Synopsys (SNPS) stock plummeted 5.21% during intraday trading on Thursday, a sharp reversal following the company's release of its fiscal second-quarter results.

The chip-design software maker reported quarterly revenue and adjusted earnings per share that exceeded analyst expectations, driven by surging AI chip design demand. However, the adjusted EPS figure represented a year-over-year decline, with GAAP profits significantly pressured by costs associated with integrating its recent Ansys acquisition. Furthermore, while the company raised its full-year revenue guidance, the new range was only marginally above consensus estimates, which investors viewed as conservative.

This combination of factors triggered a classic "sell-the-news" reaction, as the stock had rallied in the sessions leading up to the earnings report. The announcement of a cooperation agreement with activist investor Elliott Investment Management, which includes adding an Elliott partner to the board, did little to offset the negative sentiment stemming from the profit decline and cautious outlook.