Synopsys Raises Full-Year Guidance as AI Complexity Drives Demand

On Wednesday, Synopsys, Inc. reported strong fiscal third-quarter results and raised its guidance.

During the earnings call, CEO Sassine Ghazi said AI is creating unprecedented complexity and driving stronger demand for the silicon IP and engineering solutions needed to build next-generation AI computing, infrastructure, and physical AI systems.

The company reported adjusted earnings per share of $3.91, beating the analyst consensus estimate of $3.67.

Revenue rose 42% year-over-year to $2.48 billion, surpassing Wall Street expectations of $2.44 billion. The company attributed the performance to broad strength across its EDA, Ansys, and design IP businesses.

Free cash flow stood at $746 million, with $3.6 billion in cash and short-term investments, while debt was approximately $10 billion.

Business Performance

Ansys contributed approximately $711 million in revenue, and management said the business continues to perform strongly one year after the acquisition.

EDA revenue grew 8.5% year-over-year, driven by strong software performance and a record quarter for hardware-assisted verification, with double-digit growth expected in the fourth quarter and full-year 2026.

Additionally, design IP revenue grew 11% to $474 million, with an adjusted operating margin of 26.5%. The business won over 95% of PCIe 7 projects and has secured 25 LPDDR6 design wins year-to-date.

Chip-to-chip interconnect IP revenue is on track to double year-over-year, with more than 100 design wins. Meanwhile, as ADAS platforms transition to 5nm and 3nm technologies, Synopsys has maintained a design win rate of over 90% in automotive for three consecutive quarters.

USB IP Cumulative Orders Exceed $2 Billion

Synopsys' USB IP orders have surpassed $2 billion, with tier-one customers advancing orders to leading-edge process nodes. Its new multiphysics fusion solution has achieved up to 10x faster design convergence and 3x runtime improvements in customer validation, with revenue contributions expected to begin in 2027. Backlog in the third quarter was $10.9 billion.

The company has more than 30 agentic AI engagements, and its verification agents have achieved up to 50x faster verification RTL acceleration, 20% coverage improvements, and up to 40% shorter debug cycles.

Synopsys added 12 new hardware-assisted verification customers and 66 repeat customers in the third quarter.

Guidance Raised

Synopsys expects fourth-quarter adjusted EPS between $4.10 and $4.16, with revenue between $2.53 billion and $2.58 billion, versus market expectations of $4.00 and $2.552 billion, respectively.

The company raised its fiscal 2026 adjusted EPS guidance from $14.72-$14.80 to $15.04-$15.10, and raised its revenue guidance from $9.625 billion to $9.705 billion to $9.69 billion to $9.74 billion, versus market expectations of $14.76 and $9.68 billion.

Synopsys expects Ansys to contribute $2.98 billion in full-year revenue.

SNPS Price Action: In premarket trading Thursday, Synopsys shares rose 0.24% to $411.00.