The Six Five team discusses Synopsys Q3FY24 Earnings
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Transcript:
Patrick Moorhead: So, yeah, Synopsys at earnings. I had the opportunity to chat with Sassine Ghazi, the CEO. So I appreciate a lot to get that double-click. I mean net-net they had a great quarter. They had a beat and a beat. They had record revenue. Then their forecast looked in line on revenue with an upward revision on EPS. There was a slight uptick after-hours and their stock actually declined the day after. But the NASDAQ, everything else was down, too. It’s interesting, as opposed to digging into specifically in the quarter, I really wanted to dive into what was said on the call. Synopsys is one of those companies that, in regards to earnings, you literally have to go on the call to get any insights.
The amount of insights and how it relates to the rest of the industry, I just thought was fascinating. On the call, Sassine … First of all, he talked about Ansys, which still expects it to close first half of 2025. But then there were these … They didn’t use their names. Sassine used characterization of their customers and how they were doing this. So debug right is a major time and resource investment for any chip, and he had said that a large US-based GPU company adopted the Verdi platform, and a large US mobile SOC company reducing failure debug from days to minutes. So how do you say Nvidia and Qualcomm without saying Nvidia and Qualcomm? That’s the way you describe it. Verification is also another key part of the design and test process for any IP or SOC vendor. With VSO.ai, a marquee US GPU company deployed the VSO.ai across multiple IPs with time improvements of 2X to 7X and coverage improvements up to 33%. So 33%, more stuff that you test 2X to 7X the speed.
Now I’ll throw one final one out here, which is … Actually I’ll do two. ZeBu, which is part of the EP product line for emulation and prototyping, hence the E and the P, they had a significant hardware expansion at a large US hyperscaler in a direct win versus the competition, competitive takeout with cadence. I guess there’s just one of three of these hyperscalers. My final one here is it also gives you an insight into tape-outs and foundries. He said we continue to win new design wins on ICV with 20 tape-outs in Q3. Four of these tape-outs were on TSMC N3 and one on IFS 18A where engagements are increasing rapidly.
What’s interesting, we had a little taste of IFS versus TSMC leading. What’s interesting is I thought Intel had said that there won’t be any tape-outs on 18A until ’25. Anyways, maybe I misheard what Intel said, or maybe they’re talking about Intel Design company using Synopsys to do a tape-out on 18A. I don’t know, we’ll see. But the insights … And I think what this did, just to make a long story longer, it just shows the value that Synopsys has on EDA.
Daniel Newman: Yeah, Pat, you hit it on the head. I mean this IP and EDA company continues to be a quiet but really critical star of this AI transformation that we have going on, whether it comes down to generative AI tools to speed up design, to being a key partner to … You kind of named without naming. It’s pretty much pervasive across the players. They’re expanding. They’re investing and divesting. They’ve been adding the things that I think are essential for their growth. They spun off some things, I think, that were not focal points for the business. They saw record revenue. They were able to confirm guidance on the earnings. They were able to get to the revenue midpoint.
I think they’re able to be somewhat conservative but optimistic because of the overall situation and the amount of demand. I mean, look, as we keep hearing about these next … We’re going to talk about this throughout the show today. We’re hearing about these design wins, whether it’s OpenAI building an XPU. I mean Synopsys just has a part to play in so many of this scale of this AI movement. Of course, it’s not just AI chips. Every time you hear about AI, there’s more storage, there’s more networking, there’s more traditional general purpose compute. This stuff all happens in tandem, memory. I mean all this stuff happens, and Synopsys has a role to play in so many of these parts.
So it’s an exciting company. I’ve had a number of conversations with Sassine. I mean since he’s taken the helm, I feel like he’s doing a really good job steering the ship. I’m glad you had the chance to sit down with him. It sounds to me like there’s a lot of reason for optimism over there. It’s going to be one of those … I don’t know if I used the word unsung hero, because they’re definitely not unknown, but I think when people talk about chips, they like to talk about AMD and Nvidia, Intel, Qualcomm. A lot of times there’s this whole supply chain, this whole … There’s the material stuff … We talked about Coherent last week … laser beams, there’s machinery, there’s wafer. What I’m saying is there’s just so much more to producing these final products, and it’s not always as cool, but, gosh, try to do this stuff without these companies. It’s just … You can’t. I mean-
Patrick Moorhead: Yeah, it’s interesting. It’s very similar to the way nobody had really ever heard of Arm, right?
Daniel Newman: Yeah.
Patrick Moorhead: Then, boom, the market gets some education. I think EDA players are going to be the power brokers. As you get more people, as you get more people making SOCs, doing IPs, chip load-based architectures enable small garage shops to do this stuff. Add on that the system part of it with Ansys and now you’ve got end-to-end.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
