Synopsys Inc ($SNPS) Q2 2026 Earnings Call

Ladies and gentlemen, welcome to the Synopsys earnings conference call for the second quarter fiscal year 2026. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session. If you'd like to ask a question at that time, please press star one on your telephone keypad. To remove yourself from that queue, press star one again. If you require assistance during the call, please press star zero and an operator will assist you. Today's call will last 1 hour. As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Tushar Jain, head of investor relations. Please go ahead.

Good afternoon, everyone. Welcome to Synopsys' second quarter fiscal year 2026 earnings call. With us today are Sassine Ghazi, president and CEO of Synopsys, and Shelagh Glaser, CFO. Before we begin, I'd like to remind everyone that during the course of this conference call, Synopsys will discuss forecasts, targets, and other forward-looking statements regarding the company and its financial results. While these statements represent our best current judgment about future results and performance as of today, our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect. In addition to any risk that we highlight during this call, important factors that may affect our future results are described in our most recent SEC reports and today's earnings press release. In addition, we will refer to certain non-GAAP financial measures during the discussion. Reconciliations to their most directly comparable GAAP financial measures and supplemental financial information can be found in the earnings press release, financial supplement, and 8-K that we released earlier today. In addition, as mentioned in our earnings press release today, we plan to host an investor day on September 30th, 2026. All of these items, plus the most recent investor presentation and the investor day information, can be found on our website at www.synopsys.com. In addition, the prepared remarks will be posted on our website at the conclusion of the call. With that, I'll turn the call over to Sassine Ghazi.

Good afternoon. Synopsys delivered a strong second quarter, exceeding guidance on revenue, non-GAAP operating margin, and non-GAAP EPS, driven by solid execution and continued AI-driven demand strength. This is an exceptional moment to be the leading engineering solutions provider. EDA, IP, and multi-physics simulation have emerged as essential capabilities in the AI supply chain. AI scaling semiconductor demand, architectural diversity, and complexity of both chips and the systems they power, driving increased demand across our portfolio. Our opportunities expanding as customers design increasingly complex systems, from silicon to full-scale AI infrastructure and physical AI, requiring more integrated engineering solutions across design, simulation, and system validation. Synopsys is uniquely positioned to capture this opportunity, and our recent Synopsys Converge event showcased the depth of our expanded portfolio and the strength of our road map. Zooming out, Q2 further reinforced my confidence in our strategy and trajectory. Our global team showed continued strong execution on the Synopsys-Ansys integration, disciplined focus on higher-value IP opportunities, and engineering excellence to advance our differentiated innovation pipeline with agentic AI and multi-physics fusion technology. I look forward to diving deeper on these topics, along with our strategy to increase value capture and expand margins at our investor day in September. Based on our momentum, leadership roadmap, and market signals, we are raising our full-year 2026 revenue, operating margin, EPS, and free cash flow guidance. I'll cover segment highlights before handing over to Shelagh for the financial details. Design automation delivered a strong quarter, reflecting robust AI-driven design activity and sustained demand for advanced node and 3DIC solutions, where Synopsys EDA leads. Hardware-assisted verification remained a key growth driver, with particular demand from hyperscaler and leading semiconductor customers, who are scaling emulation and prototyping for increasingly complex AI designs. This drove multiple strategic system wins across ZS5, ZeBu, and HAPS 200. In EDA, our leadership in 3DIC is translating into production-scale adoption. For example, in Q2, a leading HPC provider successfully taped out an incredibly complex next-generation AI accelerator using Synopsys' unified multi-physics-aware design-to-signoff solution. This demonstrates the production-proven capability of our 3D IC compiler platform. And we expect sustained adoption as next-generation AI designs increasingly move to multi-die and chiplet-based architectures. We also continue to lead at advanced nodes with over 30 full-flow technical wins in the quarter, driven by our ability to deliver superior PPA for increasingly complex designs. Across our EDA portfolio, we are extending our competitive advantage by pioneering new capabilities, including multi-physics fusion, GPU-accelerated computing, and AI-driven automation. Early results for our forthcoming multi-physics fusion technology demonstrate meaningful productivity gains, including up to 3x faster design closure with higher ECO success rates, and up to 2x faster turnaround times for complex analog designs compared to traditional flows. Multi-physics fusion is currently in expanding trials with leading customers and will begin ramping into commercial availability in the second half of 2026. As we deliver more value to customers, we expect to share in that value creation as contracts are renewed and expanded. For example, we're seeing early signs of monetization with GPU accelerated EDA, a premium capability driving both increased customer value and contract uplift. We're also advancing AI-driven design. Our agentic EDA capabilities are gaining traction with 20 customers now evaluating solutions across more than 25 specialized AI agents spanning front-end, verification, implementation, and analog flows. This agent-engineered technology represents a meaningful long-term opportunity to further increase productivity and drive higher value customer engagements. We are maintaining our EDA leadership position supported by the success of recent renewals, pipeline activity, and monetization trends. Turning to Ansys, which delivered another strong quarter. Ansys extends our reach into system-level design and multi-physics simulation, strengthening our position as the leader in engineering solutions from silicon to systems. In Q2, we saw continued demand for system-level digital engineering and physics-based simulation across industries. For example, the AI data center build-out is driving SNA demand including and beyond semis as customers use the power of ANSYS simulation from chip to grid. In aerospace and defense customers are adopting ANSYS simulation to generate physics-based synthetic data to train AI models for highly complex operating environments. And in automotive, manufacturers are increasingly digitizing engineering workflows and relying on simulation for safety-critical systems. Together these trends reinforce our opportunity to deliver differentiated value at the intersection of silicon systems and physics. Turning to design IP we are increasing our alignment with hyperscaler demand for custom AI silicon. Where our differentiated portfolio first-to-protocol leadership and silicon-proven quality enable higher-value engagements. Demand for high-speed interconnect IP continues to accelerate driven by AI's massive data requirements. In Q2 our PCIe 7.0 IP achieved a greater than 90% win rate with 18 new licenses and a growing pipeline. We also continue to see strong momentum in advanced connectivity technologies including 224 gig with multiple wins across leading and emerging innovators. The shift to multi-die and chiplet architectures is driving demand for die-to-die interoperability. In Q2 we secured additional UCIe design wins and achieved a 64 gig tapeout on a 2 nanometer process, bringing total UCIe lifetime wins to over 150. We're strengthening our position in memory IP with design wins across hyperscalers, AI startups, and leading semiconductor companies. In Q2, we also delivered the industry's first HBM4 IP test chip. While we continue to expect muted IP growth for fiscal year 2026, we believe the IP segment bottomed in Q1 and has begun its recovery. We expect sequential quarterly improvement throughout the second half, supported by our road map execution and pipeline. Importantly, we are focusing our IP business on the highest value opportunities, aligned to AI-driven demand and hyperscaler customization. These engagements enable us to provide greater value as they increasingly involve deeper collaboration, customized IP solutions, and even broader Synopsys participation in the design process. Also advancing our IP strategy, we expect to close the pending sale of the processor IP solutions business shortly. I'm increasingly confident in the long-term growth of this business and look forward to sharing more at our investor day. I'm also pleased to share that today we announced the cooperation agreement with Elliott Management and the appointment of Jesse Cohn to our board as an independent director. Jesse has deep appreciation for the company and our mission. We welcome his constructive insights and I look forward to working with him. In summary, the expansion of AI positions Synopsys for sustainable growth and margin expansion. As AI scales both chip complexity and system-level design requirements, our leadership portfolio of engineering solutions across EDA, IP, and multi-physics simulation enables us to deliver differentiated value to customers and to capture a larger share of this expanding opportunity. I want to thank the Synopsys team for an impactful Q2 with disciplined execution, continued technology leadership, and engineering excellence driving our next-gen solutions. Now, over to Shelagh.

Thank you. Before we begin the Q&A session, I would like to ask everyone to please limit yourself to one question and one brief follow-up to allow us to accommodate all participants. If you have additional questions, please re-enter the queue and we'll take as many as time permits. Please stand by while we compile the Q&A roster. Your first question comes from the line of Citi Panigrahi from Mizuho. Please go ahead.

Thanks. It's Citi Panigrahi from Mizuho. So, Sassine, congrats on a good quarter. I want to ask you about the IP business. That's one of the questions we get from investors after the weakness last year. It's good to see that Q1 was kind of bottom and sequential improvement. And you talked about some of the shift towards the higher value, more customized IP segments and I know with hyperscaler. Can you give us a sense like how these deals are compared to traditional IP? And what are the factors that give you that confidence of second half acceleration? And how should we think about the growth opportunity going forward in IP?

Thank you, Citi, for the question. Overall, I cannot be more enthusiastic and confident about our portfolio, in particular the IP opportunity. If you look at the Synopsys IP opportunity, we have the broadest portfolio serving many markets from AI, HPC, and data center build-out to mobile to consumer, automotive, etc. And that portfolio is available across multiple foundries. The area that we are focused on when we talk about high-value IP opportunities is how do we capture the value that we're delivering to the customers and a different monetization and business model. We're making actually very good progress. As I mentioned a number of quarters ago, by the end of this fiscal year, we will have a few customers with signed agreements with a new business model that provide the opportunity to capture more dollar than the traditional use fee or some level of NRE. And the reason the customers are willing to entertain that change in the business model is their entire strategy, especially if you're a hyperscaler, to build your own chips like the COT direction and trajectory is built on the availability of the Synopsys IP. And that discussion is very positive. I'm confident that we will get to the direction I communicated a number of quarters ago, which will accelerate our opportunity of growth in IP. And as you mentioned, for the short term, for this fiscal year, what we committed is sequential quarter-over-quarter growth. And as you could see, we achieved a 12% Q2 to Q1. Q1, we hit the bottom. I have no doubt we'll continue on delivering that sequential growth for the rest of the year.

That's good to hear that update on IP. And Shelagh, I have a follow-up question on your margin guidance you raised for the fiscal year. And if I heard you correctly, you said half of that committed Ansys cost synergy expected for this year. So, can you help us find the magnitude of the remaining synergy opportunity in the back half or in 27? And how should we think about the primary driver for further margin expansion? Any other additional levers you can talk about beyond synergy?

Great. I thank you both.

Thank you, Citi.

Your next question comes from the line of Joe Catroppa from Wells Fargo. Please go ahead.

Yeah, thanks for taking the questions. I was wondering if you could help us just kind of understand of the 35 million increase to the full year guide on the revenue outlook from business performance, how much of that was related to EDA and versus IP?

Yeah, so we saw strengths across the business. The key driver for the strength is the continued AI semiconductor from a chip point of view that our customers are seeing and therefore translating into chip start or design start. And system companies, i.e. the hyperscalers, integrating these silicon or expanding into their own chips, the COT model. For us, it's a great opportunity on both ends, on the semiconductor suppliers as well as the hyperscalers, because for any of these designs, you will need EDA software. You need hardware assisted verification to verify the chip in the context of the software and IP. For any chip start, you need IP. So, the strengths were across the portfolio. The other part that is actually proving to be an increase in demand and essentialness is the SNA solution. Most of these chips are advanced package. Thermal is essential, all the physics simulation like fluid, structure, etc. are essential. So, we're seeing the strengths across the portfolio.

Thanks for that. And then, I guess, maybe as a follow-up, I'm wondering if you could just kind of provide us any sort of color on, you talked about the engagements that you're seeing on agentic AI and agents. How should we think about like just the structure of those contracts? And then I guess as we really look further, how should we think about agentic AI driving your EDA's share of R&D spend higher?

The whole AI for EDA started from the journey of reinforcement learning where we insert AI in every part of our products to a co-pilot or an assistant for the human engineer. And we've always thought at some point the workflow will change toward an autonomous set of engineers or agent engineers. And we're seeing it happening right now. What we're witnessing is the traditional EDA product delivery where the focus was on the user interface, simplifying out of the box results for the human engineer to manage and tame the complexity of the chips that they're designing to a combination of human engineer and agent engineers running our tools. And that's a fantastic opportunity for us because in both cases, you need more of our products in order to deal with the complexity and the new workflow that our customers are trying to evolve to. The current thinking and we're in early exploration with customers is how do we build from the subscription license that our customer has for the human engineers to run our product to subscription plus consumption for the agents to utilize our products. So, that's absolutely an upside for our EDA and SNA business as agents become more pervasive in our customers workflow.

Thank you.

Thank you.

Your next question comes from line of Vivek Arya from BOA Securities. Please go ahead.

Hi, this is Liam Paul on behalf of Vivek. Thank you so much for taking our questions. So, I guess just to start, in regards to your largest customer, it sounded like 18A and 14A pipeline building. Have you seen any of that benefit? And if not, how and when does it start to impact your numbers?

So, the great news for Synopsys is any new foundry or a new technology within the same foundry is a tailwind in particular for our IP business. Because you cannot on-ramp a customer to any technology, process technology, or foundry without our IP. It starts with the foundation IP, which is the library, etc., and the interface IP. So, when we see or you hear about customers like Intel, Intel Foundry expanding their engagements, we're of course aware of these engagements very early on when that target customers evaluating the technology. Now, to remind you, we get paid once the customer commits to the technology and they want to go into production. During the eval phase, it's just an eval. Once it goes into production, we get paid for it. So, in terms of how are we taking it into account for FY 26, we're not accounting or taking into account or in our guidance any upside. But, as these wins move from an eval into production, we'll absolutely see the upside.

Makes sense. And then, my follow-up, new investors, new board members, what do you expect to change from pricing or operational perspectives?

You're referring to Jesse and Elliott. Actually, from day one, our interaction with Elliott and in particular in a number of interactions I had with Jesse, there was an immediate alignment on the value creation that Synopsys provide, the essentialness of our assets, there was no debate on that point. We're passionate about the portfolio and the leadership we have. The two other points that they made, given the value creation and essentialness of the asset, is there an opportunity to monetize further? And the third point, can we improve the efficiency, profitability, and translating it into a better operating margin for the company? As we've been talking about for at least three quarters now, we see the same thing. You need an inflection point in order to go from that value creation to broader value capture. And we're seeing it on the software side with AI, as I mentioned earlier with the opportunity to have broader set of users of our technology from human engineer to agentic engineers. And on the IP side with the move from a merchant silicon to COT and the essentialness of the IP portfolio, we absolutely see the opportunity to change the business model and capture more dollar for the value we're delivering. On the operating margin, there's no debate. There's an efficiency as well that we can drive. We're demonstrating it in the last number of quarters. This year we're raising our operating margin by more than 300 basis points in terms of delivery to where we finished last year. And we see the opportunity to continue on improving on both the top line and bottom line.

Thank you very much.

Thank you.

Your next question comes from the line of Jason Celino from KeyBank Capital Markets. Please go ahead.

Great. Thanks for taking my question. Wow, Synopsys not shying away from tough questions. So, for me I want to ask about your IP business. It seems like it was through the trough as you may call it. Did you close any business earlier than expected or see some earlier draw downs? I'm just trying to understand the sequential improvement commentary. Like are you up ticking on IP here? Maybe that's my first part.

Yeah, Jason, the current IP sequential improvement is based on the pipeline that we've had and the closing the engagements that we could see in our forecast with the existing business model that we have with our customers. Where you are seeing a strong confidence and enthusiasm is the engagements around the new business model in particular in HPC and the AI based chips with the hyperscalers.

Okay, helpful. And then when we look at the Ansys business, it looks like it's growing in the mid-teens even when excluding the accounting stuff. But keeping the guidance the same for the year, I think the guidance assumes roughly 10% ish growth. Help me understand the strength in Ansys and why you're seeing these mid-teens growth levels and what would drive that steep decel down to double digits in the second half of the full year. Thank you.

So the one thing I'll start with is our very successful integration of the two companies. As you know, acquiring a company like Ansys with a broad portfolio as well as a go-to-market motion, making sure we're not missing a beat on both the technology integration as well as the go-to-market, I cannot be more thankful and happy to see that integration coming along. From a market dynamics point of view for the portfolio, there is the semiconductor part of Ansys. Think of it like the EDA part of Ansys. And that's where the multi-physics fusion into the portfolio is taking place. The number of the engagements with customers with that new technology is happening at a rapid pace with very good outcome. Now, the monetization of that is not happening yet because we're in an eval phase with those customers with the new technology. The part of Ansys that serves industrial, automotive, aerospace, and defense, we're seeing an uptick. And the reason we're seeing that uptick is picture those products that are being designed for the future. They're intelligent systems, they're very complex, the need for more simulation and analysis to reduce the cost as well as increase the fidelity of delivering to that product is the sweet spot of Ansys portfolio because it's the trusted multi-physics simulation for these markets. So that's the tailwind that we are seeing outside of the semiconductor.

Okay, perfect. Wonderful. Thank you.

Your next question comes from the line of Gary Mobley from Loop Capital. Please go ahead.

Hi everybody. Thanks for taking my question. You've seen over the last several quarters when describing chip design activity broadly, you talked about a tale of two cities where in the analog design community, I think you were hopeful you would see some acceleration of chip design activity, but not quite yet. I think the evidence is there in the marketplace that a lot of these big analog chip companies are seeing a much improved business environment. So therefore, have you seen a sort of a resurgence in that customer base from a renewal activity perspective or just general chip design activity?

You know, Gary, we track chip start very, very closely. What we are seeing is a chip start increase or a design start increase in anything AI related. In industrial and automotive, while customers are reporting strength in revenue, there are multiple reasons for that. But the design starts are not growing, definitely not growing at the pace as we're seeing for the other cohort. Now where we're seeing customers excitement in the analog space is things related to physical AI. Because you need sensors, you need actuators, you need the actual analog to interface with the real world and translating it into the digital world. But from a design start is still fairly muted. Design start activity in that domain.

Okay, appreciate that. As my follow-up, I wanted to sort of get a gauge on the monetization of maybe the half dozen or so joint collaborative products between Synopsys and Ansys as outlined at Converge. When would you expect the first phase of that $400 million in revenue synergies, post-acquisition, and then eventually that $1 billion in revenue synergy?

FY '27 because we released to a limited set of partners the technology. We're expanding it further as we're getting more feedback and input from the early customers that they're evaluating the technology. And the key principle here, Gary, the key principle that we are putting guardrails around with the sales organization and the engagement with customers is 1 + 1 must be greater than 2. Many of these customers, they have access to Synopsys technology, they have access to Ansys technology. The new multiphysics fusion, it's additive to the baseline. So, 1 + 1 must be greater than 2 to get access to that technology, and that will start in FY '27. We did communicate a 400 million in revenue synergy for that base. The base meaning the semiconductor related multi-physics opportunity. And I want to say had a thesis that is accelerating around the whole physical AI digital twin, etc. So we're still on track to what we have committed. And then actually the confidence is higher given the early customer feedback that we're receiving.

Thank you, Sassine.

Thank you, Gary.

Your next question comes from the line of Andrew De Gaspari from BNP Paribas. Please go ahead.

Yes. Thanks for taking my question. I wanted to ask one on where you mentioned about the leading HPC provider successfully taping out the next generation of AI accelerator. I'm just wondering is this like a first one in terms of what you've seen from a data center customer? And how meaningful could this be for you?

If you're referring to hyperscaler taping out an accelerator, no, it's not the first one. There are of course different hyperscalers at different stages of maturity when it comes to their ability to bring their own silicon inside their data centers. In each one of these engagements, Synopsys IP, hardware, EDA, Ansys portfolio is in use. And when I say everyone is everyone. There are none of these COT that does not use the EDA, HAV, IP, and SNA. The point I'm emphasizing for IP in particular, as these customers are moving to more sophisticated complex COT, they need to make sure they have a customized IP, the latest IP, that is competitive with what they get from a merchant silicon. And that's the opportunity we're seeing that is expanding and I'm very excited about and confident we'll be able to change the current engagement model.

That's helpful. And Shelagh, I just want to ask a question on the organic revenue for the quarter. Given the noise around the channel, and also the divestitures, I mean, we're shaking out somewhere between 3% and 4% ex-Ansys. Is that what you're saying, or are we missing something? Thanks.

Got it. And referring to Q2 specific this quarter specifically is the organic growth accurate?

Got it. Thanks.

Your next question comes from the line of Joe Bruewink from Baird. Please go ahead.

Hi, thanks for the time tonight. I wanted to go back to multi-physics fusion, and is the greatest initial applicability really within sign-off? And I ask because Synopsys and ANSYS already have very high market share in sign-off, respectively, but I think the opportunity is probably accelerating at the category level, just given what's happening around advanced packaging, and that certainly brings a lot more sign-off challenges than set design efforts. And so, is it really a case where the overall pie is starting to grow, and the bringing together of your two companies into this new format is going to capitalize on that?

Yeah, Joe, you're absolutely right. The sign-off is always an essential part before a customer commit to the next phase of the workflow. And we're fortunate that we have the sign-off leadership across multiple physics, as well as timing, power, etc. The opportunity and the innovation we're driving is customers are moving more and more towards 3D IC and chiplet in an advanced package. The complexity of beyond electronics into structure, fluid, thermal, taking these factors into account during the design phase, we have the leadership position in 3D IC compiler and fusion compiler, bringing that technology in during the design phase. So, our customers has a convergent flow. So, they're not running into surprises later in the flow is the value we're adding to customers. As much as the sign-off piece is important, bringing some of these algorithm and solvers early in the design phase is the value that we are engaged the customer on.

That's great. And then on backlog, I know this is really noisy right now, but the quarter-over-quarter decline to 11 billion is that as expected and is it relating to just when renewals happen to fall within the fiscal year?

Thank you.

Your next question comes from the line of Jay Vle Shower from Griffin Securities. Please go ahead.

Thank you. Question for you, Shelagh, first on expenses then I'll follow up with Sassine for the follow-up. Your headcount as of the end of Q2 was down about 7% from the peak at close in Q3 after Ansys added about 6,000 or more employees. So, it would seem on the one hand that you have a few points left to go to fully complete the rift that you announced sometime ago. On the other hand, what's interesting is that over the last number of months, there's been an unmistakable sequential uptrend in your open positions for both Synopsys classic and Ansys classic. As an example, Synopsys classic positions are more than four times the number at the end of Q4. Ansys Classic more than double where they were a few months ago. So, maybe talk about what you're thinking of with respect to bringing people in as per those numbers versus on the other hand reducing your head count to keep the margins in line. Am I following?

Thank you. So, seeing the accounting thing with regard to the Ansys channel is interesting, but I'm more interested in the operational plans that you have for that channel. In Ansys this last year, it was a more than $600 million business overwhelmingly not EBITDA. The first batch of the multi-fusion cohort is largely about EDA integrations that probably would have happened anyway. So, could you talk about what the product set has to look like beyond this first batch in multi-physics to really enable you to sell more conjoint products into the Ansys channel beyond just the EDA products. And then maybe speak more broadly about what your new CRO has been doing over the last half year.

Yeah, Jay, your observation is correct. Ansys sales channel had the direct sales organization and the channel. Most of the EDA were handled with direct. Very little was handled in the channel. So, the semiconductor customers and the customers that get the classic to Synopsys and the multi-physics fusion, that will continue on happening primarily through the direct channel. And in most of the direct channel is the Synopsys classic channel where we have integrated the Synopsys Ansys EDA into the Synopsys classic go-to-market team. There's some co-selling opportunity with some of these customers and that's what Mike, the CRO, is working on and ensuring that there is a smooth interface to the customers. So far, actually, I've been very pleased with the way that integration is going from a go-to-market point of view. Then you have the channel partner that Ansys has built over decades, which is truly impressive. The ability to go after long tail of customers and capture the opportunities is something that the classic Synopsys would like to leverage in areas of the portfolio that we did not have the similar investment or coverage. So, we are moving some products from the classic Synopsys into the channel in order to just do what they do best, engage with customers in a light touch and broadly to sell that portfolio. Mike, as you know, brings in a very strong knowledge of both EDA semiconductor and has a very strong view and experience in the whole system level design and the whole industrial, automotive, aerospace from the fact where he came from. So, he's been very deliberate on architecting the organization to deliver the current as we're building the future opportunities.

Okay. Thank you.

Thank you, Jay.

Your final question comes from the line of Josh Tilton from Wolfe Research LLC. Please go ahead.

Thanks, guys. I've never sounded so official in my life. I have two. The first one is more of a clarification question. I was just hoping that you can maybe help us unpack some of the strength you saw from a geographic perspective. China was up sequentially, but North America and I think Europe declined. So, anything to call out on what kind of drove the dispersion there? And then I have a follow-up.

No, overall, actually, I'll comment on China first, but then the rest of the regions there are no surprises, per se. And even with China, there isn't much in terms of change from what we've communicated before. Where the design start environment in China remains challenged given all the restrictions and the cumulative impact of the restrictions. And as we've communicated we're fairly pragmatic when it comes to our guide in China. As far as the US, Europe, etc. where we are seeing strengths as outlined in our SNA portfolio a number of areas outside of semi like aerospace and defense, automotive, industrial and that's happening across the board.

Makes sense. Maybe just a follow-up and a very high level and kind of stepping back. I think a lot of investors listening to this call and even myself kind of look at Synopsys and see a whole laundry list of reasons as to why we are all hoping and betting and looking to a future where we think growth can be better whether it's pricing on multi-physics fusion, the IP business recovering, adjacencies, new hardware, like the list is endless. But Sassine when I listen to you in the prepared remarks it felt like you used the word durability of growth a lot more than this talk track around improving growth. And I'm just kind of curious and I don't want to ruin what you're going to give us the investor day but just like how do you think about the potential for Synopsys to improve the growth rate from here versus more that durable type of growth you were talking to? Anything you can just help us understand maybe the shape or just how you're thinking about the future growth power of the business given that whole laundry list of opportunities I kind of just rattled off. That would be great.

Yes, thank you, Josh. The part I want to emphasize is there's a beauty about having the durability of the business, but at the same time there are a number of inflection points you just rattled a number of them. The few I outlined that there is commitment, focus, discipline in changing the monetization capture is around IP, is around EDA and SNA when it comes to the inflection point with AI. We're not expecting the customer to pay 20-30% more by just delivering the same, but as they're injecting a change in their workflow with agents, with collaborating with humans, and there's a massive increase in demand for licenses to train and influence these agents. We are absolutely expecting that the change in monetization and business model will happen, and we will drive it, and we'll make it happen. That's what I'm really looking forward for the investor day to share with you all how are we thinking about it, and this is not something new. We started thinking about it in the last couple months. We've been talking about it for a number of quarters that we are determined given the value we're delivering and creating, we will capture different value and different business model to drive it home. And we'll talk about it more at investor day. And I know we're out of time. With that, I'll take the opportunity to just really wrap up with my enthusiasm to be the leading provider of engineering solutions from silicon to systems. Our portfolio spanning the EDA, IP, multi-physics simulation are all essential for the AI innovation. A huge thank you to our global Synopsys team for an amazing quarter, and thanks to our customers, shareholders for your continued commitment. Thank you.

This concludes today's call. Thank you all for attending. You may now disconnect.