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    SNPS
    Earnings call· Jan 2026(Q1 FY26)

    SYNOPSYS INC SNPS

    Feb 25, 2026 Source

    Executive summary

    Synopsys Q1 FY26 — Strong Start with Ansys Integration and AI-Driven Design Momentum

    Synopsys reported a strong Q1 FY26, exceeding non-GAAP EPS expectations and achieving revenue at the high end of guidance, driven by robust Ansys performance and hardware-assisted verification. The company is strategically integrating Ansys to expand into new markets and is pioneering AI-driven design capabilities, which are amplifying its competitive advantage rather than disrupting it. While the Design IP segment is undergoing a transitional year with muted growth, management remains confident in its long-term trajectory and is focused on delivering joint solutions and improving monetization.

    Highlights

    5

    • Q1 revenue reached $2.41 billion, at the high end of guidance, primarily due to Ansys deals.

    • Non-GAAP EPS was $3.77, exceeding expectations due to revenue and expense timing, and lower net other and interest expense.

    • Ansys revenue contributed approximately $886 million in Q1, reflecting strong execution and leadership in simulation.

    • Backlog ended at $11.3 billion, underscoring a strong and resilient business model.

    • The stock repurchase program was replenished with authorization to purchase up to $2 billion of common stock.

    Concerns

    3

    • China revenue, excluding Ansys, declined slightly year-over-year due to the cumulative impact of restrictions.

    • Design IP segment revenue was $407 million, down approximately 6% year-over-year and flat sequentially.

    • The IP business is in a transitional year for FY26, with muted growth and depressed operating margins due to continued investment in new titles.

    Guidance & targets

    20
    CategoryTargetConfidence
    Total revenue
    $9.56 billion to $9.66 billion
    high materiality
    High
    Ansys revenue contribution
    $2.9 billion at the midpoint, growing double digits
    high materiality
    High
    Total GAAP costs and expenses
    $8.46 billion and $8.60 billion
    medium materiality
    High
    Total non-GAAP costs and expenses
    $5.69 billion and $5.75 billion
    medium materiality
    High
    Non-GAAP operating margin
    40.5% at the midpoint
    high materiality
    High
    GAAP earnings per share
    $2.21 to $2.62 per share
    high materiality
    High
    Non-GAAP earnings per share
    $14.38 to $14.46 per share
    high materiality
    High
    Cash flow from operations
    approximately $2.2 billion
    medium materiality
    High
    Capital expenditure
    approximately $300 million
    medium materiality
    High
    Free cash flow
    approximately $1.9 billion
    high materiality
    High
    Total revenue
    $2.225 billion and $2.275 billion
    high materiality
    High
    Total GAAP costs and expenses
    $2.02 billion and $2.085 billion
    medium materiality
    High
    Total non-GAAP costs and expenses
    $1.38 billion and $1.41 billion
    medium materiality
    High
    GAAP earnings per share
    $0.23 to $0.43 per share
    high materiality
    High
    Non-GAAP earnings per share
    $3.11 to $3.17 per share
    high materiality
    High
    Ansys revenue synergies run rate
    $400 million
    high materiality
    High
    Ansys cost synergies run rate
    $400 million
    high materiality
    High
    Long-term EDA growth
    double digits
    high materiality
    High
    Long-term IP growth
    mid-teens
    high materiality
    High
    Long-term Simulation and Analysis growth
    double-digit growth
    high materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Design Automation
    Saw strong growth in hardware-assisted verification, partially offset by the Optical Solutions Group divestiture. Includes Ansys.
    Hardware-assisted verification: strong growth
    		approximately $2 billion——47.3%
    Design IP
    Transitional year for the business, with the IP roadmap making steady progress. Muted growth expected for FY26 with sequential improvement.
    		$407 milliondown approximately 6%flat sequentially16.2%
    Ansys
    Strong Q1 performance driven by robust demand for system-level digital engineering, multiphysics simulation, and AI-enabled design flows. This was a seasonally strong quarter for Ansys.
    		approximately $886 million———
    China
    Due to the inclusion of Ansys. Excluding Ansys, China revenue declined slightly year-over-year, consistent with outlook, due to cumulative impact of restrictions.
    		—approximately 21% year-over-year——

    Operational metrics

    13
    Non-GAAP operating margin
    42.1%
    Q1 FY26

    Achieved at the low end of the guided range for non-GAAP costs and expenses due to timing.

    Non-GAAP EPS
    $3.77ahead of expectations
    Q1 FY26

    Ahead of expectations on revenue and expense timing as well as lower net other and interest expense.

    Cash and investments balance
    $2.2 billion
    Q1 FY26

    Ended the quarter with this balance.

    Total debt
    $10 billion
    Q1 FY26

    At the end of Q1.

    Term loans repaid
    $4.3 billionentirety
    Q1 FY26

    Repaid the entirety of the term loans, consistent with prior commitment.

    Stock repurchase program authorization
    $2 billionreplenished
    Ongoing

    Board of Directors replenished the existing stock repurchase program.

    AI accelerated chip design productivity gains
    up to 50%faster
    Q1 FY26

    Major semi and hyperscale customers using Synopsys.ai have seen these gains.

    AI accelerated chip design productivity gains
    up to 70%faster
    Q1 FY26

    Major semi and hyperscale customers using Synopsys.ai have seen these gains.

    AI accelerated chip design productivity gains
    up to 5xfaster
    Q1 FY26

    Major semi and hyperscale customers using Synopsys.ai have seen these gains.

    Automotive supplier coverage
    more than 90%
    Q1 FY26

    With Ansys as part of Synopsys, the company now supports this percentage of top automotive suppliers.

    PCIe design wins
    more than 40
    Q1 FY26

    Achieved in the quarter with HPC and automotive customers.

    SerDes lifetime wins
    10
    Lifetime

    Established first-to-market position with 224 gig SerDes on advanced nodes and leading foundries.

    IP business model evolution
    —
    FY26

    The company is in active conversations with partners to improve monetization through value-based pricing for IP, moving from time-based licenses, especially for hyperscalers who rely on Synopsys for one-generation-ahead IP. Expects to close deals in FY26, with upside visible after customer tape-outs.

    Industry KPIs

    3
    MetricValueDetails
    Revenue growth$2.41 billionUSD
    Rpo current rpo$11.3 billionUSD
    Operating FCF margin rule of 4042.1%%

    Orderbook & backlog

    1
    Total Backlog$11.3 billionQ1 FY26

    down modestly on a sequential basis

    Underscoring our strong and resilient business model. It's an ebb and flow of building and consuming backlog.

    Product announcements

    3
    ProductTypeDetails
    PCIe 8.0milestone
    224 gig SerDesmilestone
    Agent Engineersroadmap

    Deals & partnerships

    5
    GlobalFoundriesSale of processor IP solutions business

    Planned sale of the processor IP solutions business to GlobalFoundries to sharpen focus on interconnect and foundation IP.

    AMDCollaboration on AI accelerated chip design

    Received World Economic Forum honors for work with AMD to advance AI accelerated chip design.

    NVIDIADeep commitment for GPU acceleration and digital twin creation

    Partnership focuses on bringing EDA and Ansys products to GPU acceleration and leveraging Omniverse for digital twin creation for physical AI. Joint R&D is underway with expected product delivery in 2026.

    MicrosoftLeveraging orchestration layer and cognitive layer for agent engineers

    Partnering with Microsoft to leverage their orchestration and cognitive layers to accelerate the agent engineer roadmap.

    AudiAI-driven simulation for automotive development

    Showcased at CES how AI-driven simulation is helping customers like Audi reduce physical prototyping and shorten development cycles.

    Risks & headwinds

    4
    Geopolitical and macro uncertaintyQ1 FY26

    null

    Mitigation: Global Synopsys team executed well against this backdrop.

    China headwindsQ1 FY26

    China revenue declined slightly year-over-year (excluding Ansys)

    Mitigation: Company is seeing the cumulative impact of restrictions, leading customers to seek alternatives where technology is restricted, but those who can prefer Synopsys technology.

    Subdued design starts in certain marketsQ1 FY26

    Design starts in markets like consumer, automotive and industrial remain subdued

    Mitigation: Despite signals of modest recovery, Synopsys is focusing on AI infrastructure build-out and system-level R&D where design starts are robust.

    Muted FY26 growth in IPFY26

    Design IP segment revenue was $407 million, down approximately 6% year-over-year and flat sequentially.

    Mitigation: Company is focused on aligning with fastest-growing segments, making progress on IP roadmap, and expects sequential improvement. Investing to build out titles.

    What to watch in Q2 FY26

    5

    Ansys joint solutions monetization

    FY27
    CurrentAnticipated to start in FY27
    TargetInitial customer adoption and monetization progress

    Why it matters

    This will validate the strategic rationale and financial impact of the Ansys acquisition beyond initial synergies.

    We are anticipating the monetization of the joint solution to start in FY '27 with quite a bit of excitement from our customers to solve real problems that they have been looking forward for that integrated solution to come.

    Q&A highlights

    5

    Analyst notes IP revenue is expected to improve sequentially in H2, specifically Q4 weighted, despite past challenges with development milestone-based IP. Asks what gives confidence for this pickup.

    Sassine attributes confidence to robust AI segment design starts, the accelerating pace of interconnect standard evolution (now half the historical 3-4 years), and customer demand for foundry optionality. He confirms they are on track to deliver scheduled titles, with monetization expected towards the latter part of the year. Shelagh adds that the availability of these titles is more Q4 weighted.

    “The confidence in our IP business is driven by the design starts. As I mentioned in the prepared remarks, for the AI segment, the design starts remain very robust.”

    asked by Yu Shi · answered by Sassine Ghazi

    2 min read6 chapters

    Detailed Narrative

    01

    AI's Amplifying Role in Engineering Software

    Synopsys emphasizes that AI is not disrupting its business but amplifying its strategic advantage. The company is pioneering AI-driven design capabilities, delivering significant productivity gains for customers, such as up to 50% faster knowledge assistance and 70% faster workflow assistance with Synopsys.ai. This approach leverages deep domain expertise and proprietary code, ensuring deterministic, silicon-proven results that probabilistic AI models cannot replicate.

    02

    Digital Twin and Silicon-to-System Solutions

    The market is experiencing a significant shift towards digital twins and away from physical testing, driven by the need to build smarter, connected products. Synopsys, especially with the Ansys portfolio, is positioned to provide holistic software-hardware co-design solutions that accelerate, de-risk, and reduce costs for AI-powered product development. This combined offering is becoming mission-critical across industries like semiconductors, aerospace, mobility, and automotive.

    03

    Multi-Die and Advanced Node Leadership

    Synopsys is seeing accelerated momentum in multi-die design, with its 3DIC Compiler platform adopted by leading semiconductor and foundry customers for AI-driven optimization and multiphysics analysis. The company also maintains leadership in advanced nodes, with its digital flow, including Fusion Compiler and PrimeTime, achieving 100% usage on critical tape-outs at 2-nanometer and below, demonstrating sustained design win momentum.

    04

    Ansys Integration and Market Expansion

    The integration of Ansys is progressing well, with teams collaborating to solve complex engineering challenges. Ansys delivered strong Q1 performance, driven by robust demand for system-level digital engineering and multiphysics simulation. The combined entity now supports over 90% of the top 100 automotive suppliers, with significant opportunities in electrification, autonomy, and advanced semiconductor design, expanding Synopsys' customer base into new market segments.

    05

    Strategic Focus in Design IP

    FY26 is a transitional year for the Design IP business, with a strategic focus on aligning with the fastest-growing segments of the silicon market. The planned sale of the processor IP solutions business to GlobalFoundries will sharpen Synopsys' focus on interconnect and foundation IP, where it holds leadership positions. The company is investing in high-speed protocol IP, achieving over 40 PCIe design wins and demonstrating industry-first advancements like PCIe 8.0 and 224 gig SerDes.

    06

    NVIDIA Partnership for GPU Acceleration and Digital Twins

    Synopsys has a deep partnership with NVIDIA focused on accelerating its products using GPUs and leveraging the Omniverse platform for digital twin creation. This involves joint R&D to bring EDA and Ansys products to GPU acceleration, aiming for 15-20x speedups, which will enable value-based monetization. The partnership also targets the physical AI opportunity, where accurate simulation and analysis within a digital twin environment are crucial.

    AI-generated summary of the company’s earnings call. Not investment advice.