stockrowWhat it does
Synopsys is a silicon-to-systems engineering software company. It supplies tools used to design, test and prepare integrated circuits for manufacture; pre-designed semiconductor intellectual-property blocks; engineering simulation and analysis software; and related design services, support and training. Its customers include chip designers, electronics systems companies, software developers and engineering teams across industries.
Its electronic design automation, or EDA, software helps engineers move through the steps of creating a chip: specifying an architecture, writing and verifying its logic, arranging its physical layout, checking that it can be manufactured, and testing hardware and software together. Its hardware-assisted verification products emulate or prototype chip designs before production.
Its Design IP business supplies ready-to-use circuit components such as interface, memory, security and processor IP. Customers incorporate these blocks into their own system-on-chip and multi-die designs rather than building every component from scratch. Its Ansys simulation and analysis products help engineers model how products behave in areas including structures, heat, fluids, electronics and optics.
The company also offers cloud access to EDA tools, including an EDA software-as-a-service offering developed with Microsoft Azure. Management said on the Q3 2026 call that Synopsys launched Multiphysics Fusion, combining thermal analysis with the chip-design flow. Its headquarters are in Sunnyvale, California, and it has 189 offices worldwide.
How it makes money
Synopsys reports two segments: Design Automation and Design IP. Design Automation contains EDA software and verification hardware, manufacturing tools, Ansys semiconductor and simulation software, systems products, professional services, support and certain other activities. Design IP sells interface, foundation, security and embedded-processor IP, IP subsystems and implementation services.
Most EDA software is sold under technology subscription licenses, generally lasting two to three years. These arrangements bundle access to licensed software with ongoing updates, and revenue is recognized evenly through the license term. Hardware revenue is generally recognized when the product ships, while its maintenance revenue is recognized through the support period. Professional-services revenue is generally recognized as work progresses.
Ansys software is sold as subscriptions and perpetual licenses. Subscription license revenue can be recognized when the license is made available, while support and updates are recognized over the support term. Design IP licenses are generally priced per design, sometimes with royalties; license revenue is recognized when the IP is delivered or the license begins, while support is recognized over time and royalties are recognized when customers sell products incorporating the IP.
In FY2025, time-based products generated $3.5 billion, or 49.5% of revenue; upfront products generated $2.0 billion, or 28.5%; and maintenance and service generated $1.6 billion, or 22.0%. The company’s latest annual revenue was $7.1 billion in FY2025; Q3 FY2026 revenue was $2.477 billion. Design Automation generated $5.3 billion in FY2025, while Design IP generated $1.8 billion.
| Product or service | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| Time-based products | $3.5 billion | 49.5% | 8.23% |
| Upfront products | $2.0 billion | 28.5% | 11.6% |
| Maintenance and service | $1.6 billion | 22.0% | 41.2% |
Customers and how it sells
Synopsys sells EDA and Design IP primarily to semiconductor and electronics systems companies. Its simulation and analysis customers span high-tech, aerospace and defense, automotive, energy, industrial equipment, materials and chemicals, consumer products, healthcare and construction. It sells directly in the United States and principal foreign markets, and distributes certain products, including simulation software, through independent channel partners.
The company licenses software for specified uses and geographies, often through network licenses that can serve multiple users on a defined regional or global network. It delivers software and documentation electronically. One customer share of revenue was 12.6% in FY2024.
The United States was the largest reported market in FY2025, generating $3.1 billion, or 43.9% of revenue. Other countries generated $1.3 billion, or 18.5%; Republic of Korea generated $947.0 million, or 13.4%; Europe generated $888.5 million, or 12.6%; and China generated $814.3 million, or 11.5%. China revenue declined −17.7% in FY2025, while Europe revenue grew 44.6%.
Management said on the Q3 2026 call that AMD used Synopsys’ 3D IC Compiler for its Instinct MI455X GPU series, and that NVIDIA, Cisco, MediaTek and Samsung Foundry had validated Multiphysics Fusion performance benefits.
| Region | Revenue, FY2025 | Share | Change on the year |
|---|---|---|---|
| UNITED STATES | $3.1 billion | 43.9% | 13.2% |
| Other | $1.3 billion | 18.5% | 29.1% |
| KOREA, REPUBLIC OF | $947.0 million | 13.4% | 22.5% |
| Europe | $888.5 million | 12.6% | 44.6% |
| China | $814.3 million | 11.5% | −17.7% |
Suppliers and costs
Synopsys primarily delivers software electronically, while its hardware products are sold or leased and supported with maintenance. It does not identify key or sole-source suppliers in the available information.
Its cost base is largely employee-related and includes acquired-intangible amortization, as well as spending on research and development, sales, support, services and administration. It had approximately 28,000 employees at FY2025 year-end, about 75% of whom were engineers. Total cost of revenue and operating expenses were $6.1 billion in FY2025, up $1.4 billion, primarily from employee-related costs associated with the Ansys combination and organic headcount growth, plus amortization of intangible assets acquired with Ansys.
The Ansys transaction also increased debt and liquidity needs. At October 31, 2025, Synopsys held $3.0 billion of cash, cash equivalents and short-term investments. Management said on the Q3 2026 call that total debt was approximately $10 billion at quarter-end.
- Revenue$7.1B
- Cost of revenue−$1.6B
- Research and development−$2.5B
- Selling, general and administrative−$1.8B
- Other operating costs−$192.5M
- Operating income$914.9M
Competitive position
Synopsys competes in EDA against other EDA vendors, customers’ internally developed tools and internal design capabilities. It competes for EDA business on technology, product quality and features, ease of use, license and payment terms, support, flexibility and interoperability. In simulation and analysis, it faces public companies, smaller geographically focused firms, startups and software developed in-house by users. In Design IP, it competes with other IP providers and customers’ internally developed IP.
It was reported on 26 October 2026 that Cadence Design Systems and Keysight Technologies are major EDA rivals. Synopsys also sold its Optical Solutions Group to Keysight Technologies in October 2025.
Synopsys has more than 3,800 issued United States and foreign patents, though it states that its business is not significantly dependent on any single patent, copyright, trademark or license. It supports industry standards and data formats intended to enable exchanges among its own tools, third-party tools and customers’ internal applications.
Our reading: its broad EDA, IP and simulation portfolio is a meaningful moat because customers use its tools across multiple stages of chip and system development, although buying decisions span technology, commercial terms, support and interoperability rather than one factor alone. [item1]
Our reading: ongoing updates, technical support, engineering assistance and customer-specific design-flow integration provide a moderate switching barrier, but customers can develop tools internally and can use competing point products. [item1; item1a]
| Competitor | Where they compete | Threat (our reading) |
|---|---|---|
| Cadence Design Systems | electronic design automation | High |
| Keysight Technologies | electronic design automation | High |
Growth opportunities
Synopsys is expanding from chip design toward engineering solutions spanning silicon and systems. The Ansys acquisition added simulation and analysis software used across industries, while the company is integrating simulation physics into semiconductor design. Management said on the Q3 2026 call that Multiphysics Fusion was its first joint Synopsys and Ansys solution and that the company expects the add-on capabilities to begin contributing to EDA growth in 2027.
AI and high-performance computing are central demand drivers. Management said AI customers are developing specialized chips with multi-die architectures, complex packaging and system requirements. The company is also developing agentic EDA workflows and said that its agents can increase use of underlying EDA tools. It had 20 customers evaluating agentic AI design tools.
Design IP has two stated paths. Its “Factory One” model licenses standards-based IP for use across customers and designs. Its “Factory 2” model provides customized IP subsystems and engineering collaboration, with the company pursuing license-plus-royalty structures. Management said it was in advanced discussions with customers on this pricing change. It also reported more than 100 cumulative die-to-die IP design wins, 25 LPDDR6 design wins year to date and more than 95% of PCIe 7 opportunities won.
For FY2026, the company expects revenue of $9.69 to $9.74 billion, including approximately $2.98 billion from Ansys. It expects double-digit organic EDA revenue growth in Q4 and for the full year.
- $4.2BFY2021
- $4.6BFY2022
- $5.3BFY2023
- $6.1BFY2024
- $7.1BFY2025
- $9.7BFY2026 guidance
Structural risks
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Trade restrictions and China exposure. Export controls, Entity List restrictions, tariffs and other trade measures can restrict sales and create uncertainty. China export controls negatively affected the Design IP business, and China design-start activity remained challenged by restrictions and their cumulative effect.
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Customer concentration and renewal exposure. A relatively small number of large customers account for a substantial portion of revenue. Contract renewals, the timing and value of purchases, and demand for customers’ own products can affect results; one customer represented 12.6% of FY2024 revenue.
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Revenue timing and product mix. Hardware and IP revenue is generally recognized upfront, while time-based software is recognized over the arrangement period. Delayed orders, IP drawdowns, hardware shipments, services delivery, contract changes and a larger upfront-product mix can make quarterly results fluctuate.
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Competition and technology execution. Synopsys competes against EDA and IP vendors and customers’ internal capabilities. Its results depend on anticipating technology shifts, improving products, integrating offerings and providing competitive support, pricing and terms.
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Ansys integration, costs and debt. Acquisitions can bring integration challenges, lower margins, employee-retention issues, unachieved synergies, operational disruption and debt. The Ansys transaction increased employee costs, acquired-intangible amortization, debt and liquidity requirements.
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Macroeconomic and global-operating exposure. Customer budgets, payment cycles, currency movements, geopolitical conditions, supply-chain disruption and slower conditions in industrial, automotive and consumer electronics can delay decisions, spending, drawdowns and payments.
Bottom line
Our reading
Our reading: Synopsys is an engineering-software and semiconductor-IP business whose revenue combines multi-year software arrangements, upfront hardware and IP licenses, support, services and royalties. Its business is exposed to design activity in semiconductors and to the successful integration and monetization of Ansys capabilities. [item1; item7]
Our reading: AI-related chip complexity, multi-die design and engineering simulation support its stated expansion into joint EDA-and-physics tools and customized IP, while China restrictions, customer concentration, competition and acquisition-related debt remain material constraints. [call_prepared; item1a; call_qa]