Synopsys (SNPS) AI Stock Analysis

• Market Cap: $77.13B
• Dividend Yield: N/A
• Average Volume (3M): 1.00M
• Price to Earnings (P/E): 36.9
• Beta (1Y): 1.57
• Revenue Growth: -1.19%
• EPS Growth: 48.33%
• Country: US
• Employees: 20,000
• Sector: Technology
• Sector Strength: 78
• Industry: Software - Infrastructure
• EPS (TTM): 3.03
• Shares Outstanding: 154,620,070
• 10 Day Avg. Volume: 848,085
• 30 Day Avg. Volume: 1,003,547
• PEG Ratio: -3.09
• Price to Book (P/B): 7.84
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 56.01
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $588.50
• Price Target Upside: 17.97% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 8

• Rating: 79 Outperform
• Price Target: ―

Synopsys exhibits strong financial health with high profit margins and a solid balance sheet, positioning it well for growth. The company faces technical pressure with mixed indicators and a relatively high valuation, potentially limiting upside in the near term. Nonetheless, the latest earnings call reflects a strong outlook in AI and HPC markets, which could drive future growth, while acknowledging challenges in specific segments and geographies.

Positive Factors

AI Innovation

The introduction of 'AgentEngineers' aims at collaboration with human engineers, evolving from assistive to autonomous decision-making in chip design.

Financial Outlook

Synopsys is viewed as an attractive, yet underappreciated investment opportunity, and the Outperform rating is reiterated.

Growth Strategy

Systems customers are a growing contributor to Synopsys's overall growth, with systems approaches becoming more prevalent in the industry.

Negative Factors

Acquisition Uncertainty

There is uncertainty surrounding Synopsys's proposed acquisition of Ansys, which is pending approval.

China Market Challenges

Management downticked the China outlook and now sees China revenue percentage falling this year.

China Revenue Decline

China revenue declined -33% sequentially as management toned down FY25 China expectations to below corporate average growth due to cumulative effect of US-China restrictions and slowing China economy.

Synopsys Business Overview & Revenue Model

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.

How the Company Makes Money

Synopsys generates revenue through the sale of software licenses, maintenance and service agreements, and consulting services. The company's primary revenue stream comes from licensing its EDA software tools to semiconductor companies and electronics manufacturers. These licenses are typically subscription-based, providing a recurring revenue model. Additionally, Synopsys offers IP products that are licensed to customers for incorporation into their own chip designs. The company also earns money by providing professional services, which include training and consulting to help clients optimize their use of Synopsys' tools and technologies. Partnerships with leading semiconductor manufacturers and technology companies further bolster its revenue, as these collaborations often lead to joint development and innovation initiatives.

Synopsys Financial Statement Overview

Summary

Synopsys shows strong financial health with excellent profitability and a solid balance sheet. The income statement reflects a high net profit margin, while the balance sheet indicates low leverage and strong equity ratios. Cash flow generation is robust, though there is room for improvement in cash flow conversion.

Income Statement

Synopsys demonstrates a robust financial performance with a consistent increase in revenue over the years. The TTM (Trailing-Twelve-Months) gross profit margin is strong at 78.87%, indicating efficient cost management. The net profit margin for the TTM stands at an impressive 34.77%, reflecting superior profitability. However, the recent TTM net income is slightly lower compared to the previous annual period, suggesting a need for attention to sustained profitability growth.

Balance Sheet

The company's balance sheet is solid with a low debt-to-equity ratio of 0.07 in the TTM, indicating a conservative use of leverage. The equity ratio is strong at 71.36%, showing a stable financial structure with ample equity backing. Return on equity (ROE) is excellent at 22.69% in the TTM, showcasing effective management and a high return on shareholder investments.

Cash Flow

Cash flow is healthy with a TTM free cash flow of $1.30 billion, showing the company's ability to generate substantial cash. The operating cash flow to net income ratio is 0.68, which is adequate, though there's room for improvement. Free cash flow growth has been consistent, supporting operational stability and flexibility in funding future growth opportunities.

Breakdown
TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
6.07B	6.13B	5.84B	5.08B	4.20B	3.69B
	Gross Profit
4.79B	4.88B	4.62B	4.02B	3.34B	2.89B
	EBIT
1.26B	1.36B	1.27B	1.16B	734.79M	620.14M
	EBITDA
1.45B	1.65B	1.65B	1.44B	1.10B	857.40M
	Net Income Common Stockholders
2.11B	2.26B	1.23B	984.59M	757.52M	664.35M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
3.81B	4.05B	1.59B	1.57B	1.58B	1.24B
	Total Assets
13.04B	13.07B	10.33B	9.42B	8.75B	8.03B
	Total Debt
665.04M	684.46M	687.80M	656.37M	666.77M	663.49M
	Net Debt
-2.99B	-3.21B	-751.11M	-761.24M	-766.07M	-572.16M
	Total Liabilities
3.74B	4.05B	4.15B	3.86B	3.45B	3.12B
	Stockholders Equity
9.30B	8.99B	6.15B	5.52B	5.30B	4.91B
Cash Flow		Free Cash Flow
1.30B	1.28B	1.51B	1.60B	1.40B	832.55M
	Operating Cash Flow
1.43B	1.41B	1.70B	1.74B	1.49B	991.31M
	Investing Cash Flow
1.26B	1.22B	-482.10M	-572.62M	-549.03M	-360.42M
	Financing Cash Flow
-135.99M	-181.30M	-1.20B	-1.12B	-748.75M	-140.61M

Synopsys Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 498.85
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SNPS, the sentiment is Positive. The current price of 498.85 is above the 20-day moving average (MA) of 489.88, above the 50-day MA of 453.44, and above the 200-day MA of 496.66, indicating a bullish trend. The MACD of 17.37 indicates Positive momentum. The RSI at 59.99 is Neutral, neither overbought nor oversold. The STOCH value of 32.92 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for SNPS.

Synopsys Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PANW	81 Outperform	$124.52B	106.87	21.16%	―	13.91%	-50.96%
FTNT	80 Outperform	$78.96B	42.46	205.91%	―	13.83%	58.13%
SNPS	79 Outperform	$77.13B	36.89	16.27%	―	-1.19%	48.33%
ZS	79 Outperform	$39.32B	―	-1.21%	―	27.77%	89.39%
CRWD	76 Outperform	$113.48B	721.64	-0.69%	―	29.39%	-119.62%
CYBR	72 Outperform	$18.86B	1,777.39	-5.36%	―	35.12%	-191.84%
Sector *	61 Neutral	$11.28B	10.16	-6.88%	2.97%	7.41%	-8.93%

Synopsys Corporate Events

Synopsys Stockholders Approve Equity Plan Amendments

On April 10, 2025, Synopsys, Inc. held its Annual Meeting of Stockholders, where stockholders approved amendments to the 2006 Employee Equity Incentive Plan and the Employee Stock Purchase Plan. These amendments include increasing the number of shares available for issuance and aligning the plans with current financial practices and policies. The meeting also resulted in the election of nine directors to the board and the ratification of KPMG LLP as the independent accounting firm for the fiscal year ending October 31, 2025. However, a proposal regarding shareholder ratification of golden parachutes was not approved.