Synopsys Surges on Strong AI Chip Demand, Beats Q3 Revenue Forecast

Synopsys (NASDAQ:SNPS) projected third-quarter revenue above Wall Street expectations, driven by surging demand for semiconductor design software amid booming AI chip investments. The company’s stock rose 3% in after-hours trading, recovering from a 10% drop earlier in the day triggered by reports that the Trump administration had asked U.S. chip design software firms to halt sales to Chinese companies.

CEO Sassine Ghazi addressed the speculation during the earnings call, clarifying that Synopsys has not received any official notice from the U.S. Department of Commerce’s Bureau of Industry and Security (BIS), which oversees export restrictions. “We are aware of the reporting and speculations, but Synopsys has not received a notice from BIS,” he said. The company’s guidance includes its expectations of a year-over-year revenue decline in China, which typically accounts for about 16% of annual revenue.

Despite weaker demand in China, strong growth in AI and high-performance computing (HPC) sectors helped lift overall performance. Global chipmakers such as Nvidia, Intel, and Qualcomm rely on Synopsys tools to design next-gen processors, fueling continued demand for its software. The company also noted stabilizing demand in regions like Europe and South Korea, though automotive and industrial segments remained sluggish.

Revenue for the second quarter ended April 30 came in at $1.60 billion, matching analyst estimates. For the third quarter, Synopsys forecasts revenue between $1.76 billion and $1.79 billion, slightly above the $1.76 billion average estimate compiled by LSEG.

The ongoing AI boom continues to be a major growth catalyst for Synopsys, despite geopolitical risks and mixed macroeconomic signals from non-AI markets. Investors remain bullish on its long-term prospects amid the global AI chip race.