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Synopsys, Inc.
Technology | Software - Infrastructure
⚡ Executive Summary
📊 The Bottom Line
Synopsys is a leading provider of electronic design automation (EDA) software and intellectual property (IP) solutions critical for semiconductor and electronics industries. Its robust portfolio benefits from the increasing complexity of chip design and the convergence of semiconductor and systems companies, indicating a strong foundational business.
⚖️ Risk vs Reward
Trading at a forward P/E of 27.54, Synopsys appears to be valued for growth. Analyst average price target of US$555.65 suggests potential upside of approximately 19.5% from current levels. Key risks include market cyclicality in semiconductors and intense competition. The risk/reward profile appears moderate, reflecting both growth potential and inherent industry volatility.
🚀 Why SNPS Could Soar
- • Increasing demand for AI-driven design automation solutions could significantly accelerate revenue growth and market penetration.
- • Continued strategic acquisitions, such as the planned Ansys integration, could expand its market reach and product offerings, boosting revenue streams.
- • The ongoing digital transformation and proliferation of connected devices will fuel long-term demand for advanced chip design tools and IP.
⚠️ What Could Go Wrong
- • The cyclical nature of the semiconductor industry can lead to periods of reduced capital expenditure by customers, impacting Synopsys's revenue.
- • Strong competition from other EDA vendors and potential in-house tool development by large customers could pressure pricing and market share.
- • Challenges in integrating acquired companies and technologies, such as Ansys, could lead to operational disruptions and hinder expected synergies.
🏢 Company Overview
💰 How SNPS Makes Money
- • Provides electronic design automation (EDA) software that automates and aids in the chip design process for semiconductor and electronics industries.
- • Offers pre-verified and silicon-proven intellectual property (IP) solutions, including logic libraries, embedded memories, processor, and security solutions.
- • Supports advanced design flows with solutions like virtual prototyping, static/formal verification, simulation, and AI-driven EDA tools.
Revenue Breakdown
Revenue breakdown not available for this company type
%
🎯 WHY THIS MATTERS
Synopsys's role is critical in the complex and rapidly evolving semiconductor industry. Its solutions enable faster, more efficient, and more reliable chip design, allowing customers to bring innovative products to market quickly and cost-effectively, underpinning the digital economy.
⭐ Competitive Advantage: What Makes SNPS Special
1. EDA Technology Leadership
Synopsys is a recognized leader in electronic design automation (EDA) software, crucial for designing complex integrated circuits. Its comprehensive suite of tools for digital and custom IC design, verification, and manufacturing analytics enables customers to achieve higher performance and lower power consumption in their chips. This leadership is built on decades of innovation and deep expertise in semiconductor physics and software engineering.
2. Extensive IP Portfolio
The company boasts a vast portfolio of pre-verified design IP, which accelerates the development of Systems-on-Chip (SoCs). By providing silicon-proven IP for processors, security, and various interfaces, Synopsys allows customers to reduce design risk and time-to-market. This IP library is a significant competitive barrier, as creating such extensive and reliable IP from scratch is resource-intensive and time-consuming.
3. Deep Customer Integration
Synopsys's EDA tools and IP are deeply embedded into the design flows of its semiconductor and electronics customers. Switching costs are high due to the significant investment in training, integration, and validation of these complex tools. This creates strong customer stickiness and recurring revenue streams through long-term licensing agreements, providing a stable and predictable business model.
🎯 WHY THIS MATTERS
These advantages collectively create a strong moat for Synopsys, allowing it to maintain a leading position in a critical industry. Its technological expertise, extensive IP, and deep customer relationships ensure consistent demand and robust pricing power, contributing to long-term profitability and market relevance.
👔 Who's Running The Show
Sassine Ghazi
CEO, President & Director
Sassine Ghazi, 55, leads Synopsys as CEO, President, and Director. His extensive experience within the company, culminating in the top leadership role, positions him well to drive innovation and strategic growth in the complex EDA and IP markets. He is responsible for steering the company's vision and operational execution.
⚔️ What's The Competition
The Electronic Design Automation (EDA) market is highly concentrated, dominated by a few key players. Competition revolves around technological superiority, the breadth and depth of IP offerings, and strong customer relationships. Companies strive to provide comprehensive, integrated design flows to address the increasing complexity and demands of advanced semiconductor manufacturing.
📊 Market Context
- Total Addressable Market - The global EDA market, valued at approximately US$13 billion in 2023, is projected to grow significantly, driven by AI, IoT, and advanced chip design.
- Key Trend - The convergence of hardware and software design, coupled with AI integration, is shaping the future of competitive EDA solutions.
Competitor
Description
vs SNPS
Cadence Design Systems
A primary rival in EDA, offering a broad portfolio of software, hardware, and IP for semiconductor design, with strong focus on verification and custom IC design.
Directly competes across various EDA segments, particularly in verification and custom design, often seen as a duopoly with Synopsys.
Siemens EDA
A significant player acquired by Siemens, providing EDA tools for IC design, verification, PCB design, and electronic system design, with strength in design-for-test.
Offers a competitive suite of tools, especially in areas like PCB design and automotive electronics, providing an alternative to Synopsys's offerings.
Ansys
A leader in simulation software, enabling engineers to predict product performance across various physics. Recently acquired by Synopsys.
While traditionally complementary, its acquisition by Synopsys creates a more integrated design-to-simulation workflow, making it a former competitor that is now part of Synopsys.
📊 Valuation & Analysis
📈 Wall Street Summary
Analyst Rating Distribution - 1 Strong Sell, 5 Hold, 16 Buy, 3 Strong Buy
1
5
16
3
12-Month Price Target Range
Low Target
US$425
-9%
Average Target
US$556
+19%
High Target
US$650
+40%
Closing: US$465.12 (30 Jan 2026)
🚀 The Bull Case - Upside to US$650
1. Continued AI Chip Design Dominance
High Probability
Synopsys is uniquely positioned to capitalize on the explosive growth in AI chip development, offering specialized tools and IP that are essential for designing next-generation AI accelerators. This could drive higher licensing fees and broader market adoption, boosting revenue by 10-15% annually in this segment.
2. Successful Ansys Integration and Cross-Selling
Medium Probability
The successful integration of Ansys will create a comprehensive 'silicon to systems' solution, enabling significant cross-selling opportunities for simulation software to Synopsys's existing EDA customer base. This synergy could add US$500M to US$1B in new annual revenue streams by 2028.
3. Expanding Automotive Market Penetration
Medium Probability
The increasing electronic content and software-defined architectures in modern vehicles present a substantial growth avenue. Synopsys's automotive-grade IP and design solutions could see robust demand, leading to a 5-8% increase in overall revenue from this sector over the next three years.
🐻 The Bear Case - Downside to US$425
1. Semiconductor Industry Cyclicality and Downturns
Medium Probability
The EDA market is inherently tied to the health of the semiconductor industry, which experiences cyclical downturns. A prolonged slowdown in chip demand or capital expenditure by foundries could lead to delayed license renewals and reduced new tool adoption, impacting revenue growth by 5-10%.
2. Intensified Competition from Cadence and Emerging Players
High Probability
Fierce competition from established rivals like Cadence Design Systems and potential disruption from new entrants or open-source initiatives could exert pricing pressure and lead to market share erosion. This could result in a 2-3% point reduction in gross margins over time.
3. Regulatory Scrutiny on Acquisitions and Market Dominance
Low Probability
Given its significant market position and recent acquisitions like Ansys, Synopsys might face increased regulatory scrutiny, particularly regarding antitrust concerns. This could delay or block future strategic moves, limiting growth opportunities and potentially incurring legal costs.
🔮 Final thought: Is this a long term relationship?
Owning Synopsys for a decade would depend on its ability to maintain technological leadership in EDA and successfully integrate key acquisitions while navigating industry cycles. Its deep customer relationships and extensive IP portfolio provide a strong foundation. However, the highly competitive nature of the semiconductor design market and potential regulatory hurdles pose long-term challenges. Investors should weigh the company's critical role in innovation against these inherent industry risks for sustained growth.
📋 Appendix
Financial Performance
Metric
31 Oct 2025
31 Oct 2024
31 Oct 2023
Income Statement
Revenue
US$7.05B
US$6.13B
US$5.32B
Gross Profit
US$5.43B
US$4.88B
US$4.29B
Operating Income
US$0.91B
US$1.36B
US$1.33B
Net Income
US$1.33B
US$2.26B
US$1.23B
EPS (Diluted)
0.00
14.51
7.92
Balance Sheet
Cash & Equivalents
US$2.89B
US$3.90B
US$1.43B
Total Assets
US$48.22B
US$13.07B
US$10.33B
Total Debt
US$14.29B
US$0.68B
US$0.68B
Shareholders' Equity
US$28.33B
US$8.99B
US$6.15B
Key Ratios
Gross Margin
77.0%
79.7%
80.6%
Operating Margin
13.0%
22.1%
24.9%
Return on Equity
4.70
25.17
20.01
Analyst Estimates
Metric
Annual (31 Oct 2026)
Annual (31 Oct 2027)
EPS Estimate
US$14.38
US$16.89
EPS Growth
+11.4%
+17.4%
Revenue Estimate
US$9.6B
US$10.6B
Revenue Growth
+36.6%
+10.4%
Number of Analysts
24
23
Valuation Ratios
| Metric | Value | Description |
|---|---|---|
| P/E Ratio (TTM) | 59.55 | Measures the price investors are willing to pay for each dollar of earnings over the past twelve months, indicating how expensive a stock is relative to its trailing earnings. |
| Forward P/E | 27.54 | Indicates the price investors are willing to pay for each dollar of expected future earnings, offering insight into a company's future earnings power and valuation. |
| Price/Sales (TTM) | 12.61 | Measures the stock price relative to its revenue per share over the past twelve months, useful for valuing companies with inconsistent earnings or in early growth stages. |
| Price/Book (MRQ) | 3.05 | Compares a company's market price to its book value per share for the most recent quarter, indicating how much investors are willing to pay for its net assets. |
| EV/EBITDA | 75.53 | Measures the total value of a company relative to its earnings before interest, taxes, depreciation, and amortization, often used for valuing capital-intensive businesses across different debt levels. |
| Return on Equity (TTM) | 0.07 | Indicates how much profit a company generates for each dollar of shareholders' equity over the past twelve months, reflecting management's efficiency in utilizing equity. |
| Operating Margin | 0.05 | Measures the percentage of revenue remaining after paying for operating expenses, indicating a company's profitability from its core operations. |