Synopsys, Inc.

Ladies and gentlemen, welcome to the Synopsis 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 would like to ask a question at that time, please press star 1 on your telephone keypad. To remove yourself from that queue, press star 1 again. If you require assistance during the call, please press star 0 and an operator will assist you. Today's call will last one 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 Saseen Ghazi, President and CEO of Synopsys, and Sheila Glazer, 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 risks 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 8K 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 Saseen 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 is 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 roadmap. 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 Sheila for the financial details. Design automation delivered a strong quarter, reflecting robust AI-driven design activity and sustained demand for advanced node and 3D IC solutions where Synopsys EDA leads. Hardware-assisted verification remained the 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, Xebu, and HAPS200. 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, designed-to-sign-off solution. This demonstrates the production-proven capability of our 3DIC 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. Multiphysics 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 engineer 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 tape-out 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 improvements throughout the second half, supported by our roadmap, 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 synopsis 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 synopsis 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 Sheila.