by Shares of Synopsys ( SNPS ) are jumping after the company reported better-than-expected results and raised its full-year guidance on Wednesday. Synopsys CEO Sassine Ghazi joins Market Domination to discuss the company’s work with Nvidia (NVDA) and the acquisition of Ansys (ANSS), and the broader AI moment.
Ghazi explains that the quarter’s “strong performance” was due to two parts of the company’s portfolio: design automation, or the software used by chip designers like NVDA to create chips, and design IP, the prepackaged “lego blocks” of chip design used by chip developers and hyperscalers.
Like Nvidia CEO Jensen Huang, Ghazi believes that the “next industrial revolution” is here, but in its “early stage.” The first step is building out infrastructure, including the computing requirement, he says. The second stage, “which you could call the industrial revolution, is when all systems become intelligent systems,” the CEO tells Yahoo Finance.
Ghazi adds that some of the company’s revenue can be directly attributed to AI. He notes that Synopsys began selling AI embedded in software in 2020, contributing to a “20% increase” in domains where customers are using AI.
For more expert insight and the latest market action, click here to watch this full episode of Market Domination.
This article was written by Gabriel Roy.
Video transcript
Summary shares jumped after that company reported better-than-estimated second-quarter results and raised its guidance for the full year.
Join us now Synopsis Sin Ghazi, Ceo C. Good to see you.
Thank you for being here.
Great to see you Julie.
So there’s obviously a lot of excitement around the broader chip space right now, you of course recently announced that you were working with NVIDIA, even though you already had a relationship with them.
Um What would you say was actually the element or elements that powered your numbers this quarter?
Yes, we are seeing strong performance across the portfolio.
Remember that we have two parts to the portfolio.
We have the design automation, which is the software that the chip designers use to design their chips.
So when Jensen talks about summarizing as mission critical to their development, that’s where they use our software to design the chip.
I design is the other part of our portfolio and you have to think of it as part of the chip like lego blocks of the chip design that we prepackage and reuse either by chip developers or the semiconductor or hyperscalar industry for although they are developing their own chips, they use the software and IP from Synopsis.
So the strength was driven by both segments.
So it was interesting to hear the kind of talk Jensen had about the AI moment we’re in and that was just the language he used on stage.
He said that we are the, the next industrial revolution has begun.
He said, I’m just curious, that’s how you see it’s a scene where we’re really in this kind of historical moment.
Here?
I do, I do but I believe at the same time, we are in that early stage, that the first stage is building out the infrastructure, the AI is driving massive computing needs.
And you see most of these investments happening in the data center for the obvious reasons.
Then the second part is the networking to connect these data centers and these chips together.
The second stage when you can call it, the industrial revolution will happen when all systems will be Smart systems, which means your car will be smarter, your house, smarter, which means connected both from conclusion and connected to it the data center or on. the margin for calculation.
And Cecin, I know I ask you this every quarter, but we keep talking about it incrementally when you say you’re early in that AI revolution, especially as it relates to you.
What we’re seeing is that you can attribute revenue directly to AI in a smart way right now.
And also since the shareholders approved the acquisition of A, assuming it still goes through, they get regulatory approval, how much will the AI business grow as well?
Yeah, so what I’m saying is, it’s still in the early stages.
I’m talking about the early stage of the whole market.
When you look at data center consumption in terms of building out information system computing, etcetera, uh, as a software provider, we started selling our AI embedded in our software in 2020.
So we are four years into that cycle and now we are able to communicate with our investor who is adding about 20% lift in the domains where the customers are using AI four.
So we are already seeing the benefit and the very fast pace of technology adoption.
But to give you an idea, we are only about 20%.
Now, you can argue that 20% is too high for AI in terms of adoption, but yes, it is growing very nicely.
So we’re already seeing that value uh from our software monetization using AI and Cinna O on that question, um getting answers.
Where are we now in terms of regulatory approvals?
So about four or five weeks after we announced the acquisition, we started the process.
So with the FTC, we’re in phase two, with the CM we filed in April and we’re going through the process with China, the first step or the first step was to indicate that we’re under the compounding portal, the compounding filing portal.
And last week, China confirmed that we are below the threshold but still showed interest in reviewing the deal.
We are still focusing on the first half of 25.
And really, we feel that this process should be manageable to a positive end.
Finally, Cine I wanted to ask you about the broader corporate spending environment right now, right?
You wouldn’t know you had any questions about economic growth, looking at your results.
But I’m curious what you’re hearing from clients, if there are any changes they’re making on the edge.
So if you zoom out and look at market segments, of course, anything related to AI, our customers are investing and building their T and F capabilities.
The second segment that is really exciting and we talked about it in our Q two report is automotive, automotive.
We have seen a push and the need regardless if it is or not, but to make the car more autonomous, which means more infotainment, a type of application inside the car that requires a more sophisticated chip.
The third market we’re seeing is early interest going deeper into electricity than anything industrial to go back to manufacturing and smarter industrial systems.
Now there is talk but I will add that it will be more four or five years out.
Is there anything around life sciences.
So that’s where we’re seeing the general landscape and of course, anything hyperscale, it’s driving significant growth because of the AI CIN build out.
It was great to have you on the show today.
Thank you so much for taking the time to join us.
Thank you.
Thank you for having me.
