Synopsys, Inc. SNPS used its fiscal third-quarter 2026 earnings call to raise expectations for the year and emphasize accelerating EDA demand, stronger Design IP trends and early opportunities from the Ansys combination.
Management’s central message was that AI-driven design complexity is increasing demand across chip design, simulation and IP, while several newer initiatives are positioned to contribute more meaningfully in fiscal 2027.
SNPS Raises the Full-Year Outlook
CFO Shelagh Glaser said Synopsys raised full-year revenue guidance by $50 million at the midpoint to $9.69 billion-$9.74 billion, driven by Design Automation strength led by EDA. The non-GAAP operating-margin target rose 50 basis points to 41.5% at the midpoint.
Non-GAAP EPS guidance increased to $15.04-$15.10. The quarter also topped the Zacks Consensus Estimate, with non-GAAP EPS reaching 3.91 cents compared with 3.67 cents. Revenues reached $2.47 billion, compared with $2.43 billion.
For the fourth quarter, Synopsys targets revenues of $2.53 billion-$2.58 billion and non-GAAP EPS of $4.10-$4.16. Glaser also raised operating cash flow guidance to about $2.8 billion and free cash flow guidance to about $2.6 billion.
Synopsys Sees EDA Growth Accelerate
CEO Sassine Ghazi said EDA revenues rose 8.5% year over year in the third quarter despite a difficult comparison, supported by software strength and record hardware-assisted verification revenue.
Management expects organic EDA growth to reach double digits in the fourth quarter and for fiscal 2026. Ghazi tied that confidence to rising chip complexity, advanced packaging, 3DIC adoption and AI-related design activity.
In the Q&A session, a KeyBanc analyst asked what was driving the acceleration. Ghazi stressed multiple contributors rather than a single factor, while Glaser noted the third-quarter growth rate came against 16% EDA growth a year earlier.
SNPS Tests Agentic AI Monetization
Ghazi said Synopsys has more than 30 active customer engagements around its agentic AI platform, with early workloads increasing use of the company’s underlying EDA tools.
During Q&A, a Needham analyst asked whether AI could eventually bypass commercial EDA. Ghazi pushed back, arguing autonomous design still depends on accurate, deterministic sign-off tools and physics-based ground truth.
He also said Synopsys is discussing subscription and consumption-based models for agents and workflows. Management plans to provide more detail on long-term AI monetization at its Sept. 30 Investor Day.
Synopsys Expands Ansys Into EDA Flows
Ghazi highlighted Multiphysics Fusion as the first major joint Synopsys-Ansys solution, integrating thermal analysis directly into chip design and targeting the growing complexity of multi-die systems.
Early customer validations showed up to 10 times faster design closure and three times faster runtime. Ghazi said the product is in early deployment and is expected to begin contributing to EDA growth in fiscal 2027.
A Mizuho analyst pressed on timing and the revenue opportunity. Ghazi said production deployments should create revenue upside and reiterated the company’s $400 million synergy commitment for year four of the Ansys combination.
SNPS Reframes IP Around Factory 2
Design IP returned to year-over-year growth, with revenues of $474 million, up about 11%. Ghazi said demand was broad across AI infrastructure, memory, interface and die-to-die applications.
He also described a higher-growth Factory 2 model centered on customized IP for hyperscalers, ASIC vendors, foundries and traditional semiconductor companies, with economics shifting from licensing plus nonrecurring engineering fees toward licensing plus royalties.
In the Q&A session, a Morgan Stanley analyst asked about the pace of that transition. Ghazi said Synopsys is already in advanced discussions with multiple customers and plans to provide more modeling detail at Investor Day.
Synopsys Sets Priorities for Fiscal 2027
Management’s tone remained focused on execution after the Ansys acquisition, with fiscal 2026 strength centered on EDA acceleration, improving IP performance and Ansys cost synergies running ahead of schedule.
Ghazi said Investor Day will address longer-term growth modeling for AI and Factory 2, while management also plans to discuss fiscal 2027 contributions from joint Synopsys-Ansys solutions.
SNPS Rank and Style Scores Stay Mixed
SNPS carries a Zacks Rank #3 (Hold), which sits outside the Zacks Rank #1 (Strong Buy) and 2 (Buy) group that the Style Scores framework pairs most favorably with A or B grades. You can see the complete list of today’s Zacks #1 Rank stocks here.
Its Value Score is D, Growth Score B, Momentum Score D and VGM Score D, all below the A/B grades highlighted as most favorable in the framework. Higher grades are associated with better expected performance over the Rank’s one-to-three-month horizon. The Zacks Rank can change as analyst earnings estimates are revised following the just-reported results.
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