Synopsys (SNPS) Reports Q3 Earnings: What’s Up Next?

Synopsys SNPS is expected to release its third quarter fiscal year 2021 results on August 18.

Management expects third-quarter revenue of between $1.03 billion and $1.06 billion. The Zacks Consensus Estimate for revenue is currently pegged at $1.04 billion, indicating 8.3% year-over-year growth.

Management expects non-GAAP earnings between $1.75 and $1.80 per share. Notably, the consensus earnings figure is pegged at $1.78 per share, suggesting 2.3% year-over-year growth.

Let’s take a look at how things have developed prior to this announcement.

Synopsys, Inc. Price and EPS surprise

Synopsys, Inc.  Price and EPS surprise

Synopsys, Inc. Price and EPS surprise

Synopsys, Inc. price eps surprise | Synopsys, Inc. Quote

Factors at play

The increasing impact of artificial intelligence (AI), 5G, internet of things, high-performance computing and the cloud, and automotive are expected to drive demand for the company’s advanced solutions in the quarter under review. Synopsys’ performance is likely due to growth in Custom Compiler, fueled by big deals in the 5G, AI, and server chip markets.

Synopsys’ fiscal third quarter results likely benefited from growing demand for its solid product portfolio. Increasing global design activity and customer engagement have likely been the drivers of growth.

Also, the continued shift to high-performance cloud computing due to the pandemic-induced remote work environment is expected to drive demand for the company’s Intellectual Property (IP) solutions, such as PCI Express, 112G Ethernet and DDR.

In addition, widespread contract wins and the increasing deployment of the Fusion Platform, including Fusion Compiler, are expected to have been key drivers of growth. Synopsys’ Verification Continuum platform is witnessing robust demand and competitive advantages, which have also likely been important catalysts.

Furthermore, the company’s USB4 IP solution for advanced 5nm processes is likely to have fueled order growth in the quarter yet to be reported. Strong adoption of the interface and basic IP solutions is also expected to drive revenue for the company’s interface portfolio.

In addition, Synopsys partnerships with industry leaders such as: Microsoft MSFT and Taiwan Semiconductor Manufacturing Company are expected to accelerate the implementation of their cloud solutions, supporting the company’s revenue during the reporting quarter.

Its solid software partner base for electronic design automation (EDA), which includes Advanced Micro Devices, Juniper Networks, Realtek, Toshiba and Wolfson, will likely have been a major source of revenue.

Increased design investments in Synopsys’ ARC processors by automotive companies, despite the pandemic-induced headwinds in the automotive industry, are positives. However, the partial resumption of normal activities is expected to have reduced some expenses that were on hold during the lockdown and works. -from home period. This may have been a slight drag on margins.

Component supply constraints are also expected to partially offset the benefits of the above factors. Beyond this, the increasing competition from Cadence Design Systems may have been a bummer.

In addition, geopolitical challenges, coupled with uncertainties related to trade restrictions with Huawei Technologies, may have negatively impacted overall business operations during the fiscal third quarter.

What our model says

Our proven model predicts no profit knock for Synopsys this time around. The combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chance of a win. But that’s not the case here. You can discover the best stocks to buy or sell before they are reported with our Earnings ESP filter.

Synopsys currently has a Zacks ranking of 3 and has a profit ESP of 0.00%.

Shares with favorable combinations

Here are some companies that, according to our model, have the right combination of elements to take profit in their upcoming releases:

Chewy Inc. CHWY has an earnings ESP of +20.00% and currently has a Zacks Rank of 2. You can view the full list of the current Zacks #1 Rank stocks here.

AutoZone AZO has a profit ESP of +9.54% and currently has a Zacks Rank #2.

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