidly and we have several customer engagements underway with agents across design and verification.

Speaker #2: In EDA, we also saw sustained momentum across three trends. First, the application of AI across the stack. Major semi and hyperscale customers using Synopsys.ai have seen up to 50% faster knowledge assistance, up to 70% faster workflow assistance, and up to 5X faster formal test bench generation.

Second leadership in multi-day multi-day, momentum accelerated as leading semiconductor and Foundry, customers adopted synopsis 3D IC compiler platform.

Leveraging Automation, and Aiden optimization with our industry-leading, multi-physics analysis, tools to improve.

Signal and power Integrity quality of results.

In hands thermal efficiency and speed up design convergence.

And third.

Speaker #2: Our agent engineer technology is advancing rapidly, and we have several customer engagements underway with agents across design and verification. Second, leadership in multi-die. Multi-die momentum accelerated as leading semiconductor and foundry customers adopted Synopsys' 3D IC compiler platform.

Sustained design, win momentum at Advanced nodes with our digital flow, including Fusion compiler and Prime Time achieving 100% usage on critical tape outs at 2, nanometer and below.

Moving to answers.

Sassine Ghazi: Multi-die momentum accelerated as leading semiconductor and foundry customers adopted Synopsys' 3DIC Compiler platform, leveraging automation and AI-driven optimization with our industry-leading multi-physics analysis tools to improve signal and power integrity quality of results, enhance thermal efficiency, and speed up design convergence. Third, sustain design win momentum at advanced nodes with our digital flow, including Fusion Compiler and PrimeTime, achieving 100% usage on critical tapeouts at 2 nanometer and below. Moving to Ansys, which delivered a strong Q1 performance, driven by robust demand for system-level digital engineering, multi-physics simulation, and AI-enabled design flows. We won large multi-year agreements across aerospace, hyperscale, industrial, and automotive. With Ansys as part of Synopsys, we now support more than 90% of the top 100 automotive suppliers.

Which delivered a strong q1 performance driven by robust demand for system. Level digital engineering.

Multi-physics, simulation and AI enabled, design flows.

Speaker #2: Leveraging automation and AI-driven optimization, with our industry-leading multi-physics analysis tools to improve signal and power integrity quality of results, enhance thermal efficiency, and speed up design convergence.

We won large multi-year agreements across Aerospace. Hyperscale industrial and Automotive.

With Ms. As part of synopsis, we now support more than 90%.

Of the top 100 Automotive suppliers.

Speaker #2: And third, sustain design win momentum at advanced nodes, with our digital flow including fusion compiler and prime time achieving 100% usage on critical tapeouts at 2 nanometer and below.

And at CES in January we showcased how AI driven simulation is helping customers like Audi reduce physical prototyping and shortened development Cycles.

Speaker #2: Moving to Ansys. Which delivered a strong Q1 performance driven by robust demand for system-level digital engineering, multi-physics simulation, and AI-enabled design flows. We won large multi-year agreements across aerospace, hyperscale, industrial, and automotive.

Our confidence in this business is only increasing AS Global demand for electrification.

Autonomy, digital twins, Advanced semiconductor design and Mission engineering remains resilient and expanding.

Turning to design IP which performed in line with expectations.

as we've said,

Speaker #2: With Ansys as part of Synopsys, we now support more than 90% of the top 100 automotive suppliers, and at CES in January, we showcased how AI-driven simulation is helping customers like Audi reduce physical prototyping and shorten development cycles.

2026 is a transitional year for the IP business and we're focused on aligning the fastest, growing segments of the Silicon Market.

We're making progress on this front.

Sassine Ghazi: At CES in January, we showcased how AI-driven simulation is helping customers like Audi reduce physical prototyping and shorten development cycles. Our confidence in this business is only increasing as global demand for electrification, autonomy, digital twins, advanced semiconductor design, and mission engineering remains resilient and expanding. Turning to Design IP, which performed in line with expectations. As we've said, 2026 is a transitional year for the IP business, and we're focused on aligning the fastest-growing segments of the silicon market. We're making progress on this front. The planned sale of our processor IP solutions business to GlobalFoundries sharpens our focus on extending our leadership positions in interconnect and foundation IP. As interconnect standards evolve at an unprecedented pace, customers count on Synopsys' one generation ahead approach, and in Q1, we saw continued strong demand for high-speed protocol IP.

The planned sale of our processor IP Solutions, business, to Global foundries. Sharpens, our focus on extending our leadership positions in interconnect and Foundation IP.

Speaker #2: Our confidence in this business is only increasing as global demand for electrification, autonomy, digital twins, advanced semiconductor design, and mission engineering remains resilient and expanding.

As interconnect standards evolve at an unprecedented pace.

Customers count on synopsis 1. Generation ahead approach.

Speaker #2: Turning to design IP, which performed in line with expectations. As we've said, 2026 is a transitional year for the IP business, and we're focused on aligning with the fastest growing segments of the silicon market.

and in q1, we saw continued strong demand for high-speed protocol IP

Speaker #2: We're making progress on this front. The planned sale of our processor IP solutions business to global foundries sharpens our focus on extending our leadership positions in interconnect and foundation IP.

We achieved more than 40. Pcie design wins in the quarter with HPC and Automotive customers achieved an industry. First demonstration of pcie 8.0 and established first to Market position with our 224 gig Sardis.

On Advanced nodes and leading foundr with 10 lifetime wins.

Speaker #2: As interconnect standards evolve at an unprecedented pace, customers count on Synopsys' one-generation-ahead approach and in Q1 we saw continued strong demand for high-speed protocol IP.

We continue to expect muted FY 26 growth in IP with sequential Improvement. Given our road map and sales pipeline.

Trends. Give us conviction in the growth, trajectory of the business.

This includes the global expansion of foundries and accelerated node transitions.

Speaker #2: We achieved more than 40 PCIe design wins in the quarter with HPC and automotive customers. Achieved an industry-first demonstration of PCIe 8.0 and established first-to-market position with our 224-gig SERDEs on advanced nodes and leading foundries with 10 lifetime wins.

Sassine Ghazi: We achieved more than 40 PCIe design wins in the quarter with HPC and automotive customers, achieved an industry-first demonstration of PCIe 8.0, and established first-to-market position with our 224G SerDes on advanced nodes and leading foundries with 10 lifetime wins. We continue to expect muted FY 26 growth in IP, with sequential improvement given our roadmap and sales pipeline. Longer term, several industry trends give us conviction in the growth trajectory of the business. This includes the global expansion of foundries and accelerated node transitions, standards advancing at unprecedented pace, and increasing demand for chiplets and subsystems. Our 40th anniversary year is off to a great start with operational excellence, financial discipline, and the most competitive, compelling roadmap ever.

Standards advancing at unprecedented pace and increasing, demand for chiplets and subsystems.

Our 4 years anniversary Year is off to a great start with operational, excellence, Financial discipline, and the most competitive compelling road map, ever.

Speaker #2: We continue to expect muted FY26 growth in IP with sequential improvement given our roadmap and sales pipeline. Longer term, several industry trends give us conviction in the growth trajectory of the business.

Our priority for FY, 26 remains on driving, sustainable growth and margin expansion by advancing our technology leadership with holistic, integrated silicon to system, engineering solutions by pioneering Aiden engineering and focusing our IP portfolio for growth.

and,

Speaker #2: This includes the global expansion of foundries and accelerated node transitions. Standards are advancing at an unprecedented pace and there is increasing demand for chiplets and subsystems. Our four-year anniversary year is off to a great start with operational excellence, financial discipline, and the most competitive, compelling roadmap ever.

Efficiently scaling to accelerate our strategy.

The answers integration is well underway.

It's great how our teams have come together at PACE to solve. Engineering's, biggest challenges.

We'll have a lot more to say and show at synopsys converge in March, and I look forward to seeing many of you there. Now over to Sheila,

Speaker #2: Our priority for FY26 remains on driving sustainable growth and margin expansion. By advancing our technology leadership with holistic, integrated silicon-to-system engineering solutions by pioneering AI-driven engineering and focusing our IP portfolio for growth.

Sassine Ghazi: Our priority for FY 2026 remains on driving sustainable growth and margin expansion by advancing our technology leadership with holistic, integrated silicon-to-system engineering solutions, by pioneering AI-driven engineering, and focusing our IP portfolio for growth, and efficiently scaling to accelerate our strategy. The Ansys integration is well underway. It's great how our teams have come together at pace to solve engineering's biggest challenges. We'll have a lot more to say and show at Synopsys Converge in March, and I look forward to seeing many of you there. Now, over to Sheila.

Thank you. It's the scene as the scene. Noted q1 26 marked a strong start to the year with Revenue at the upper, end of our guided range, non-gaap operating margin of 42.1%, and non-gaap EPS above guidance. These results, reflect strong execution and financial discipline across the business.

Speaker #2: And efficiently scaling to accelerate our strategy. The Ansys integration is well underway, is great how our teams have come together at pace to solve engineering's biggest challenges.

Backlog ended at 11.3 billion underscoring, our strong and resilient business model. As a result. We are reiterating our full year Revenue non-gaap operating margin and cash flow guidance. While raising our non-gaap EPS, guidance, for the full year,

Speaker #2: We'll have a lot more to say and show at Synopsys Converge in March, and I look forward to seeing many of you there. Now over to Sheila.

I'll now review our first quarter results.

Speaker #1: Thank you, Sassine. As Sassine noted, Q126 marked a strong start to the year with revenue at the upper end of our guided range, non-gap operating margin of 42.1%, and non-gap EPS above guidance.

[Company Representative] (Synopsys): Thank you, Sassine. As Sassine noted, Q1 2026 marked a strong start to the year, with revenue at the upper end of our guided range, non-GAAP operating margin of 42.1%, and non-GAAP EPS above guidance. These results reflect strong execution and financial discipline across the business. Backlog ended at $11.3 billion, underscoring our strong and resilient business model. As a result, we are reiterating our full-year revenue, non-GAAP operating margin, and cash flow guidance, while raising our non-GAAP EPS guidance for the full year. I'll now review our Q1 results. All comparisons are year-over-year, unless otherwise stated. As a reminder, our Q1 2025 comparers include the Optical Solutions Group, which was divested in Q4 2025.

Shelagh Glaser: Thank you, Sassine. As Sassine noted, Q1 2026 marked a strong start to the year, with revenue at the upper end of our guided range, non-GAAP operating margin of 42.1%, and non-GAAP EPS above guidance. These results reflect strong execution and financial discipline across the business. Backlog ended at $11.3 billion, underscoring our strong and resilient business model. As a result, we are reiterating our full-year revenue, non-GAAP operating margin, and cash flow guidance, while raising our non-GAAP EPS guidance for the full year. I'll now review our Q1 results. All comparisons are year-over-year, unless otherwise stated. As a reminder, our Q1 2025 comparers include the Optical Solutions Group, which was divested in Q4 2025.

All comparisons are year-over-year unless otherwise stated as a reminder our q125 Compares include the optical solutions group which was deed in Q4 255.

We generated total revenue of 2.41 billion dollars coming in at the high end of our guidance. Primarily due to the timing of ancest deals.

Speaker #1: These results reflect strong execution and financial discipline across the business. Backlog ended at $11.3 billion, underscoring our strong and resilient business model. As a result, we are reiterating our full-year revenue, non-GAAP operating margin, and cash flow guidance while raising our non-GAAP EPS guidance for the full year.

Answers Revenue was approximately 886 million reflecting our leadership simulation and Analysis portfolio and exceptional execution in the seasonally strong quarter.

Geographically, China, grew, approximately 21% year-over-year due to the inclusion of anise.

Excluding anise China Revenue, decline slightly year-over-year consistent with our Outlook.

Speaker #1: I'll now review our first quarter results. I'll comparisons our year-over-year unless otherwise stated. As a reminder, our Q125 comparers include the optical solutions group, which was divested in Q425.

Total Gap costs and expenses were 2.2 billion.

Total non-gaap costs and expenses were 1.4 billion at the low end of our guided range due to timing resulting in a non-gaap operating margin of 42.1%.

Speaker #1: We generated total revenue of 2.41 billion dollars coming in at the high end of our guidance. Primarily due to the timing of Ansys deals.

[Company Representative] (Synopsys): We generated total revenue of $2.41 billion, coming in at the high end of our guidance, primarily due to the timing of Ansys deals. Ansys revenue was approximately $886 million, reflecting our leadership, simulation, and analysis portfolio, and exceptional execution in the seasonally strong quarter. Geographically, China grew approximately 21% year-over-year due to the inclusion of Ansys. Excluding Ansys, China revenue declined slightly year-over-year, consistent with our outlook. Total GAAP costs and expenses were $2.2 billion. Total non-GAAP costs and expenses were $1.4 billion, at the low end of our guided range due to timing, resulting in non-GAAP operating margin of 42.1%. GAAP earnings per share were $0.34.

Shelagh Glaser: We generated total revenue of $2.41 billion, coming in at the high end of our guidance, primarily due to the timing of Ansys deals. Ansys revenue was approximately $886 million, reflecting our leadership, simulation, and analysis portfolio, and exceptional execution in the seasonally strong quarter. Geographically, China grew approximately 21% year-over-year due to the inclusion of Ansys. Excluding Ansys, China revenue declined slightly year-over-year, consistent with our outlook. Total GAAP costs and expenses were $2.2 billion. Total non-GAAP costs and expenses were $1.4 billion, at the low end of our guided range due to timing, resulting in non-GAAP operating margin of 42.1%. GAAP earnings per share were $0.34.

Gap earnings per share were 34 cents.

Speaker #1: Ansys revenue was approximately 886 million dollars reflecting our leadership, simulation, and analysis portfolio and exceptional execution in the seasonally strong quarter. Geographically, China grew approximately 21% year-over-year due to the inclusion of Ansys.

Non-gaap earnings per share. Were $3.77 coming in ahead of expectations on revenue and expense timing. As well as lower net, other and interest expense.

Now, onto our segments.

Design automation, segment Revenue was approximately 2 billion dollars.

Speaker #1: Excluding Ansys, China revenue declined slightly year-over-year consistent with our outlook. Total gap cost and expenses were 2.2 billion dollars. Total non-gap cost and expenses were 1.4 billion dollars at the low end of our guided range due to timing, resulting in non-gap operating margin of 42.1%.

In addition to strength and ansys, the segment saw, strong growth and Hardware assisted verification partially offset by the optical solutions group deveste.

Design automation, adjusted. Operating margin was 47.3%.

Design IP segment Revenue was 407 million down approximately 6% year-over-year and flat sequentially.

Speaker #1: GAAP earnings per share were $0.34. Non-GAAP earnings per share were $3.77, coming in ahead of expectations, with revenue and expense timing as well as lower net other and interest expense contributing to the results.

We continue to expect fiscal year. 26 to be a transitional year for the business, as our IP roadmap continues to make steady progress.

[Company Representative] (Synopsys): Non-GAAP earnings per share were $3.77, coming in ahead of expectations on revenue and expense timing, as well as lower net other and interest expense. Now, on to our segments. Design Automation segment revenue was approximately $2 billion. In addition to strength in Ansys, the segment saw strong growth in hardware-assisted verification, partially offset by the Optical Solutions Group divestiture. Design Automation adjusted operating margin was 47.3%. Design IP segment revenue was $407 million, down approximately 6% year-over-year and flat sequentially. We continue to expect fiscal year 2026 to be a transitional year for the business, as our IP roadmap continues to make steady progress. Design IP adjusted operating margin was 16.2%.

Shelagh Glaser: Non-GAAP earnings per share were $3.77, coming in ahead of expectations on revenue and expense timing, as well as lower net other and interest expense. Now, on to our segments. Design Automation segment revenue was approximately $2 billion. In addition to strength in Ansys, the segment saw strong growth in hardware-assisted verification, partially offset by the Optical Solutions Group divestiture. Design Automation adjusted operating margin was 47.3%. Design IP segment revenue was $407 million, down approximately 6% year-over-year and flat sequentially. We continue to expect fiscal year 2026 to be a transitional year for the business, as our IP roadmap continues to make steady progress. Design IP adjusted operating margin was 16.2%.

Design. IP adjusted operating margin was 16.2%.

Speaker #1: Now onto our segments. Design automation segment revenue was approximately 2 billion dollars. In addition to strength in Ansys, the segment saw strong growth in hardware-assisted verification partially offset by the optical solutions group divestiture.

Free cash. Flow was approximately 822 million in q1 and we ended the quarter with cash and short-term Investments of 2.2 billion. Total debt at the end of q1 was 10 billion. We have repaid, the entirety of the 4.3 billion term loans, consistent with our commitment last quarter.

Now to guidance.

Speaker #1: Design automation adjusted operating margin was 47.3%. Design IP segment revenue was 407 million dollars down approximately 6% year-over-year and flat sequentially. We continue to expect fiscal year '26 to be a transitional year for the business as our IP roadmap continues to make steady progress.

our full year targets are

Double digits.

Total Gap costs and expenses between 8.46 billion and 8.60 billion.

Speaker #1: Design IP adjusted operating margin was 16.2%. Free cash flow was approximately 822 million dollars in Q1 and we ended the quarter with cash and short-term investments of 2.2 billion dollars.

[Company Representative] (Synopsys): Free cash flow was approximately $822 million in Q1. We ended the quarter with cash and short-term investments of $2.2 billion. Total debt at the end of Q1 was $10 billion. We have repaid the entirety of the $4.3 billion term loans, consistent with our commitment last quarter. Now, to guidance. Our full year targets are: total revenue of $9.56 billion to $9.66 billion. We continue to expect Ansys revenue contribution of $2.9 billion at the midpoint, growing double digits. Total GAAP costs and expenses between $8.46 billion and 8.60 billion dollars.

Shelagh Glaser: Free cash flow was approximately $822 million in Q1. We ended the quarter with cash and short-term investments of $2.2 billion. Total debt at the end of Q1 was $10 billion. We have repaid the entirety of the $4.3 billion term loans, consistent with our commitment last quarter. Now, to guidance. Our full year targets are: total revenue of $9.56 billion to $9.66 billion. We continue to expect Ansys revenue contribution of $2.9 billion at the midpoint, growing double digits. Total GAAP costs and expenses between $8.46 billion and 8.60 billion dollars.

Total non-gaap costs and expenses between 5.69 and 5.75 billion.

Speaker #1: Total debt at the end of Q1 was 10 billion dollars. We have repaid the entirety of the 4.3 billion dollar term loans consistent with our commitment last quarter.

Resulting in non-gaap operating margin of 40.5% of the midpoint Gap, earnings of $2 and 21 cents to $2.62 per share.

Speaker #1: Now to guidance. Our full-year targets are: total revenue of 9.56 billion dollars to 9.66 billion dollars. We continue to expect Ansys revenue contribution of 2.9 billion dollars at the midpoint growing double digits.

non-gaap earnings of 14.38 to 14.46 cents per share up to 6 cents from prior guidance, due to lower net, other and interest expense in q1,

Speaker #1: Total gap cost and expenses between 8.46 billion and 8.60 billion dollars. Total non-gap cost and expenses between 5.69 and 5.75 billion dollars. Resulting in non-gap operating margin of 40.5% at the midpoint.

[Company Representative] (Synopsys): Total non-GAAP costs and expenses between $5.69 and $5.75 billion, resulting in non-GAAP operating margin of 40.5% at the midpoint. GAAP earnings of $2.21 to $2.62 per share. Non-GAAP earnings of $14.38 to $14.46 per share, up $0.06 from prior guidance due to lower net other and interest expense in Q1. We still expect cash flow from operations of approximately $2.2 billion and CapEx of approximately $300 million, resulting in free cash flow of approximately $1.9 billion. With the term loans fully paid off and a strong cash position, our board of directors has replenished our existing stock repurchase program with authorization to purchase up to $2 billion of our common stock.

Shelagh Glaser: Total non-GAAP costs and expenses between $5.69 and $5.75 billion, resulting in non-GAAP operating margin of 40.5% at the midpoint. GAAP earnings of $2.21 to $2.62 per share. Non-GAAP earnings of $14.38 to $14.46 per share, up $0.06 from prior guidance due to lower net other and interest expense in Q1. We still expect cash flow from operations of approximately $2.2 billion and CapEx of approximately $300 million, resulting in free cash flow of approximately $1.9 billion. With the term loans fully paid off and a strong cash position, our board of directors has replenished our existing stock repurchase program with authorization to purchase up to $2 billion of our common stock.

we still expect cash flow from operations of approximately 2.2 billion dollars and capex of approximately, $300 million, resulting in free cash flow of approximately 1.9 billion dollars with the term lens fully paid off and a strong cash position. Our board of directors has replenished, our existing stock repurchase program, with authorization, to purchase up to 2 billion dollars of our common stock.

Speaker #1: Gap earnings of $2.21 to $2.62 per share. Non-gap earnings of $14.38 to $14.46 per share. Up 6 cents from prior guidance due to lower net other and interest expense in Q1.

Our Capital allocation priority will continue to be investing in the business with flexibility to opportunistically repurchase shares while paying down debt.

Now, to Target for the second quarter total revenue between 2.225 and 2.275 billion.

Speaker #1: We still expect cash flow from operations of approximately 2.2 billion dollars and capex of approximately 300 million dollars resulting in free cash flow of approximately 1.9 billion dollars.

Total Gap costs and expenses between 2.02 and 2.085 billion. Total non-gaap costs and expenses between 1.38 and 1.41 billion dollars.

Speaker #1: With the term loans fully paid off and a strong cash position, our board of directors has replenished our existing stock repurchase program with authorization to purchase up to $2 billion dollars of our common stock.

Gap earnings of 23 cents to 43 cents per share, and non-gaap earnings of $3.11 to $3.17 per share.

Speaker #1: Our capital allocation priority will continue to be investing in the business with flexibility to opportunistically repurchase shares while paying down debt. Now to targets for the second quarter.

[Company Representative] (Synopsys): Our capital allocation priority will continue to be investing in the business with flexibility to opportunistically repurchase shares while paying down debt. Now, to targets for Q2. Total revenue between $2.225 and $2.275 billion. Total GAAP costs and expenses between $2.02 and $2.085 billion. Total non-GAAP costs and expenses between $1.38 and $1.41 billion. GAAP earnings of $0.23 to $0.43 per share, and non-GAAP earnings of $3.11 to $3.17 per share. Our press release and financial supplement include additional targets and GAAP to non-GAAP reconciliations. In conclusion, 2026 is off to a strong start, and we're executing to the priorities we laid out at the beginning of the year.

Shelagh Glaser: Our capital allocation priority will continue to be investing in the business with flexibility to opportunistically repurchase shares while paying down debt. Now, to targets for Q2. Total revenue between $2.225 and $2.275 billion. Total GAAP costs and expenses between $2.02 and $2.085 billion. Total non-GAAP costs and expenses between $1.38 and $1.41 billion. GAAP earnings of $0.23 to $0.43 per share, and non-GAAP earnings of $3.11 to $3.17 per share. Our press release and financial supplement include additional targets and GAAP to non-GAAP reconciliations. In conclusion, 2026 is off to a strong start, and we're executing to the priorities we laid out at the beginning of the year.

Our press release and financial supplement include additional targets and gaap to non-gaap reconciliation.

In conclusion, 2026 is off to a strong start and we're executing to the priorities we've laid out at the beginning of the year.

Speaker #1: Total revenue between 2.225 and 2.275 billion dollars. Total gap cost and expenses between 2.02 and 2.085 billion dollars. Total non-gap cost and expenses between 1.38 and 1.41 billion dollars.

With our broad leadership portfolio, expansive Market opportunity, and Technology trends that play to our strengths. We are focused on executing with financial discipline as we solve. Our customers biggest engineering challenges from Silicon to systems with that. I'll turn it over to the operator for questions.

Speaker #1: Gap earnings of 23 cents to 43 cents per share. And non-gap earnings of $3.11 to $3.17 per share. Our press release and financial supplement included additional targets in gap to non-gap reconciliations.

Thank you. Before we begin, the Q&A session, I would like to ask everyone to please limit yourself to 1, question and 1 brief follow-up to allow us to accommodate all participants. If you have additional questions, please reenter the queue and we'll take as many as time permits.

Our first question today will come from Charles shei from Neiman company.

Speaker #1: In conclusion, 2026 is off to a strong start and we're executing to the priorities we've laid out at the beginning of the year. With our broad leadership portfolio, expansive market opportunity and technology trends that play to our strength, we are focused on executing with financial discipline as we solve our customers' biggest engineering challenges from silicon to systems.

[Company Representative] (Synopsys): With our broad leadership portfolio, expansive market opportunity, and technology trends that play to our strength, we are focused on executing with financial discipline as we solve our customers' biggest engineering challenges, from silicon to systems. With that, I'll turn it over to the operator for questions.

Shelagh Glaser: With our broad leadership portfolio, expansive market opportunity, and technology trends that play to our strength, we are focused on executing with financial discipline as we solve our customers' biggest engineering challenges, from silicon to systems. With that, I'll turn it over to the operator for questions.

Speaker #1: With that, I'll turn it over to the operator for questions.

Speaker #2: Thank you. Before we begin the Q&A session, I would like to ask everyone to please limit yourself to one question and one brief follow-up to allow us to accommodate all participants.

Operator: Thank you. Before we begin the Q&A session, I would like to ask everyone to please limit yourself to one question and one brief follow-up to allow us to accommodate all participants. If you have additional questions, please reenter the queue and we'll take as many as time permits. Our first question today will come from Charles Shi from Needham & Company.

Speaker #2: If you have additional questions, please re-enter the queue and we'll take as many as time permits. Our first question today will come from Charles Xie from Needham and Company.

Hi, thanks for taking my question. So, uh, the first 1 I want to, uh, take a little bit more into the IP segment. Uh, thanks for the commentary, uh, music growth for the year, but sequential, uh, uh, improvement from here for the remainder of the year. But it does look to me that, uh, the second half IP, uh, Revenue should have see some pick up. I I'm not questioning it. You that uh, you're not going to deliver that but I think going back to a couple years you you talk about visibility in some development Milestone based uh, IP revenues, probably coming from the sum of The Foundry customers. But, uh, that part of the business is going away. So wondering, what is the confidence on the second, half IP, uh, business the pickup and uh um, maybe I can ask a second question after this. Thank you.

Speaker #3: Hi. Thanks for taking my question. So the first one I want to dig a little bit more into the IP segment. Thanks for the commentary, muted growth for the year, but sequential improvement from here.

Charles Shi: Hi, thanks for taking my question. The first one, I wanna dig a little bit more into the IP segment. Thanks for the commentary on music growth for the year, a sequential improvement from here for the remainder of the year. It does look to me that the second half IP revenue should see some pickup. I'm not questioning you that you're not gonna deliver that, but I think going back a couple of years, you talk about visibility in some development milestone-based IP revenues, probably coming from some of the foundry customers, but that part of the business is going away. Wondering, what gives the confidence on the second half IP business the pickup? Maybe I can ask a second question after this. Thank you.

Yeah sure. Charles the the confidence in our IP business is driven by the design starts. As I mentioned, in the prepare remarks.

Speaker #3: And for the remainder of the year, but it does look to me that the second half IP revenue should have seen some pickup. I'm not questioning you that you're not going to deliver that, but I think going back a couple of years, you talk about visibility in some development milestone-based IP revenues probably coming from some of the foundry customers, but that part of the business is going away.

For the AI segment. The design start remain, very robust and that's where we, uh, engage the customers early and uh, have the opportunity to sell the IP as a portfolio with the various needs that these customer have

And we have an advantage uh in these uh situations given the breadth of the portfolio. So that's 1 aspect.

Speaker #3: So wondering what gives the confidence on the second half IP business the pickup and maybe I can ask a second question after this. Thank you.

Speaker #4: Yeah, sure, Charles. The confidence in our IP business is driven by the design starts. As I mentioned in the prepare remarks, for the AI segment, the design starts remain very robust.

Sassine Ghazi: Yeah, sure, Charles. The confidence in our IP business is driven by the design starts. As I mentioned in the prepared remarks, for the AI segment, the design starts remain very robust, That's where we engage the customers early and have the opportunity to sell the IP as a portfolio with the various needs that these customer have. We have an advantage in these situations, given the breadth of the portfolio. That's one aspect. The other aspect that has changed over the last number of years is the pace and time in which these standards are evolving, where historically the standard life used to be three to four years. Right now, it's about half that time, and the reason for that is the increased need for higher bandwidth, lower power, et cetera, standard.

The other aspect that has changed over the last number of years, is the pace and time in which these standards are evolving. Where historically, The Standard Life used to be 3 to 4 years right now. It's about half that time. And the reason for that is the increased need for uh higher bandwidth, lower power Etc. Uh, standard

Speaker #4: And that's where we engage the customers early and have the opportunity to sell the IP as a portfolio with the various needs that these customers have.

Synopsis portfolio is across multiple foundr with all of that is giving us that confidence. Now, as far as the second half,

Speaker #4: And we have an advantage in these situations given the breadth of the portfolio. So that's one aspect. The other aspect that has changed over the last number of years is the pace and time in which these standards are evolving, where historically the standard life used to be three to four years.

as we have communicated a number of a couple quarters ago, that uh, we have uh, some work to do on some of the schedule on delivering on uh, a few of the titles and we're on track to deliver to that with an expectation. That will be able to monetize uh, toward the latter part of the year.

Speaker #4: Right now, it's about half that time. And the reason for that is the increased need for higher bandwidth, lower power, etc., standard. The last point we're seeing and observing is our customers looking for foundry optionality.

yeah, and I would just add on Charles that uh the availability that

Sassine Ghazi: The last point we're seeing and observing is our customers looking for foundry optionality, and given the Synopsys portfolio is across multiple foundries, with all of that, is giving us that confidence. Now, as far as the second half, as we have communicated a number of, a couple quarters ago, that we have some work to do on some of the schedule on delivering on a few of the titles, and we're on track to deliver to that with an expectation that we'll be able to monetize toward the latter part of the year.

Speaker #4: And given the synopsis portfolio is a cross multiple foundries, with all of that is giving us that confidence. Now, as far as the second half, as we have communicated a number of a couple of quarters ago, that we have some work to do on some of the schedule on delivering on a few of the titles and we're on track to deliver to that with an expectation that will be able to monetize toward the latter part of the year.

Okay. A little bit Q4 way there. Thanks, um, maybe a follow-up question. Um, um, also, I think, I think in the past we talk about not, uh, and not having the right resources to capture some of the IP opportunity, uh, because of, uh, you know, there was a little bit of a focus, probably on The Foundry side of the customer, but, uh, but the sum of the hyperscaler is probably needs a little bit more handholding. Um, wondering if you can give us a little bit of update other than I think, you talked about some work, will be delivered in the second half of the year. But, uh, any any, any any, any, any, any sort of update on on that front, that would be great. Thank you.

Speaker #2: Yeah, and I would just add on, Charles. That the availability that's seen talks about is a little bit more Q4 weighted.

[Company Representative] (Synopsys): Yeah, I would just add on, Charles, that the availability that Sassine talked about is a little bit more Q4 weighted.

Shelagh Glaser: Yeah, I would just add on, Charles, that the availability that Sassine talked about is a little bit more Q4 weighted.

Yes, Charles to be clear. We absolutely have the right skills.

Speaker #3: Okay, a little bit Q4 weighted. Thanks. Maybe a follow-up question. We're also seeing, I think in the past, you talk about not having the right resources to capture some of the IP opportunity because of there was a little bit of a focus probably on the foundry side of the customer.

Charles Shi: Okay, a little bit Q4 weighted. Thanks. Maybe a follow-up question. Also seeing I think in the past, you talk about not having the right resources to capture some of the IP opportunity because of, you know, there was a little bit of focus probably on the foundry side of the customer. Some of the hyperscalers probably needs a little bit more handholding. Wondering if you can give us a little bit update other than, I think you talked about some work will be delivered in the second half of the year. Any sort of update on that front, that would be great. Thank you.

Speaker #3: But some of the hyperscalers probably need a little bit more hand-holding if you can give us a little bit update other than I think you talk about some work will be delivered in the second half of the year.

Speaker #3: But any sort of update on that front, that would be great. Thank

And um, what we have communicated, it was a prioritization of some of these skills to deliver on the schedule required for some of these hyperscalers. And uh, again it's not a question of. Do we have the right people with the right skill set and understanding and knowing what we want to build, those are things that we absolutely do have. It was putting the right resources and priority of the resources to deliver on time and schedule for uh for these titles. And that's exactly what uh we're doing. And I feel great actually. But the progress that we're making uh, on our road map and schedule to deliver to these opportunities,

Speaker #4: Yes, Charles, to be clear, we absolutely have the right skills, and what we have communicated was a prioritization of some of these skills to deliver on the schedule required for some of these hyperscalers.

Sassine Ghazi: Yes, Charles, to be clear, we absolutely have the right skills. What we have communicated, it was a prioritization of some of these skills to deliver on the schedule required for some of these hyperscalers. Again, it's not a question of, do we have the right people with the right skill set and understanding and knowing what we wanna build? Those are things that we absolutely do have. It was putting the right resources and priority of the resources to deliver on time and schedule for these titles, that's exactly what we're doing, I feel great, actually, about the progress that we're making on our roadmap and schedule to deliver to these opportunities.

Thanks.

Thank you. Charles

Gary Moby from loop, capital markets has the next question.

Speaker #4: And again, it's not a question of do we have the right people with the right skill set and understanding and knowing what we want to build.

Speaker #4: Those are things that we absolutely do have. It was putting the right resources and priority of the resources to deliver on time and schedule for these titles and that's exactly what we're doing.

Question for Sheila. But, you know, I noticed the rpos are down, you know, modestly in a sequential basis, you know. And it's clear that the fourth quarter of last year was a strong bookings quarter. So maybe if you could speak to the seasonality of the bookings, as you see it on both for the balance of, of this fiscal year. And, uh, in general talk about the renewal activity on on, uh, you know,

BDA side and the simulation software side to the business.

Speaker #4: And I feel great, actually, about the progress that we're making. On our roadmap and schedule to deliver to these opportunities.

Speaker #3: Thanks.

Charles Shi: Thanks.

Speaker #4: Thank you, Charles.

Sassine Ghazi: Thank you, Charles.

Speaker #2: Gary Mobley from Loop Capital Markets has the next question.

Operator: Gary Mobley from Loop Capital Markets has the next question.

Speaker #3: Yeah, thank you so much for taking my question. Maybe this is a question for Sheila, but I noticed the RPOs are down modestly in a sequential basis.

Gary Mobley: Good afternoon. Thank you so much for taking my question. Maybe this is a question for Sheila, but, you know, I noticed the RPO are down, you know, modestly on a sequential basis, you know, and it's clear that the Q4 of last year was a strong bookings quarter. Maybe if you could speak to the seasonality of the bookings as you see it on both for the balance of this fiscal year and, in general, talk about the renewal activity on, you know, the EDA side and the simulation software side of the businesses.

Is well, as you know, it's an EB and flow of building. And um, um, consuming backlog, we feel great. We are sitting at 11.35% and as you say that just kind of es and flows with the renewal timing. So there's nothing there's nothing about backlog. That, uh, does anything other than give us confidence as sitting at 1, 1. 3.

Speaker #3: And it's clear that the fourth quarter of last year was a strong bookings quarter. So maybe if you could speak to the seasonality of the bookings as you see it unfold for the balance of this fiscal year.

Speaker #3: And in general, talk about the renewal activity on the EDA side and the simulation software sides of the businesses.

Okay, thank you. Just ask a quick follow-up. Um, on the verification of Hardware side of the business, how do you see the product cycle of zebu? And how is 200 playing out for the balance of the year in, you know, in comparison to to last year and where, where are we at in terms of the product cycle strength?

Yes. So um,

Speaker #2: Well, as you know, it's an ebb and flow of building and consuming backlog. We feel great. We are sitting at 11.3 billion of backlog.

[Company Representative] (Synopsys): Well, as you know, it's an ebb and flow of building and consuming backlog. We feel great. We are sitting at $11.3 billion of backlog, so we've got a strong understanding of what our customer demands are and what we need to deliver to them. As you say, that just kind of ebbs and flows with renewal timing. There's nothing about backlog that does anything other than give us confidence sitting at $11.3 billion.

Shelagh Glaser: Well, as you know, it's an ebb and flow of building and consuming backlog. We feel great. We are sitting at $11.3 billion of backlog, so we've got a strong understanding of what our customer demands are and what we need to deliver to them. As you say, that just kind of ebbs and flows with renewal timing. There's nothing about backlog that does anything other than give us confidence sitting at $11.3 billion.

Exactly what you pointed out. We have 2 parts of our Hardware portfolio. We have zebu and haps and we introduced the EP family, which is an emulation prototyping. Uh,

Speaker #2: So we've got a strong understanding of what our customer demands are and what we need to deliver to them. And as you say, that just kind of ebbs and flows with renewal timing.

Which is a hybrid that provide. Our customer the flexibility.

Speaker #2: So there's nothing about backlog that does anything other than give us confidence. Sitting at 11.3 billion.

To achieve the highest performance that is needed for software development as well as the ability to uh to verify uh uh the function of the chip.

Speaker #3: Okay, like you said, ask a quick follow-up. On the verification of hardware side of the business, how do you see the product cycle of ZBU in haps 200 playing out for the balance of the year in comparison to last year?

Gary Mobley: Okay. Like you said, ask a quick follow-up. On the verification and hardware side of the business, how do you see the product cycle of the ZeBu and HAPS-200 playing out for the balance of the year in, you know, in comparison to last year? Where are we at in terms of the product cycle strength?

Uh, we had a record here, uh, last year.

Speaker #3: And where are we at in terms of the product cycle strength?

Speaker #4: Yes, so exactly what you pointed out, we have two parts of our hardware portfolio. We have ZBU and haps. And we introduced the EP family, which is an emulation prototyping which is a hybrid that provides our customer the flexibility to achieve the highest performance that is needed for software development, as well as the ability to verify the function of the chip.

Sassine Ghazi: Yes. Exactly what you pointed out. We have two parts of our hardware portfolio. We have ZeBu and HAPS, and we introduced the EP-Ready family, which is an emulation prototyping, which is a hybrid that provide our customer the flexibility to achieve the highest performance that is needed for software development, as well as the ability to verify the function of the chip. We had a record year last year, and it was following a number of other record years. We have an expectation for that business to continue on delivering to such expectations, given the demand and complexity that our customers are driving. That requires both a ZeBu, HAPS, EP-Ready system, and we have number of use cases today that we're leading the market in terms of technology differentiation there.

And uh, it was following a number of other record years, and we have an expectation for that business to continue, uh, on delivering to such expectations given the demand and complexity that our customers are driving, that requires both a zebu, perhaps EP system. And, uh, and and we, we have number of use cases today that were leading the market in terms of Technology differentiation there.

Thank you, both.

Thank you, Gary.

The next question is Jay V shower Griffin securities.

Speaker #4: We had a record year last year and it was following a number of other record years. And we have an expectation for that business to continue on delivering to such expectations given the demand and complexity that our customers are driving that requires both a ZBU, haps, EP system, and we have a number of use cases today that we're leading the market in terms of technology differentiation there.

Speaker #3: Thank you both.

Gary Mobley: Thank you both.

Speaker #4: Thank you, Gary.

Sassine Ghazi: Thank you, Gary.

Speaker #2: Thank you. The next question is Jay Vlieshour, Griffin Securities.

Operator: The next question is Jay Vleeschhouer, Griffin Securities.

Jay Vleeschhouwer: Thank you. Good evening. Seeing the first question for you and perhaps somewhat technical. You began your remarks by noting how AI could be variously constructive to your business rather than disruptive, and I happen to agree with that. I would like to ask about three ingredients that you might have to execute upon to make sure that continues to be the case. We hear a lot, for example, about orchestration requirements across agentic AI. I think that's probably going to be pertinent to EDA as well, or engineering software broadly. Secondly, data repository across a broad apps portfolio that you now have. Finally, traceability, particularly for simulation, but also more broadly. I know it's a little technical, but for a call like this.

Speaker #5: Thank you. Good evening. So seeing the first question for you and perhaps somewhat technical, you began your remarks by noting how AI could be variously constructive to your business rather than disruptive.

Uh, thank you. Good evening. Um, so seeing the first question for you and perhaps uh, somewhat technical, you began your remarks by noting, how AI could be variously constructive to your business rather than disruptive, and I have to agree with that. But I'd like to ask about 3 ingredients that you might have to execute upon to make sure that continues to be the case. Um, we hear a lot for example, about, uh, orchestration requirements across agentic AI. I think that's probably going to be pertinent to Eda as well, or or engineering software, broadly. Secondly data repository across a broad, uh, apps portfolio that you now have, and then finally traceability particularly for simulation, but also more broadly. And I, I know that the little technical but for a call like this but perhaps in in so far as those are, I think critical ingredients. Maybe talk about your capabilities there and then the follow-up Sheila.

Yeah, Jake. Thank you for the question. If you recall last year at converge, we put our road map for agent engineers.

Speaker #5: And I happen to agree with that. But I'd like to ask about three ingredients that you might have to execute upon to make sure that continues to be the case.

Speaker #5: We hear a lot, for example, about orchestration requirements across agentic AI. I think that's probably going to be pertinent to EDA as well or engineering software broadly.

And in that road map, we mapped out L1 through L5 where L1 think of it as a uh, reinforcement learning applied to every aspect of the, the technology that we offer. Uh, in L2 where we have, what we call, a task agent.

Speaker #5: Secondly, data repository across a broad apps portfolio that you now have and then finally traceability, particularly for simulation, but also more broadly. I know it's a little technical, but for a call like this, but perhaps insofar as those are, I think, critical ingredients, maybe talk about your capabilities there.

Jay Vleeschhouwer: Perhaps, insofar as those are, I think, critical ingredients, maybe talk about your capabilities there, and then the follow-up, Sheila.

In L3 into orchestration of these agents in Alpha and then L4 into the planning Etc into a full autonomy, uh, of uh, orchestration where the human engineer will be dramatically augmented and the workflow will change uh on um uh how to design the chip.

Speaker #5: And then the follow-up, Sheila.

Speaker #4: Yeah, Jay, thank you for the question. If you recall, last year at Converge, we put out our roadmap for agent engineers. And in that roadmap, we mapped out L1 through L5, where L1—think of it as reinforcement learning applied to every aspect of the technology that we offer.

Sassine Ghazi: Jay, thank you for the question. If you recall, last year at Converge, we our roadmap for AgentEngineer. In that roadmap, we mapped out L1 through L5, where L1, think of it as a reinforcement learning applied to every aspect of the technology that we offer. In L2, where we have what we call a task agent, in L3, into orchestration of these agents, in L4, into the planning, et cetera, into a full autonomy of orchestration, where the human engineer will be dramatically augmented and the workflow will change on how to design the chip.

Now what stitches all of that together is a visibility and Continuum of data? Exactly. The second point that you're mentioning, and then of course, the traceability visibility, uh, into the accuracy of the verification. Because at the end of the day,

Speaker #4: And L2, where we have what we call a task agent, and L3 into orchestration of these agents, and L4 into the planning, etc., into a full autonomy of orchestration where the human engineer will be dramatically augmented and the workflow will change on how to design the chip.

What we do. Our agents cannot hallucinate. Uh, it they have to be 100% accurate, uh, as you move to the next phase and the following phase of the workflow,

we have number of the tasks agents and we have uh multiple orchestration layer and we talked about these through some of our Partnerships. We have with Nvidia with Microsoft Etc to leverage, uh, some of that orchestration layer and the cognitive layer that they offer.

Speaker #4: Now, what stitches all of that together is a visibility and continuum of data exactly the second point that you're mentioning and then, of course, the traceability, visibility, into the accuracy of the verification.

Sassine Ghazi: What stitches all of that together is a visibility and continuum of data, exactly the second point that you're mentioning, and then, of course, the traceability, visibility, into the accuracy of the verification. Because at the end of the day, what we do, our agents cannot hallucinate. They have to be 100% accurate, as you move to the next phase and the following phase of the workflow. We have number of the tasks agents, and we have multiple orchestration layer, and we talked about these through some of our partnerships we have with NVIDIA, with Microsoft, et cetera, to leverage some of that orchestration layer and the cognitive layer that they offer.

Speaker #4: Because at the end of the day, what we do, our agents cannot hallucinate. They have to be 100% accurate as you move to the next phase and the following phase of the workflow.

Uh, so, uh, it's a combination of what we're building. And what we're partnering with the ecosystem, in order to accelerate, uh, our road map, uh, on the vision of an agent engineer, which we believe strongly that we have pioneered and we continue on engaging, the customers there. But, uh, I want to make sure that, uh, it's clear as well in order to deliver to that Vision. You need the data and you need the verification ability of every step of the flow.

Speaker #4: We have a number of the tasks agents, and we have multiple orchestration layers, and we talked about these through some of our partnerships we have with NVIDIA, with Microsoft, etc., to leverage some of that orchestration layer and the cognitive layer that they offer. So it's a combination of what we're building and what we're partnering with the ecosystem in order to accelerate our roadmap on the vision of an agent engineer, which we believe strongly that we have pioneered, and we continue on engaging the customers there.

okay um Sheila for you with regard to answers 2 things stand out in the results and Outlook um and

Sassine Ghazi: It's a combination of what we're building and what we're partnering with the ecosystem in order to accelerate our roadmap on the vision of an AgentEngineer, which we believe strongly that we have pioneered, and we continue on engaging the customers there. I want to make sure that it's clear as well, in order to deliver to that vision, you need the data and you need the verification ability of every step of the flow.

Speaker #4: But I want to make sure that it's clear as well in order to deliver to that vision, you need the data and you need the verification ability of every step of the flow.

Speaker #5: Okay. Shelagh, for you, with regard to answers, two things stand out in the results and outlook. And so the question is really about the forecastability of the answers business.

Jay Vleeschhouwer: Okay. Sheila, for you, with regard to Ansys, two things stand out in the results and outlook. The question is really about the forecastability of the Ansys business. It remains clear that their results are still heavily influenced by pronounced ASC 606 effects, which was certainly the case for them before the acquisition. Maybe you could talk about how forecastable the Ansys business is, given that variability in that particular accounting. Also, if we think about the renewals cohort from 2023, it was heavily reliant upon automotive. That's where they had their growth 3 years ago. Presumably, that's where you're going to have to rely upon the renewals cohort growth for this year as compared to A and B and high tech.

The question is really about the forecast ability of the answers business. Um, it remains clear that their results, uh, uh, are are still heavily influenced by pronounced 606 effects, uh, which was certainly the case for them before the acquisition. Um, so maybe you could talk about how forecast. Uh, the answers business is given that variability in that uh uh particular accounting. And then also we think about the renewals cohort from 2023. It was heavily Reliant upon Automotive. That's where they had their growth 3 years ago. Um, so presumably, that's where you're going to have to rely upon the renewals cohort growth for this year as compared to a and b and high-tech. So maybe talk about some of the End Market assumptions behind your your forecast for answers for this year.

Speaker #5: It remains clear that their results are still heavily influenced by pronounced 606 effects, which were certainly the case for them before the acquisition. So maybe you could talk about how forecastable the answers business is given that variability in that particular accounting.

Speaker #5: And then also if we think about the renewals cohort from 2023, it was heavily reliant upon automotive. That's where they had their growth three years ago.

Speaker #5: So presumably that's where you're going to have to rely upon the renewals cohort growth for this year as compared to AMD and high-tech. So maybe talk about some of the end market assumptions behind your forecast for answers for this year.

Jay Vleeschhouwer: maybe talk about some of the end market assumptions behind your forecast for Ansys for this year.

Speaker #2: Yeah, I'll start with the back end of the question, Jay. So as we have the capability and answers really to service multiple market segments, that's what gives us a lot of confidence.

[Company Representative] (Synopsys): Yeah, I'll start with the back end of the question, Jay. As we have, you know, the capability in Ansys really to service multiple market segments, that's what gives us a lot of confidence. You know, simulation and analysis is still very lightly penetrated in the TAM, so there's ample place, ample opportunity not only to grow within customers, but to actually grow new customers. That opportunity set is quite broad for us. In terms of how we think about the business, as you know, December was always very big for them. That happens to have fall into our Q1. They were a fiscal year. Obviously, we're a 10/31 year. What you saw in Q1 was, you know, the combination of what there would have been their typical year-end.

Shelagh Glaser: Yeah, I'll start with the back end of the question, Jay. As we have, you know, the capability in Ansys really to service multiple market segments, that's what gives us a lot of confidence. You know, simulation and analysis is still very lightly penetrated in the TAM, so there's ample place, ample opportunity not only to grow within customers, but to actually grow new customers. That opportunity set is quite broad for us. In terms of how we think about the business, as you know, December was always very big for them. That happens to have fall into our Q1. They were a fiscal year. Obviously, we're a 10/31 year. What you saw in Q1 was, you know, the combination of what there would have been their typical year-end.

Speaker #2: Simulation and analysis is still very lightly penetrated in the TAM, so there's ample place ample opportunity not only to grow within customers, but to actually grow new customers.

Speaker #2: So that opportunity set is quite broad for us. And then in terms of how we think about the business, as you know, the December was always very big for them.

Speaker #2: That happens to have fallen to our Q1. They were a fiscal year, obviously, where 1031 year. So what you saw in Q1 was the combination of what would have been their typical year-end.

Speaker #2: So that's a real standout in terms of our Q1 results. We anticipate that over time, that probably changes as the sales team realigns with sort of our fiscal year.

[Company Representative] (Synopsys): That's a real standout in terms of our Q1 results. We anticipate that over time, that probably changes as, you know, the sales team realigns with sort of, you know, our fiscal year. Nonetheless, what we're seeing is broad opportunity really across all those segments. As we build the forecast, it incorporates what we're seeing in existing customers, what we think the new opportunity is. In terms of the 606, as I talked about last time, as we're bringing Ansys in, we're building combined products, where a portion of Ansys will be in what we call SCBU, which will be with EDA. We're harmonizing those accounting policies, really aligned with how we're supporting the products and how we're giving further updates on the product. Over time, that's a more muted impact.

Shelagh Glaser: That's a real standout in terms of our Q1 results. We anticipate that over time, that probably changes as, you know, the sales team realigns with sort of, you know, our fiscal year. Nonetheless, what we're seeing is broad opportunity really across all those segments. As we build the forecast, it incorporates what we're seeing in existing customers, what we think the new opportunity is. In terms of the 606, as I talked about last time, as we're bringing Ansys in, we're building combined products, where a portion of Ansys will be in what we call SCBU, which will be with EDA. We're harmonizing those accounting policies, really aligned with how we're supporting the products and how we're giving further updates on the product. Over time, that's a more muted impact.

Year end. So that's a real, um, standout in terms of our q1 results. Uh, we anticipate that over time, that probably changes as, you know uh the sales team realigned with sort of um you know our our fiscal year. But none, the less, what we're seeing is Broad opportunity, really across all those segments. And as we build the forecast, it incorporates, what we seeing in existing customers, what we think the new opportunity is and then, in terms of the 606, as I talked about last time as we're bringing answers in, we're building combined products. We're, uh, portion of answers will be in what we call scbu, which will be with Eda. We're harmonizing. Um, those accounting policies really aligned with how we're supporting the products and how we're giving further updates on the product. So over time that's that's a more muted impact and I would say really what you're seeing here is there's just a really broad opportunity in terms of ability to service.

Multiple markets with the leadership products and answer.

Thank you.

Speaker #2: But nonetheless, what we're seeing is broad opportunity really across all those segments. And as we build the forecast, it incorporates what we're seeing in existing customers, what we think the new opportunity is, and then in terms of the 606, as I talked about last time, as we're bringing answers in, we're building combined products, we're a portion of answers will be in what we call SCBU, which will be with EDA.

Okay, thank you.

Jason Selena from keybanc Capital markets is up next.

Speaker #2: We're harmonizing those accounting policies really aligned with how we're supporting the products and how we're giving further updates on the product. So over time, that's a more muted impact.

Speaker #2: And I would say really what you're seeing here is there's just a really broad opportunity in terms of ability to service multiple markets with the leadership products and answers.

[Company Representative] (Synopsys): I would say, really, what you're seeing here is there's just a really broad opportunity in terms of ability to service multiple markets with the leadership products in Ansys.

Shelagh Glaser: I would say, really, what you're seeing here is there's just a really broad opportunity in terms of ability to service multiple markets with the leadership products in Ansys.

Great. Thank you. Um, sine, I I wanted to ask about the the park processor business that you're divesting. So understand, you know, portfolio review, and and your sharpening your focus in other areas. But presumably, you know, this was a core part of your portfolio before and should be well positioned for physical AI. Um, if physical AI is, is such a big opportunity on the come, you know, maybe it's not a growth driver today but could be, I guess why the rationale on on the diversity?

Jay Vleeschhouwer: Okay. Thank you.

Speaker #5: Okay. Thank you.

[Company Representative] (Synopsys): Thanks, Jay.

Shelagh Glaser: Thanks, Jay.

Speaker #2: Thanks, Jay. Jason Solino from KeyBank Capital Markets is up next.

Operator: Jason Celino from KeyBanc Capital Markets is up next.

Speaker #3: Great. Thank you. Sassine, I wanted to ask about the ARC processor business that you're divesting. So I understand portfolio review in your sharpening your focus.

Jason Celino: ... Thank you. Sassine, I wanted to ask about the ARC processor business that you're divesting. I understand, you know, portfolio review and you're sharpening your focus in other areas, but presumably, you know, this was a core part of your portfolio before and should be well positioned for physical AI. If physical AI is such a big opportunity on the come, you know, maybe it's not a growth driver today, but could be, I guess, why the rationale on the divestiture?

Speaker #3: In other areas, but presumably this was a core part of your portfolio before and should be well positioned for physical AI. If physical AI is such a big opportunity on the come, maybe it's not a growth driver today, but could be.

The sure Jason, The Arc business went through a couple of transformation, uh, from The Arc itself architecture to the risk 5 Isa architecture and what we are seeing is many of our customers, uh, are developing their own, uh, processor IP using for the most part. Our software Eda software to design and verify, using the Eda software, our Hardware portfolio Etc to, uh, to to, to develop their own processor for all kind of embedded applications.

Speaker #3: I guess why the rationale on the divesture?

Speaker #5: Sure, Jason. The ARC business went through a couple of transformations. From the ARC itself architecture to the RISC-V ISA architecture, and what we are seeing is many of our customers are developing their own processor IP using for the most part our software EDA software to design and verify using the EDA software, our hardware portfolio, etc., to develop their own applications.

Sassine Ghazi: Sure, Jason. The ARC business went through a couple of transformation from the ARC itself, architecture, to the RISC-V ISA architecture. What we are seeing is many of our customers are developing their own processor IP, using, for the most part, our software, EDA software, to design and verify using the EDA software, our hardware portfolio, et cetera, to develop their own processor for all kind of embedded applications, which is still a great opportunity for Synopsys. We will continue on enabling, enhancing, leading, supporting our product and our customers for their own development.

Which is still a great opportunity for synopsis. So we will continue on uh enabling uh, enhancing leading supporting our product and our customers for their own development, from an IP point of view.

Uh, we believe when we look at our broad IP business and the portfolio, we have there's a much bigger opportunity and a growth opportunity for the interface IP, and this is where we want to capture these opportunities and put our investments at ngf will be a great partner to, uh, as they enable, uh, that part of their business. On both the interface IP side and the Eda side in their engagement with our joint customers.

Speaker #5: Which is still a great opportunity for Synopsys. So we will continue on enabling enhancing leading supporting our product and our customers for their own development.

Speaker #5: From an IP point of view, we believe when we look at our broad IP business and the portfolio we have, there's a much bigger opportunity and the growth opportunity for the interface IP and this is where we want to capture these opportunities and put our investments at.

Sassine Ghazi: From an IP point of view, we believe when we look at our broad IP business and the portfolio we have, there's a much bigger opportunity and a growth opportunity for the interface IP. This is where we want to capture this opportunity and put our investments at. GF will be a great partner to, as they enable, that part of their business on both the interface IP side and the EDA side in their engagement with our joint customers.

Thanks for clarification, kind of on the the IP messaging. Um, I assume that because the diver hasn't closed yet, the arc um, revenues are included in in the sequential Improvement that was discussed. Um, or or um, is that not included? Thanks Jason. That's correct until we close. Uh, the arc is a part of our financial

Okay. Um, any sense on how big it is? Just so we like are able to anticipate.

No, we haven't provided that.

Speaker #5: And GF will be a great partner to as they enable that part of their business on both the interface IP side and the EDA side in their engagement with our joint customers.

Okay, thank you.

the next question from,

VC, Arya from Bank of America.

Hi. This is Liam far on corporate VC. Thank you so much for taking your questions. Um,

Speaker #3: Okay. And then just for clarification, kind of on the IP messaging, I assume that because the divesture hasn't closed yet, the ARC revenues are included in the sequential improvement that was discussed.

Jason Celino: Okay. Just for clarification, kind of on the IP messaging, I assume that because the divestiture hasn't closed yet, the ARC revenues are included in the sequential improvement that was discussed, or is that not included? Thanks.

close in citizen July last year. What did you noticed by way of cost or Revenue synergies? Thus, far, for fiscal 26, as being speaking with customers on joint, synopsis ansys products.

yes, uh, Liam, what we communicated was the first half of 26,

Speaker #3: Or is that not included? Thanks.

Speaker #2: Jason, that's correct. Until we close, the ARC is a part of our financials.

[Company Representative] (Synopsys): Jason, that's correct. Until we close, the ARC is a part of our financials.

Shelagh Glaser: Jason, that's correct. Until we close, the ARC is a part of our financials.

Will be when we delivered the first wave of the joint Solutions. Um, and I'm looking really forward to communicating

Speaker #3: Okay. Any sense on how big it is just so we are able to anticipate?

Jason Celino: Okay. Any sense on how big it is, just so we, like, are able to anticipate?

Speaker #2: No, we haven't provided that.

Converge, which is our conference, uh, in few weeks, the, the rollouts of number of the joint Solutions with clear.

[Company Representative] (Synopsys): No, we haven't provided that.

Shelagh Glaser: No, we haven't provided that.

Speaker #3: Okay. Thank you.

Jason Celino: Okay. Thank you.

Speaker #2: The next question.

[Company Representative] (Synopsys): The next question from Vivek Arya from Bank of America.

Operator: The next question from Vivek Arya from Bank of America.

Speaker #4: Thanks, Jason. From Vivek Arya from Bank of America.

Speaker #3: Hi, this is Liam Farr on for Vivek. Thank you so much for taking our question. You closed answers in July last year. What have you noticed by way of cost or revenue synergies thus far for fiscal 26 as being speaking with customers on joint Synopsys Ansys products?

Liam Farr: Hi, this is Liam Farr on for Vivek Arya. Thank you so much for taking our question. You closed Ansys in July last year. What have you noticed by way of cost or revenue synergies thus far for fiscal 2026, as you've been speaking with customers on joint Synopsys Ansys products?

Liam Pharr: Hi, this is Liam Farr on for Vivek Arya. Thank you so much for taking our question. You closed Ansys in July last year. What have you noticed by way of cost or revenue synergies thus far for fiscal 2026, as you've been speaking with customers on joint Synopsys Ansys products?

Speaker #5: Yes. Liam, what we communicated was the first half of 26 will be when we deliver the first wave of the joint solutions and I'm looking really forward to communicating at Converge, which is our conference in a few weeks the rollout of a number of the joint solutions with clear visibility to which market, which customer, and then, of course, once you release a product, you focus on the customer adoption and monetization.

Sassine Ghazi: Yes, Liam, what we communicated was the first half of 2026 will be when we deliver the first wave of the joint solutions. I'm looking really forward to communicating at Converge, which is our conference, in few weeks, the rollout of number of the joint solutions with clear visibility to which market, which customer, and then, of course, once you release a product, you focus on the customer adoption and monetization. We are anticipating the monetization of the joint solution to start in FY 2027 with quite a bit of excitement from our customers to solve real problems that they have been looking forward for that integrated solution to come.

The customer adoption and monetization. And we are anticipating the monetization of the joint solution to start an FY 27. Uh, with quite a bit of excitement from our customers to solve real problems, that they have been looking forward for that integrated, uh, solution to come. And I would just comment that, uh, the teams are already trained on cross-selling, so existing,

Speaker #5: And we are anticipating the monetization of the joint solution to start in FY27 with quite a bit of excitement from our customers to solve real problems that they have been looking forward for that integrated solution to come.

So, synopsis sales team being able to sell answers products, answer sales, team, being able to sell synopsis products. So we're well underway in that. Um, and we do have Revenue this year. We haven't, uh, given specific amounts. Our commit is 400 million, uh, in Revenue synergies run rate by year, 4 obviously incorporating. Those, um, uh, joint solution that uh, sustained talked about in terms of cost synergies, our commitment was 400 million run rate by year 3, we're well underway, accelerating that and as you um as we've worked through, we're working on accelerating that into year 1 and year 2 which is 2026 and 2020.

And so we're well on my way on those too.

Speaker #2: And I would just comment that the teams are already trained on cross-selling. So existing products, so Synopsys sales team being able to sell Ansys products, Ansys sales team being able to sell Synopsys products.

[Company Representative] (Synopsys): I would just comment that the teams are already trained on cross-selling, so existing products, so Synopsys sales team being able to sell Ansys products, Ansys sales team being able to sell Synopsys products. We're well underway in that. We do have revenue this year. We haven't given specific amounts. Our commit is $400 million in revenue synergies run rate by year four, obviously incorporating those joint solution that Sassine talked about. In terms of cost synergies, our commit was $400 million run rate by year three. We're well underway accelerating that, and as you, as we've worked through, we're working on accelerating that into year one and year two, which is 2026 and 2027. We're well on way on those two. Thank you.

Shelagh Glaser: I would just comment that the teams are already trained on cross-selling, so existing products, so Synopsys sales team being able to sell Ansys products, Ansys sales team being able to sell Synopsys products. We're well underway in that. We do have revenue this year. We haven't given specific amounts. Our commit is $400 million in revenue synergies run rate by year four, obviously incorporating those joint solution that Sassine talked about. In terms of cost synergies, our commit was $400 million run rate by year three. We're well underway accelerating that, and as you, as we've worked through, we're working on accelerating that into year one and year two, which is 2026 and 2027. We're well on way on those two. Thank you.

Thank you so much and then for a follow-up, I want to go a little deeper on China. I understand it remains challenging but what are the puts and takes around it being flat or even growing year-over-year this year. And have you seen any change in the competitive landscape? Against a peer who continues to see a healthy design activity environment there?

Speaker #2: So we're well underway in that. And we do have revenue this year. We haven't given specific amounts. Our commit is $400 million in revenue synergies run rate by year four.

Speaker #2: Obviously, incorporating those joint solution that Sassine talked about. In terms of cost synergies, our commit was $400 million run rate by year three. We're well underway, accelerating that.

Speaker #2: And as you as we've worked through, we're working on accelerating that into year one and year two, which is 2026 and 2027. So we're well on way on those two.

Speaker #2: Thank you.

Speaker #3: Thank you so much. And then for a follow-up, I want to go a little deeper on China. I understand it remains challenging. But what are the puts and takes around it being flat or even growing year over year this year?

Liam Farr: Thank you so much. For a follow-up, I want to go a little deeper on China. I understand it remains challenging, but what are the puts and takes around it being flat or even growing year-over-year this year? Have you seen any change in the competitive landscape against a peer who continues to see a healthy design activity environment there? Any insight behind that would be very helpful. Thank you.

Liam Pharr: Thank you so much. For a follow-up, I want to go a little deeper on China. I understand it remains challenging, but what are the puts and takes around it being flat or even growing year-over-year this year? Have you seen any change in the competitive landscape against a peer who continues to see a healthy design activity environment there? Any insight behind that would be very helpful. Thank you.

Any any that would be very helpful. Thank you. Yeah, surely, um, China for the quarter for q1 performed in line with expectations. Uh as we mentioned as well in the prepared prepared remarks. Uh, the classic synopsis was down slightly whereas NCIS uh, portfolio performed uh, fairly well. Now, the reason you're seeing that mix per se in the performance is the cumulative impact of the restrictions. Both in entity list and Technology are truly having an impact on our customer, uh, commitment and demand.

Speaker #3: And have you seen any change in the competitive landscape against a peer who continues to see a healthy design activity environment there? Any story behind that would be very helpful.

Speaker #3: Thank you.

Speaker #5: Yeah, sure, Liam. China for the quarter for Q1 performed in line with expectations. As we mentioned as well in the prepared remarks, the classic Synopsys was down slightly whereas Ansys portfolio performed fairly well.

Sassine Ghazi: Yeah, sure, Liam. China, for the quarter, for Q1, performed in line with expectations. As we mentioned as well in the prepared remarks, the classic Synopsys was down slightly, whereas the Ansys portfolio performed fairly well. Now, the reason you're seeing that mix, per se, in the performance, is the cumulative impact of the restrictions, both in entity list and technology, are truly having an impact on our customer commitment and demand. The reason it impacts Synopsys in a greater way, I want to say, is the mix in our portfolio. We have a leadership position in our IP business. That part of the business in China, customers may decide not to go for an external foundry and look at a domestic foundry, for an example, and therefore that will impact the IP business.

The reason it impacts synopsis in a in a greater way, I want to say is the mix in our portfolio. We have a leadership position in our IP business. That's part that part of the business in China customers, may decide not to go for an external Foundry and look at the domestic Foundry for an example and therefore, that will impact the IP business.

Speaker #5: Now, the reason you're seeing that mix, per se, in the performance is the cumulative impact of the restrictions—both in the entity list and technology—are truly having an impact on our customer commitment and demand.

But it may not impact as much the hardware business or the Eda business. So, that's from a macro standpoint, the way we're seeing the landscape in China, as far as the domestic. Uh, competitors. Yes, we're seeing them because obviously, if if customers cannot, uh, use our technology, uh, they're looking for Alternatives and, uh, the customers who can use,

Speaker #5: The reason it impacts Synopsys in a greater way, I want to say, is the mix in our portfolio. We have a leadership position in our IP business.

News. Uh, the technology that absolutely still preferred to use our technology versus domestic.

Thank you very much.

Thank you, Liam.

The next question is Kelsey Chia city?

Speaker #5: That part of the business in China customers may decide not to go for an external foundry and look at a domestic foundry for an example.

Speaker #5: And therefore, that will impact the IP business. But it may not impact as much the hardware business or the EDA business. So that's, from a macro standpoint, the way we're seeing the landscape in China.

Sassine Ghazi: It may not impact as much the hardware business or the EDA business. That's from a macro standpoint, the way we're seeing the landscape in China. As far as the domestic competitors, yes, we're seeing them, because obviously, if customers cannot use our technology, they're looking for alternatives. The customers who can use the technology, they absolutely still prefer to use our technology versus domestic.

Speaker #5: As far as the domestic competitors yes, we're seeing them because obviously if customers cannot use our technology, they're looking for alternatives. And the customers who can use the technology, they're absolutely still prefer to use our technology versus domestic.

Hi, thanks for taking my question. Um so my question is on IP so I understand that it's not serve as a leader. In Internet, interconnect IP with Pia 2, 24 service. Um, but um, the the company is also um, late in terms of Ip delivery, is there a risk that with synopsys named Miss, customer design, starts or customers, shift away from using the IP that's analysis has developed

Hi Kelsey. The it.

Depends and let. Let me explain. What? It depends. What we sell to is a customer schedule.

Lee Simpson: Thank you very much.

Liam Pharr: Thank you very much.

Speaker #5: Thank you, Liam.

Sassine Ghazi: Thank you, Liam.

Speaker #4: The next question is Kelsey Chia, Citi.

Operator: The next question is Kelsey Chia, Citi.

Kelsey Chia: Hi, thanks for taking my question. My question is on IP. I understand that Synopsys is a leader in interconnect IP with PCIe 8, 224G SerDes. The company is also late in terms of IP delivery. Is there a risk that Synopsys may miss customer design starts, or customers may shift away from using the IP that Synopsys has developed?

Speaker #6: Hi, thanks for taking my question. So my question is on IP. I understand that Synopsys is a leader in interconnect IP, with PCIe 8, 2024 service, but the company is also late in terms of IP delivery.

Speaker #6: Is there a risk that Synopsys may miss customer design starts or customers may shift away from using the IP that Synopsys has developed?

Customers uh, Engagement start with aligning, what we have to when do they need the IP and uh their tape out. So in number of the the 1 that you mentioned the pcie or the 224 I'll expand it into an HPM, lpddr ucie which are all titles that customer need in order to design a high-end HPC chip. And for a number of those customers, we are engaged. We're selling that whole portfolio based on aligning the schedules. Uh,

Speaker #5: Hi, Kelsey. It depends. And let me explain why it depends. What we sell to is a customer schedule. Customers engagement starts with aligning what we have to when do they need the IP and their tape out.

Sassine Ghazi: Hi, Kelsey. It depends, and let me explain why it depends. What we sell to is a customer schedule. customers' engagement starts with aligning what we have to when do they need the IP and their tapeout. A number of the one that you mentioned, the PCIe or the 224G, I'll expand it into an HBM, LPDDR, UCIe, which are all titles that customers need in order to design a high-end HPC chip. For a number of those customers, we are engaged with selling that whole portfolio based on aligning the schedule.

Uh, the comment I made earlier where we do have the expertise. We do have the, the capacity is the prioritization for specific customers to deliver and we're putting a lot of focus on that and that's why the, the point Sheila made earlier that our confidence in the second half waiting is coming through the, the road map alignment. And by when do we deliver, uh, on these titles?

Speaker #5: So a number of the ones that you mentioned, the PCIe or the 2024, I'll expand it into an HPM, LPDDR, UCIe, which are all titles that customers need in order to design a high-end HPC chip.

Speaker #5: And for a number of those customers, we are engaged. We're selling that whole portfolio based on aligning the schedule. The comment I made earlier where we do have the expertise, we do have the capacity is the prioritization for specific customers to deliver and we're putting a lot of focus on that.

Um, and uh, short follow-up. So IP operating margins are depressed today. Um, is there can we use the rule of 15 to think about the operating margins at? A normalized level? And also, um, you did talk about eventually moving to a royalty business model. So, is there a framework to think about a normalized? Operating margins for IP

Sassine Ghazi: The comment I made earlier, where we do have the expertise, we do have the capacity, is the prioritization for specific customers to deliver, and we're putting a lot of focus on that, and that's why the point Sheila made earlier, that our confidence in the second half waiting is coming through the roadmap alignment and by when do we deliver on these titles.

Speaker #5: And that's why the point Shelagh made earlier, that our confidence in the second half weighting is coming through the roadmap alignment and by when we deliver on these titles.

Speaker #4: Got it.

Kelsey Chia: Got it. A short follow-up. IP operating margins are depressed today. Can we use the rule of 50 to think about the operating margins at a normalized level? Also, you did talk about eventually moving to a royalty business model. Is there a framework to think about a normalized operating margins for IP?

Speaker #6: And short follow-up. So IP operating margins have been pressed today. Is there can we use the rule of 50 to think about the operating margins at a normalized level?

Speaker #6: And also, you did talk about eventually moving to a loyalty business model. So is there a framework to think about a normalized operating margins for IP?

Speaker #2: Let me take the operating margin, and I'll have Sassine comment on evolving the business model. So, as we've talked about, IP growth this year is muted.

[Company Representative] (Synopsys): Let me take the operating margin, and I'll have Sassine comment on evolving the business model. As we've talked about IP growth this year is muted. We're still investing to build out the titles that Sassine was talking through. We've got, you know, the engineering team working very diligently, making lots of progress on the titles, but with muted growth, we get muted operating margin. For this year, we're going to see more muted operating margin. Over time, though, once we get, you know, to the back to having the titles on time, my expectation is that's a very good business, so the operating margin will always be below the corporate average because it's more people-intensive, but that's my expectation. That's how we've run that business over time.

Shelagh Glaser: Let me take the operating margin, and I'll have Sassine comment on evolving the business model. As we've talked about IP growth this year is muted. We're still investing to build out the titles that Sassine was talking through. We've got, you know, the engineering team working very diligently, making lots of progress on the titles, but with muted growth, we get muted operating margin. For this year, we're going to see more muted operating margin. Over time, though, once we get, you know, to the back to having the titles on time, my expectation is that's a very good business, so the operating margin will always be below the corporate average because it's more people-intensive, but that's my expectation. That's how we've run that business over time.

Let me take the operating margin and I have uh 16 comment on uh, evolving the business model. So as we've talked about IP growth this year is muted. We're still investing to build out the titles. That's just seeing what's talking through. So we've got, you know, um, the engineering team, working very diligently, making lots of progress, on the titles but with muted growth, we get muted operating margin. So for this year, we're going to see more muted operating margin over time though. Once we get, you know, to the um, back to having the titles on time. My expectation is that's a very good business. So the operating margin will always be below the corporate average because it's more people intensive. But that's my expectation. That's how we've run that business over time, but you will see muted, compressed, operating margin this year, just driven by the muted uh, revenue and we're not changing our investment profile there because we're still building out those titles. Yeah, I I in terms of the business model, the

Speaker #2: We're still investing to build out the titles that Sassine was talking through, so we've got the engineering diligently making lots of progress on the titles.

Speaker #2: But with muted growth, we get muted operating margin. So for this year, we're going to see more muted operating margin. Over time, though, once we get back to having the titles on time, my expectation is that's a very good business.

I'll start with the market. The, the great news is there's such a high demand for customization, as well as acceleration of delivering on the IP titles, in particular for hyperscalers because they don't have their own, it team, they are counting on us to be able to deliver on time, and what we call 1 generation ahead, for for, for various of the titles, I just mentioned earlier.

Speaker #2: So the operating margin will always be below the corporate average because it's more people intensive. But that's my expectation. That's how we've run that business over time.

Speaker #2: But you will see muted compressed operating margin this year just driven by the muted revenue. And we're not changing our investment profile there because we're still building out those titles.

[Company Representative] (Synopsys): You will see muted, compressed operating margin this year, just driven by the muted, revenue, and we're not changing our investment profile there because we're still building out those titles.

Shelagh Glaser: You will see muted, compressed operating margin this year, just driven by the muted, revenue, and we're not changing our investment profile there because we're still building out those titles.

Therefore, it's an inflection point, it's a great opportunity to focus on the quality of the deals, and capturing the right monetization for that value. We're in active conversations with number of these partners. And I do expect

Speaker #5: Yeah. In terms of the business model, I'll start with the market, the great news is there's such a high demand for customization as well as acceleration of delivering on the IP titles in particular for hyperscalers.

Sassine Ghazi: Yeah. In terms of the business model, I'll start with the market. The great news is there's such a high demand for customization as well as acceleration of delivering on the IP titles, in particular for hyperscalers, because they don't have their own IP team. They are counting on us to be able to deliver on time and what we call one generation ahead, for various of the titles I just mentioned earlier. Therefore, it's an inflection point. It's a great opportunity to focus on the quality of the deals and capturing the right monetization for that value. We're in active conversations with a number of these partners, and I do expect that we will close, a number of these conversations will move into an actual business in FY 26.

That we will close, uh, number of uh, these uh conversations will move into uh an actual business in FY. 26 now, of course you won't see it, uh, in terms of that upside until we deliver and the customer tape out and start delivering product for it. But we're very excited about this opportunity to improve the monetization.

Speaker #5: Because they don't have their own IP team, they are counting on us to be able to deliver on time and what we call one generation ahead.

Thank you.

Thank you, Kelsey.

Your next question is from Lee Simpson. Morgan Stanley.

Speaker #5: For various of the titles I just mentioned earlier. Therefore, it's an inflection point. It's a great opportunity to focus on the quality of the deals and capturing the right monetization for that value.

Speaker #5: We're in active conversations with a number of these partners, and I do expect that we will close a number of these conversations and that they will move into actual business in FY26.

Speaker #5: Now, of course, you won't see it in terms of that upside until we deliver and the customer tape out and start delivering product for it.

Sassine Ghazi: Of course, you won't see it in terms of that upside, until we deliver and the customer tapeout and start delivering product for it. We're very excited about this opportunity to improve the monetization.

Speaker #5: But we're very excited about this opportunity to improve the monetization.

Speaker #6: Thank you.

Kelsey Chia: Thank you.

Speaker #5: Thank you, Kelsey.

Sassine Ghazi: Thank you, Kelsey.

Speaker #4: Your next question is from Lee Simpson, Morgan Stanley.

Operator: Your next question is from Lee Simpson, Morgan Stanley.

Lee Simpson: Great, thanks for fitting me in. Maybe, maybe just 2 quick ones from me, actually. We did hear from a peer last week that the monetization perhaps on agentic play would come on a value-based basis, perhaps even on a token-based basis. I wonder if you guys had looked at doing things on that similar format and whether or not this business could, and I'm talking about AgentEngineer here, whether or not that could be margin accretive from day one. Maybe as a follow-on, you know, if we look at Ansys, clearly a market leader in its product range, but quite broad-based in its customer range, does that maybe carry some extra risk? Because, you know, value isn't even across all those customers.

Speaker #7: Great. Thanks for fitting me. And maybe just two quick ones for me, actually. We did hear from a peer last week that the monetization perhaps on Agentic Play would come at a value-based basis, perhaps even on a token-based basis.

Uh, great. Thanks for fitting me in, maybe, maybe just 2 quick ones for me. Actually, uh, we we did hear from a peer, uh, last week that the the monetization perhaps on. Eugenic, play would come on, a value based basis, perhaps, even on a token based basis. I wondered if you guys had looked at, at doing things on that similar format and whether or not this business could, and I'm talking about agent engineer here, uh, whether or not that could be margin of creative from day 1. Uh, and maybe as follow on, you know, if we look at answers, clearly a market leader, uh, and it's part range but but quite broad base and its customer range, it does that. Does that maybe carry some extra risk because, you know, value is an even across all those customers there. There's some areas where there's clearly higher value for instance, 3D IC, the emulation thereof. Um, and so could could that maybe perhaps slow some of the growth uh, through this year and into next, uh,

On on answers or at least have some risk of it. Thanks.

Speaker #7: I wonder if you guys had looked at doing things on that similar format. And whether or not this business could, and I'm talking about agent engineer here, whether or not that could be marginally creative from day one.

Yeah, thank you lie on the agentic as we communicated about a year ago, when we introduced the agent engineer, is that the workflow will change the moment, the workflow will change. It's an opportunity for us.

Speaker #7: And maybe as a follow-on, if we look at Ansys, clearly a market leader, and its product range, but quite broad-based in its customer range, does that maybe carry some extra risk?

Speaker #7: Because value isn't even across all those customers. There are some areas where there's clearly higher value—for instance, 3DICs, the emulation thereof. And so, could that maybe perhaps slow some of the growth through this year and into next on Ansys?

To adjust the monetization based on value. So, uh, yes. What what what uh, you commented on will value based be in consideration. Absolutely, that's what we've been communicating for about a year now that the workflow will change and there will be a monetization adjustment.

Lee Simpson: There are some areas where there's clearly higher value, for instance, 3D ICs, the emulation thereof. Could that maybe perhaps slow some of the growth through this year and into next on Ansys, or at least have some risk of it? Thanks.

Speaker #7: Or at least have some risk of it. Thanks.

Speaker #5: Yeah. Thank you, Lee. On the Agentic as we communicated about a year ago when we introduced the agent engineer, is that the workflow will change?

Sassine Ghazi: Yeah, thank you, Lee. On the Agentic, as we communicated about a year ago when we introduced the AgentEngineer, is that the workflow will change. The moment the workflow will change, it's an opportunity for us to adjust the monetization based on value. Yes, what you commented on, will value-based be in consideration? Absolutely. That's what we've been communicating for about a year now, that the workflow will change and there will be monetization adjustment. The customers, by the way, they're very receptive for that conversation because they understand that they have to change as the workflow changes, and how will that value equation from a time-based license to a different type of license as we're accelerating their ability to deal with complexity and schedule. Now, on Ansys.

Uh, and the customers, by the way, they're very receptive for that conversation because they understand that they have to change as the workflow changes. And how will that value equation from a a Time based, uh, uh, license to a different type of license as we're uh, accelerating their ability to deal with complexity and, uh, schedule.

Speaker #5: The moment the workflow will change, it's an opportunity for us to adjust the monetization based on value. So yes, what you commented on will, value-based, be in consideration?

Now, on answers.

Our business, as Sheila mentioned.

Speaker #5: Absolutely. That's what we've been communicating for about a year now, that the workflow will change and there will be a monetization adjustment. And the customers, by the way, they're very receptive for that conversation.

when you look at the various markets that are uh, doing engineering R&D, the penetration of

Speaker #5: Because they understand that they have to change as the workflow changes and how will that value equation from a time-based license to a different type of license as we're accelerating their ability to deal with complexity and schedule.

Uh, sophisticated simulation, analysis CAD environment, Etc, has a significant opportunity. Very different than semiconductor that that the Moose law pushed and accelerated the adoption of Eda.

Now, with physical AI.

Speaker #5: Now, on Ansys, we see Ansys as a force multiplier for our business. As Sheila mentioned, when you look at the various markets, that are doing engineering R&D, the penetration of sophisticated simulation analysis, CAD environment, etc., has a significant opportunity.

Sassine Ghazi: We see Ansys as a force multiplier for our business. As Sheila mentioned, when you look at the various markets that are doing engineering R&D, the penetration of sophisticated simulation analysis, CAD environment, et cetera, has a significant opportunity, very different than semiconductor, that the Moore's Law pushed and accelerated the adoption of EDA. Now, with physical AI, if you are in industrial or automotive or robotics, you cannot build those products without investing more in R&D, and therefore investing more in system-level design, simulation, and analysis. As the results speak to themselves for Q1, this is not a one-time phenomena. We see that opportunity for the long term as I mentioned, as a force multiplier and an expansion in customer base for Synopsys that we're very excited about.

If you are an industrial or Automotive, or robotics, you cannot build those products without investing more in R&D. And therefore, investing more in system, level design, simulation and Analysis. So, uh, as the results speak to themselves for q1, this is not a 1-time, uh, phenomena. We see that opportunity for the long term as as, as I mentioned as a force multiplier and an expansion in customer base uh for synopsis that we're very excited about.

Speaker #5: Very different than semiconductor, that the Moore's Law pushed and accelerated the adoption of EDA now with physical AI. If you are an industrial or automotive or robotics, you cannot build those products without investing more in R&D and therefore investing more in system-level design, simulation, and analysis.

Next, we'll go to City panigrahi from mizuho.

Uh uh thanks for taking my question. Can you hear me?

Yes, it is.

Speaker #5: So, as the results speak for themselves for Q1, this is not a one-time phenomenon. We see that opportunity for the long term, as I mentioned, as a force multiplier and an expansion in customer base for Synopsys that we're very excited about.

Yeah. Uh, thanks for taking my question. I don't know this question. May I answer, uh, a question, uh, is, uh, about your Nvidia partnership that you announced. Uh, recently. Uh, there was a big investment from Nvidia wondering how that partnership uh, coming along and how should we see about the product or priorities evolved and how how you think about the monetization there?

Speaker #7: Great. Thanks.

Operator: Great, thanks.

Lee Simpson: Great, thanks.

Speaker #5: Thank you, Lee.

Sassine Ghazi: Thank you, Lee.

Speaker #4: Next, we'll go to City Panagrahi from Mizuho.

Operator: Next, we'll go to Siti Panigrahi from Mizuho.

Siti Panigrahi: Thanks for taking my question. Can you hear me?

Speaker #7: Thanks for taking my question. Can you hear me?

Siti Panigrahi: Thanks for taking my question. Can you hear me?

Speaker #5: Yes, ET.

Sassine Ghazi: Yes, Siti.

Yeah, uh, ciki the way I, I, uh, uh, explained this partnership at least internally. This is not a press release partnership. It's a deep commitment. From both companies that we both saw a market opportunity that we want to accelerate and capture and it comes in 2 forms. The first form is a road map. We communicated on

Speaker #7: Yeah. Thanks for taking my question. I don't know if this question may I answer, a question is about your NVIDIA partnership that you announced recently.

Siti Panigrahi: Yeah. Thanks for taking my question. I don't know if this question may I answer. A question is about your NVIDIA partnership that you announced recently. There was a big investment from NVIDIA. I'm wondering how that partnership coming along, and how should we see about the product or priorities evolve, and how you think about the monetization there?

Speaker #7: There was a big investment from NVIDIA. I'm wondering how that partnership coming along and how should we see about the product or priorities evolve and how you think about the monetization there.

bringing number of our products Eda as well as the Legacy ansys products into GPU acceleration. Uh, and delivering the multiples of acceleration that is uh, that we set as a Target and a goal between the 2 companies. So we have a joint R&D working on these products with an expectation to deliver number of them in 26.

Speaker #5: Yeah. CT, the way I explain this partnership, at least internally, this is not a press release partnership. It's a deep commitment from both companies that we both saw a market opportunity that we want to accelerate and capture.

Sassine Ghazi: Yeah, Siti, the way I explain this partnership, at least internally, this is not a press release partnership. It's a deep commitment from both companies that we both saw a market opportunity that we wanna accelerate and capture. It comes in two forms. The first form is a roadmap we communicated on bringing number of our products, EDA, as well as the legacy Ansys products, into GPU acceleration, and delivering the multiples of acceleration that is that we set as a target and a goal between the two companies. We have a joint R&D working on these products with an expectation to deliver a number of them in 2026, and that will come with an upside in a business model.

And that will come with an upside in a business model. Meaning if you're using a product, a from synopsys running on a CPU.

Speaker #5: And it comes in two forms. The first form is a roadmap we communicated on bringing a number of our products, EDA as well as the legacy Ansys products, into GPU acceleration and delivering the multiples of acceleration that is that we set as a target and a goal between the two companies.

That will continue that road map, will continue and will have a parallel product of that product, a running on a GPU. And if it's delivering 15 20x, then there's an uplift for that value. We're delivering to the customer.

That's 1 layer. The second layer is Omniverse, the ability to create a digital twin for the physical AI opportunity.

Physical AI is not possible.

by having a, a a, uh, old method physical prototype, you need to create a digital twin, a digital twin,

Speaker #5: So we have a joint R&D working on these products with an expectation to deliver a number of them in '26. And that will come with an upside, in a business model.

Speaker #5: Meaning, if you're using a product A from Synopsys running on a CPU, that will continue, that roadmap will continue. And we'll have a parallel product of that product A running on a GPU.

Sassine Ghazi: Meaning, if you're using a product A from Synopsys running on a CPU, that will continue, that roadmap will continue, and we'll have a parallel product of that product A running on a GPU, and if it's delivering 15, 20x, then there's an uplift for that value we're delivering to the customer. That's one layer. The second layer is Omniverse, the ability to create a digital twin for the physical AI opportunity. Physical AI is not possible by having a old method physical prototype. You need to create a digital twin. A digital twin is useless without an accurate simulation and analysis, and that's where we come in. That's where the Ansys portfolio comes in and where we wanna lead the opportunity to monetize on both the GPU acceleration as well as the digital twin opportunity for physical AI.

Is useless without an accurate, simulation and Analysis. And that's where we come in. That's where the answers portfolio comes in. And we're uh, we want to lead the opportunity to monetize on both the GPU acceleration, as well as the the, the digital twin opportunity for physical AI.

That's great. Thanks, Austin for the caller.

Speaker #5: And if it's delivering 15, 20X, then there's an uplift for that value we're delivering to the customer. That's one layer. The second layer is Omniverse.

Thank you, CT.

The next question will come from Gianna. Marco Ki Deutsche Bank

Speaker #5: The ability to create a digital twin for the physical AI opportunity. Physical AI is not possible by having a old method, physical prototype. You need to create a digital twin.

Speaker #5: A digital twin is useless without an accurate simulation and analysis. And that's where we come in. That's where the Ansys portfolio comes in. And we're we want to lead the opportunity to monetize on both the GPU acceleration as well as the digital twin opportunity for physical AI.

Yeah hi thank you for taking my questions. Um so maybe you just want to go back on a genetic. Um, could you perhaps give us some color on where do you currently sit with customers using it for both front end versus back end and and whether you have a sort of like an idea of customer penetration into the next 12 months, um, how our customers using it right now. Um, and will they require higher competition or needs as their designs or scaling faster with more agents? And I'm just trying kind of curious as to how is the delivery method being being addressed in these customers? Ask yes.

Speaker #7: That's great. Thanks, Justin, for the call.

Siti Panigrahi: That's great. Thanks, Assum, for the call.

Speaker #5: Thank you, CT.

Sassine Ghazi: Thank you, Siti.

Speaker #4: The next question will come from Giannamarco Conti, Deutsche Bank.

Operator: The next question will come from Gianmarco Conti, Deutsche Bank.

Yes, I'll I'll I'll talk more about it. And Shankar will, uh, talk more about it at converge, but at the high level what we have right now is number of tasks agents.

Speaker #7: Yeah. Hi. Thank you for taking my questions. So maybe you just want to go back on Agentic. Could you perhaps give us some color on where do you currently sit with customers using it for both front-end versus back-end?

Gianmarco Conti: Yeah, hi. Thank you for taking my questions. Maybe you just wanna go back on Agentic. Could you perhaps give us some color on where do you currently sit with customers using it for both front-end versus back-end? Whether you have a sort of like an idea of customer penetration into the next 12 months, and how are customers using it right now, and will they require higher computational needs as their designs are scaling faster with more agents? I'm just kind, kinda curious as to how is the delivery method being addressed in these customers or possible.

Advisor.

Speaker #7: And whether you have sort of an idea of customer penetration into the next 12 months. How are customers using it right now? And will they require higher computational needs as their designs are scaling faster, with more agents?

Uh, that's an area where the test coverage has always been, uh, a very time and compute consuming

task for our customers.

This is a great opportunity on how to leverage both. Uh,

An agent to be able to look at a specific task.

Speaker #7: I'm just kind of curious as to how is the delivery method being addressed in these customers? I'll ask a follow-up question.

Speaker #5: Yes, yes. I'll talk more about it, and Shankar will talk more about it at Converge. But at the high level, what we have right now is a number of tasks, agents.

Sassine Ghazi: Yes. Yes, I'll talk more about it and Shankar will talk more about it at Converge. At the high level, what we have right now is number of tasks agents. For example, I mentioned in my prepared remarks some value we're seeing with the Formal Advisor. That's an area where test coverage has always been a very time and compute-consuming task for our customers. This is a great opportunity on how to leverage both an agent, to be able to look at a specific task, and series of agents to orchestrate and accelerate both the coverage and the whole verification opportunity.

And series of agents to orchestrate and uh uh accelerate the both the coverage, and the whole verification, uh opportunities. So your, your question about front end,

Speaker #5: For example, I mentioned in my prepared remarks some value we're seeing with formal advisor. That's an area where test coverage has always been a very time and compute-consuming task for our customers.

And the back end, we're working absolutely on both where the early opportunity that we're seeing. And we're tackling it because of the bottleneck that our customers, they do see, uh, in terms of time and number of Engineers, they put is in the front end, um, uh, uh area, but we have a road map, uh, on on on both.

Speaker #5: This is a great opportunity on how to leverage both an agent to be able to look at a specific task and a series of agents to orchestrate and accelerate the both the coverage and the whole verification opportunity.

So, this is something stay tuned. We'll communicate more at converge, uh, but we're um, uh, we're seeing great progress, based on the number of customers were engaged with in early with early engagements.

Got it. Uh, Sheila maybe just like uh, 1 last 1 for me would be um what's driving uh the lower Gap UPS guys. Despite Gap expenses being lower,

Speaker #5: So your question about front-end and the back-end, we're working absolutely on both. Where the early opportunity that we're seeing and we're tackling it because of the bottleneck that our customers, they do see, in terms of time and number of engineers they put, is in the front-end area.

Sassine Ghazi: Your question about front-end and the back end, we're working absolutely on both. The early opportunity that we're seeing, and we're tackling it because of the bottleneck that our customers they do see in terms of time and number of engineers they put is in the front-end area. We have a roadmap on both. This is something stay tuned. We'll communicate more at Converge, but we're seeing great progress based on the number of customers we're engaged with in early with early engagements.

Speaker #5: But we have a roadmap on both, so this is something—stay tuned. We'll communicate more at Converge. We're seeing great progress based on the number of customers we're engaged with in early engagements.

So, uh, I think real Delta this year between, uh, gaap and non-gaap is, if you look at it's really the amortization, um, schedule and there's more detail in our quarterly. Filing on that. So we've got the restructuring, which is 1 time only, its 26 and 27, but they'll be an amortization schedule that will be, um, rolling through uh, over the the next several years.

Got it. Thank you.

Thank you. Thanks for the question.

Next up is Joshua, Tilton Wolfe research.

Speaker #7: Got it. Shelagh, maybe just one last one for me: what's driving the lower GAAP G&A, despite GAAP expenses being lower?

Hey guys, thanks for uh sneaking me in and congrats on a solid start to the year.

[Analyst]: Got it. Sheila, maybe just like, one last one for me would be, what's driving, the lower GAAP EPS guide, despite GAAP expenses being lower?

Gianmarco Conti: Got it. Sheila, maybe just like, one last one for me would be, what's driving, the lower GAAP EPS guide, despite GAAP expenses being lower?

I have uh 2. My first 1 is more of a longer term question and uh I I guess the question is

Speaker #8: So I think real delta this year between gap and non-gap is if you look at it's really the amortization. Schedule and there's more detail in our quarterly filing on that.

[Company Representative] (Synopsys): I think the real delta this year between GAAP and non-GAAP is, if you look at it's really the amortization schedule, and there's more detail in our quarterly filing on that. We've got the restructuring, which is one time only, it's 2026 and 2027, but there'll be an amortization schedule that will be rolling through over the next several years.

Shelagh Glaser: I think the real delta this year between GAAP and non-GAAP is, if you look at it's really the amortization schedule, and there's more detail in our quarterly filing on that. We've got the restructuring, which is one time only, it's 2026 and 2027, but there'll be an amortization schedule that will be rolling through over the next several years.

Speaker #8: So, we've got the restructuring, which is one time only. It's '26 and '27. But there'll be an amortization schedule that will be rolling through over the next several years.

This is seen, I think the word you used were 2026. Is the year that you begin to deliver on the technology Promises of synopsis plus antis. And what I'm trying to understand is and I'm assuming you will. But when you guys do deliver on this technology promise in 2026, what does it mean for the direction of growth for your business in 27, and Beyond, I think a lot of investors see the growth that Cadence is putting up and they're kind of excited for, you know, your organic growth to sort of trend

Speaker #7: Got it. Thank you.

In that direction. So any any help or any caller would be greatly appreciated?

[Analyst]: Got it. Thank you.

Gianmarco Conti: Got it. Thank you.

Speaker #5: Thank you.

Sassine Ghazi: Thank you.

Speaker #8: Thanks for the question.

[Company Representative] (Synopsys): Thanks for the question.

Shelagh Glaser: Thanks for the question.

Speaker #4: Next up is Joshua Tilton. Wolf Research.

Operator: Next up is Joshua Tilton, Wolfe Research.

Speaker #7: Hey, guys. Thanks for sneaking me in and congrats on a solid start to the year. I have two. My first one is more of a longer-term question.

Joshua Tilton: Hey, guys, thanks for sneaking me in, and congrats on a solid start to the year. I have 2. My first one is more of a longer-term question. I guess the question is: I think the words you used were 2026 is the year that you begin to deliver on the technology promise of Synopsys plus Ansys. What I'm trying to understand is, and I'm assuming you will, but when you guys do deliver on this technology promise in 2026, what does it mean for the direction of growth for your business in 2027 and beyond? I think a lot of investors see the growth that Cadence is putting up, and they're kind of excited for, you know, your organic growth sort of trend in that direction.

Speaker #7: And I guess the question is to see—I think the words you used were, '2026 is the year that you begin to deliver on the technology promise of Synopsys plus Ansys.'

Speaker #7: And what I'm trying to understand is, and I'm assuming you will, but when you guys do deliver on this technology promise in 2026, what does it mean for the direction of growth for your business in 2027 and beyond?

Yeah, sure. Josh on, um, as far as the long-term, uh, growth view, it has not changed, uh, on uh, Eda double digits on IP, uh, mid teens, as well as on the simulation and Analysis, it's a double digit growth so that puts the company as a whole in a, uh, double digit growth, uh, opportunity driven by the demand, and the leadership we have in our portfolio. When I say that 2026 is the year where we begin delivering on, um, on technology and the value promises.

Speaker #7: I think a lot of investors see the growth, the cadence is putting up, and they're kind of excited for your organic growth to sort of trend in that direction.

Speaker #7: So any help or any color would be greatly appreciated.

Joshua Tilton: Any help or any color would be greatly appreciated.

There are today, problems are not being solved with the current offering that the industry uh, is providing the customers. And when we talk about the joint Solutions, how to bring in physics,

Speaker #5: Yeah, sure, Josh. As far as the long-term growth view, it has not changed. On EDA, double digits. On IP, mid-teens. As well as on the simulation and analysis, it's a double-digit growth.

Sassine Ghazi: Yeah, sure, Josh. On as far as the long-term growth view, it has not changed. On EDA, double digits, on IP, mid-teens, as well as on the simulation and analysis, it's a double-digit growth. That puts the company as a whole in a double-digit growth opportunity, driven by the demand and the leadership we have in our portfolio. When I say that 2026 is the year where we begin delivering on the, on technology and the value promises, there are today, problems are not being solved with the current offering that the industry is providing the customers. When we talk about the joint solutions, how to bring in physics analysis into the design phase when you're designing a multi-die system.

Uh, analysis into the design phase when you're designing a multi-day system.

A lot of the challenges, our customers are dealing with.

Speaker #5: So that puts the company as a whole in a double-digit growth opportunity driven by the demand and the leadership we have in our portfolio.

Speaker #5: When I say that 2026 is the year where we begin delivering on technology and the value promises, there are today problems that are not being solved with the current offering that the industry is providing the customers.

Is they design? They go to sign off, they discover an issue. Say a thermal or a structure issue. Then they have to iterate and iterate in order to solve so that takes time and risk. And this is what we're so excited about. With the joint solution, given what answers has is a leadership sign up.

Speaker #5: And when we talk about the joint solutions, how to bring in physics analysis into the design phase when you're designing a multi-die system. A lot of the challenges our customers are dealing with is they design, they go to sign off, they discover an issue, say a thermal or a structure issue, then they have to iterate and iterate in order to solve.

For physics. And what synopsis has is a leadership position in the design platform and that's where the joint solution come together that um, um, our customers are anxiously waiting to see Innovation and bringing these these 2 platforms together. So that's where we're seeing the opportunity of growth. Now, as we compared to uh, the market or our closest peer, uh,

Sassine Ghazi: A lot of the challenges our customers are dealing with is they design, they go to sign off, they discover an issue, say, a thermal or a structural issue, then they have to iterate and iterate in order to solve. That takes time and risk, and this is what we're so excited about with the joint solution. Given what Ansys has, is a leadership sign-off for physics, and what Synopsys has is a leadership position in the design platform. That's where the joint solution come together, that our customers are anxiously waiting to see innovation and bringing these two platforms together. That's where we're seeing the opportunity of growth. Now, as we compare to the market or our closest peer, our commitment is on what I just mentioned in terms of double-digit growth.

Speaker #5: So that takes time and risk. And this is what we're so excited about with the joint solution, given what Ansys has is a leadership sign-off for physics.

For for us for 26. But the market opportunity is there. We have the scale, we have the scales and we have no doubt that we will. Um, we will deliver to our long-term view for IP.

Speaker #5: And what Synopsys has is a leadership position in the design platform. And that's where the joint solution comes together, that our customers are anxiously waiting to see—innovation and bringing these two platforms together.

Speaker #5: So that's where we're seeing the opportunity for growth. Now, as we compare to the market or our closest peer, our commitment is on what I just mentioned in terms of double-digit growth.

Makes sense maybe just a quick follow for Sheila more of a clarification question. Um, did I hear correctly? That a relative to your guys's expectation that it was anise that drove most of the outperformance to the revenue guide? Uh, and if that is the case, when we think about the potential, for upside throughout the rest of the year, um, are we playing for that upside coming from the ancis business and more of a, of an inline near for the organic business? How do I think about that?

Speaker #5: In IP in particular, we have communicated, and we repeated that it's a transitional year for us for '26. But the market opportunity is there.

Sassine Ghazi: In IP, in particular, we have communicated, and we repeated that it's a transitional year for us for 2026, but the market opportunity is there. We have the scale, we have the skills, and we have no doubt that we will deliver to our long-term view for IP.

Speaker #5: We have the scale. We have the skills. And we have no doubt that we will deliver to our long-term view for IP.

So uh we saw significant strength in q1 and anise so uh as as reflected in uh what we shared the 8666 Million number for anise. So the strength we saw was really across uh the industries that answer cells into. And then for the full year, obviously we don't guide by segments, but we're looking for um strong performance across all the lines.

Makes sense. Thank you guys.

Speaker #7: Makes sense. Maybe just a quick follow-up for Shelagh. More of a clarification question. Did I hear correctly that, relative to your guys' expectation, it was Ansys that drove most of the outperformance to the revenue guide?

Joshua Tilton: Makes sense. Maybe just a quick follow-up for Sheila. More of a clarification question. Did I hear correctly that relative to your guys' expectation, that it was Ansys that drove most of the outperformance of the revenue guide? If that is the case, when we think about the potential for upside throughout the rest of the year, are we playing for that upside coming from the Ansys business and more of an in-line year for the organic business? How do I think about that?

Thanks, thank you.

And next up is Joe wynk beard.

Hi great. Thanks for taking my question.

Speaker #7: And if that is the case, when we think about the potential for upside throughout the rest of the year, are we playing for that upside coming from the Ansys business and more of an inline year for the organic business?

Speaker #7: How do I think about that?

Speaker #8: So we saw significant strength in Q1 in Ansys. So as reflected in what we shared, the 866 million for Ansys. So the strength we saw was really across the industries that Ansys sells into.

[Company Representative] (Synopsys): We saw significant strength in Q1 in Ansys. As reflected in what we shared, the $866 million for Ansys. The strength we saw was really across the industries that Ansys sells into. For the full year, obviously, we don't guide by segments, but we're looking for strong performance across all the lines.

Shelagh Glaser: We saw significant strength in Q1 in Ansys. As reflected in what we shared, the $866 million for Ansys. The strength we saw was really across the industries that Ansys sells into. For the full year, obviously, we don't guide by segments, but we're looking for strong performance across all the lines.

I wanted to ask about Eda software specifically within design. Automation, if Hardware was a big, uh, contributor to strength for the overall segment. I'm assuming the software piece is still growing in the single digits. Maybe can you walk through some of the biggest items in your mind, that start to lift the growth profile in the Eda software business higher? And are you seeing any evidence of that yet in bookings or renewal opportunities that are on the horizon?

Speaker #8: And then, for the full year, obviously, we don't guide by segments, but we're looking for strong performance across all the lines.

Speaker #7: Makes sense. Thank you, guys.

Joshua Tilton: Makes sense. Thank you, guys.

Speaker #8: Thanks, Josh.

[Company Representative] (Synopsys): Thanks, Josh.

Shelagh Glaser: Thanks, Josh.

Sassine Ghazi: Thank you.

Speaker #5: Thank you.

Speaker #4: And next up is Joe Verwink Baird.

Operator: Next up is Joe Vrinciard.

Speaker #9: Hi, Greg. Thanks for taking my questions. I wanted to ask about EDA software specifically within design automation, if hardware was a big contributor to strength for the overall segment.

Joe Vrinciard: Great. Thanks for taking my questions. I wanted to ask about EDA software, specifically within Design Automation, if hardware was a big contributor to strength for the overall segment, I'm assuming the software piece is still growing in the single digits. Maybe can you walk through some of the biggest items in your mind that start to lift the growth profile in the EDA software business higher? Are you seeing any evidence of that yet in bookings or renewal opportunities that are on the horizon?

Joe Vruwink: Great. Thanks for taking my questions. I wanted to ask about EDA software, specifically within Design Automation, if hardware was a big contributor to strength for the overall segment, I'm assuming the software piece is still growing in the single digits. Maybe can you walk through some of the biggest items in your mind that start to lift the growth profile in the EDA software business higher? Are you seeing any evidence of that yet in bookings or renewal opportunities that are on the horizon?

Yeah, thank you Joe on the Eda software given this is a relatable, fairly predictable type of business. We know when the renewals are coming up, we engage with customers early to deploy new technology. It depends on the customer. When I talk about the tale of 2 markets, the the first tale that are serving, uh, AI buildout

Speaker #9: I'm assuming the software piece is still growing in the single digits. Maybe can you walk through some of the biggest items in your mind that start to lift the growth profile in the EDA software business higher?

Speaker #9: And are you seeing any evidence of that yet in bookings or renewal opportunities that are on the horizon?

Those are the customers that they're racing to deploy the synopsis that AI racing to deploy. The 3D IC. Compiler Fusion. Compiler Prime Time VCS Etc. We have as you know, a leadership position in the Eda software and we uh continue on uh collaborating engaging early, uh and finding an opportunity to upsell during or between uh,

Speaker #5: Yeah, thank you, Joe. On the EDA software, given this is a rateable, fairly predictable type of business, we know when the renewals are coming up.

Sassine Ghazi: Yeah. Thank you, Joe. On the EDA software, given this is a ratable, fairly predictable type of business, we know when the renewals are coming up. We engage with customers early to deploy new technology. It depends on the customer. When I talk about the first tale that are serving AI buildout, those are the customers that they are racing to deploy the Synopsys.ai, racing to deploy the 3D IC Compiler, Fusion Compiler, PrimeTime, VCS, et cetera. We have, as you know, a leadership position in the EDA software, and we continue on collaborating, engaging early, and finding an opportunity to upsell during or between renewal cycles.

Uh, renewal Cycles.

Speaker #5: We engage with customers early to deploy new technology. It depends on the customer. When I talk about a tale of two markets, the first tale is those that are serving AI build-out—those are the customers that are racing to deploy the Synopsys.ai.

Speaker #5: Racing to deploy the 3D IC compiler, Fusion compiler, Primetime, VCS, etc. We have, as you know, a leadership position in the EDA software and we continue on collaborating and engaging early and finding an opportunity to upsell during or between renewal cycles.

But net net, the Eda software, uh, for us, we are excited about all the opportunities. The classic synopsis has been building. The next opportunity, of course, is the joint solution that will leverage the answers portfolio to create the new product and a new opportunity to monetize.

And everyone that does conclude our question and answer session. I would like to hand the conference back to sin gazi for any additional or closing remarks.

Speaker #5: On the second tail of customers, where the R&D investment and the push for acceleration has not been as strong as the first tail, typically our renewals are timed with the monetization—is timed with the renewal expiration.

Sassine Ghazi: On the second tale of customers, where the R&D investment and the push for acceleration has not been as strong as the first tale, typically, our renewals are timed with the monetization is timed with the renewal expiration. Net-net, the EDA software, for us, we are excited about all the opportunities the classic Synopsys has been building. The next opportunity, of course, is the joint solution that will leverage the Ansys portfolio to create the new product and a new opportunity to monetize.

Thank you. It's such an exciting time to execute as 1 company and answers. Now, part of synopsis,

With that, we have extended our technology leadership into simulation and Analysis.

And we expanded our customer base into New Market opportunities.

Speaker #5: But net, net, the EDA software for us, we're excited about all the opportunities the classic Synopsys has been building. The next opportunity of course is the joint solution that will leverage the Ansys portfolio to create the new product and a new opportunity to monetize.

The other point is on ai, ai is absolutely a mega Trend that is fueling system level and semiconductor R&D investment, and our AI products are capable, and our mission critical for our customers success.

Speaker #4: And everyone, that does conclude our question and answer session. I would like to hand the conference back to Sassine Ghazi for any additional or closing remarks.

Operator: Everyone, that does conclude our question and answer session. I would like to hand the conference back to Sassine Ghazi for any additional or closing remarks.

We are focused on executing with financial discipline as we solve. Our customers biggest engineering challenges from Silicon to systems,

Speaker #5: Thank you. It's such an exciting time to execute as one company, with Ansys now part of Synopsys. With that, we have extended our technology leadership into simulation and analysis, and we've expanded our customer base into new market opportunities.

Sassine Ghazi: Thank you. It's such an exciting time to execute as one company and Ansys, now part of Synopsys. With that, we have extended our technology leadership into simulation and analysis, and we expanded our customer base into new market opportunities. The other point is on AI. AI is absolutely a mega trend that is fueling system-level and semiconductor R&D investment, and our AI products are capable and are mission-critical for our customers' success. We are focused on executing with financial discipline as we solve our customers' biggest engineering challenges from silicon to systems. Big thank you to the global Synopsys team for a strong start to 2026, and thank you all for joining us today.

Big, thank you to the global synopsis team for a strong start to 2026 and thank you all for joining us today.

Once again, everyone that does conclude today's conference, we would like to thank you all for your participation. You may now disconnect

Speaker #5: The other point is on AI. AI is absolutely a mega trend that is fueling system-level and semiconductor R&D investment. And our AI products are capable and are mission-critical for our customers' success.

Speaker #5: We are focused on executing with financial discipline, as we solve our customers' biggest engineering challenges from silicon to systems. Big thank you to the global Synopsys team for a strong start to 2026.

Speaker #5: And thank you all for joining us today.

Operator: Once again, everyone, that does conclude today's conference. We would like to thank you all for your participation. You may now disconnect.

Q1 2026 Synopsys Inc Earnings Call

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