SNPS

Synopsys stock presents a clear valuation split for investors. The intrinsic value estimate from a Discounted Cash Flow (DCF) approach points to a discount to current trading levels, while market based multiples and a low overall value score suggest the shares are not obviously cheap. Over the past 1 year the share price has fallen 29.9%, which means investors are assessing Synopsys after a meaningful reset rather than at a recent peak. Stronger demand for Synopsys tools linked to AI and chip complexity can support expectations for future cash flows. However, any slowdown in that demand or weaker monetisation of recent acquisitions may weigh on what investors are willing to pay. The broader valuation checks lean expensive. Synopsys scores 2 out of 6 on value, even though the intrinsic value estimate screens the stock at roughly a 19.8% discount. The issue now is whether that gap between the DCF based intrinsic value and the more cautious market multiple view leaves enough margin of safety at today’s price. Compare Synopsys' valuation gap with other AI exposed chip and software players by scanning the hand picked 55 AI infrastructure stocks that could also be pricing in strong cash flow potential. The Discounted Cash Flow (DCF) model for Synopsys looks at the cash the business is expected to generate for shareholders over time. On this view, Synopsys produced last twelve month free cash flow of about $2.7b, and the model assumes those cash flows continue growing from this base rather than shrinking. Projecting that stream forward and discounting it back, the DCF points to an estimated intrinsic value of about $517 per share, which is roughly 19.8% above the current share price. Because Synopsys recently reported strong Q3 2026 results and raised full year guidance on AI driven demand, the current discount suggests the share price may not be fully reflecting the cash flow profile implied by those expectations. On this DCF view, Synopsys stock currently appears undervalued relative to its projected cash flows. Our Discounted Cash Flow (DCF) analysis suggests Synopsys is undervalued by 19.8%. Track this in your watchlist or portfolio, or discover 50 more high quality undervalued stocks. Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Synopsys. P/E is a useful lens for Synopsys because earnings are a key focus for many of the investors who follow large, established software companies. Synopsys currently trades on a P/E of about 73.8x, which is more than double the Software industry average of 30.7x and well above the peer group average of 32.6x. That puts the stock at a clear premium to many software and chip related peers. The fair P/E ratio for Synopsys is estimated at roughly 51.5x, based on its growth profile, margins, sector and risk mix. Compared with the current 73.8x, this framework implies that investors today are paying a materially higher multiple than the model suggests would be justified on fundamentals. This sits in contrast to the DCF work, which points to a discount on cash flow. On the P/E multiple, Synopsys stock screens as overvalued relative to both tailored fair value estimates and broader software peers. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives for Synopsys pick up where the valuation split above leaves you. They explain which assumptions about Synopsys' future growth, margins and earnings would need to hold for the stock to be worth materially more or less than today’s price. Each one links its number to a specific view on how growth, profitability and risks might evolve, which you can revisit as fresh information becomes available on the Community page. Share a data backed narrative on Synopsys' stock to set out your view on whether the recent revenue strength, earnings performance and higher guidance linked to AI driven demand really support today’s valuation. Be one of the first voices in the Simply Wall St community to put a clear number driven case on Synopsys and see how it holds up as new results and guidance arrive. Do you think there's more to the story for Synopsys? Head over to our Community to see what others are saying! Synopsys offers a split message on valuation. The Discounted Cash Flow (DCF) intrinsic value points to a meaningful discount, while the P/E based view flags the stock as overvalued against peers. Broader checks therefore lean cautious despite the intrinsic value signal. The key question from here is whether Synopsys can convert AI linked demand and product complexity into the cash flows that justify both its premium multiple and the DCF upside, rather than the current discount proving to be a value trap. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include SNPS. Have feedback on this article? Concerned about the content? Get in touch with us directly. 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Image source: The Motley Fool. Wednesday, Aug. 26, 2026 at 5 p.m. ET Vice President - Tushar Jain President and CEO - Sassine Ghazi CFO - Shelagh Glaser Need a quote from a Motley Fool analyst? Email [email protected] Operator: Ladies and gentlemen, welcome to the Synopsys earnings conference call for the third quarter fiscal year 2026. [Operator Instructions] As a reminder, today's call is being recorded. At this time, I would like to turn the conference over to Tushar Jain, Vice President. Please go ahead. Tushar Jain: Good afternoon, everyone. Welcome to Synopsys' Third Quarter Fiscal Year 2026 Earnings Call. With us today are Sassine Ghazi, President and CEO of Synopsys; and Shelagh Glaser, 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 8-K that we released earlier today. All of these items, plus the most recent investor presentation, prepared remarks and Investor Day information can be found on our website at www.synopsys.com. With that, I'll turn the call over to Sassine Ghazi. Sassine Ghazi: Good afternoon. Synopsys delivered an outstanding third quarter with revenue, non-GAAP operating margin and EPS all exceeding the high end of guidance. These results reflect broad-based strength, including outperformance in EDA and Ansys and continued growth in IP. We are raising our full year revenue, non-GAAP operating margin and EPS guidance. In addition, we expect EDA growth to accelerate in Q4 and to deliver double-digit growth for the full year. The key takeaway from Q3 is that the fundamentals across our portfolio are strengthening. EDA is accelerating. Design IP has returned to growth and Ansys is performing strongly while beginning to create new growth opportunities across the combined portfolio. This quarter marked 1 year since the Ansys acquisition close. And in Q3, we launched our first joint Synopsys and Ansys solutions, Multiphysics Fusion. I want to recognize our global team for executing with focus and agility to integrate our world-class capabilities. The combination has strengthened our competitive position, expanded our opportunity and enabled us to deliver differentiated solutions addressing the physics challenges of modern chip design. Industry trends are aligned to our strategy and our strengths as the leading provider of engineering solutions from silicon to systems. Unprecedented design complexity driven by the demands of AI is fueling the need for the IP and design solutions necessary to deliver next-generation AI compute, infrastructure and physical AI systems. These trends are evident in our Q3 results. Starting with Design Automation, which achieved healthy growth in Q3, underpinned by strength in EDA, including record hardware revenue. We expect this momentum to continue with EDA growth accelerating to double digits in Q4 and for the full year. Design activity is highest among AI and high-performance compute customers, developing increasingly specialized chips with multi-die architectures, more complex packaging and system requirements. These are all areas where Synopsys leads. AMD's recently launched Instinct MI455X GPU is a good example. To deliver this highly sophisticated new product series, AMD leveraged Synopsys' 3DIC Compiler, the industry's only exploration-to-sign-off platform for multi-die and advanced package co-design and optimization. The complex software and system requirements of AI compute also drive demand for our hardware-assisted verification solutions. We secured 12 new and 66 repeat HAV customer wins in the quarter. As I mentioned, the launch of Multiphysics Fusion was a major EDA milestone in Q3 and creates a new growth opportunity for Synopsys. Multiphysics Fusion combines Synopsys and Ansys technology in the industry's only solution with thermal analysis fully integrated into the chip design flow. Customers, including NVIDIA, Cisco, MediaTek and Samsung Foundry have validated up to 10x faster design closure and 3x faster runtime. This drives greater value for our customers and also for our products. We expect these add-on capabilities to begin contributing to EDA growth in 2027. Agentic AI is another growth vector for Synopsys, and we demonstrated strong progress in Q3. At the DAC conference, with NVIDIA, we showcased a fully autonomous long-running design verification agent that can orchestrate the entire chip verification cycle and deliver up to 50x faster time to validated RTL while achieving 20% additional coverage improvement. With Microsoft and AMD, we introduced the first autonomous EDA workflows on Microsoft Discovery that can automate debug, implementation and design closure. Early engagements show up to 40% reduction in debug cycle time, saving weeks of engineering effort while improving design quality. We're seeing strong customer interest in our agentic AI platform with more than 30 active customer engagements underway. Early feedback has made clear that as these agents take on more engineering work, they orchestrate our underlying EDA tools at a significantly higher rate. That allows customers to run more design and verification workloads, creating an incremental growth opportunity for Synopsys as we capture our fair share of the value that these agentic workflows and foundational tools provide for our customers. Turning to Ansys. One year into our integration, Ansys continues to see strong demand. From semis to aerospace to industrial and more, companies are embracing digital engineering. Across industries, Ansys simulation is accelerating innovation while reducing development risk and cost. For example, a leading automaker is using Ansys SimAI to achieve roughly 98% prediction accuracy and move crash analysis to near real time. And a leading heavy equipment manufacturer achieved more than 10x faster motor design. We're applying AI to extend our S&A leadership and further automate the simulation of complex systems. This includes expanding our portfolio of GPU-accelerated Ansys applications. And in Q3, our largest Ansys deal was for GPU-accelerated Ansys CFD to support a company-wide digital twin at a multinational electronics component maker. Turning to Design IP, which grew sequentially and year-over-year on broad AI infrastructure demand. As AI drives demand for higher bandwidth, faster connectivity and more complex system architectures, our interface, memory and die-to-die IP portfolio sits at the center of the stack. And our Q3 results showed it. We won more than 95% of PCIe 7 opportunities, including a subsystem win at a marquee enterprise storage customer. In LPDDR6, silicon proven across multiple nodes and foundries, we've secured 25 design wins year-to-date. Our die-to-die business is on pace to double year-over-year, and we now have more than 100 cumulative design wins. The industry continues to rely on Synopsys for silicon-proven quality and unrivaled scale. Our standards-based build once, sell many IP model remains foundational to our growth strategy. We'll continue to invest and grow this business, what I call Factory 1, which benefits from strong chip start activity and solid traction across industries. For example, in automotive, we've sustained a 90% plus design win rate for 3 consecutive quarters as ADAS platforms refresh on to 5- and 3-nanometer. In mobile, consumer and edge AI, our USB IP has now crossed $2 billion in lifetime bookings with Tier 1 design wins already moving to the leading-edge node. As AI expands beyond digital infrastructure into physical products, demand for silicon will continue to expand, providing a tailwind for our standards-based IP business. The higher growth opportunity in IP lies with a growing set of AI customers who are asking for deeper collaboration and IP solutions optimized to their specific workloads and architectures. To meet that demand, we are expanding into differentiated IP subsystems and enabling custom silicon solutions. Customers ranging from hyperscalers, ASIC vendors, foundries and classic semiconductors want to partner with Synopsys to accelerate their chip development efforts and leverage our IP and engineering expertise to build increasingly differentiated custom silicon. This is our Factory 2 model for customized IP. It moves us up the value chain from licensing alone to licensing plus royalties and positions us to capture the fast-growing custom silicon opportunity. This is a large focus, and we are making strong progress. We are in active discussions with multiple Factory 2 customers, and I look forward to sharing more at Investor Day. To summarize, I want to thank the entire Synopsys team for their continued focus, innovation and execution. Q3 reinforced the strength of our strategy and our confidence in a strong finish to the year. AI is driving demand for advanced silicon, system-level engineering and AI-powered design. Our leadership portfolio positions us to capture a greater share of R&D investment across industries. We remain focused on translating our technology leadership into sustainable growth and margin expansion. Now over to Shelagh. Shelagh Glaser: Thank you, Sassine. We delivered an outstanding Q3, achieving revenue of $2.477 billion, non-GAAP operating margin of 41.6% and non-GAAP EPS of $3.91, all beating the high end of our guidance range. With broad-based strength across the business, the revenue outperformance was driven by EDA as well as strength in the Ansys business. Backlog remains very strong at $10.9 billion, modestly down quarter-over-quarter due to the divestiture of the processor IP solutions business that closed in Q3. With the strength in Q3, strong cash flow generation and continued momentum into Q4, we are raising our full year revenue, non-GAAP operating margin, EPS and cash flow guidance. I'll now review our third quarter results. All comparisons are year-over-year unless otherwise stated. We generated total revenue of $2.477 billion, up approximately 42%, including Ansys revenue of approximately $711 million. As Sassine noted, 1 year into the combination, Ansys continues to perform strongly. We are also ahead of the schedule on the cost synergy commitments we made at close and have repaid the term loans earlier than planned. Total GAAP costs and expenses were $2.119 billion with GAAP earnings per share of $2.84. Q3 GAAP EPS includes a gain associated with the sale of the processor IP solutions business that closed in the quarter. Total non-GAAP costs and expenses were $1.446 billion, on the lower end of our guided range, as we continue to improve operational efficiency and deliver Ansys cost synergies ahead of schedule, resulting in non-GAAP operating margin of 41.6%. Non-GAAP earnings per share were $3.91, ahead of our guidance, underscoring our strong operational execution in the quarter. Now on to our segments. Design Automation segment revenue was approximately $2 billion. As a reminder, this excludes the Optical Solutions Group, which was divested in Q4 '25. Within the Design Automation segment, Q3 EDA revenue increased 8.5% year-over-year, reflecting robust EDA software performance and another record quarter for hardware-assisted verification solutions. Design Automation adjusted operating margin was 45.2%. The Design IP segment returned to growth with revenue of $474 million, up approximately 11% year-on-year. Consistent with our outlook, this represents continued sequential growth in the IP segment as we've repositioned the portfolio to focus on the highest value opportunities. Design IP adjusted operating margin was 26.5%. Turning to cash. Free cash flow was $746 million in Q3, and we ended the quarter with cash and short-term investments of $3.6 billion. Total debt at the end of Q3 was approximately $10 billion. Now to guidance for the full year. We are raising our total revenue guidance by $50 million at the midpoint, driven by strength in Design Automation segment led by EDA. As Sassine stated, momentum in EDA remains strong, and we expect double-digit organic EDA revenue growth in Q4 and for the full year 2026. We continue to expect the IP business to grow sequentially in Q4. This results in a revenue range of $9.69 billion to $9.74 billion. Within that, Ansys revenue contribution is expected to be approximately $2.98 billion, up $20 million versus our prior guidance. Next, expenses. Total GAAP costs and expenses are expected to be between $8.667 billion and $8.742 billion. This includes an increase in expected charges for fiscal year 2026 in relation to our previously announced restructuring program as we continue to accelerate our committed synergies. Total non-GAAP costs and expenses are expected to be between $5.67 billion and $5.70 billion and non-GAAP operating margin of 41.5% at the midpoint, a 50 basis point raise to our previous guidance. GAAP earnings are expected to be between $3.84 to $4.08 per share. We expect non-GAAP earnings of $15.04 to $15.10 per share, a $0.31 increase at the midpoint from our prior guidance due to higher revenue and increased operational efficiency. We are raising our cash flow from operations guidance by $500 million to approximately $2.8 billion on strong cash collections and reducing our CapEx guidance to approximately $225 million, resulting in free cash flow of approximately $2.6 billion, an increase of $600 million versus our previous guidance. Now to targets for the fourth quarter: total revenue between $2.53 billion and $2.58 billion, total GAAP costs and expenses between $2.225 billion and $2.3 billion, total non-GAAP cost and expenses between $1.45 billion and $1.48 billion, GAAP earnings of $0.60 to $0.85 per share, and non-GAAP earnings of $4.10 to $4.16 per share. Our press release and financial supplement include additional targets and GAAP to non-GAAP reconciliations. Thanks to our global Synopsys team for another strong quarter. These results reflect strong execution across the business, continued demand for our technology and disciplined operating performance as we build the foundation for the next phase of growth. We look forward to seeing many of you at our September Investor Day to discuss the compelling long-term opportunity we have as a mission-critical partner for our customers. With that, I'll turn it over to the operator for questions. Operator: [Operator Instructions] Your first question comes from the line of Jason Celino with KeyBanc Capital Markets. Jason Celino: Really good results here. I think what really stuck out to me was the 8% EDA growth, which was stable with last quarter despite the harder comp. You mentioned it's supposed to accelerate to double digits in Q4 and the full year. I mean, how would you describe what's driving that incremental acceleration? Is it design start activity? Is it agentic? Is it just better monetization strategies? Just help us understand. Sassine Ghazi: Thanks, Jason, for the question. Yes, we are very excited about the overall performance in EDA and the acceleration to wrap up the year with double-digit growth, exactly what we have committed to in terms of our segment growth. What's driving the increase in confidence in our business in EDA is driven by multiple factors, the complexity of chip design, the move to advanced package 3DIC, the example I mentioned in my prepared remarks like an AMD expansion and use of 3DIC Compiler, and there are a number of other customers that are designing these advanced package are using our technology. AI is definitely a tailwind. As customers are rethinking of how to reengineer their chip design engineering, it's requiring different methods for that engineering. So that's driving another tailwind for us. And hardware, we had a record revenue year on hardware. So all in all, that 8-plus percent is organic growth for EDA that we're fairly excited about. Shelagh Glaser: Yes. And I'd just point out, Jason, that the 8.5% Q3 EDA growth that you saw was against a really tough compare. Q3 '25 was 16%. And so as Sassine said, it really just shows the strength of the business to be able to perform against that tough compare and then have the full year continue to have double digit. Jason Celino: Yes. And then, Sassine, you mentioned something. You talked about your customers having to reengineer their processes. We're seeing a lot of innovation happening. Everyone always talks about these new AI models. I think yesterday, there was an example. OpenAI talked about the development of their new chip. They talked about using their own AI models to accelerate the design process. Maybe can you speak to when you hear examples like this, because a lot of your customers have used their own models in the past, what is involved in the reengineering of a design process? How much is supplemental or incremental or replacement of something that might be existing? I don't know if that makes sense but... Sassine Ghazi: Yes, of course, of course. Yes. Thank you for the question. For at least 1.5 years now to 2 years, we've been talking about how AI is reshaping how engineering is done. The investment that Synopsys has been making and leading in delivering agent engineers to our customers in rethinking the workflow, including AI models that will absolutely participate and contribute to that reengineering of engineering, in every case, the underlying requirement is more and more and more of our software because if you're using an AI model or agents that the customer is developing, it doesn't matter. You still need the ground truth physics in order to -- for that model to be able to operate with confidence and delivering to the best outcome. So the example that you mentioned actually is a very good example and a great opportunity for Synopsys on the EDA front. Not to mention, it's a huge opportunity on the IP as well because that's rethinking the whole architecture as you customize the silicon. Operator: Your next question comes from the line of Joe Vruwink with Baird. Joseph Vruwink: I wanted to go back a few years, but at your 2024 Investor Day, you shared an outlook back then around how 30% of EDA software demand might end up coming from multi-die efforts by next year. I'm curious how that figure might be tracking and maybe what you see after 2027. I think we all appreciate there's been quite a lot of recent attention even this week on HBM. How might EDA content change for you when thinking about DRAM processes moving to logic, that sort of thing? And is it actually strengthening maybe relative to what you thought a few years ago? Sassine Ghazi: Yes, Joe, actually, that forecast has accelerated. As I mentioned in the prepared remarks as well, the die-to-die wins that we've had in the last 12 months have doubled. And the reason for that is this whole advanced package and 3DIC architecture. That drives a significant opportunity in IT. Die to die is one example; then, of course, all the other interfaces that are required to stitch the system together as a final product at our customer. And on the EDA side is 3DIC Compiler, and this is where the emphasis of the joint solution with Ansys is essential. You cannot build these systems without taking into account physics, thermal, structure, fluid into the chip design phase. So the 30% back then was the figure we thought was a stretch, but it absolutely accelerated given all the investments our customers are making to build these efficient custom silicon. Joseph Vruwink: Okay. That's great. I wanted to ask, the double-digit organic growth in EDA, if you think about splitting that up between software and hardware, is the performance in your software business where you would like it to be here at year-end? It seems like hardware has remained a very large and strong driver. I'm more curious about the software performance. Sassine Ghazi: We're very happy with the software component actually. Very, very pleased. The part that actually I'm most excited about is the delivery of our joint solution with Ansys. And that gives us the platform to deliver to where the future of engineering challenges is heading. As we just talked about, the advanced package, the need for physics into electronics gives us even the confidence to look at the trajectory and continue on delivering these double-digit growth. Operator: Your next question comes from the line of Charles Shi with Needham & Company. Yu Shi: First thing, Shelagh, I have -- maybe this is for Sassine. I have a high level -- maybe a long-term question. Sassine, we know that going back probably more than 10 years, you played a very pivotal role in terms of infusing AI. I know back then, it was not a large language model, probably more like reinforcement learning type of AI into the Synopsys tool flows, DSO.ai, all those great products. But AI has advanced so much over the last 10 years, especially last 3. So the question I constantly hear from investors is about is there any risk for AI to actually disrupt the commercial EDA business. And I think one -- at least one school of thought we're thinking, could there be an end-to-end, what they call, AI native chip design that bypasses all the commercial EDA tools, especially maybe with some AI models trained by the commercial EDA generated synthetic data. Is that a real threat, in your opinion, to the overall EDA industry at all? Or where do you see where AI can be more substitutive or complementary to the commercial EDA business? Sassine Ghazi: Yes. Thank you, Charles. I don't need to go back or go as far as 10 years ago. You're right. Around 2017, we introduced and invested and saw great results with DSO.ai centered around reinforcement learning. If you look at the last 3 years, the focus was around copilot, generative AI, move to agents. Right now, we're talking about autonomous designs. As you start looking at autonomous workflow, the most important thing is accuracy and determinism. Customers will not invest hundreds of millions of dollars in a product without having the confidence that it's going to work. The portfolio we have with the sign-off leadership is essential to building these autonomous workflows. We are participating with our customers on how to achieve an autonomous workflow. It's not like it's happening without our participation. We're proactively engaged with them to reengineer how they're looking at the future of engineering with AI being the center of that evolution. I am not worried at all that, at some point that, that model can do the end to end without our participation because you have to remember, these models are not static. They're constantly changing. They constantly need to learn. So the opportunity is the opposite. It's not a threat. It's a significant demand for our software to train, to inference, to constantly enable that faster design to deal with the complexity, and we're at the center of it. Yu Shi: Maybe, Sassine, on the agentic AI agent opportunities, how should we think about any uplift to the overall revenue growth, especially EDA growth? And can you give us an update on the changing the business model more to the subscription plus consumption, at least for the agents? Any discussion with your customers so far? Sassine Ghazi: Yes, number of engagements. Actually, to the first question you had, as our customers are exploring whether to use an agent from Synopsys or an agent plus -- from Synopsys plus their own agents to keep their special sauce inside their workflow, the customer workflow or the customer agent, the need is for more licenses. We are defining with our customers multiple ways on how to engage from a subscription of our agents, subscription of our workflow as well as a consumption measure as these agents and the new workflow is consuming more software. We'll highlight more of how we're thinking how to model the long-term growth with this context that I just described in a few weeks, September 30. But absolutely, we're in advanced discussions with number of customers with different flavors of using their agents, our agents, a hybrid of both and multiple model optionality that they're thinking about. Operator: Your next question comes from the line of Lee Simpson with Morgan Stanley. Lee Simpson: Great. Maybe just a couple of quick ones on IP actually. Maybe just preempting the Analyst Day. I wondered, Sassine, if you can maybe just give us a little bit of outline on the speed of shift to the Factory 2 opportunity you outlined with licensing and royalties. And then secondly, it's been about a year, I think, since we've seen the Intrinsic ID acquisition. And I think at the time, you talked about security IP as being a new vector of growth in IP. Just wanted to hear if you could maybe outline the size of that opportunity, how you've seen engagements go and where in particular you think deployments will happen. Sassine Ghazi: Thank you, Lee. On Factory 2, actually, all you need to look at is the momentum in every hyperscaler investing and are at various stages of delivering their own custom silicon. These chips will not happen without our interface IP. These customers need our interface IP in order to build their own chips and to connect to the ecosystem, be it the memory provider or if they're using -- if they are investing in their XPU, but they need a networking chip from their supplier, connecting them together come through our interface IP. So that's the opportunity. What we could see as well and the reason we started talking about Factory 2 is the need to customize these standards and to accelerate the delivery of these customizations. Synopsys is in a unique position given our scale and the knowledge, the skills, the market position to deliver on that customization and acceleration. We are in advanced discussions with number of these customers to change the business model from the traditional IP license plus some NRE to a license plus a royalty. I look forward in a few weeks to, again, help you model what does that look like. But I cannot be more excited about the investment that we've made and the agility in pivoting in that direction while absolutely continue on leading and investing in Factory 1 because that's another significant opportunity that will continue. As for security, the reason we started looking at the portfolio and we divested the processor IP is to focus on the areas of growth. Security is one of them. As you said, we don't split it out as a separate item, but we have a great market position in security and will only continue on becoming more and more important given you need to secure the chip not only at the software level, as much as you can do at the hardware level, and that's where our security portfolio comes in. Operator: Your next question comes from the line of Josh Tilton with Wolfe Research. Arsenije Matovic: This is Arsenije on for Josh. Just, Sassine, first, you talked about seeing strong early customer interest in Multiphysics Fusion following the launch. And just historically, chip design and simulation often were kind of handled by different engineering teams and different workflows and tools. I guess when you're bringing thermal analysis directly into the design flow, how are customers structurally, I guess, approaching that convergence? Are you seeing those teams start to work more closely together and consolidate around more common workflows? Or does adoption still kind of require navigating distinct engineering teams and maybe separate budgets? Sassine Ghazi: Yes, you're absolutely right. These teams or the skills and expertise of engineering were separate domains. They had a different handshake as the design steps are moving from the synthesis to the physical design to sign-off, et cetera. The requirements to have codesign is essential to reduce margin and deliver to these competitive products. So absolutely, leading customers are requiring, to take thermal into account during the design implementation to take structure, stress as they're building these 3DIC into the architecture of the chip, not only the synthesis or the implementation of the multiple chiplets. So yes, absolutely. And this is where we have invested, that the implementation engineer that's sitting in the upfront part of the design flow are able without too much effort to be able to bring in sign-off accuracy early in the design flow. And that's exactly where we see the opportunity of the combined portfolio and delivering to the fusion of physics with electronics. From a budget point of view, by the way, the second part of your -- I'm sorry, from the second part of your question, from a budget point of view, as we have committed 1 plus 1 will be greater than 2. What it means even if it's coming from an EDA budget, the joint solution will capture an upside in revenue to the existing separate point tools. Arsenije Matovic: Got it. That's helpful. And then just, Shelagh, just clarifying just 1 topic specifically on Ansys, the raise $20 million to the $2.98 billion. Last quarter, you helped us with $12.5 million contribution from that accounting dynamic and it was $60 million for the full year. Is it still $60 million for the full year and that raise on that $20 million increase in Ansys is just core upside from good execution there? Shelagh Glaser: Yes. So last quarter, we talked about the accounting change, and so we made that accounting change, and we'll be making that accounting change and in the guidance that we're giving incorporates that. So we're seeing strength in the Ansys business, including the channel [ business ]. Arsenije Matovic: Got it. And what was it, I guess, in Q3, for Ansys' accounting change and it's still $60 million for the full year? Or is it a different number this time? Shelagh Glaser: It's still in that same range for the full year. Arsenije Matovic: Got it. And the quarter, it was $12.5 million or... Shelagh Glaser: We didn't disclose the in quarter. Operator: Your next question comes from the line of Joe Quatrochi with Wells Fargo. Joseph Quatrochi: You talked about a tale of 2 markets with AI versus non-AI and EDA. I'm just wondering if the acceleration that you're seeing, is AI becoming a larger piece or in offsetting kind of the non-AI? Or have you started to see also some acceleration from the non-AI part of your business as well? Sassine Ghazi: Yes, Joe, the -- so the reason for our assertion to begin with, what we do on a quarterly basis, that these are internal measures that we have is we track chip starts. And the reason we have a good coverage on design starts is our IP portfolio. There is no customer that is planning a new chip start that we don't engage very early on through our IP portfolio. And of course, EDA will follow. The observation is on the non-AI, in the last 2 quarters, it has stabilized. What it means was we were observing a slowdown in design start in the non-AI segment. In the last couple of quarters, stabilization, so it's not declining anymore. Now on the flip side for AI, where we have been seeing and continue on seeing an acceleration in design start, which is a great balance for the opportunity that we have. Joseph Quatrochi: That's helpful. And then maybe as a follow-up, just wondering if you could give any puts and takes on the RPO. It was down a touch this quarter. Was there any impact from the divestiture? And did it come in as expected with your plan? Shelagh Glaser: Yes, it came in as expected. And as I said in my prepared remarks, the modest change is really due to the divestiture of the processor IP business that happened inside the quarter. As you recall, we were close to closing the deal when we did last earnings. It closed a few days after we did the earnings. So that's why you're seeing it this quarter. Operator: Your next question comes from the line of Siti Panigrahi with Mizuho. Sitikantha Panigrahi: Sassine, it's really a good quarter. Congratulations. Going back to the Ansys and Synopsys, the integrated products that you launched. I think you talked about that Multiphysics Fusion is not expected to contribute to EDA growth until 2027. So can you talk about the adoption of pipeline trajectory that we should expect from now and then? And is that '27 contribution more likely to show up as an incremental EDA growth? Or as share gains from your Ansys simulation base? Any color like what you are seeing in terms of pricing benefit, value to the customer on that? That will be great. Sassine Ghazi: Yes. So from a value to the customer, the 10x faster design closure or a 3x faster SPICE accurate multiphysics timing, that is a significant value to customers. What does it mean for the customer? Less iteration, better design, faster. So our customers in these early engagements have validated and they're in early stages of deployment. The moment we move to production, which those customers will move to production, we'll start seeing the revenue upside. As we've said from the beginning, FY '26, we will not have much contribution in the joint solution. It was a year of execution, delivering to these products. As we look at FY '27, absolutely, it will contribute to our growth in EDA. We are absolutely committed as well to the $400 million synergy in year 4. So as we meet in September, we'll be able to start talking about '27 and the longer-term contribution of this differentiated solution. Sitikantha Panigrahi: That's helpful. And then a quick follow-up. I know Mike Ellow has been there now a few quarters. How is he driving the sales organization? Any kind of specific changes he is contemplating or has been working towards as you roll out this integrated product? Sassine Ghazi: Yes. Mike has been doing a great job in leveraging what the organization does incredibly well and the areas that we need to increase our investment from portfolio, go-to-market point of view, et cetera, et cetera. The priority as we look at FY '27 and beyond is how to engage the customers in the areas of differentiation and ensure we have the right investment with the customer. We're enabling the customers successfully so we capture the monetization opportunity. So Mike has been spending a lot of energy internally with the team to prepare the organization for IP Factory 2, for the AI monetization, for the joint solutions. All this is a significant time where Mike is spending as we look at '27 and beyond. Sitikantha Panigrahi: He's a great hire. Sassine Ghazi: He is. We're happy having him. Operator: Your next question comes from the line of Jay Vleeschhouwer with Griffin Securities. Jay Vleeschhouwer: Sassine, for you first. This may be an imperfect analogy. But how would you compare the prospective migration or adoption benefit of the new multiphysics cohort and cohorts to follow, might compare with the ICC to Fusion Compiler transition? That obviously didn't include Ansys component at the time, but that was your last big architectural or generational change in your stack. So how would you think this one now that it's underway might compare to that? And then a follow-up. Sassine Ghazi: Yes. Jay, thank you. Actually, a very good question. What we've done with Fusion was bringing our sign-off capability and strength into the design physical implementation phase because the customers at the time were having to iterate late stage to correlate or to sign off the chip. It's exactly the same here, but you're including physics. Now the RedHawk, the HFSS, the rest of the portfolio of Ansys, how do you bring not only proximation into the design phase, how do you bring the actual engines into the design phase so you reduce iteration, you have a convergent flow, et cetera? The investment we made in the Fusion platform, because remember, the Fusion platform is not about bringing tools together with a common interface or a user interface. We made a significant investment at the data model level. So we -- so our R&D team can write code, optimize on the same exact infrastructure and data model. And that's where Shankar and team have been investing quite heavily from day 1 of the integration start to deliver to exactly the same value that we were able to build on with Fusion. Jay Vleeschhouwer: Okay. Secondly, the reengineering of engineering concept that you've talked about now since Converge last year remains a very interesting concept and prospect for you and your customers. The question is what are the ingredients that customers need to make that work. Is it a set of variables or changes they need to make? Is there a single magic bullet that they can implement to make that happen? The demos that you did jointly, for example, at DAC with AMD and Microsoft around Discovery seemed quite interesting as perhaps a catalyst for some of those changes. So maybe talk about what actually has to happen for the whole reengineering thing to really happen. Sassine Ghazi: Yes. We talked about Fusion as an essential part to have the entire complete set from a spec all the way to sign-off. So that's an essential component that Synopsys has that complete set of assets. Now from bringing together a workflow that can leverages the AI speed from a copilot, generative AI all the way to autonomy is where we're putting significant investment and racing. The 2 demos we've done -- and thank you for mentioning the Microsoft, AMD, which was a demonstration of a full autonomous EDA workflow on the Microsoft Discovery. Think how powerful that is, where you can start from a spec and you have a cognitive layer that can orchestrate multiple tasks agents in order to deliver to the outcome of the spec. At the same time, what we've done at DAC actually is a demonstration with NVIDIA on an autonomous long-running agent capability. So that's part of -- essential part of reengineering the workflow. What I'm most excited about, as you double-click into what I just described, is not only the assets that we have, the consumption of these assets is exponential in order to allow for an autonomous flow to deliver to the promise that the customer is looking for, which is an efficient design, better power, better performance, better cost, and that's exactly what we're doing. Operator: Your next question comes from the line of Gary Mobley with StoneX. Gary Mobley: Sassine, you mentioned in your prepared remarks, the largest deal in the quarter for Ansys was a GPU-based digital twin. Was that a large deal because it is accelerated compute, runs an accelerated compute versus CPU-based compute? I'm asking because I'm just trying to get a sense of whether the efficiency from an accelerated compute digital twin system accrues to NVIDIA or accrues to you as well. Sassine Ghazi: Thank you, Gary, for the question. So simulation is a perfect application for GPU acceleration because these are jobs you can, for the most part, not only paralyze. You can achieve a significant speed up. So the speed up does not stop or has limitation at 10 or 15x. In CFD, we're seeing 40, 50, 60x speed up. The bottleneck for our customers is the time to results, the time to accurate results. And the investment actually started with the GPU acceleration even before the acquisition of Ansys by Synopsys. After the acquisition, we just accelerated even further the commitment, the investment and of course, the NVIDIA investment and alignment towards this opportunity only helped. In terms of who gets the value, we sell and we capture the entire value and uplift of the GPU. NVIDIA, of course, in the back end, they -- you need GPU to run from the traditional CPU to a GPU. They benefit that way. So the large deal is large because of the benefit to the customer and the speed up we were able to deliver to the customer. Gary Mobley: And my follow-up, I wanted to ask about Korea. Revenue generated from Korea appears to be trending up, close to 20% this year. That's a standout for sure. Is that a reflection of the strength of the memory market? Is it a reflection of maybe, I guess, you retaining more market share at Samsung and what many have speculated? Maybe you can just give some color there. Sassine Ghazi: I'm not sure about the speculation. One thing I can tell you is our relationship with Samsung, with SK hynix, with the broad market in Korea has been a great collaboration in an area and a region that are leading with a very essential part of the AI infrastructure, and we are leading with those customers and not limited to those 2 in the broader region itself in -- across the portfolio. So you need to think of it from IP with our custom HBM and HBM engagements with the lead customers to EDA and to Ansys. So very pleased with the performance that we have. Operator: Your next question comes from the line of Kelsey Chia with Citi. Wei Chia: Great to see the IT business getting back on track. I believe the team outlined a long-term growth of about mid-teens for IP business several years ago. I mean since then, we have seen significant acceleration in the chip design activity, particularly among hyperscalers. And it seems that the non-AI portion of the business is also stabilizing. Given that backdrop, is it unreasonable to think that IP business could achieve a much stronger growth than the mid-teens laid out over the next couple of quarters? And if so, are there any factors that could prevent that growth algorithm from being set higher? Sassine Ghazi: Kelsey, thank you for the question. Your assumptions are good ones, which is more chip start, a huge opportunity with custom chips, which I refer to as Factory 2, as Factory 1 continue on delivering and expanding. And for now, the mid-teens is our long-term guide. We look forward for September, where we can share more and provide any updates as necessary. Operator: We have reached the end of the Q&A session. I will now turn the call back to Sassine Ghazi for closing remarks. Sassine Ghazi: Thank you for all the questions. One year after the transformational acquisition of Ansys, we're executing with focus, gaining momentum and extending our leadership from silicon to systems. I look forward to seeing many of you at Investor Day in September. Thank you very much. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Synopsys, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Synopsys wasn’t one of them. The 10 stocks that made the cut are built for long-term growth and could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $440,710!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,335,252!* That performance is why people listen. With a track record of beating the S&P 500 by nearly 5x, Stock Advisor offers a distinct advantage. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built for the long haul. See the 10 stocks » *Stock Advisor returns as of August 31, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Synopsys. The Motley Fool has a disclosure policy. Synopsys (SNPS) Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

Synopsys (SNPS) is back in focus after its third quarter fiscal 2026 report on 26 August, which showed stronger than expected revenue and earnings, as well as a raised full year outlook supported by AI driven demand. The Q3 surprise and higher guidance triggered a sharp short term rebound in Synopsys, with a 1 day share price return of 13.39% and a 30 day share price return of 21.12%. However, the total shareholder return over one year is still down 24.06%, so recent momentum is picking up from a weaker longer term base. Spot fresh AI driven opportunities beyond Synopsys by scanning our hand picked list of 29 AI small caps that are also riding this earnings momentum story. After that sharp bounce, Synopsys now trades below the average analyst target and at a modest discount to some intrinsic value estimates. Is this still a gap worth closing, or has the price already caught up? On the most followed narrative, Synopsys screens below an estimated fair value of $559.58 compared with a last close of $464.89. This is where the current debate around upside really begins. Read the complete narrative. Want to know what kind of revenue path and profit profile has to materialise for that fair value to hold up? The narrative leans on faster earnings growth, richer margins and a punchy future earnings multiple tied to Synopsys owning key AI and chip design workflows. Result: Fair Value of $559.58 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, the bullish Synopsys narrative still faces real tests, including export restrictions affecting China-related demand and the complex, cost-heavy integration of Ansys. Find out about the key risks to this Synopsys narrative. The SWS DCF model suggests Synopsys is worth $512.24 per share, which is above the current $464.89 price and points to some undervaluation. However, the market is already paying 82.8x P/E, compared with a 48x fair ratio, 31.6x for the US Software industry and 36.3x for peers. That gap raises the question of how much valuation risk you are really willing to carry. See what the numbers say about this price — find out in our valuation breakdown. With sentiment split between upside potential and real risks around Synopsys, it makes sense to move quickly and test the numbers yourself. To see a concise breakdown of both sides of the story, start with the 2 key rewards and 2 important warning signs. If Synopsys has sharpened your focus, do not stop here. Use the Simply Wall Street Screener to spot other opportunities that match your own risk and return preferences. Target potential mispricings by reviewing companies on our 46 high quality undervalued stocks that combine quality fundamentals with prices that may not fully reflect them. Prioritise resilience and support a more stable portfolio by assessing stocks in the 76 resilient stocks with low risk scores that score well on financial and risk metrics. Strengthen your income focus by scanning the 12 dividend fortresses where companies offer higher yields backed by consistent dividend histories. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include SNPS. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Synopsys, Inc. SNPS reported third-quarter fiscal 2026 non-GAAP earnings of $3.91 per share, which increased 15.3% year over year and beat the Zacks Consensus Estimate by 6.5%. Broad-based strength, led by EDA and Ansys, supported the earnings outperformance. Revenues rose 42.4% year over year to $2.48 billion, topping the consensus mark by 1.7%. Backlog remained strong at $10.9 billion, while Design IP returned to year-over-year growth. Time-based product revenues were $1 billion, which increased 12.4% from the year-ago quarter. Upfront product revenues increased 28.8% to $665.2 million, reflecting higher product contributions during the quarter. Maintenance and service revenues surged 144.4% year over year to $808.8 million. Ansys contributed approximately $711 million to total quarterly revenues. Synopsys, Inc. price-consensus-eps-surprise-chart | Synopsys, Inc. Quote Design Automation revenues were $2 billion, which increased 52.7% year over year, accounting for 80.9% of total revenues. Within the segment, EDA revenues increased 8.5%, supported by robust software performance and record hardware-assisted verification revenues. Design IP revenues rose 10.8% to $473.8 million and represented 19.1% of revenues. Management cited broad AI infrastructure demand, including strength in interface, memory and die-to-die IP. The company said its die-to-die business is on pace to double year over year and has surpassed 100 cumulative design wins. The non-GAAP operating margin was 41.6% in the quarter. Design Automation’s adjusted operating margin expanded to 45.2% from 44.5% a year ago, while the Design IP adjusted margin improved to 26.5% from 20.1%. Total non-GAAP costs and expenses were $1.45 billion, landing at the lower end of management’s guided range. Synopsys credited operational efficiency and Ansys cost synergies that are running ahead of schedule. Free cash flow was $746 million in the third quarter. For the first nine months of fiscal 2026, net cash provided by operating activities totaled $2.30 billion. Synopsys ended the third quarter with $3.61 billion in cash, cash equivalents and short-term investments. Total debt was about $10 billion after the company repaid term loans earlier than planned. Management highlighted AI-driven design complexity as a key demand driver across the portfolio. More than 30 customer engagements are underway for Synopsys’ agentic AI platform, which is designed to automate engineering workflows while increasing use of the company’s underlying EDA tools. Synopsys also launched Multiphysics Fusion, its first joint Synopsys-Ansys solution. Early customer validations showed up to 10 times faster design closure and three times faster runtime. Management expects these add-on capabilities to begin contributing to EDA growth in fiscal 2027. Synopsys raised its fiscal 2026 revenue guidance to $9.69-$9.74 billion, with the midpoint up $50 million. The company expects Ansys to contribute about $2.98 billion, up $20 million from its previous outlook, and continues to expect Design IP revenues to grow sequentially in the fourth quarter. The company lifted its fiscal 2026 non-GAAP earnings guidance to $15.04-$15.10 per share, a 31-cent increase at the midpoint from the prior forecast. Non-GAAP operating margin is now projected at about 41.5% at the midpoint, up 50 basis points from the previous guidance. For the fourth quarter, SNPS projects revenues of $2.53-$2.58 billion and non-GAAP earnings of $4.10-$4.16 per share. Management expects EDA revenue growth to accelerate to double digits in the fourth quarter and for fiscal 2026. Currently, SNPS carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the broader Zacks Computer and Technology sector are Applied Materials AMAT, Lam Research LRCX and Palo Alto Networks PANW, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 earnings is pegged at $12.73 per share, up by 4.9% over the past 30 days, indicating a year-over-year surge of 35.1%. Applied Materials shares have surged 87.5% year to date (YTD). The Zacks Consensus Estimate for Lam Research’s fiscal 2027 earnings has moved northward by 17.8% to $9.32 per share over the past 30 days and calls for a year-over-year jump of 60.4%. Lam Research shares have soared 83.8% YTD. The Zacks Consensus Estimate for Palo Alto Networks’ fiscal 2026 earnings has remained unchanged at $3.78 per share, over the past 30 days, implying a year-over-year increase of 13.2%. Palo Alto Networks shares have risen 94.1% YTD. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Synopsys, Inc. (SNPS) : Free Stock Analysis Report Lam Research Corporation (LRCX) : Free Stock Analysis Report Applied Materials, Inc. (AMAT) : Free Stock Analysis Report Palo Alto Networks, Inc. (PANW) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Synopsys, Inc. SNPS used its fiscal third-quarter 2026 earnings call to raise expectations for the year and emphasize accelerating EDA demand, stronger Design IP trends and early opportunities from the Ansys combination. Management’s central message was that AI-driven design complexity is increasing demand across chip design, simulation and IP, while several newer initiatives are positioned to contribute more meaningfully in fiscal 2027. CFO Shelagh Glaser said Synopsys raised full-year revenue guidance by $50 million at the midpoint to $9.69 billion-$9.74 billion, driven by Design Automation strength led by EDA. The non-GAAP operating-margin target rose 50 basis points to 41.5% at the midpoint. Non-GAAP EPS guidance increased to $15.04-$15.10. The quarter also topped the Zacks Consensus Estimate, with non-GAAP EPS reaching 3.91 cents compared with 3.67 cents. Revenues reached $2.47 billion, compared with $2.43 billion. Synopsys, Inc. price-consensus-eps-surprise-chart | Synopsys, Inc. Quote For the fourth quarter, Synopsys targets revenues of $2.53 billion-$2.58 billion and non-GAAP EPS of $4.10-$4.16. Glaser also raised operating cash flow guidance to about $2.8 billion and free cash flow guidance to about $2.6 billion. CEO Sassine Ghazi said EDA revenues rose 8.5% year over year in the third quarter despite a difficult comparison, supported by software strength and record hardware-assisted verification revenue. Management expects organic EDA growth to reach double digits in the fourth quarter and for fiscal 2026. Ghazi tied that confidence to rising chip complexity, advanced packaging, 3DIC adoption and AI-related design activity. In the Q&A session, a KeyBanc analyst asked what was driving the acceleration. Ghazi stressed multiple contributors rather than a single factor, while Glaser noted the third-quarter growth rate came against 16% EDA growth a year earlier. Ghazi said Synopsys has more than 30 active customer engagements around its agentic AI platform, with early workloads increasing use of the company’s underlying EDA tools. During Q&A, a Needham analyst asked whether AI could eventually bypass commercial EDA. Ghazi pushed back, arguing autonomous design still depends on accurate, deterministic sign-off tools and physics-based ground truth. He also said Synopsys is discussing subscription and consumption-based models for agents and workflows. Management plans to provide more detail on long-term AI monetization at its Sept. 30 Investor Day. Ghazi highlighted Multiphysics Fusion as the first major joint Synopsys-Ansys solution, integrating thermal analysis directly into chip design and targeting the growing complexity of multi-die systems. Early customer validations showed up to 10 times faster design closure and three times faster runtime. Ghazi said the product is in early deployment and is expected to begin contributing to EDA growth in fiscal 2027. A Mizuho analyst pressed on timing and the revenue opportunity. Ghazi said production deployments should create revenue upside and reiterated the company’s $400 million synergy commitment for year four of the Ansys combination. Design IP returned to year-over-year growth, with revenues of $474 million, up about 11%. Ghazi said demand was broad across AI infrastructure, memory, interface and die-to-die applications. He also described a higher-growth Factory 2 model centered on customized IP for hyperscalers, ASIC vendors, foundries and traditional semiconductor companies, with economics shifting from licensing plus nonrecurring engineering fees toward licensing plus royalties. In the Q&A session, a Morgan Stanley analyst asked about the pace of that transition. Ghazi said Synopsys is already in advanced discussions with multiple customers and plans to provide more modeling detail at Investor Day. Management’s tone remained focused on execution after the Ansys acquisition, with fiscal 2026 strength centered on EDA acceleration, improving IP performance and Ansys cost synergies running ahead of schedule. Ghazi said Investor Day will address longer-term growth modeling for AI and Factory 2, while management also plans to discuss fiscal 2027 contributions from joint Synopsys-Ansys solutions. SNPS carries a Zacks Rank #3 (Hold), which sits outside the Zacks Rank #1 (Strong Buy) and 2 (Buy) group that the Style Scores framework pairs most favorably with A or B grades. You can see the complete list of today’s Zacks #1 Rank stocks here. Its Value Score is D, Growth Score B, Momentum Score D and VGM Score D, all below the A/B grades highlighted as most favorable in the framework. Higher grades are associated with better expected performance over the Rank’s one-to-three-month horizon. The Zacks Rank can change as analyst earnings estimates are revised following the just-reported results. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Synopsys, Inc. (SNPS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Synopsys (SNPS) reported $2.48 billion in revenue for the quarter ended July 2026, representing a year-over-year increase of 42.4%. EPS of $3.91 for the same period compares to $3.39 a year ago. The reported revenue represents a surprise of +1.68% over the Zacks Consensus Estimate of $2.44 billion. With the consensus EPS estimate being $3.67, the EPS surprise was +6.54%. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how Synopsys performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Revenue- Maintenance and service: $808.81 million versus the four-analyst average estimate of $564.01 million. The reported number represents a year-over-year change of +144.4%. Revenue- Total products revenue: $1.67 billion versus $1.88 billion estimated by four analysts on average. Compared to the year-ago quarter, this number represents a +18.4% change. Revenue by segment- Design IP: $473.8 million compared to the $487.38 million average estimate based on three analysts. The reported number represents a change of +10.8% year over year. Revenue by segment- Design Automation: $2 billion compared to the $1.97 billion average estimate based on three analysts. The reported number represents a change of +52.7% year over year. Revenue- Upfront products: $665.22 million compared to the $598.23 million average estimate based on three analysts. The reported number represents a change of +28.8% year over year. Revenue- Time-based products: $1 billion compared to the $1.34 billion average estimate based on three analysts. The reported number represents a change of +12.4% year over year. View all Key Company Metrics for Synopsys here>>> Shares of Synopsys have returned +6.5% over the past month versus the Zacks S&P 500 composite's +3.7% change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Synopsys, Inc. (SNPS) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Synopsys (SNPS) came out with quarterly earnings of $3.91 per share, beating the Zacks Consensus Estimate of $3.67 per share. This compares to earnings of $3.39 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +6.54%. A quarter ago, it was expected that this maker of software used to test and develop chips would post earnings of $3.17 per share when it actually produced earnings of $3.35, delivering a surprise of +5.68%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Synopsys, which belongs to the Zacks Computer - Software industry, posted revenues of $2.48 billion for the quarter ended July 2026, surpassing the Zacks Consensus Estimate by 1.68%. This compares to year-ago revenues of $1.74 billion. The company has topped consensus revenue estimates four times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Synopsys shares have lost about 13% since the beginning of the year versus the S&P 500's gain of 12.2%. While Synopsys has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Synopsys was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $3.99 on $2.56 billion in revenues for the coming quarter and $14.79 on $9.68 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Computer - Software is currently in the bottom 33% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. One other stock from the same industry, Descartes Systems (DSGX), is yet to report results for the quarter ended July 2026. The results are expected to be released on September 10. This logistics provider is expected to post quarterly earnings of $0.57 per share in its upcoming report, which represents a year-over-year change of +32.6%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Descartes Systems' revenues are expected to be $199.04 million, up 10.7% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Synopsys, Inc. (SNPS) : Free Stock Analysis Report The Descartes Systems Group Inc. (DSGX) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

(Bloomberg) -- Wall Street is eagerly anticipating Nvidia Corp.'s (NVDA) earnings on Wednesday afternoon, not so much for what the numbers will say about the chip giant, but for what they mean to artificial intelligence investors and the market itself. Most Read from Bloomberg Lutnick's Intervention in Canada Talks Draws Praise, Blame Apple Gears Up to Launch Its First New Mac Mini in Two Years Xi Signals Defiance as US Threatens Sanctions Over Iran Help US Weighs More Trade Measures Against Canada After Retaliation Bessent's Mentor Druckenmiller Calls Bond Buying a Mistake "Nvidia is the best barometer for AI spending," said Rob Conzo, chief executive officer of the Wealth Alliance, which owns Nvidia shares in several portfolios. "It will help determine if hyperscalers are still accelerating, from an infrastructure perspective, or if they're becoming more disciplined." The company's shares have been on a wild ride this year, sinking through the winter, then soaring through the spring, and bouncing around all summer. They're coming off a seven-day losing streak, matching the longest since 2019, in which they lost 7.5%. And that follows a 19% leap from late July through mid-August. All told, Nvidia is up 14% in 2026, a decent showing but still a far cry from its past performance. At this time last year, the stock had gained 34%, and in 2024 it was soaring more than 150%. The reason is hardly a secret, with investors increasingly cautious about the durability of the AI trade with inflation remaining high, interest rates rising and geopolitical risks all over the place, whether it's the US's military and economic war with Iran or its trade war with Canada. The tech-heavy Nasdaq 100 Index suffered its worst month in more than a year in July, falling 6.6% as investors dumped the shares of companies exposed to the AI buildout amid concerns about how much longer the heavy spending would last. But since its July 29 trough, the index has regained much of that lost ground, led by memory and storage companies like Sandisk Corp. and chipmakers such as Marvell Technology Inc. Wall Street expects Nvidia to deliver stellar results for the fiscal second quarter, which ended July 31. Analysts project that revenue nearly doubled from a year ago, which would be the fastest pace in two years, as did net income, according to data compiled by Bloomberg. That, however, isn't what the market is focused on. Rather, investors want to hear what Chief Executive Officer Jensen Huang has to say about capital spending by its biggest customers, future demand and a spate of new financing deals that involve Nvidia. Price increases will also be top of mind after some of the company's customers were told that the cost of servers with its AI chips will rise more than 15% in some cases, due to surging memory costs. "This will be a very interesting report, but it isn't so much about the numbers," Conzo said. "The forward guidance discussions will be far more in view." Earlier this month, Nvidia said it's partnering with Wall Street firms including Goldman Sachs Group Inc., BlackRock Inc. and Apollo Global Management Inc. to provide $500 billion in financing for AI infrastructure. Nvidia also agreed to spend as much as $105 billion to back a data center campus in Ohio that will be leased by OpenAI. "They're going to need to discuss those two big partnerships or agreements in good detail and sort of calm the market's fears around the circularity of financing," said Shaon Baqui, a senior equity analyst at Janus Henderson, which holds a substantial position in Nvidia. The big questions from investors are how much of Nvidia's revenue is being driven by its own financing and if it's creating or bringing forward demand. Huang's comments alone likely won't be enough to resolve some of the issues the market is having with AI investments at the moment, according to Daniel Pilling, portfolio manager at Sands Capital Management, which owns the stock. "It's going to be a really important quarter for them, not because of what they're doing on the balance sheet, but what they're doing off the balance sheet," said Brian Mulberry, chief market strategist at Zacks Investment Management, which holds Nvidia shares. "It effectively makes Jensen Huang kind of like the pope of AI. He gets to bless any of these deals." Even with a market capitalization of more than $5 trillion, the biggest in the world, Nvidia's equity valuation has been steadily eroding this year. At roughly 19 times earnings expected over the next 12 months, the stock is close to the cheapest it has been since late 2018, before AI exploded and when the chipmaker's market value was less than $100 billion. "Nvidia isn't the most exciting part of the market, or even the AI trade, anymore," said Randy Hare director of equity research at Huntington National Bank, which owns the stock. "Right now the tightness is in the memory space, the optical area, energy. Momentum is shifting from semis to other parts of infrastructure, and from there it could shift to hyperscalers again." In terms of trading into the earnings, Nvidia shares haven't performed well after its results over the last few quarters, falling the day after five of its last six reports, according to data compiled by Bloomberg. The options market is pricing in a roughly 5% swing in either direction. Of course, the shares could get a boost from a strong report and forecasts that calm investors' nerves, potentially reinvigorating the broader AI trade. Wall Street will be listening for updates on Nvidia's Vera Rubin and Blackwell chip sales as well as its outlook for gross margins. "Their stock in my view is at a bit of a nexus, like a bit of a turning point," said Melissa Otto, head of technology, media and telecommunications research at Visible Alpha. "We're going to get a lot more visibility, hopefully, and commentary around Rubin and the performance of Blackwell." Tech Chart of the Day Top Tech Stories Meta Platforms Inc. and state attorneys general have discussed a possible mid-trial settlement of a blockbuster case accusing the company of deliberately designing Facebook and Instagram to addict teens, people familiar with the matter said. OpenAI said that its new Jalapeno chips performed better than Nvidia's current lineup during testing, underscoring the company's progress developing AI processors in-house. SoftBank Group Corp. is talking with investment banks about a potential $10 billion to $20 billion bond offering to help refinance a loan for its investment in US tech giant OpenAI, according to people familiar with the matter. Apple announced upgraded Mac mini and Mac Studio desktop computers, giving the in-demand machines major processor upgrades. Earnings Due Earnings Postmarket: --With assistance from Subrat Patnaik and David Watkins. Most Read from Bloomberg Businessweek The Diamond Industry's Old Guard Wants You to Buy 'Natural' Plus-Size Clothes Are Disappearing at Retailers in GLP-1 Era Drones, Balloons and Sound Waves: New Ways to Fight the World's Fires Moldy Peanuts Can Be Deadly. The Solution Is More Mold New York's Israeli Restaurants Are Doing Better Than You Might Think ©2026 Bloomberg L.P.

Interested in Synopsys, Inc.? Here are five stocks we like better. Strong Q3 performance: Revenue rose 42% year over year to $2.477 billion, ahead of guidance, while non-GAAP EPS reached $3.91. Growth was broad-based across EDA, Ansys and design IP. Growth drivers strengthened: EDA revenue increased 8.5%, supported by record hardware-assisted verification demand, while design IP revenue grew 11% to $474 million. Management expects EDA growth to reach double digits in the fourth quarter. Full-year outlook raised: Synopsys increased fiscal 2026 revenue guidance to $9.69 billion-$9.74 billion and lifted operating cash-flow and free-cash-flow expectations to approximately $2.8 billion and $2.6 billion, respectively. Shares Fall, Targets Rise—Markets and Analysts Diverge on Synopsys Synopsys (NASDAQ:SNPS) reported third-quarter fiscal 2026 results above the high end of its guidance, citing broad-based strength in electronic design automation, its Ansys business and design IP. The company raised its full-year revenue, non-GAAP operating margin, earnings and cash-flow outlook. Revenue for the quarter rose about 42% year over year to $2.477 billion, including approximately $711 million from Ansys. Non-GAAP operating margin was 41.6%, while non-GAAP earnings per share reached $3.91. GAAP earnings per share were $2.84, including a gain tied to the sale of the Processor IP Solutions business, which closed during the quarter. → What Rising Delivery Forecasts Say About Rivian's Stock Prospects Keysight: The Quiet Winner in the AI and Defense Spending Boom “The key takeaway from Q3 is that the fundamentals across our portfolio are strengthening,” President and CEO Sassine Ghazi said. “EDA is accelerating, design IP has returned to growth, and Ansys is performing strongly while beginning to create new growth opportunities across the combined portfolio.” The design automation segment generated about $2 billion in revenue and posted a 45.2% adjusted operating margin. Within the segment, EDA revenue increased 8.5% year over year, supported by software demand and a record quarter for hardware-assisted verification solutions. → NVIDIA Reveals $21 Billion SpaceX Stake: Signal of Confidence or Circular Financing? Synopsys: Long-Term Opportunity Outweighs Near-Term Headwinds Ghazi said the company expects EDA growth to accelerate to double digits in the fourth quarter and for the full fiscal year. He attributed the outlook to increasingly complex chip designs, advanced packaging and 3D integrated-circuit architectures, AI-related chip development, and demand for hardware-assisted verification. The company said it secured 12 new and 66 repeat customer wins for hardware-assisted verification during the quarter. Ghazi also highlighted AMD’s use of Synopsys 3DIC Compiler for the recently launched Instinct MI455X GPU series. → Berkshire Boosts Its Bet: This AI Hyperscaler Is Now a Top-3 Holding Management said activity has remained strongest among AI and high-performance-computing customers. Ghazi told analysts that chip-start activity in non-AI markets has stabilized after slowing, while AI-related chip starts continue to accelerate. The quarter marked one year since Synopsys completed its acquisition of Ansys. CFO Shelagh Glaser said Ansys continued to perform strongly, while Synopsys was ahead of schedule on cost-synergy commitments and had repaid term loans earlier than planned. Synopsys launched Multiphysics Fusion during the quarter, combining Synopsys and Ansys technologies to integrate thermal analysis into chip-design workflows. Ghazi said customers including NVIDIA, Cisco, MediaTek and Samsung Foundry validated up to 10 times faster design closure and three times faster runtime. However, management does not expect the offering to make a meaningful contribution to EDA growth until fiscal 2027. Ghazi said customers are in early deployment stages and revenue should begin to increase as they move the technology into production. In the Ansys portfolio, the company also cited demand for GPU-accelerated simulation. Its largest Ansys deal during the quarter involved GPU-accelerated computational fluid dynamics software supporting a company-wide digital twin at a multinational electronics-component manufacturer. Ghazi said simulation workloads can achieve substantial acceleration on GPUs, and that Synopsys captures the value associated with the GPU-based software offering. Design IP revenue increased about 11% year over year to $474 million, returning the segment to growth. The segment’s adjusted operating margin was 26.5%. Ghazi said the performance reflected demand from AI infrastructure customers for higher bandwidth, faster connectivity and more complex system architectures. The company said it won more than 95% of PCIe 7.0 opportunities during the quarter and has secured 25 LPDDR6 design wins year to date. Its die-to-die business is on pace to double year over year and has surpassed 100 cumulative design wins, according to management. Synopsys also discussed two IP business models. Its established “Factory One” strategy centers on standards-based IP that can be developed once and licensed broadly. Ghazi said the company has maintained a design-win rate above 90% in automotive for three consecutive quarters as advanced driver-assistance systems move to 5- and 3-nanometer nodes. He added that USB IP has exceeded $2 billion in lifetime bookings. The company is also pursuing a “Factory Two” model for customized IP subsystems and custom-silicon engagements. Ghazi said Synopsys is in advanced discussions with multiple customers about arrangements that could shift from traditional licensing and non-recurring engineering fees toward licensing plus royalties. Synopsys ended the quarter with $10.9 billion in backlog, modestly lower sequentially because of the Processor IP Solutions divestiture. Free cash flow was $746 million, cash and short-term investments totaled $3.6 billion, and total debt was about $10 billion. For fiscal 2026, Synopsys raised its revenue outlook to a range of $9.69 billion to $9.74 billion, including an expected Ansys contribution of approximately $2.98 billion. The company expects non-GAAP operating margin of 41.5% at the midpoint and non-GAAP EPS of $15.04 to $15.10. Fourth-quarter revenue is projected at $2.53 billion to $2.58 billion. Fourth-quarter GAAP EPS is expected to be $0.60 to $0.85. Fourth-quarter non-GAAP EPS is forecast at $4.10 to $4.16. Full-year operating cash flow guidance was raised by $500 million to approximately $2.8 billion. Full-year free cash flow is now expected to be approximately $2.6 billion, up $600 million from prior guidance. Ghazi said Synopsys has more than 30 active customer engagements involving its agentic AI platform. He said the company is considering subscription and consumption-based models for AI agents and workflows, while emphasizing that such systems require Synopsys’ underlying EDA tools, sign-off technology and physics-based data. Synopsys, Inc is a leading provider of electronic design automation (EDA) software and semiconductor intellectual property (IP) used to design, verify and manufacture integrated circuits and complex systems-on-chip (SoCs). Its product portfolio spans tools and technologies for front‑end design and synthesis, simulation and verification, physical implementation and signoff, and design-for-manufacturability, enabling chip designers to move from architecture through tape‑out. In addition to core EDA offerings, Synopsys supplies a broad set of semiconductor IP building blocks — such as interface, memory and analog/mixed-signal cores — that customers integrate into SoCs to accelerate development. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Synopsys Q3 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.