Kelsey Chia

Kelsey Chia from Citi questioned the risk of Synopsys missing customer design starts or customers shifting away due to IP delivery timing, specifically for PCIe 8 and 224 Certus. She also asked about the applicability of the 'rule of 50' for IP operating margins, a framework for normalized operating margins, and the impact of an eventual royalty business model.

Answer

Sassine Ghazi, President and CEO, explained that IP delivery aligns with customer schedules and tapeouts, and Synopsys is engaged with customers for high-end HPC chips, focusing on prioritizing delivery for specific customers. Shelagh Glaser, CFO, stated that IP operating margins are muted this year due to muted growth and continued investment in titles, but are expected to improve over time, remaining below the corporate average due to being more people-intensive. Ghazi added that the market presents a great opportunity for value-based monetization, especially with hyperscalers, and expects to close deals in FY 2026, with upside visible upon customer tapeouts.

Kelsey Chia from Citi asked about the risk of Synopsys missing customer design starts due to late IP delivery and the outlook for IP operating margins, including the potential for a royalty business model.

Answer

President and CEO Sassine Ghazi clarified that IP delivery aligns with customer schedules and tapeouts, particularly for high-end HPC chips, and that the company is prioritizing resources to deliver on its roadmap, which underpins confidence in second-half IP performance. CFO Shelagh Glaser stated that IP operating margins are currently muted due to investment in new titles amid muted growth but are expected to improve over time, remaining below the corporate average due to being more people-intensive. Sassine Ghazi expressed excitement about improving monetization through value-based models for hyperscalers.

Kelsey Chia from Citigroup Inc. inquired about the EDA growth rate, asking if slower chip design momentum in China was the reason for lower growth in fiscal year 2026 and if there were any share shift dynamics. She also asked if Ansys synergies could drive revenue growth back to target. Additionally, she questioned the IP business regarding the EMIT advanced packaging technology, its incremental positive impact, and whether operating margins for that segment could return to historical averages.

Answer

Sassine Ghazi, CEO of Synopsys, confirmed share shift in China due to customers seeking local alternatives amid restrictions. He stated that long-term double-digit EDA growth would come from Synopsys-Ansys joint solutions, with the first wave expected in the first half of fiscal year 2026, and from Agentic AI changing workflows. For IP, Ghazi explained monetization through building, porting, and selling to end customers, assuming a status quo for new customer on-ramping in FY26. Shelagh Glaser, CFO, noted continued investment in HPC tiles, which will pressure IP operating margins in 2026, but expects expansion with long-term mid-teens growth.

Kelsey Chia inquired about the sustainability of China revenue strength, which grew 18% in 2025, outpacing the corporate average and initial guidance, and asked about the assumptions embedded in the 2026 guidance for China.

Answer

Senior Vice President and CFO John Wall stated that China revenue was 12% in 2024 and 13% in 2025, with a similar range expected for 2026. He noted strong design activity and bookings growth in China, but the guidance includes more prudence for the second half of 2026 due to near-term visibility. President and CEO Anirudh Devgan added that design activity in China is good and has stabilized, with trends mirroring those in the U.S., including strong AI chip development and physical AI in automotive and EVs.

Kelsey Chia inquired about the sustainability of Cadence's China revenue strength, which grew 18% last year, and the assumptions embedded in the 2026 guidance for the region.

Answer

SVP and CFO John Wall stated that China revenue is expected to remain in the 12-13% range for 2026, consistent with 2024 (12%) and 2025 (13%). He noted strong design activity and bookings growth in China, with near-term visibility for the first half of 2026, leading to more prudence in the second-half guidance. President and CEO Anirudh Devgan added that design activity in China is good and has stabilized, with trends mirroring the U.S., including strong demand for AI chips, physical AI, autonomous driving, and EVs.

Kelsey Chia asked if the updated enterprise data guidance includes market share gains or is purely industry growth, and if MPS can navigate potential supply constraints to gain share. She also requested an update on the 55-60% gross margin target, including end markets above/below average and specific drivers.

Answer

Bernie Blegen, EVP and CFO, stated that MPS is strategically engaged with top customers and participating across the long tail of the large enterprise data market, positioning them well for opportunities. Michael Hsing, CEO and Founder, emphasized long-term vision beyond current markets. Regarding gross margin, Michael Hsing noted MPS is at the low end of its target range. Bernie Blegen explained that with developing backlog, MPS expects to resume incremental sequential improvements of 10-20 basis points quarter-over-quarter sometime during the year.

Kelsey Chia asked if the updated enterprise data guidance includes market share gains or is solely due to industry growth, and if MPS is positioned to take share during potential supply constraints. She also requested an update on gross margin drivers and which end markets are above or below the corporate average of 55%-60%.

Answer

Bernie Blegen, EVP and CFO, explained that MPS's strong position in enterprise data comes from strategic engagement with top customers and participation across the long tail of the market, making it difficult to quantify share gains versus market growth. Michael Hsing, CEO and Founder, emphasized thinking beyond current markets for long-term growth. Bernie Blegen noted that gross margins are at the low end of the 55-60% model, and with developing backlog, MPS expects to resume incremental sequential improvements of 10-20 basis points quarter-over-quarter.

Kelsey Chia inquired about the competitive landscape, particularly regarding gallium nitride (GaN) and silicon carbide (SiC) materials, and MPS's positioning and view on their importance for next-generation power modules and chips. She also asked about management's sentiment compared to a quarter ago, considering market share changes, ASIC visibility, mega partnerships, and supply chain maturity.

Answer

Michael Hsing (CEO and Founder) confirmed that MPS develops its own silicon carbide and is evaluating gallium nitride, while also noting that silicon power MOSFETs are evolving to be cost-effective and competitive. Regarding sentiment, Michael Hsing stated he measures performance over multiple years, not quarter-by-quarter. Bernie Blegen (EVP and CFO) added that MPS is broadly indexed across various opportunities and well-positioned in the market.

Kelsey Chia of Citi Research asked about the competitive landscape, particularly concerning material technologies like gallium nitride (GaN) and silicon carbide (SiC). She inquired about MPS's positioning in these areas, especially given partnerships between MPS's largest enterprise data customer and other semiconductor companies, and the importance of these materials for next-generation power modules and chips. She also asked how MPS's sentiment today compares to a quarter ago, considering market share changes, ASIC visibility, mega partnerships, and supply chain maturity.

Answer

Michael Hsing, CEO and Founder, confirmed that MPS develops its own silicon carbide and is building modules, while also evaluating GaN at a very early stage. He noted that silicon power MOSFETs have evolved significantly and can be very cost-effective, competing effectively with silicon carbide. Regarding sentiment, Michael Hsing stated he measures performance over multiple years, not quarter by quarter. Bernie Blegen, EVP and CFO, added that MPS is broadly indexed across various vendors and opportunities, still very early in the process, and well-positioned in the market.

Kelsey Chia asked if the ramp of new ASIC platforms would lead to a return to a more diversified customer base with no single customer over 5% of sales. She also questioned if a growth rate near 20% for 2026 was a reasonable assumption based on market recovery and MPS's outperformance targets.

Answer

EVP & CFO Bernie Blegen confirmed that the recent high customer concentration was an 'aberration' and he expects a return to a more normal, diversified customer profile. Regarding 2026 growth, Blegen agreed that the analyst's assumptions were accurate within a few percentage points, with enterprise data expected to be a key contributor to that growth.