Chip design software provider Synopsys saw its shares tumble by nearly 18.5% after the bell on Tuesday, following weaker-than-expected third-quarter results. The California-based firm reported revenue of $1.74 billion for the quarter ended July 31, falling short of Wall Street’s $1.77 billion estimate. Adjusted profit also came in below expectations at $3.39 per share, compared to analysts’ forecast of $3.74.
The company attributed the shortfall to weakness in its Design IP segment, which includes interface, security, and embedded processor intellectual property. CEO Sassine Ghazi explained during the post-earnings call that new export restrictions to China had disrupted design starts, while a major foundry customer pulled out of anticipated deals for market-related reasons. Although restrictions were lifted in early July, their earlier imposition had already impacted Synopsys’ pipeline.
Despite the setback, Synopsys is projecting a stronger fourth quarter, with revenue guidance between $2.23 billion and $2.26 billion, above analysts’ estimates of $2.09 billion. The company, which counts Nvidia, Intel, and Qualcomm among its partners, also highlighted its recent $35 billion acquisition of engineering design firm Ansys, completed in July after regulatory approvals. The deal, one of the largest in the sector, faced significant antitrust scrutiny in both China and Britain.
While Synopsys grapples with challenges, rival Cadence Design Systems raised its annual sales and profit forecast in July, signaling growing competition in the industry. Synopsys remains confident that its heavy investments in intellectual property for key customers could yield returns by the second half of 2025, even as it works to recover momentum in the face of geopolitical and market headwinds.