Synopsys, Inc.
SNPS · Nasdaq
Next quarter
Reports Aug 26, 2026, after the close.
Consensus is $2.67 EPS for Jul 2026 across 6 estimates, ranging $2.60 to $2.75.
SNPS Apr 2026
- 7.14%
- -8.61%
- $2.24
- $2.40
- —
- $2.28B
Reported results
- $2.28B
- 72.33%
- $120.43M
- 5.29%
- $17.11M
- $0.09
Highlights
- Revenue: Q2 FY2026 revenue was $2.276 billion, up 42% year over year from $1.604 billion, but down 5.6% sequentially from $2.41 billion in Q1.
- Earnings beat: Reported EPS of $2.40 exceeded the $2.24 consensus by $0.16, or 7.14%; GAAP diluted EPS was $0.09, versus $0.34 in Q1 and $2.21 a year ago.
- Ansys contribution: Ansys added $652.4 million of quarterly revenue, including $402.9 million of maintenance revenue, $149.3 million of upfront products revenue and $78.7 million of time-based products revenue.
- Design Automation: Revenue rose 62% year over year to $1.822 billion, while adjusted operating margin expanded to 43% from 41%; the segment generated $789.1 million of adjusted operating income.
- Design IP weakness: Design IP revenue declined 6% to $454.2 million, and adjusted operating margin fell to 24% from 31%, as Synopsys reallocates resources toward higher-growth opportunities.
- GAAP profitability: Operating income fell 68% year over year to $120.4 million, with $403.6 million of acquired-intangible amortization, $222.3 million of stock compensation and $115.9 million of restructuring charges.
- Cash and debt: Operating cash flow reached $1.486 billion in the first half, while the company repaid the remaining $3.5 billion of Ansys-related term loans; total debt was $10.0 billion at quarter-end.
- Backlog: Contracted but unsatisfied performance obligations were approximately $11.0 billion, including $1.8 billion of non-cancellable flexible spending commitments; 49% excluding those commitments is expected to be recognized within 12 months.
- Governance: Synopsys entered a cooperation agreement with Elliott and will appoint Elliott Managing Partner Jesse Cohn as an independent director on June 1, expanding the board to 11 members.
Analysis
Synopsys’ second quarter was primarily an Ansys scale-up and integration quarter, with revenue of $2.276 billion rising 42% year over year and modestly below the $2.41 billion reported in Q1. Reported EPS of $2.40 beat the $2.24 consensus by 7.14%, but the GAAP result was much weaker: diluted EPS was $0.09, compared with $0.34 in Q1 and $2.21 in the year-ago quarter. GAAP operating income fell to $120.4 million from $376.4 million a year ago, as the Ansys acquisition added substantial amortization, operating costs and financing expense.
Ansys contributed $652.4 million of revenue and drove most of the consolidated growth, with particular strength in maintenance and services. The underlying operating picture was mixed: Design Automation revenue rose 62% to $1.822 billion and its adjusted margin improved to 43%, while Design IP revenue fell 6% to $454.2 million and its adjusted margin compressed to 24%. Synopsys is restructuring and reallocating resources in the IP business; it recorded $115.9 million of restructuring charges in the quarter, within a planned $300 million-$350 million program. Cash generation was strong, with $1.486 billion of operating cash flow in the first half, but the company still carried $10.0 billion of debt after repaying $3.5 billion of term loans.
Ansys integration
The acquisition reshaped the quarter’s revenue base. Ansys contributed $652.4 million, or roughly 29% of consolidated revenue, making the 42% reported growth rate difficult to compare directly with the $1.604 billion year-ago quarter, which did not include Ansys. The contribution was weighted toward recurring revenue, with $402.9 million from maintenance, compared with $149.3 million from upfront products and $78.7 million from time-based products.
- Revenue mix: Maintenance and service revenue increased 196% to $784.1 million and represented 34% of total revenue, up from 16% a year ago; time-based products rose 14% to $945.6 million, while upfront products increased 7% to $546.3 million.
- Channel accounting: Synopsys began reporting certain Ansys reseller arrangements gross in Q2 after gaining greater visibility into end-customer pricing and delivery control; the change contributed $12.5 million to revenue.
- Integration burden: Employee-related costs increased by $244.5 million year over year, primarily from Ansys headcount, while total acquired-intangible amortization reached $403.6 million in the quarter.
Operating profitability
The revenue expansion did not translate into GAAP earnings growth. Gross margin declined to approximately 72.3% from 80.1% a year ago, while operating margin fell to approximately 5.3% from 23.5%. The principal charges were acquisition-related amortization, stock-based compensation and restructuring, with higher interest expense also reducing pretax income.
- Acquisition amortization: Acquired-intangible amortization was $403.6 million, versus $11.7 million in the year-ago quarter, including $248.4 million in cost of revenue and $155.3 million in operating expenses.
- Restructuring: Synopsys recorded $115.9 million of restructuring charges in Q2 and $234.2 million in the first half. The overall plan is expected to cost $300 million-$350 million and is aimed at a business reorganization.
- Financing drag: Interest expense rose 41% year over year to $133.4 million because of the $10.0 billion of senior notes issued to help fund the Ansys acquisition.
- Adjusted performance: Consolidated segment adjusted operating income rose 48% to $899.7 million, and adjusted operating margin improved to 40% from 38%, showing that the reported GAAP decline was dominated by acquisition and restructuring items.
Segment divergence
Design Automation supplied the quarter’s operating momentum, while Design IP remained the weak point. Management attributed the Design Automation improvement primarily to revenue from arrangements booked in prior periods. In Design IP, lower revenue and profitability reflected continued resource reallocation toward higher-growth opportunities.
- Design Automation: Revenue increased $699.5 million, or 62%, to $1.822 billion; adjusted operating income rose 72% to $789.1 million and adjusted margin expanded two percentage points to 43%.
- Design IP: Revenue declined $27.8 million, or 6%, to $454.2 million; adjusted operating income dropped 26% to $110.7 million and adjusted margin contracted seven percentage points to 24%.
- Portfolio actions: Synopsys agreed to sell its Processor IP business to GlobalFoundries, with closing expected in June 2026 subject to customary conditions and regulatory approvals.
Cash flow and leverage
Cash generation was a clear counterpoint to the weak GAAP earnings. Operating cash flow in the first six months was $1.486 billion, versus $207.9 million in the prior-year period, helped by Ansys, organic growth, stronger collections and working-capital movements. The company used that liquidity to reduce acquisition financing while retaining $2.5 billion of cash, cash equivalents and short-term investments at quarter-end.
- Debt reduction: Synopsys repaid the remaining $3.5 billion under its Ansys-related term loans in the first half, leaving total debt of $10.0 billion, consisting primarily of senior notes.
- Capital returns: The company repurchased $262.5 million of stock in the first half, including a $250.0 million accelerated share repurchase, and had $1.7 billion remaining under its repurchase authorization at April 30.
- Forward visibility: Backlog was approximately $11.0 billion, including $1.8 billion of non-cancellable flexible spending commitments; approximately 49% of the remainder is expected to convert to revenue within 12 months.
Elliott board agreement
The quarter’s reporting was accompanied by a governance development that puts additional focus on execution and shareholder value. Synopsys entered a cooperation agreement with Elliott Investment Management and will appoint Jesse Cohn as an independent director effective June 1. Cohn will join the Corporate Governance and Nominating Committee, and the board will expand to 11 members.
- Board change: Cohn is a Managing Partner at Elliott and has experience as an investor and director of public technology companies.
- Agreement terms: Elliott agreed to customary standstill, voting and confidentiality commitments under the cooperation agreement.
- Strategic context: The announcement comes as Synopsys manages Ansys integration, a restructuring program, Design IP weakness and a portfolio shift toward higher-growth opportunities.
