Synopsys, Inc.

What they do

Synopsys provides mission-critical EDA solutions used to design and test integrated circuits, along with semiconductor IP (logic libraries, embedded memories, interface IP, processors) and simulation & analysis software (Ansys portfolio). It also offers design services and technical support. The company operates in two segments: Design Automation and Design IP.

Revenue drivers

• Design Automation segment — Includes advanced silicon design, verification software and hardware, Ansys products, and system integration. This is the core EDA business, and saw strong demand for hardware products in fiscal 2025.
• Design IP segment — Sells pre-designed circuits (logic libraries, memories, interface IP, security IP, embedded processors). Revenue in fiscal 2025 was weak due to China export controls, reduced demand from a major foundry, and internal resource decisions.
• Ansys (within Design Automation) — Contributed $756.6 million in revenue in fiscal 2025 following the merger, driving growth and expanding the customer base into high-tech, aerospace, automotive, and other industries.
• Time-based and upfront product licensing — Revenue recognized from licensing software over the arrangement period (time-based) or upfront. For Q2 FY2026, time-based products were $945.6M and upfront products $546.3M.

Recent performance

Fiscal 2025 revenue was $7.05B, up 15% year-over-year, but net income dropped to $1.33B from $2.26B in 2024, reflecting Ansys-related amortization and other costs. Q2 FY2026 revenue was $2.276B, up 42% from $1.604B a year earlier, and GAAP EPS was $0.09; non-GAAP EPS was $3.35. Operating income in Q2 FY2026 was $120M, down from $376M in the prior-year quarter, partly due to restructuring charges of $115.9M. The company raised its full-year revenue guidance to $9.665B at the midpoint.

Strategy

Management is focusing on executing its silicon-to-systems strategy, leveraging AI to drive chip design and expand into systems-level engineering. They are integrating Ansys and driving cost discipline and synergies. The company is reallocating resources to the highest-growth opportunities in the Design IP segment after a weak 2025. They plan to hold an Investor Day in September 2026 to outline long-term financial targets.

Risks

• China export controls — Export restrictions, including BIS rules, disrupted customer design starts in China, causing a 22% revenue decline in that region in fiscal 2025.
• Macroeconomic uncertainty — Tariffs, inflation, and potential recessions could cause customers to delay spending or payments, pressuring revenue.
• Integration risks from Ansys — The large merger adds complexity, and the company faces headwinds in the Design IP segment from a major foundry customer and internal execution issues.
• Customer concentration — Weakness in demand from a major foundry customer hurt Design IP revenue in fiscal 2025.

Outlook

Management raised full-year FY2026 revenue guidance to between $9.625B and $9.705B, and non-GAAP EPS to $14.76 at the midpoint. They expect continued strength across the business, but muted growth in Design IP in fiscal 2026. The targets assume no further changes to export control restrictions. The company is also planning to divest its Processor IP Solutions business, which will impact revenue.