Synopsys, Inc.
SNPS · Nasdaq
Next quarter
Expected to report Dec 9, 2026 — estimated from last year’s reporting date.
Consensus is $3.08 EPS for Oct 2026 across 6 estimates, ranging $2.85 to $3.15.
SNPS Jul 2026
- 7.14%
- +13.39%
- $2.66
- $2.85
- —
- $2.48B
Reported results
- $2.48B
- 72.57%
- $357.49M
- 14.43%
- $545.80M
- $2.84
Highlights
- Quarterly outperformance: Revenue was $2.477 billion, up 42% year over year and 9% from $2.28 billion in Q2; reported EPS of $2.85 exceeded the $2.66 consensus by 7.14%, while GAAP diluted EPS was $2.84.
- AI-led demand: Management cited continued strength in AI and high-performance computing, with EDA revenue expected to grow at a double-digit rate for fiscal 2026.
- Design Automation strength: Revenue increased 53% year over year to $2.003 billion, producing adjusted operating income of $905.0 million and a 45.2% adjusted margin.
- Ansys contribution: Ansys added $622.2 million of year-over-year revenue in the quarter, reflecting a full-quarter contribution versus a partial-quarter contribution in Q3 FY2025; fiscal 2026 Ansys revenue is expected to be approximately $2.98 billion.
- Design IP recovery: Design IP revenue returned to year-over-year growth, rising 11% to $473.8 million, while adjusted operating margin expanded to 26.5% from 20.1%; nine-month revenue remained down 1%.
- Guidance raised: Fiscal 2026 revenue guidance increased to $9.690-$9.740 billion, or $9.715 billion at the midpoint, and non-GAAP EPS guidance to $15.04-$15.10, or $15.07 at the midpoint.
- Cash generation and leverage: Nine-month operating cash flow was $2.299 billion, versus $878.9 million a year earlier; cash and equivalents were $3.607 billion against total debt of $10.037 billion at quarter-end.
- Restructuring expanded: The expected cost of the 2026 restructuring plan increased to $425-$500 million from the prior $300-$350 million range; $236.3 million had been recorded through nine months.
Analysis
Synopsys delivered a strong third quarter, beating the $2.66 EPS consensus with reported EPS of $2.85, a 7.14% surprise. Revenue of $2.477 billion increased 42% from $1.740 billion a year earlier and 9% sequentially from $2.28 billion in Q2. GAAP operating income rose to $357.5 million from $165.3 million in Q3 FY2025 and $120.4 million in Q2, while net income increased to $545.8 million from $242.5 million a year ago and $17.1 million in the prior quarter. The sequential comparison was amplified by Q2 acquisition and restructuring effects, but the underlying print was also supported by broad-based demand and a full quarter of Ansys revenue.
The quarter was defined by strong Design Automation execution, including EDA and Ansys, alongside an initial recovery in Design IP. Design Automation revenue rose 53% to $2.003 billion, with a 45.2% adjusted operating margin, while Design IP revenue grew 11% to $473.8 million. Management raised fiscal 2026 revenue guidance to a $9.715 billion midpoint and non-GAAP EPS guidance to $15.07, citing AI-driven demand. Offsetting considerations include the increased restructuring plan, substantial acquisition-related amortization, and $10.0 billion of senior notes remaining after repayment of the $4.3 billion term loan.
Results and guidance
The print showed both strong demand and operating leverage. Revenue grew faster than total cost of revenue and operating expenses, which increased 35% year over year to $2.119 billion, lifting GAAP operating income to $357.5 million and operating margin to 14.4% from 9.5% a year earlier. Non-GAAP EPS was $3.91, up from $3.39, and non-GAAP operating margin was 41.6%.
- Raised fiscal-year outlook: Revenue guidance is now $9.690-$9.740 billion, compared with the $9.715 billion midpoint, and non-GAAP EPS is guided to $15.04-$15.10, or $15.07 at the midpoint.
- Fourth-quarter target: Revenue is expected at $2.530-$2.580 billion and non-GAAP EPS at $4.10-$4.16; midpoint non-GAAP operating margin is approximately 41.5%.
- Accounting drag: Q3 included $402.4 million of acquired-intangible amortization, $231.6 million of stock-based compensation and $2.2 million of restructuring charges.
Design Automation momentum
Design Automation was the central operating driver. Revenue increased 53% to $2.003 billion, and adjusted operating income rose 55% to $905.0 million. The 45.2% adjusted margin was 70 basis points above the prior-year quarter, reflecting revenue from prior-period bookings and broad-based EDA demand. Management expects double-digit EDA growth for the full fiscal year.
- Segment mix: Design Automation represented 80.9% of consolidated revenue, versus 75.4% a year earlier.
- Ansys scale: Ansys represented 28.7% of quarterly revenue and contributed $622.2 million of incremental year-over-year revenue because the comparison now includes a full quarter.
- Revenue composition: Time-based products rose 12% to $1.003 billion, upfront products rose 29% to $665.2 million, and maintenance and service revenue rose 144% to $808.8 million, largely reflecting Ansys.
Design IP recovery
Design IP showed a better quarter after a weak first half. Revenue rose 11% year over year to $473.8 million, driven by the timing of customer demand for IP products, and adjusted operating income increased 46% to $125.4 million. Margin expanded to 26.5% from 20.1%. The recovery is not yet complete: nine-month revenue was $1.335 billion, down 1% from the prior-year period, and nine-month adjusted operating income fell 17% to $302.2 million as Synopsys reallocates resources toward higher-growth opportunities.
- Portfolio shift: Synopsys completed the sale of its Processor IP Solutions business to GlobalFoundries for $443.3 million of cash consideration and recorded a $380.5 million net pre-tax gain after divestiture costs.
- Strategic focus: The company is redirecting Design IP resources toward higher-growth areas, including opportunities tied to AI and data-center markets.
- Backlog support: Total backlog was approximately $10.9 billion, including $1.9 billion of non-cancellable flexible spending commitments; 49% excluding those commitments is expected to convert to revenue over the next 12 months.
Restructuring and cash
Synopsys is generating substantial cash while continuing to absorb the financial consequences of the Ansys transaction and a workforce reorganization. Nine-month operating cash flow reached $2.299 billion, up from $878.9 million a year earlier, helped by Ansys, organic growth, collections and non-cash amortization. Free cash flow is expected to be approximately $2.6 billion for fiscal 2026.
- Restructuring escalation: The expected total charge for the 2026 Plan increased to $425-$500 million from $300-$350 million, with most workforce reductions expected in fiscal 2026 and completion by the end of fiscal 2027.
- Year-to-date charges: Synopsys recorded $236.3 million of restructuring charges through July 31 and paid $171.4 million under the plan.
- Debt reduction: The company repaid the remaining $3.5 billion term loan during the first quarter; quarter-end debt was $10.037 billion, including $9.927 billion of senior notes net of issuance costs.
Trade and litigation risks
The outlook assumes no further changes to export-control restrictions or U.S. Entity List restrictions. Synopsys said AI and high-performance computing demand remained strong, but industrial, automotive and consumer-electronics markets were more moderate. China-related restrictions remain a source of uncertainty, while several shareholder class and derivative actions related to Design IP performance and the Ansys merger remain unresolved.
- Export controls: The company expects further changes to U.S. and foreign trade restrictions, which could delay transactions, constrain sales in China or encourage customers to develop alternatives.
- Customer caution: Some customers have postponed decisions, delayed drawdowns under committed contracts, reduced spending or delayed payments amid macroeconomic uncertainty.
- Securities litigation: The consolidated shareholder class action seeks unspecified damages; no loss has been accrued because Synopsys cannot estimate a probable loss or range. A consolidated complaint is due September 23, 2026.
