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Synopsys
(NASDAQ:SNPS)
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Rating:72Outperform
Price Target:
$534.00
▲(18.78% Upside)
Action:Reiterated
Date:05/29/26
The score is driven primarily by strong underlying financial quality (high gross margins and robust free cash flow) and a constructive earnings update with raised FY2026 guidance and improving non-GAAP margins. These positives are moderated by very expensive valuation, a recent TTM profitability/ROE dip alongside higher leverage, and only mixed near-term technical signals.
Positive Factors
Strong free cash flow
Sustained, high free cash flow provides durable financial flexibility to fund R&D, integrate acquisitions (ANSYS), buy back stock, and service debt. Over months this supports strategic investments and reduces execution risk versus firms with weaker cash conversion.
Negative Factors
Higher leverage after ANSYS deal
Material rise in leverage reduces balance-sheet flexibility and raises interest and refinancing sensitivity. Even with strong cash flow, elevated net debt amplifies downside risk if revenue or margins slip over the next several quarters, limiting strategic optionality.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong free cash flow
Sustained, high free cash flow provides durable financial flexibility to fund R&D, integrate acquisitions (ANSYS), buy back stock, and service debt. Over months this supports strategic investments and reduces execution risk versus firms with weaker cash conversion.
Read all positive factors
Synopsys Key Performance Indicators (KPIs)
Any
Operating Income by Segment
Shows profit generated from different business units, highlighting which segments drive profitability and where there might be challenges or opportunities.
Shows profit generated from different business units, highlighting which segments drive profitability and where there might be challenges or opportunities.
Data provided by:
The Fly
The FlySynopsys (SNPS) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$87.22B
Dividend YieldN/A
Average Volume (3M)1.98M
Price to Earnings (P/E)112.3
Beta (1Y)1.49
Revenue Growth39.60%
EPS Growth-69.00%
CountryUS
Employees28,000
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)4.40
Shares Outstanding191,479,320
10 Day Avg. Volume1,972,675
30 Day Avg. Volume1,975,178
Financial Highlights & Ratios
PEG Ratio-1.24
Price to Book (P/B)2.57
Price to Sales (P/S)10.30
P/FCF Ratio53.88
Enterprise Value/Market Cap1.11
Enterprise Value/Revenue11.16
Enterprise Value/Gross Profit15.19
Enterprise Value/Ebitda35.74
Forecast
1Y Price Target
$585.85Price Target Upside30.31% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering13
EPS Forecast (FY)14.78
Revenue Forecast (FY)$9.68B
Synopsys Business Overview & Revenue Model
Company Description
Synopsys, Inc. is a leading provider of electronic design automation (EDA) software, instrumental in the creation and validation of integrated circuits. The company offers a robust portfolio of platforms, including the Fusion Design Platform for d...
How the Company Makes Money
Synopsys primarily makes money by selling (1) software tools and (2) semiconductor IP, with additional revenue from (3) services and (4) software integrity/security offerings.
1) EDA software licensing and related maintenance/support
- Synopsys s...
Synopsys Earnings Call Summary
Earnings Call Date:May 27, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Aug 19, 2026
Earnings Call Sentiment Positive
The call presented multiple material positive developments: a quarter that beat on revenue and non‑GAAP profitability, raised full‑year guidance, strong free cash flow, broad AI-driven demand across EDA/IP/ANSYS, early productivity gains from multiphysics fusion, and concrete IP/connectivity wins. Offsetting items include a YoY decline in IP revenue (though sequentially recovering), one‑time GAAP headwinds from restructuring that depressed GAAP EPS, significant debt, and the fact that several strategic initiatives (multiphysics fusion, agentic EDA, GPU‑accelerated monetization) are still largely in evaluation with monetization yet to fully convert. Overall, the positives (operational execution, raised guidance, cash flow, and clear AI tailwinds) materially outweigh the negatives, though execution and monetization of new technology and channel accounting nuances will be key watch points.Positive Updates
Quarterly Revenue and Earnings Beat
Q2 revenue of $2.276 billion exceeded guidance; non-GAAP operating margin of 39.5% and non-GAAP EPS of $3.35 also beat expectations.
Negative Updates
Design IP Year‑over‑Year Weakness
Design IP revenue was $454 million, down ~6% year‑over‑year (though up 12% sequentially); company still expects muted IP growth for FY26 despite signs that Q1 was the bottom.
Read all updates
Q2-2026 Updates
Positive
Negative
Quarterly Revenue and Earnings Beat
Q2 revenue of $2.276 billion exceeded guidance; non-GAAP operating margin of 39.5% and non-GAAP EPS of $3.35 also beat expectations.
Read all positive updates
Company Guidance
Synopsys raised its fiscal 2026 outlook to revenue of $9.625B–$9.705B (including roughly $2.96B of ANSYS revenue and a $60M ANSYS channel accounting uplift), with GAAP EPS of $2.49–$2.91 and non‑GAAP EPS of $14.72–$14.80 (non‑GAAP operating margin ~41% at the midpoint); total GAAP costs are guided to $8.469B–$8.599B and total non‑GAAP costs to $5.675B–$5.725B, it expects cash flow from operations of ~ $2.3B, CapEx of ~ $300M and free cash flow of ~ $2.0B (a $100M raise versus prior), and management said it will have realized roughly half of the committed ANSYS cost synergies by year‑end; quarterly targets for Q3 are revenue $2.41B–$2.46B, GAAP costs $2.075B–$2.125B, non‑GAAP costs $1.44B–$1.47B, GAAP EPS $0.84–$0.98 and non‑GAAP EPS $3.63–$3.69 (after a Q2 beat: revenue $2.276B, non‑GAAP EPS $3.35 and non‑GAAP operating margin 39.5%).Synopsys Financial Statement Overview
Summary
Income Statement
78
Positive
Balance Sheet
64
Positive
Cash Flow
82
Very Positive
| Breakdown | TTM | Oct 2025 | Oct 2024 | Oct 2023 | Oct 2022 | Oct 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 8.68B | 7.05B | 6.13B | 5.32B | 4.62B | 4.20B |
| Gross Profit | 6.38B | 5.43B | 4.88B | 4.29B | 3.72B | 3.34B |
| EBITDA | 2.71B | 2.50B | 1.85B | 1.56B | 1.33B | 1.01B |
| Net Income | 773.03M | 1.33B | 2.26B | 1.23B | 984.59M | 757.52M |
Balance Sheet | ||||||
| Total Assets | 46.89B | 48.22B | 13.07B | 10.33B | 9.42B | 8.75B |
| Cash, Cash Equivalents and Short-Term Investments | 2.48B | 2.96B | 4.05B | 1.59B | 1.57B | 1.58B |
| Total Debt | 10.84B | 14.29B | 684.46M | 677.60M | 656.37M | 666.77M |
| Total Liabilities | 16.41B | 19.90B | 4.05B | 4.15B | 3.86B | 3.45B |
| Stockholders Equity | 30.48B | 28.33B | 8.99B | 6.15B | 5.52B | 5.30B |
Cash Flow | ||||||
| Free Cash Flow | 2.68B | 1.35B | 1.28B | 1.51B | 1.60B | 1.40B |
| Operating Cash Flow | 2.84B | 1.52B | 1.41B | 1.70B | 1.74B | 1.49B |
| Investing Cash Flow | -16.02B | -15.91B | 1.22B | -482.10M | -572.62M | -549.03M |
| Financing Cash Flow | 1.56B | 13.39B | -181.30M | -1.20B | -1.12B | -748.75M |
Synopsys Technical Analysis
Negative
449.58
Price Trends
483.73
Negative
453.54
Positive
456.42
Negative
Market Momentum
-8.79
Positive
43.80
Neutral
26.06
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SNPS, the sentiment is Negative. The current price of 449.58 is below the 20-day moving average (MA) of 461.70, below the 50-day MA of 483.73, and below the 200-day MA of 456.42, indicating a bearish trend. The MACD of -8.79 indicates Positive momentum. The RSI at 43.80 is Neutral, neither overbought nor oversold. The STOCH value of 26.06 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SNPS.
Synopsys Risk Analysis
Synopsys disclosed 29 risk factors in its most recent earnings report. Synopsys reported the most risks in the "Tech & Innovation" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Synopsys Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $286.91B | 295.83 | 6.30% | ― | 19.51% | -33.05% | |
79 Outperform | $106.04B | 54.71 | 155.65% | ― | 15.75% | 6.24% | |
76 Outperform | $83.86B | 12.06 | 62.39% | ― | 11.49% | 11.45% | |
72 Outperform | $87.22B | 112.26 | 2.64% | ― | 39.60% | -69.00% | |
68 Neutral | $23.68B | -305.10 | -3.71% | ― | 24.61% | -91.58% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
60 Neutral | $410.47B | 23.99 | 50.38% | 1.00% | 17.35% | 32.98% |
* Technology Sector Average
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Synopsys Corporate Events
Business Operations and StrategyExecutive/Board Changes
Synopsys Reaches Governance Agreement With Activist Elliott Investor
Positive
May 27, 2026
On May 26, 2026, Synopsys entered into a cooperation agreement with activist investor Elliott Investment Management that includes appointing Elliott managing partner Jesse Cohn as an independent director, effective June 1, 2026, expanding the boar...
Business Operations and StrategyExecutive/Board ChangesShareholder Meetings
Synopsys Shareholders Approve Amended Equity Incentive Plan
Positive
Apr 20, 2026
At its April 16, 2026 annual meeting, Synopsys shareholders approved an amended and restated equity incentive plan that, for the first time, makes non-employee directors eligible for equity awards alongside executive officers, reinforcing equity-b...
Business Operations and StrategyStock Buyback
Synopsys Launches $250 Million Accelerated Share Repurchase
Positive
Mar 2, 2026
On March 2, 2026, Synopsys announced it had entered into a $250 million accelerated share repurchase agreement with The Bank of Nova Scotia to buy back its common stock. The move underlines the company’s capital return strategy and could sig...
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.