Shares of the chip design automation software company Synopsys Inc. were trending higher in late trading today after it beat expectations on earnings and revenue and offered strong profit guidance for the current quarter and year.

The company reported fiscal 2025 fourth-quarter earnings before certain costs such as stock compensation of $2.90 per share, ahead of Wall Street’s forecast of $2.78 per share. Revenue for the period rose by an impressive 37%, to $2.26 billion, just ahead of the analyst consensus estimate of $2.25 billion. Synopsys ended the quarter with net income of $448.4 million, down from the $1.095 billion profit it recorded in the same period one year ago.

For the full year, Synopsys posted record revenue of $7.1 billion, up about 15% from the previous year.

Synopsys President and Chief Executive Sassine Ghazi (pictured) said the company delivered on a solid year that underscored its status as the industry’s leader in engineering solutions for silicon systems. “We enter fiscal 2026 with an intense focus on driving sustainable growth and margin expansion through continued innovation and disciplined execution,” he added.

The fortunes of Synopsys are tied to those of the semiconductor industry, for the company is one of the major suppliers of the electronic design automation software that’s used by chipmakers such as Nvidia Corp., Intel Corp., Samsung Electronics Co. Ltd. and Qualcomm Inc. Those companies rely on Synopsys’ software to automate large parts of the chip design process, including steps such as the actual design, verification, signoff, physical verification and more.

Synopsys’ main competitor is Cadence Design Systems Inc., and the two dominate the chipmaking software market. Virtually every computer chip in the world was designed using either Synopsys or Cadence software.

Not surprisingly, Synopsys has grown immensely over the last three years or so thanks to the rise of artificial intelligence, which is fueling intense demand for ever-more powerful computer chips that can satisfy the enormous processing requirements of large language models.

Synopsys Chief Financial Officer Shelagh Glaser told analysts on a conference call that the company now has an order backlog of more than $11.4 billion, all waiting to be converted into revenue. “We expect to set another revenue record in 2026 while fully integrating Ansys,” he added, referring to the company’s $35 billion acquisition of the engineering design software maker Ansys Corp., which closed earlier this year.

The company said it’s looking for first-quarter earnings of around $3.55 per share on revenue of $2.39 billion, while Wall Street is targeting $3.42 per share in earnings and sales of $2.42 billion. For the full year, Synopsys said it’s looking for earnings of $1.436 per share at the midpoint of its guidance range, with revenue forecast at $9.6 billion. Analysts are targeting a profit of $14.05 per share on slightly higher sales of $9.63 billion.

Glaser said the company’s outlook includes approximately $2.9 billion of expected revenue from Ansys, whose engineering simulation software is used to design things such as batteries, car engines, wind turbines and other systems. In the prior quarter, Ansys contributed $667.7 million in sales. The outlook also includes a $110 million impact resulting from Synopsys’ divestment of its Optical Solutions Group and PowerArtist RTL businesses.

The results come just days after Synopsys revealed that AI chip industry leader Nvidia, the world’s most valuable public company, had acquired a $2 billion stake in the company. It’s part of a new strategic partnership that will see them jointly develop software tools for chip design.

Nvidia plans to optimize its graphics processing units to improve the performance of Synopsys’ software and speed up the chip design and testing process. Nvidia has used Synopsys’ tools for years already. “This is going to expand the market of computing into the world of design and engineering for the very first time,” Nvidia founder and CEO Jensen Huang said about the partnership.

Synopsys’ stock initially gained more than 7% after-hours, although the gains were later pared back, and it’s currently up 2%. In the year to date, the stock is down 2%.

Photo: Synopsys/YouTube