Synopsys Q4 Earnings Preview: All Eyes On AI Copilot, Microsoft And Azure OpenAI Strategic Collaboration

Synopsys Inc SNPS, will be reporting its fourth-quarter earnings on Nov. 29. Wall Street watchers expect Synopsys to report $3.03 in EPS and $1.58 billion in revenue as it prints its Q4 earnings after market hours.

The company provides electronic design automation (EDA) software and hardware for designing and testing integrated circuits (ICs) and electronic systems. Their products and services play a crucial role in the semiconductor and electronics industry.

Synopsys stock is up 70% on a year-to-date basis. The stock got a further 2.5%+ boost since it announced its strategic collaboration with Microsoft Inc MSFT on Nov. 15.

Synopsys has introduced Synopsys.ai Copilot, a generative artificial intelligence (GenAI) capability that integrates Azure OpenAI Service into the design process of semiconductors.

Here's what analysts will be focusing on, and how the stock currently maps against Wall Street estimates.

Business & Fundamentals

The company is strategically leveraging AI across three value streams:

• Design participation and demand for AI chips
• Embedding AI in their EDA stack, and
• Optimizing internal workflows

Synopsys.ai, a success with 270 tapeouts and adoption by nine of the top 10 semiconductor vendors, contributes to segments including Design Automation (65% revenue), Design IP (25%), and Software Integrity (10%). The Microsoft collaboration should provide another boost to this success.

As a pivotal player in supporting semiconductor growth, particularly in AI-focused startups, Synopsys faces increased demand for its tools. With 10% of trailing revenues from AI trends, the company plays a crucial role in the smart era. Factors like industry-leading profitability and a robust balance sheet work in favor of the stock. However, cash flows remain weak.

Its premium valuation is another factor that makes some analysts cautious.

Also Read: Synopsys Enters $300M Accelerated Share Buyback Deal

Analyst Focus, Ratings & Consensus Estimates

Consensus ratings on the stock indicate a Buy with a price target of $405.23.

Stifel analyst Ruben Roy rates the stock a Buy with a price target of $550. Roy expects strong results from the company, given semiconductor design activity remains robust. He also expects continued progress on AI tool set.

“We expect to hear more about the company’s recent announcement regarding the Synopsys.ai Copilot in collaboration with Microsoft Azure OpenAI,” said Roy.

SNPS Price Action: Synopsys stock was trading at $547.22 at the time of publication on Wednesday.

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