Company: SNPS
Filing Date: 2025-02-26
Form Type: 10-Q
Source: 0000883241-25-000014
Chunk: 76

Company: SYNOPSYS INC
Filing Date: 2025-02-26
Form: 10-Q
Item: Item 1
Chunk 76
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 policies that most frequently require us to make estimates and assumptions and therefore are critical to understanding our results of operations, are:

•Revenue recognition; and

•Business combinations.

There have been no material changes in our critical accounting estimates during the three months ended January 31, 2025 since our Annual Report for fiscal 2024. Refer to Item 7A, Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II of our Annual Report for a complete description of our critical accounting estimates.

Results of Operations

Revenue

Our revenues are generated from two business segments: the Design Automation segment and the Design IP segment. See Note 17. Segment Disclosure of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for more information about our reportable segments and revenue by geographic regions. 

Further disaggregation of the revenues into various products and services within these two segments is summarized as follows:

Design Automation Segment

•EDA solutions include digital, custom and FPGA IC design software, verification software and hardware products, system integration products and services, and obligations to provide unspecified updates and support services. EDA products and services are typically sold through Technology Subscription 

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License (TSL) arrangements that grant customers the right to access and use all of the licensed products at the outset of an arrangement; software updates are generally made available throughout the entire term of the arrangement. The duration of our TSL contracts is generally three years, though it may vary for specific arrangements. We have concluded that the software licenses in TSL contracts are not distinct from the obligation to provide unspecified software updates to the licensed software throughout the license term, because the multiple software licenses and support represent inputs to a single, combined offering, and timely, relevant software updates are integral to maintaining the utility of the software licenses. We recognize revenue for the combined performance obligation under TSL contracts ratably over the term of the license. 

•In the case of arrangements involving the sale of hardware products, we generally have two performance obligations. The first performance obligation is to transfer the hardware product, which includes software integral to the functionality of the hardware product. The second performance obligation is to provide maintenance on the hardware and its embedded software, which includes rights to technical support, hardware repairs and software updates that are all provided over the same term and have the same time-based pattern of transfer to the customer. The portion of the transaction price allocated to the hardware product is generally recognized as revenue at the time of shipment because the customer obtains control of the product at that point in time