Synopsys, Inc.
Analysis
Ansys turned Synopsys into the company that designs both the AI chip and the machine it sits in, and demand is now lifting every part: EDA is accelerating into double digits and IP has stopped shrinking. The test is charging more for it. How much of the FY2026 guidance raise came from Ansys, not the core?
- EDA growth is accelerating back to double digits
Q3 EDA grew 8.5% against a tough prior-year compare and management says growth speeds up to double digits in Q4 and for the full year, driven by AI design starts rather than any broad recovery in non-AI chip work. Which end markets are driving the EDA acceleration into Q4?
- Design IP bottomed and is growing again, at a cost
IP revenue fell for a year, then rose 11% year over year in Q3 as delayed titles finally shipped. The margin stayed far below the corporate average because the engineering was paid for roughly a year before the sales arrived. What margin can IP earn once all the delayed titles ship?
- The payoff from charging more has not arrived yet
The new ways to charge (royalties on custom IP, agent usage fees, a premium for Multiphysics Fusion) only start paying in FY2027. Backlog has slipped every quarter this year, so growth still rests on chip activity, not pricing.
- AI design complexityThe bull case is that AI chips keep getting more complex, so customers need more Synopsys software per design and EDA growth holds above the industry's recent single digits.
- Ansys cross-sellAnsys simulation opens industries and accounts Synopsys never sold into, and combined products let the sales force raise prices on the same design budgets.
- Custom IP royaltiesIn IP, management is negotiating royalties on customized blocks for hyperscalers, which would turn a licensing business into one that shares in the volume of chips shipped.
- China export restrictionsExport controls cap the China opportunity and push blocked customers toward domestic tool makers, so a slice of the market is lost permanently rather than delayed.
- IP delivery slippageThe bear case on IP is that missed delivery dates on key titles cost Synopsys sockets at hyperscalers, and the royalty model is still unsigned and unproven.
- Non-AI design startsOutside AI, customers in automotive, industrial and consumer markets are still not starting enough new chips, so renewals rather than new demand carry that half of the business.
| Politician | Transaction | Amount | Traded | Filed |
|---|---|---|---|---|
Donald Trump Republican · Executive | Sale | ≥$15K | Aug 28 | Oct 8 |
Donald Trump Republican · Executive | Sale | ≥$1K | Aug 24 | Oct 8 |
Donald Trump Republican · Executive | Sale | ≥$1K | Jul 24 | Sep 22 |
Donald Trump Republican · Executive | Purchase | ≥$50K | Jul 23 | Sep 22 |
Donald Trump Republican · Executive | Sale | ≥$500K | Jul 20 | Sep 22 |
Congressional trading data provided by QuiverQuant
How Synopsys turned $7.1B of revenue into $914.9M of operating income.
| Revenue | ||
|---|---|---|
| License and Maintenance | $3.5B | ▲ 8.23% YoY |
| License | $2.0B | ▲ 11.56% YoY |
| Technology Service | $1.6B | ▲ 41.15% YoY |
| Total revenue | $7.1B | |
| Gross profit | $5.4B | 77.0% |
| Operating income | $914.9M | 13.0% |