- Company name
- Synopsys
- Sector
- Chip design software
- About
- Synopsys makes software that engineers use to design computer chips. This software is called electronic design automation, or EDA. Chip makers pay for licenses to this software, along with pre-built circuit blocks called design IP. In 2025, Synopsys bought Ansys, a maker of engineering simulation software, adding tools that test how a product performs before it is built.
- Thesis
- The market prices Synopsys at a discount because it worries about the $35 billion Ansys deal and about US-China trade rules. The deal added heavy debt, and integrating two large engineering software companies takes years to fully play out. Export rules for China have already changed once in 2025, and could change again with little warning. For the gap to close, Synopsys must keep lowering its debt. It must also show real margin gains from combining Synopsys and Ansys tools. It must avoid another sudden China export shock like the one in May 2025. Synopsys raised its full-year fiscal 2026 revenue guidance again in August 2026 after a strong Q3. Wall Street firms including Wells Fargo and Morgan Stanley raised their price targets in September 2026 on AI-driven demand for design software. Synopsys is expected to report fiscal Q4 2026 results around late November 2026. That report should show whether the guidance raise holds and whether Ansys integration savings are on track. If debt keeps falling and no new export shock hits, the discount can close over the next three to five quarters. A fresh China trade restriction would likely delay that.
- Risks
- Synopsys carries about $10 billion in debt from the Ansys acquisition. If integration costs run higher than planned, or cost savings arrive slower than promised, planned margin expansion and debt reduction will slip.
In May 2025, a new US export rule briefly barred EDA software sales to China. Synopsys pulled its guidance and cut its earnings forecast before the rule was reversed two months later. China policy can change again with little warning.
The design IP part of the business can miss badly on its own. In one recent quarter, design IP revenue fell year over year after a major foundry customer unexpectedly withdrew from a deal Synopsys had already invested in. This part of the business depends on a small number of large, lumpy customer commitments.
- Balance sheet
- Synopsys borrowed to buy Ansys in July 2025. All of its remaining debt is unsecured fixed-rate notes that the parent company issued. At July 31, 2026, debt was $10.0 billion: six series of senior notes at 4.55% to 5.70%, due from April 2027 to 2055. $1.0 billion is due on April 1, 2027. Synopsys has already repaid all $4.3 billion of floating-rate term loans from the deal. $2.0 billion that Nvidia paid for new shares helped this. Cash and short-term investments were $3.6 billion, and about $1.7 billion of this was outside the US. Thus net debt was about $6.4 billion. In the nine months to July 31, 2026, operating income plus amortization and depreciation was $2.0 billion, and interest expense was $429 million. When Synopsys issued the notes in March 2025, Moody's rated them Baa1 and S&P rated them BBB, both stable. An $850 million revolving credit line to December 2027 was undrawn. Goodwill and intangible assets from the deal are larger than total equity of $31.2 billion. Thus the value of the balance sheet depends on Ansys earning its price. Synopsys guides fiscal 2027 free cash flow at about $3.1 billion. It plans to buy back about $1 billion of stock and return up to 50% of free cash flow. Thus debt will now fall more slowly than in the last year.
As of 2026-07-31.
- Checkpoints
- Nov 26, 2026 (estimate): Fiscal Q4 2026 earnings: full-year result and Ansys integration. Pending. Watch: Revenue inside the raised $9.69 to $9.74 billion range and fiscal 2027 guidance kept near $11.15 billion pass; a miss or a lower 2027 outlook fails.
Feb 2027 (estimate): Fiscal Q1 2027 earnings: margin progress and buyback pace. Pending. Watch: Non-GAAP operating margin moving toward the 44% fiscal 2027 target and buybacks on plan pass; margin pressure from Ansys costs fails.
Apr 1, 2027: First $1.0 billion of Ansys deal notes fall due. Pending. Watch: Repayment from cash without new borrowing passes; refinancing that keeps gross debt at $10 billion fails the debt reduction test.
- Recent events
- 2026-09-30: At its Investor Day, Synopsys set fiscal 2027 revenue guidance of about $11.15 billion at the midpoint, up about 15%. It also announced plans to buy back about $1 billion of its shares and to return up to 50% of free cash flow.
2026-09-30: Synopsys announced a multi-year deal worth over $1 billion with Amazon Web Services, which will license Synopsys chip design IP and software for its custom chips. It also announced an OpenAI partnership to build an AI model for chip design.
2026-09-10: Wells Fargo upgraded Synopsys to Overweight from Equalweight and raised its price target to $475 from $450. Morgan Stanley had upgraded Synopsys to Overweight on September 8, with a $500 price target, both citing AI-driven demand for chip design software after Synopsys's fiscal Q3 2026 earnings beat and guidance raise.
2026-09-01: Synopsys expanded its collaboration with TSMC, adding agentic AI design workflows, advanced-node certification, and multi-die system support to the partnership.
2026-08-26: Synopsys reported Q3 fiscal 2026 revenue of $2.48 billion, up about 42% from last year, and raised its full-year revenue guidance to $9.69-$9.74 billion.
2025-12-01: Nvidia announced a $2 billion investment in Synopsys stock, as part of an expanded partnership to bring AI into chip design and engineering simulation tools.