Should You Hold or Fold SNPS Stock After a 20% Decline in 3 Months?

Synopsys, Inc. SNPS shares have plunged 19.8% in the past three months, underperforming the Zacks Computer - Software industry and the Zacks Computer and Technology sector’s appreciation of 15.7% and 2%, respectively.

SNPS Three-Month Performance Chart

Image Source: Zacks Investment Research

Despite the underperformance, SNPS stock is trading at a P/S multiple of 7.53x, much above the industry P/E multiple of 6.36x. This suggests a premium valuation further substantiated by a Zacks Value Score of D.

SNPS Forward 12-Month Valuation Chart

Image Source: Zacks Investment Research

Given these dynamics, investors are wondering if it’s the right time to buy, sell or hold the stock. Let’s dive into the fundamentals and financials of the stock and discuss what investors should do with SNPS right now.

Synopsys Gains From AI Infrastructure Boom

Synopsys gains from a multi-trillion-dollar AI infrastructure buildout, driving strong system-level and semiconductor R&D spending and robust AI compute design activity. Synopsys is embedding AI across its product portfolio to automate engineering workflows and improve customer productivity. Synopsys has expanded beyond its traditional silicon design business with the acquisition of Ansys, adding multi-physics simulation capabilities to its portfolio. Ansys contributed 28.7% of revenues in the second quarter of fiscal 2026.

While generative AI could disrupt software companies, Synopsys gains from decades of deep engineering expertise, proprietary codebases and solvers, silicon-proven design technologies and foundry co-optimization capabilities. The company has been able to provide its customers with up to 50% faster knowledge assistance, 70% faster workflow assistance and 5x faster formal testbench generation.

Synopsys generates most of its revenues from recurring sources, which made up 83% of total revenues in the second quarter of fiscal 2026. Much of this revenue comes from time-based products, maintenance and services that are recognized over the life of a contract rather than upfront, helping create more stable and predictable results. The company’s backlog stood at roughly $11 billion and includes non-cancellable Flexible Spending Account commitments, where customers can choose the product mix later.

Synopsys’ partnership with NVIDIA is likely to open new avenues of growth for the company. In 2025, Synopsys issued about 4.8 million shares in a private placement with NVIDIA for $2 billion of net proceeds. The added capital increases financial flexibility at a time when the company is integrating Ansys and investing across EDA, IP and simulation. It also deepens alignment with a leading AI compute platform, which matters as Synopsys expands AI-driven EDA solutions and automation across the design flow.

Given these tailwinds, Synopsys has been experiencing robust growth in both top and bottom lines. The Zacks Consensus Estimate for SNPS’ fiscal 2026 earnings is pegged at $14.5, indicating 14.3% year-over-year growth. Estimates have remained unchanged over the past 60 days.

Image Source: Zacks Investment Research

SNPS Strengthens Its Competitive Edge in the EDA Space

Synopsys faces competition from EDA vendors such as Cadence Design Systems Inc. CDNS, Keysight Technologies KEYS and Siemens SIEGY. These companies offer products focused more on distinct phases of the IC design process and provide a range of services to companies throughout the world to help optimize their product development process, among other things.

Keysight Technologies competes in the electronic design and testing space, particularly providing software solutions for electromagnetic analysis, circuit simulation and hardware verification. While Cadence benefits from higher design complexity and rising customer spend on AI-driven automation.

Amid rapid AI proliferation, the Cadence.ai portfolio has been gaining strength, and the new product launches like AgentStack, along with ChipStack, ViraStack and InnoStack AI Super Agents are expected to aid in sustaining the momentum. Siemens EDA, which is Siemens' electronic design automation division and Cadence Design System both provide EDA tools like software, hardware and services essential for designing chips and semiconductor devices.

However, SNPS is continuously improving its expertise in EDA with launches like the first Multiphysics Fusion solutions, combining AI-powered EDA tools with advanced multiphysics analysis to improve chip design accuracy, accelerate design closure and support AI and multi-die semiconductor development. Partnership with NVIDIA also positions SNPS higher than its competitors.

Conclusion: Buy SNPS Stock Now

Synopsys is gaining from solid design wins, driven by a robust product portfolio. Growth in the hybrid working trend is driving demand for bandwidth. Broad demand for advanced chip design, verification and simulation tools and a more diversified portfolio following the Ansys acquisition is benefiting the company. Backlog and a high mix of recurring revenues improve visibility, and Design Automation continues to deliver the bulk of profits. Given these dynamics, we suggest investors accumulate this Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

7 Best Stocks for the Next 30 Days

Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."

Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention. 

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research