Synopsys Faces Class Action Lawsuit as Investors Fret Over AI Claims

A class action lawsuit was filed against Synopsys (SNPS) on October 31, 2025.

The plaintiffs (shareholders) alleged that they bought Synopsys stock at artificially inflated prices between December 4, 2024 and September 9, 2025 (the “Class Period”). They are now seeking compensation for financial losses incurred upon public revelation of the Company’s alleged misconduct during that time.

Investors who bought Synopsys stock during that period can click here to learn about joining the lawsuit.

Synopsys provides electronic design automation software products for use in the designing and testing of integrated circuits.

As detailed in the complaint, it has two segments or divisions – Design Automation and Design IP. The latter is responsible for the provision of pre-designed, silicon-proven components that semiconductor companies use to build chips and System-on-Chips (SoCs) more quickly and cost-effectively.

According to the complaint, the Design IP segment has been the fastest-growing part of Synopsys, growing from 25% of its revenue in fiscal year 2022, to 31% in fiscal year 2024.

Synopsys has been in business for 35 years and generates more than $6 billion in annual revenue. It has more than 20,000 employees.

Its share price has had a tough 2025, falling around 5% in the year-to-date – see above.

Misleading Claims

Synopsys and two of its senior officers are accused of deceiving investors by lying and withholding important information about the company’s business practices and prospects during the Class Period.

In particular, they are accused of omitting truthful information about its increased focus on artificial intelligence customers and its effect on Synopsys’ Design IP business, from SEC filings and related material. By knowingly or recklessly doing so, they allegedly caused Synopsys stock to trade at artificially inflated prices during the time in question.

As mentioned in the class action the truth came out after the market closed on September 9, 2025. That’s when Synopsys released its third quarter 2025 financial results, which showed that its “IP business underperformed expectations.” Specifically, Synopsys reported that its Design IP segment accounted for approximately 25% of revenue and came in at $426.6 million, a 7.7% decline year-over-year. To add insult to injury, the company also provided guidance implying that Design IP revenues will decline by at least 5% on a full-year basis in fiscal 2025.

This news prompted a substantial decline in its stock price, according to the complaint.

Plaintiffs’ Arguments

The plaintiffs allege that the Company and/or Individual Defendants repeatedly made false and misleading public statements throughout the Class Period.

In an annual report filed with the SEC on December 19, 2024, for example, the Company stated in relevant part: “We may not be successful in our AI initiatives, which could adversely affect our business, operating results or financial condition.”

Then, in a quarterly report filed with the SEC on February 26, 2025, Synopsys stated: “We have incorporated, and are continuing to develop and deploy, AI into our products and the operations of our business. While these AI initiatives can present significant benefits, the AI landscape is rapidly evolving and may create risks and challenges for our business.”

In the same report, the company said: “Our operating results are subject to quarterly and annual fluctuations, which may adversely affect our stock price. Our historical results should not be viewed as indicative of our future performance due to these periodic fluctuations.”

Lastly, in  a quarterly report filed on May 28, 2025, the Company said: “If we fail to develop and timely offer products with AI features, if such products fail to meet our customers’ demands, if these products fail to operate as expected, or if our competitors incorporate AI into their products more quickly or more successfully than we do, we may experience brand or reputational harm and lose our competitive position, our products may become obsolete, and our business, operating results or financial condition could be adversely affected.”

The deadline to file for lead plaintiff in this class action is December 30, 2025.