Executive Summary

Q1 FY25 revenue was $1.455B (down ~4% YoY due to one fewer work week and a tough IP compare) with non-GAAP EPS of $3.03; revenue landed at the upper end of guidance and EPS exceeded the high end. Management reaffirmed full‑year revenue and non‑GAAP EPS targets, while GAAP EPS guidance was trimmed versus December (details below) .
Segment mix: Design Automation grew 4% YoY to $1.02B with 39.7% adjusted segment margin, while Design IP fell 17% YoY to $435M versus a record prior-year compare and 29.1% adjusted segment margin .
Free cash flow was an outflow of ~$108M for the quarter amid inventory build tied to next-gen hardware launches (HAPS‑200 and ZeBu‑200); backlog stood at $7.7B and demand exceeds near‑term supply for new HAV systems, pointing to a back‑half hardware skew .
China outlook was marked down to grow below corporate average in FY25 due to export restrictions and macro softness, but management expects to offset with strength in AI/HPC and new hardware/IP momentum; pending ANSYS acquisition remains on track to close in 1H25 following EU approval and UK CMA provisional remedies acceptance .

What Went Well and What Went Wrong

What Went Well
- Non‑GAAP EPS beat guidance; management highlighted “revenue in the upper end” and EPS “above the high end” with 36.5% non‑GAAP operating margin: “We delivered a solid start to the year” .
- Design Automation strength: revenue +4% YoY despite one fewer week; adjusted segment margin 39.7%; strong adoption of next‑gen HAPS‑200 and ZeBu‑200 HAV platforms with performance up to 2x vs prior gen and early marquee customers (AMD, Arm, NVIDIA, SiFive) .
- Strategic positioning in AI: CEO emphasized “strong design activity at advanced nodes, fueled by the AI‑driven reinvention of compute” and emerging “agentic AI” to shift workflows and monetization over time .
What Went Wrong
- Total revenue declined ~4% YoY to $1.455B, primarily due to eight fewer 1H days (one fewer week in Q1 vs Q1’24) and IP timing/record prior‑year compare; non‑GAAP EPS declined YoY to $3.03 from $3.38 .
- Design IP down 17% YoY to $435M with adjusted margin falling to 29.1% (vs 46.7% a year ago) due to timing and tough compare; noted lumpiness likely persists near term .
- GAAP EPS full‑year guide was lowered (to $10.09–$10.31 from $10.42–$10.63 in December) alongside higher GAAP expense guidance, reflecting acquisition/divestiture and other GAAP items .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Billions)	$1.53	$1.636	$1.455
GAAP EPS ($)	$2.73	$1.79	$1.89
Non-GAAP EPS ($)	$3.43	$3.40	$3.03
Non-GAAP Operating Margin %	40.0%	—	36.5%

Segment breakdown (Q1 YoY):

Segment	Q1 2024 Revenue ($M)	Q1 2025 Revenue ($M)	YoY %	Adjusted Op Margin Q1’24	Adjusted Op Margin Q1’25
Design Automation	985.3	1,020.2	+3.5%	36.5%	39.7%
Design IP	525.7	435.1	-17.3%	46.7%	29.1%

KPIs and cash/balance items:

KPI	Q1 2025
Backlog (RPO)	$7.7B
Cash + ST Investments	$3.809B
Operating Cash Flow	$(67.5)M
Free Cash Flow	$(108.2)M outflow
Deferred Revenue (Current)	$1,320.6M
Deferred Revenue (Long-term)	$316.2M
Inventory	$415.2M

Notes: RPO mix shifted somewhat toward current balances; management said no change in contract duration behavior, with IP/hardware pull-downs still driven by program timing .

Guidance Changes

Metric	Period	Previous Guidance (Dec 4, 2024)	Current Guidance (Feb 26, 2025)	Change
Revenue	Q2 FY25	n/a	$1.585–$1.615B	New
GAAP EPS	Q2 FY25	n/a	$2.21–$2.33	New
Non-GAAP EPS	Q2 FY25	n/a	$3.37–$3.42	New
Non-GAAP Expenses	Q2 FY25	n/a	$985–$995M	New
Non-GAAP Tax Rate	Q2 FY25	n/a	16%	New
Diluted Shares	Q2 FY25	n/a	156–158M	New
Revenue	FY25	$6.745–$6.805B	$6.745–$6.805B	Maintained
GAAP EPS	FY25	$10.42–$10.63	$10.09–$10.31	Lowered
Non-GAAP EPS	FY25	$14.88–$14.96	$14.88–$14.96	Maintained
GAAP Expenses	FY25	$4.926–$4.983B	$4.972–$5.029B	Raised
Non-GAAP Expenses	FY25	$4.045–$4.085B	$4.045–$4.085B	Maintained
Operating Cash Flow	FY25	~ $1.8B	~ $1.8B	Maintained
Free Cash Flow	FY25	~ $1.6B	~ $1.6B	Maintained
Capex	FY25	~ $170M	~ $170M	Maintained
Non-GAAP Tax Rate	FY25	16%	16%	Maintained
Diluted Shares	FY25	157–159M	157–159M	Maintained

Management reiterated FY25 revenue growth of ~10–11% and ~13% non‑GAAP EPS growth; they noted Q2 OpEx step-up from annual merit while maintaining the full‑year cost outlook .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3’24 and Q4’24)	Current Period (Q1’25)	Trend
AI/Agentic AI	Scaling AI optimization (DSO.ai/VSO.ai/ASO.ai), early generative AI copilots; 12–14% long‑term DA growth thesis; record AI design activity .	Introduced “agentic AI” that could change design workflows and monetization; continued synopsys.ai adoption, with 30–35% productivity lifts in early engagements .	Improving
China	Pragmatic stance; still growing but decelerating; restrictions/macros monitored .	Now expected to grow below corporate average in FY25; export list adds and macro cited .	Worsening
Hardware (HAV)	Strong momentum; record 2024 hardware; EP platform versatility .	Launched HAPS‑200/ZeBu‑200 (up to 2x perf vs prior gen); demand > supply; H2 (Q4‑weighted) shipments expected .	Improving near-term demand; supply‑constrained
Design IP	+32% YoY in Q3; roughly flat in Q4 vs strong compare .	-17% YoY on tough compare/timing; opportunity pipeline remains robust .	Mixed/near-term softer
Backlog/RPO	Backlog $7.9B in Q3; FY24 ending backlog ~$8.1B; visibility high .	Backlog $7.7B; mix shift toward current; durations unchanged .	Stable/high
FY25 framing	Fewer days and China prudence; double-digit growth and 40% margin target .	Reaffirmed FY targets; issued Q2 guide; reiterated H2 weight from days and IP/hardware timing .	Stable
Ansys deal	HSR waiting period expired; 1H25 close targeted .	EU approval; UK CMA provisionally accepted remedies; 1H25 close still expected .	Advancing

Management Commentary

CEO: “We are continuing to see strong design activity at advanced nodes, fueled by the AI‑driven reinvention of compute. As the pace and complexity of technology innovation increases, new silicon‑to‑systems design paradigms are essential, and Synopsys is well‑positioned to deliver” .
CFO: “We delivered a solid start to the year, with non‑GAAP earnings above guidance, and revenue in the upper end of our guided range… We are reaffirming our full‑year guidance” .
On agentic AI: “We see a paradigm shift coming with agent AI where engineers can task autonomous agents with executing complex workflows… a massive value and productivity unlock” .
On China: “Headwinds… are getting stronger… we believe that China will be decelerating below the corporate average; however, the guide is not changing” .
On hardware capacity: “We’re racing to build those products… demand exceeds supply right now… much more back‑half, in fact Q4‑loaded hardware year” .

Q&A Highlights

China deceleration below corporate average: Management cited cumulative export restrictions and a slowing local economy; assumptions are embedded in guidance and offset by strength elsewhere .
Hardware trajectory and inventory: New HAPS‑200/ZeBu‑200 launched; demand exceeds supply, with capacity ramping; expect Q4‑weighted deliveries; inventory includes WIP for new platforms .
Backlog and duration: Backlog at $7.7B; RPO tilt toward current balances this quarter; no structural change in contract durations or customer behavior; IP/hardware pull‑downs remain timing‑driven .
OpEx cadence: Q1 lighter on timing; Q2 steps up with annual merit; full‑year expense outlook unchanged .
AI monetization: AI optimization monetizes today; broader uplift to industry growth expected as generative/agentic AI changes workflows; no fixed timetable on the incremental growth contribution .

Estimates Context

Wall Street consensus (S&P Global) was unavailable during this session due to an access limit. As a proxy, the company reported Q1 revenue at the upper end of guidance and non‑GAAP EPS above the high end, and reaffirmed FY non‑GAAP targets; Q2 guidance was introduced as shown above .
Where estimates are required for trading models, please note we could not retrieve S&P Global consensus today due to a daily request limit; consider cross‑checking with your market data terminal or S&P CIQ directly.

Key Takeaways for Investors

Quality print in a low‑seasonal quarter: revenue at the high end and a clear non‑GAAP EPS beat against guidance despite a one‑week headwind; DA segment resilience underpins results .
Guidance signals stability: FY revenue and non‑GAAP EPS maintained; GAAP EPS trimmed on higher GAAP expense items, while Q2 guidance is constructive; H2 (especially Q4) skew persists given days, IP timing, and HAV availability .
Hardware as a catalyst: New HAPS‑200/ZeBu‑200 launches have demand outpacing near‑term supply; meeting that demand and capacity ramp are pivotal for back‑half upside and narrative momentum .
China remains a watch item: Below‑average growth expected, but diversified AI/HPC demand and system‑company exposure provide offset; narrative hinges on regulatory and macro developments .
IP lumpiness is transitory: -17% YoY vs a record compare; pipeline remains strong across Ethernet/PCIe/UCIe/SerDes, with AI/edge use‑cases supporting medium‑term growth .
Structural AI tailwinds: Expanding synopsys.ai adoption and the shift toward agentic AI could unlock new monetization and workflow changes—an incremental medium‑term growth lever beyond current optimization engines .
Deal catalyst: ANSYS regulatory process advancing (EU approved, UK CMA provisional remedies accepted); on‑track for 1H25 close—potentially expanding TAM and multi‑physics/silicon-to‑systems positioning .

Additional details and source materials:

Q1 FY25 press release and financials .
Q1 FY25 8‑K (Item 2.02) and exhibits .
Q1 FY25 earnings call transcript (prepared remarks and Q&A) .
Hardware launch PR (HAPS‑200/ZeBu‑200) .
Prior quarters for context: Q4 FY24 PR and call and Q3 FY24 call .

SYNOPSYS INC (SNPS)·Q1 2025 Earnings Summary