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Synopsys: Synopsys Posts Record Revenue, Guides for Strong Growth in FY '26

Synopsys reported record annual revenue of $7.05 billion for FY '25, with fourth-quarter revenue coming in at $2.25 billion, in line with guidance. EPS for the quarter was slightly ahead of guidance. The company's design automation segment achieved a record year, with 12 competitive wins in hardware-assisted verification. The Design IP segment revenue was $1.75 billion, down 8% due to a challenging second half. Total expenses exiting Q4 were $1.43 billion, guided to $1.41 billion in Q1, with an average quarterly expense run rate of $1.43 billion for the year.

SNPS

USD 463.73

1.22%

A-Score: 3.7/10

Publication date: December 10, 2025

Full Report

Author: Analystock.ai

šŸ“‹ Highlights
  • Record Revenue and Backlog Synopsys achieved $7.05B annual revenue and $11.4B backlog in 2025.
  • 2026 Guidance Revenue midpoint of $9.61B and non-GAAP operating margin of 40.5% (up 320 bps vs. 2025).
  • Design IP Challenges Segment revenue fell 8% to $1.75B in Q4 2025 due to a weak second half.
  • Divestiture Headwind Optical Solutions and PowerArtist divestitures to cost $110M in 2026.
  • ANSYS Growth Potential ANSYS acquisition expected to deliver double-digit revenue growth from semiconductors and industrial markets.

Guidance and Outlook

Synopsys guides for FY 2026 revenue of $9.61 billion at the midpoint, factoring in ANSYS, completed divestitures, and pragmatism around China. Non-GAAP operating margin is expected to be 40.5% at the midpoint, up approximately 320 basis points versus 2025. The company expects to drive sustainable growth and margin expansion through innovation and disciplined execution. GAAP earnings are guided to be $2.49 to $2.90 per share, and non-GAAP earnings are guided to be $14.32 to $14.40 per share.

Segment Performance

The EDA growth rate is lowered due to slower chip design momentum in China, with some share shift dynamics happening. However, the company expects joint solutions with ANSYS to drive revenue growth back to target. The ANSYS business is expected to see double-digit growth, driven by the semiconductor market and industrial applications. The IP business sees a muted growth outlook for 2026, with headwinds in China and execution on custom IP blocks.

Valuation and Estimates

Analysts estimate next year's revenue growth at 36.7%. The actual EPS came out at $2.9, relative to estimates at $2.78. With a P/E Ratio of 54.49 and an EV/EBITDA of 65.63, the market seems to be pricing in significant growth expectations. The company's ROE is 7.09%, and ROIC is 1.97%, indicating a relatively efficient use of capital. The Net Debt / EBITDA ratio is 7.67, which may raise concerns about the company's leverage.

Operational Highlights

The company's backlog is $11.4 billion, showing strength in bookings and commitment from customers. They are focused on execution and delivery. Adjusted EBIT margins are nearing the mid-40 goal, and cash flow performance is expected to improve, with one-time items settling out of the model. Management acknowledges that the EDA/IP industry has shown growth deceleration over the last couple of years, despite AI's strong growth, and is exploring new avenues, such as royalties for IP.

Synopsys's A-Score