Synopsys raises annual forecast on demand for AI chip design software

(Corrects paragraph 6 to indicate that Ghazi said AI tools and chip royalties are two separate initiatives to increase sales in different revenue reporting segments)

By Stephen Nellis and Harshita Mary Varghese

SAN FRANCISCO, May 27 (Reuters) – Synopsys raised its annual results forecast on Wednesday, signaling steady demand for its chip design software from companies racing to develop AI chips and infrastructure.

Demand tied to AI has been strong as chipmakers and hyperscalers invest in more complex semiconductor designs and intelligent systems. Synopsys expects fiscal 2026 revenue between $9.63 billion and $9.71 billion, up from its previous forecast of $9.56 billion to $9.66 billion, with a midpoint above analyst estimates of $9.63 billion, according to LSEG data.

It expects annual adjusted profit to be between $14.72 and $14.80 per share, above analyst estimates of $14.45 per share.

Synopsys also reached an agreement with Elliott Investment Management that will give one board seat to the activist investor’s managing partner, Jesse Cohn.

Synopsys CEO Sassine Ghazi told Reuters he has had “constructive” discussions with Cohn on how to generate more revenue from the company’s software and intellectual property.

Ghazi said the company is working on new agreements with large customers in which they will pay more for AI software tools, including “agent engineers” that help boost productivity. To separately boost revenues in the company’s intellectual property licensing business, Ghazi said the agreements will also involve customers paying royalties for each chip made with Synopsys technology.

“AI changing both the balance between a human engineer and agent engineer is an inflection point to have a different conversation with our customers, so that’s on the software side,” Ghazi said. “On the IP side, there is clearly a trend in data centers for the hyperscalers to build their own chips. You cannot build your own chips without the participation of Synopsys IP.”

The company forecast third-quarter revenue between $2.41 billion and $2.46 billion, compared with analysts’ average estimate of $2.41 billion, according to data compiled by LSEG.

Total revenue came in at $2.28 billion for the second quarter, compared with estimates of $2.25 billion.

Synopsys shares declined about 1.5% in after-market trading after the results.

(Reporting by Harshita Mary Varghese in Bengaluru and Stephen Nellis in San Francisco; Editing by Shreya Biswas, Rod Nickel)