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Synopsis (SNPS +4%) is sharply higher today following an announcement yesterday after the close that it received a letter from the Bureau of Industry and Security stating export restrictions related to China have been rescinded, effective immediately. The restrictions, initially announced on May 29, prompted this software provider to withdraw both its Q3 and FY25 guidance. The upside guidance initially reported did include management expectations of a yr/yr decline in China. With the restrictions now rescinded, investors are buying back into the stock with hopes of an improved outlook.

• Prior to the announcement, Q2 (Apr) results, released May 28, were strong, with revenues growing 10% yr/yr and EPS exceeding expectations, despite market fluctuations. AI and HPC sectors remained robust, while weakness in China was offset by strong demand from customers in other regions, particularly in Europe and South Korea.
• On June 30, SNPS provided an update on its acquisition with Ansys (ANSS), stating that it is in the advanced stages of obtaining final regulatory approval. SNPS already has merger clearance in every other jurisdiction other than China.
• The deal is expected to generate $400 mln in revenue synergies by the fourth year post-close, driven by cross-selling opportunities, with an anticipated increase in adjusted EPS in the second year.
• During the Q2 call, management had confidence that the deal would be done in 1HFY25, with the completion of the deal "the only scenario we are considering." Although that window has passed, the lifting of restrictions may be boosting investor confidence in both the outlook for its China business and the completion of the ANSS transaction.

Overall, this is a favorable development for SNPS. The earlier announcement of trade restrictions and the subsequent withdrawal of guidance triggered some selling pressure from investors. With the export restrictions now rescinded, SNPS is trading above the levels seen prior to the initial announcement, reflecting renewed investor confidence in both a recovery in its China business and the pending ANSS acquisition.