Synopsys, Inc. (SNPS) | Investment Case

1. Company Snapshot

1.a. Company Description

Synopsys, Inc.provides electronic design automation software products used to design and test integrated circuits.The company offers Fusion Design Platform that provides digital design implementation solutions; Verification Continuum Platform that provides virtual prototyping, static and formal verification, simulation, emulation, field programmable gate array (FPGA)-based prototyping, and debug solutions; and FPGA design products that are programmed to perform specific functions.

It also provides intellectual property (IP) solutions for USB, PCI Express, DDR, Ethernet, SATA, MIPI, HDMI, and Bluetooth low energy applications; analog IP, including data converters and audio codecs; and system-on-chip (SoC) infrastructure IP, datapath and building block IP, and verification IP products, as well as mathematical and floating-point components, and Arm AMBA interconnect fabric and peripherals.In addition, the company offers logic libraries and embedded memories; configurable processor cores and application-specific instruction-set processor tools for embedded applications; IP subsystems for audio, sensor, and data fusion functionality; and security IP solutions.Further, it provides Platform Architect solutions for SoC architecture analysis and optimization; virtual prototyping solutions; and HAPS FPGA-based prototyping systems, as well as a series of tools used in the design of optical systems and photonic devices.

Additionally, the company offers security testing, managed services, programs and professional services, and training that enable its customers to detect and remediate security vulnerabilities, and defects in the software development lifecycle, as well as manufacturing solutions.It serves electronics, financial services, automotive, medicine, energy, and industrial areas.The company was incorporated in 1986 and is headquartered in Mountain View, California.

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1.b. Last Insights on SNPS

Synopsys' recent performance was negatively impacted by Q3 2025 earnings and revenue misses, driven by weaker margins and a lowered FY25 profit outlook. The company revealed significant problems with a major foundry customer, sparking an investigation by Hagens Berman into potential misled investors. However, recent developments include a strategic partnership with Nvidia, including a $2 billion investment, and a strong growth phase driven by AI-powered EDA and the Ansys acquisition, positioning Synopsys for innovation in chip design and verification.

1.c. Company Highlights

Last Price	463.74
Change Percentage	-0.58%
Open	462.7
Previous Close	466.44
Market Cap ( Millions)	86136
Volume	1418963
Year High	651.73
Year Low	365.74
M A 50	439.09
M A 200	488.56

FCF Yield	1.51%
Dividend Yield	0.00%
ROE	14.31%
Debt / Equity	54.83%
Net Debt / EBIDTA	684.26%
Price To Book	2.69
Price Earnings Ratio	37.18
Price To FCF	66.14
Price To sales	13.4
EV / EBITDA	53.57

2. Synopsys' Q3 Results Miss Expectations Amid IP Business Headwinds

Synopsys reported Q3 revenue of $1.74 billion and non-GAAP EPS of $3.39, driven by strong growth in the design automation segment. However, the results were impacted by underperformance in the IP business due to headwinds such as China export restrictions, foundry customer challenges, and roadmap and resource allocation issues. The actual EPS came out at $3.39, relative to estimates of $3.8. The company's P/E Ratio stands at 43.21, indicating a relatively high valuation.

Publication Date: Sep -09

                                    📋 Highlights
                                    Q3 Revenue & EPS Miss::
                                                Revenue fell to $1.6B, $100M below consensus, with IP business down $120M due to China slowdown and foundry customer issues, while EPS was $3.39.
Guidance Cut::
                                                Full-year 2025 revenue guidance lowered to $7.03B, reflecting ongoing IP headwinds and Q4 margin pressures (expected below 36%).
IP Headwinds::
                                                China export restrictions and a major foundry customer’s strategic shift caused $120M decline in IP revenue, delaying edge AI/data center IP projects.
Cost Mitigation::
                                                10% global headcount reduction by FY2026 and team restructuring to boost efficiency and focus on subsystems/chiplets, despite $78M ANSYS IP contribution.
ANSYS Integration::
                                                Acquisition diversifies revenue but adds Q4 costs; Synopsys targets mid-40s long-term margins, with IP recovery expected by FY2026.

                                

IP Business Challenges

The IP business experienced a decline driven by two main factors: a slowdown in China and challenges with a major foundry customer. Synopsys is taking actions to mitigate these headwinds, including merging IP and System Solutions Engineering Teams, realigning IP resources, and implementing a 10% global headcount reduction by FY2026 to improve efficiency and optimize cost structure.

ANSYS Acquisition and Integration

The ANSYS acquisition is expected to diversify the portfolio geographically and in terms of customer concentration. Although initial integration costs will result in higher expenses in Q4, Synopsys remains confident in achieving synergies from the acquisition. ANSYS performed well in Q3, generating $78 million in revenue, and is expected to contribute to the company's growth in the long term.

Guidance and Outlook

Synopsys lowered its full-year 2025 revenue guidance to $7.03 billion due to the headwinds in IP. The company anticipates a transitional period in IP with muted growth but expects to mitigate this through diversification and operational efficiencies. Analysts estimate next year's revenue growth at 12.5%. The company's EV/EBITDA stands at 58.53, indicating a relatively high valuation.

Operational Efficiencies

Synopsys is implementing cost-saving measures, including a 10% headcount reduction, to achieve greater efficiency and leverage AI for cost avoidance. The company remains committed to long-term margin targets in the mid-40s and expects to return to a more normalized growth trajectory in the design IP business in FY '26.

3. NewsRoom

Synopsys, Inc. Sued for Securities Law Violations – Investors Should Contact Levi & Korsinsky for More Information – SNPS

Dec -04

Source: globenewswire.com

INVESTOR ALERT: The Synopsys, Inc. Securities Fraud Class Action is Pending, Investors Urged to Contact BFA Law by December 30 Deadline

Dec -04

Source: newsfilecorp.com

Nvidia Faces Challenge of Deploying Rapidly Growing Cash Pile

Dec -04

Source: gurufocus.com

SNPS Investors Have Opportunity to Lead Synopsys, Inc. Securities Fraud Lawsuit with the Schall Law Firm

Dec -04

Source: globenewswire.com

Synopsys, Inc. Class Action: The Gross Law Firm Reminds Synopsys, Inc. Investors of the Pending Class Action Lawsuit with a Lead Plaintiff Deadline of December 30, 2025 - SNPS

Dec -04

Source: prnewswire.com

Synopsys, Inc. Sued for Securities Law Violations - Contact the DJS Law Group to Discuss Your Rights - SNPS

Dec -04

Source: prnewswire.com

SNPS Investors Have Opportunity to Lead Synopsys, Inc. Securities Fraud Lawsuit with the Schall Law Firm

Dec -04

Source: prnewswire.com

Synopsys: The Hidden Champion Behind The AI Arms Race

Dec -04

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.20%)

6. Segments

Design Automation

Expected Growth: 7.3%

Growing demand for electronic design automation software, increasing complexity in chip design, and adoption of cloud-based platforms drive Synopsys' Design Automation segment growth.

Design Ip

Expected Growth: 10.2%

Increasing demand for SoC design and artificial intelligence applications drives growth, with Synopsys' silicon-proven IP cores offering a competitive advantage in the market.

7. Detailed Products

Zeus

A scalable and flexible verification platform for system-on-chip (SoC) design

VCS

A high-performance simulation and verification solution for ASIC and FPGA designs

PrimeTime

A sign-off quality static timing analysis (STA) solution for IC design

Coverity

A static application security testing (SAST) solution for identifying security vulnerabilities in software

Black Duck

An open-source security and license compliance management solution

Defensics

A fuzz testing and vulnerability research solution for identifying security vulnerabilities in software and hardware

Polyspace

A formal methods-based verification solution for ensuring the correctness and reliability of software

Catapult

A high-level synthesis (HLS) solution for designing and verifying digital ICs

HAPS

A high-performance prototyping solution for verifying and validating SoC designs

8. Synopsys, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Synopsys, Inc. is medium due to the presence of alternative software solutions in the market, but the company's strong brand reputation and customer loyalty mitigate this threat.

Bargaining Power Of Customers

The bargaining power of customers is low for Synopsys, Inc. due to the company's strong market position and the lack of alternative suppliers for its specialized software solutions.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium for Synopsys, Inc. due to the company's dependence on a few key suppliers for its software development and maintenance.

Threat Of New Entrants

The threat of new entrants is high for Synopsys, Inc. due to the relatively low barriers to entry in the software industry and the presence of venture capital funding for startups.

Intensity Of Rivalry

The intensity of rivalry is high for Synopsys, Inc. due to the presence of established competitors in the market and the need for continuous innovation to stay ahead in the industry.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	10.06%
Debt Cost	3.95%
Equity Weight	89.94%
Equity Cost	9.27%
WACC	8.74%
Leverage	11.19%

11. Quality Control: Synopsys, Inc. passed 9 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Microsoft

A-Score: 6.0/10

Value: 0.5

Growth: 7.9

Quality: 8.5

Yield: 2.0

Momentum: 8.0

Volatility: 9.3

1-Year Total Return ->

Oracle

A-Score: 4.9/10

Value: 2.2

Growth: 6.8

Quality: 6.0

Yield: 2.0

Momentum: 9.0

Volatility: 3.3

1-Year Total Return ->

CrowdStrike

A-Score: 4.8/10

Value: 2.0

Growth: 8.8

Quality: 4.8

Yield: 0.0

Momentum: 9.0

Volatility: 4.3

1-Year Total Return ->

Fortinet

A-Score: 4.8/10

Value: 0.8

Growth: 9.1

Quality: 8.5

Yield: 0.0

Momentum: 5.5

Volatility: 4.7

1-Year Total Return ->

Adobe

A-Score: 4.7/10

Value: 3.0

Growth: 7.7

Quality: 9.0

Yield: 0.0

Momentum: 1.5

Volatility: 7.3

1-Year Total Return ->

Synopsys

A-Score: 3.7/10

Value: 0.9

Growth: 7.3

Quality: 7.2

Yield: 0.0

Momentum: 3.5

Volatility: 3.3

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

22.61%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

8.74%

Synopsys, Inc. - US8716071076

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on SNPS

1.c. Company Highlights

Better Quality

Expensive

Higher Growth

Earnings Beats

Revenues Beats

Strong Momentum

Average Growth

Weak Momentum

Stable Momentum

Medium Volatility

Average Quality

Earnings Miss

Revenues Miss

2. Synopsys' Q3 Results Miss Expectations Amid IP Business Headwinds

IP Business Challenges

ANSYS Acquisition and Integration

Guidance and Outlook

Operational Efficiencies

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.20%)

6. Segments

Design Automation

Expected Growth: 7.3%

Design Ip

Expected Growth: 10.2%

7. Detailed Products

Zeus

VCS

PrimeTime

Coverity

Black Duck

Defensics

Polyspace

Catapult

HAPS

8. Synopsys, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Synopsys, Inc. passed 9 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

463.74$

Current Price

463.74$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA