Synopsys, Inc. (SNPS – Free Report) is scheduled to announce its third quarter 2024 fiscal year results on August 21 after the market closes.
The company expects third-quarter revenues to be in the range of $1.51 billion to $1.54 billion. The Zacks Consensus Estimate is $1.53 billion, representing year-over-year growth of 2.6%.
Synopsys expects non-GAAP earnings per share to be in the range of $3.25 to $3.30. The Zacks Consensus Estimate for third-quarter earnings has remained unchanged over the past 60 days at $3.26 per share, representing year-over-year growth of 13.2%.
The software company beat the Zacks Consensus Estimate three times and missed it once over the past four quarters, with the average surprise being 3.1%.
Let’s see how things have developed ahead of the upcoming announcement.
Factors to consider
Synopsys’ third quarter results are expected to reflect growing demand for its comprehensive product portfolio. The increasing need for high-performance cloud computing driven by the hybrid work environment is expected to drive demand for the company’s intellectual property (“IP”) solutions such as Peripheral Component Interconnect Express 5.0 & 6.0, 800G Ethernet and DDR5 memory.
Increasing applications of AI, Internet of Things (IoT), 5G, high-performance computing, cloud technology and automotive sectors are expected to have boosted demand for Synopsys’ advanced solutions in the third quarter. Significant growth of the Fusion Compiler, driven by large deals in the 5G, AI and server chip markets, is expected to be a key contributor to this demand.
Increasing adoption of Synopsys.ai among chip manufacturers and vendors is expected to have driven revenue growth in the quarter. In addition, the expanded partnership with Intel, which aims to improve Synopsys’ manufacturing processes using the company’s electronic design automation (EDA), IP and multi-die systems, is expected to play a key role.
Global design activity and user engagement are expected to be key growth drivers for Synopsys in the third fiscal quarter. Increasing adoption of the company’s interface and core IP solutions is expected to have increased revenues in Synopsys’ interface portfolio. In addition, numerous contract wins and increasing adoption of the Fusion platform, including the Fusion Compiler, are expected to positively impact the company’s third-quarter results.
Synopsys’ strategic partnerships with industry leaders such as Microsoft and Taiwan Semiconductor Manufacturing Company likely enhanced the use of its cloud solutions, contributing to revenue growth in the quarter.
Synopsys’ solid base of EDA software partners, including Juniper Networks, Realtek, Advanced Micro Devices, Toshiba and Wolfson, is expected to be a key revenue driver. In addition, increased design investment by automakers in Synopsys’ ARC processors as well as strong adoption of security solutions for interfaces such as CXL, PCI Express and DDR, with more than 30 design wins in various market segments, are expected to have had a positive impact on the company’s performance.
However, increasing competition from companies such as Cadence Design Systems may have posed challenges for Synopsys. In addition, corporate budget cuts due to ongoing macroeconomic challenges and unfavorable exchange rates may have partially offset the positive impact of the growth factors mentioned above.
What our model says
Our proven model does not conclusively predict that Synopsys will beat expectations this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, but that is not the case here.
Although SNPS currently has a Zacks Rank of 3, it has an Earnings ESP of 0.00%. You can discover the best stocks to buy or sell before they are reported using our Earnings ESP filter.
Stocks with the favorable combination
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Abercrombie & Fitch will report its second-quarter 2024 earnings on August 28. The Zacks Consensus Estimate for the company’s earnings is $2.13 per share, representing a significant increase of 93.6% from the figure reported in the year-ago quarter. ANF shares have returned 73.5% year to date.
Confirm (AFRM – Free Report) currently has an Earnings ESP of +19.64% and a Zacks Rank of 2.
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American Eagle Outfitters (AEO – Free Report) has an Earnings ESP of +4.20% and currently holds a Zacks Rank of #2.
The company will report second-quarter fiscal 2024 results on August 29. The Zacks Consensus Estimate for AEO’s earnings is 37 cents per share, representing growth of 48% from the figure reported in the year-ago quarter. American Eagle Outfitters shares have fallen 2.5% year to date.
Stay up-to-date on upcoming earnings announcements with the Zacks Earnings Calendar.
