Blair Abernethy • Rosenblatt Securities

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CEO John Kibarian detailed a Sapiens win with an IDM's product side, driven by the need to connect supply chains to ERP systems for AI enablement, noting the deal originated from SAP discussions. He confirmed the SecureWise integration is on track for a September completion, with product integration with DEX underway to offer more secure data transmission. Kibarian explained the China revenue spike was due to volume shipments and CV/Exensio deployments as fabs ramp capacity, but expects it to moderate. He also anticipates strong Exensio renewals in H2, driven by AI modules like guide analytics and AI for test (MLOps). CFO Adnan Raza added that the elevated H1 CapEx was for eProbe demand and H2 levels would be similar or slightly lower.

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Executive John Kibarian outlined the SecureWise integration, focusing on security standards and combining PDF's AI with SecureWise's collaboration tools for OSATs and advanced packaging. He also confirmed a growing pipeline for Sapience. Executive Adnan Raza added that SecureWise has a highly recurring revenue model and is accretive to gross margin. On capital allocation, Raza prioritized debt repayment while remaining opportunistic on share buybacks, reaffirming commitment to long-term margin targets.

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Executive John Kibarian explained that the eProbe pipeline consists of a mix of new and repeat customers in both advanced logic and advanced DRAM. He noted that while they expect to ship over four machines in 2025, the timing of revenue conversion is uncertain due to a customer preference shift towards purchasing hardware upfront rather than subscribing. Kibarian clarified that this new sales model, which involves a one-time hardware sale and optional software subscriptions, is the primary reason for the change in backlog characteristics, as it shifts revenue recognition.

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CEO John Kibarian and CFO Adnan Raza addressed the questions. Kibarian noted a growing DFI pipeline with a third customer, promising memory applications, and expanding use cases in 3D logic. Raza confirmed CapEx will increase to support DFI demand and clarified the SG&A rise was in sales and marketing, with future focus shifting to R&D. Kibarian described a mixed macro environment, with weakness in China-influenced IYR but an expected recovery. He also confirmed positive progress on both the SAP partnership, which is key for AI deployments, and the Lantern battery pilots.

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President and CEO Neil Barua described a mixed performance. On the positive side, he noted that the strategic connection between ServiceMax and Windchill is strengthening, differentiating PTC's PLM offering and driving wins. However, he also acknowledged that the business was negatively impacted by 'one-time idiosyncratic' churn events this year. He concluded that while there is work to be done, the strategic importance of ServiceMax within the Product Data Foundation vision remains strong.

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President & CEO Anirudh Devgan attributed the strong growth to Cadence's focus on high-disruption areas: 3D-IC and data center simulation. He noted that the strength of the Allegro platform pulls through analysis tools, and the Beta CAE acquisition has helped expand the sales channel. He added that while he is 'super optimistic' about the new Millennium platform, it is still in its very early innings.

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CEO Anirudh Devgan expressed great excitement for the business, which had a strong Q1 and benefits from a key partnership with NVIDIA. He sees a huge opportunity in applying analytical simulation to optimize data center design and operations, noting it improved power efficiency by 10% in Cadence's own facilities. He is very optimistic about the potential for both design and operational phases.

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Founder & CEO Alan Trefler responded that customers are receptive to features like Coach and that KnowledgeBuddy is a key vehicle for operationalizing both Pega's and its partners' intellectual property. He reiterated that while Pega has dozens of AI features, the design-centric approach of Blueprint is the most meaningful and differentiated part of its GenAI strategy.

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CFO Kenneth Stillwell confirmed that the term license strength was due to the timing of renewals, not changes in contract length. He also stated that the company has capacity for sales investments built into its plan and that Blueprint's effectiveness is increasing interest in finding efficient ways to acquire more new logos.

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CEO Alan Trefler outlined the Blueprint roadmap, which focuses on enhancing legacy system analysis, integrating process mining outputs (like BPMN from Everflow), and improving compatibility with cloud-native databases to support the legacy transformation strategy. Regarding verticals, both Trefler and CFO Kenneth Stillwell stated that growth was well-balanced across the board, describing the quarter as "unsexy" in that no single vertical was an outlier.

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CEO Sassine Ghazi described the .DA products as a foundational data infrastructure that enhances the .ai optimization tools, with Fab.da adoption being naturally limited to customers with in-house manufacturing. Regarding AgenTeq, he stated they are currently in the L2 (task automation) and L3 (orchestration) phases with select partners and will continue to communicate progress on the exciting roadmap.

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CEO Sassine Ghazi positioned the .DA products as a foundational infrastructure layer that enhances the .ai optimization tools by providing data insights across the design flow. Regarding Agentik, he explained that Synopsys is currently in the L2 and L3 phases (task agents and orchestration) with select partners and will continue to communicate progress on what he described as a super exciting development.

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CEO Nicholas Cumins explained that AI is key to helping organizations do more with less, focusing first on automating mundane tasks like drawings production. He emphasized Bentley's unique position, using its software portfolio to train AI agents and leveraging customer data in ProjectWise only with explicit consent. Internally, he noted that AI is boosting developer productivity by 10-20% by automating tasks like code commenting and generating routine functions.

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CEO Nicholas Cumins described data centers as 'mini cities' that drive broad infrastructure needs, creating direct and indirect growth opportunities across power, water, and transportation. Executive Gregory Bentley clarified that revenue from these projects would be reported within the industrial, resources, and public works and utilities sectors, rather than in commercial facilities.

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