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    SNPS
    Earnings call· Apr 2026(Q2 FY26)

    SYNOPSYS Q2 FY26 earnings call SNPS

    May 27, 2026 Source

    Executive summary

    Synopsys Q2 FY26 — Strong AI-driven Demand and Raised Full-Year Guidance

    Synopsys delivered a strong quarter, exceeding guidance across key financial metrics, driven by robust AI-driven demand for its EDA, IP, and multiphysics simulation solutions. The company is strategically positioned to capitalize on increasing chip complexity and system-level design requirements, leading to raised full-year guidance. Management is focused on value capture through new business models and operational efficiency, with further details expected at the upcoming Investor Day.

    Highlights

    6

    • Exceeded Q2 guidance on revenue, non-GAAP operating margin, and non-GAAP EPS.

    • Full-year 2026 revenue guidance raised to $9.625B-$9.705B.

    • Full-year 2026 non-GAAP operating margin guidance raised to 41% at midpoint, a 50 bps increase.

    • Full-year 2026 non-GAAP EPS guidance raised to $14.72-$14.80, a $0.34 increase at midpoint.

    • Full-year 2026 free cash flow guidance raised to approximately $2B, an increase of $100M.

    • IP segment bottomed in Q1 and showed sequential improvement of 12% QoQ.

    Concerns

    3

    • GAAP costs and expenses were higher than expectations due to accelerated timing of restructuring costs.

    • Divestiture of Processor IP Solutions business expected to reduce full-year revenue by approximately $40M.

    • Muted IP growth expected for fiscal year 2026.

    Guidance & targets

    15
    CategoryTargetConfidence
    Full-year 2026 revenue
    $9.625 billion to $9.705 billion
    high materiality
    High
    Full-year 2026 Ansys revenue contribution
    approximately $2.96 billion
    medium materiality
    High
    Full-year 2026 GAAP costs and expenses
    between $8.469 billion and $8.599 billion
    medium materiality
    High
    Full-year 2026 non-GAAP costs and expenses
    between $5.675 billion and $5.725 billion
    medium materiality
    High
    Full-year 2026 non-GAAP operating margin
    41% at the midpoint
    high materiality
    High
    Full-year 2026 GAAP EPS
    between $2.49 to $2.91 per share
    high materiality
    High
    Full-year 2026 non-GAAP EPS
    $14.72 to $14.80 per share
    high materiality
    High
    Full-year 2026 cash flow from operations
    approximately $2.3 billion
    high materiality
    High
    Full-year 2026 CapEx
    approximately $300 million
    medium materiality
    High
    Full-year 2026 free cash flow
    approximately $2 billion
    high materiality
    High
    Q3 2026 total revenue
    between $2.41 billion and $2.46 billion
    high materiality
    High
    Q3 2026 total GAAP costs and expenses
    between $2.075 billion and $2.125 billion
    medium materiality
    High
    Q3 2026 total non-GAAP costs and expenses
    between $1.44 billion and $1.47 billion
    medium materiality
    High
    Q3 2026 GAAP EPS
    $0.84 to $0.98 per share
    high materiality
    High
    Q3 2026 non-GAAP EPS
    $3.63 to $3.69 per share
    high materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Design Automation
    Includes Ansys. EDA revenue within Design Automation grew slightly over 8% year-over-year with strength in hardware-assisted verification solutions. Adjusted operating margin was 43.3%.
    		$1.822 billionslightly over 8%—43.3%
    Design IP
    IP segment bottomed in Q1 and showed sequential improvement. Adjusted operating margin was 24.4%.
    		$454 milliondown approximately 6%up 12%24.4%

    Operational metrics

    22
    Total Revenue
    $2.276 billionexceeding guidance
    Q2 FY26

    Synopsys delivered a strong second quarter, exceeding guidance on revenue.

    Non-GAAP Operating Margin
    39.5%exceeding guidance
    Q2 FY26

    non-GAAP operating margin of 39.5%, all exceeding guidance.

    Non-GAAP EPS
    $3.35exceeding guidance
    Q2 FY26

    non-GAAP EPS of $3.35, all exceeding guidance.

    Ansys Revenue Contribution
    approximately $652 million
    Q2 FY26

    Ansys revenue was approximately $652 million, including the accounting impact of $12.5 million related to channel revenue.

    Ansys Channel Revenue Accounting Impact
    $12.5 million
    Q2 FY26

    an accounting impact associated with recognizing Ansys channel revenue on a gross basis added $12.5 million to revenue and an equal amount to expense, thus neutral to EPS and cash flow.

    Total GAAP Costs and Expenses
    $2.156 billionhigher than expectations
    Q2 FY26

    Total GAAP costs and expenses were $2.156 billion coming in higher than expectations, primarily due to the accelerated timing of restructuring costs.

    GAAP EPS
    $0.09
    Q2 FY26

    As a result, GAAP earnings per share were $0.09.

    Total Non-GAAP Costs and Expenses
    $1.376 billionbelow our guided range
    Q2 FY26

    Total non-GAAP costs and expenses were $1.376 billion, below our guided range, reflecting the progress we are making in improving efficiency and realizing synergies.

    Cash and Short-term Investments
    $2.48 billion
    end of Q2 FY26

    ended the quarter with cash and short-term investments of $2.48 billion.

    Total Debt
    approximately $10 billion
    end of Q2 FY26

    Total debt at the end of Q2 was approximately $10 billion.

    Accelerated Share Repurchase Program
    $250 million
    March 2026

    initiated a $250 million accelerated share repurchase in March, under which we received an initial share delivery of approximately 513,000 shares with final settlement expected by June 1.

    Open Market Share Repurchase
    $50 million
    Q2 FY26

    executed a $50 million open market share repurchase of approximately 127,000 shares.

    EDA Revenue Growth
    slightly over 8%year-over-year
    Q2 FY26

    Within Design Automation, Q2 EDA revenue grew slightly over 8% year-over-year with strength in hardware-assisted verification solutions.

    PCIe 7.0 IP Win Rate
    greater than 90%
    Q2 FY26

    our PCIe 7.0 IP achieved a greater than 90% win rate with 18 new licenses and a growing pipeline.

    UCIe Lifetime Design Wins
    over 150
    lifetime

    bringing total UCIe lifetime wins to over 150.

    UCIe Tapeout
    64-gig
    Q2 FY26

    achieved a 64-gig tapeout on a 2-nanometer process

    FY26 Revenue Guidance Increase (Business Performance)
    $35 million
    FY26

    the strong first half performance and increased confidence across the business, increases our previous guidance by $35 million at the midpoint.

    FY26 Revenue Guidance Increase (Ansys Channel Accounting)
    $60 million
    FY26

    the Ansys channel accounting impact increases revenue by $60 million, which is accompanied by an equivalent increase in expenses.

    FY26 Revenue Guidance Reduction (Processor IP Divestiture)
    approximately $40 million
    remainder of FY26

    the previously announced divestiture of the Processor IP Solutions business is expected to close shortly, resulting in reduction of revenue of approximately $40 million for the remainder of fiscal year 2026.

    FY26 Non-GAAP Operating Margin Guidance Increase
    50 basis point
    FY26

    a 50 basis point raise to our previous guidance.

    FY26 Non-GAAP EPS Guidance Increase
    $0.34
    FY26

    a $0.34 increase at the midpoint from our prior guidance due to the higher revenue and increased operational efficiency.

    Ansys Cost Synergy Realization
    approximately halfway
    end of FY26

    We expect to be approximately halfway through our committed cost synergy realization by the end of fiscal year 2026.

    Industry KPIs

    7
    MetricValueDetails
    Capacity CAPEX$300 millionUSD
    Revenue growth$2.276 billionUSD
    Pricing model mixsubscription plus consumptionmodel
    Acquisition contributionapproximately $2.96 billionUSD
    Operating FCF margin rule of 4039.5%%
    Ai product adoption monetization20customers
    Headcount internal ai productivitydown about 7%%

    Orderbook & backlog

    1
    Backlog$11 billionend of Q2 FY26

    Product announcements

    2
    ProductTypeDetails
    Multiphysics Fusion technologylaunch
    HBM4 IP test chipmilestone

    Deals & partnerships

    2
    Elliott Managementcooperation agreement

    Cooperation agreement announced with Elliott Management, including the appointment of Jesse Cohn to the Board as an independent director.

    Processor IP Solutions businessdivestiture

    Pending sale of the Processor IP Solutions business.

    Risks & headwinds

    2
    GAAP costs and expenses higher than expectationsQ2 FY26

    accelerated timing of restructuring costs

    Muted IP growthfiscal year 2026

    muted IP growth

    Mitigation: focusing IP business on high-value opportunities aligned to AI-driven demand and hyperscaler customization

    Q&A highlights

    6

    Inquired about the nature of high-value, customized IP deals with hyperscalers compared to traditional IP, factors driving confidence in H2 reacceleration, and future growth opportunity.

    Sassine expressed enthusiasm for the IP portfolio, highlighting the shift towards new business models with hyperscalers for customized IP, moving beyond traditional use fees or NRE. He confirmed sequential growth for the rest of the year, with Q1 being the bottom.

    “I'm confident that we will get to the direction I communicated a number of quarters ago, which will accelerate our opportunity of growth in IP.”

    asked by Sitikantha Panigrahi · answered by Sassine Ghazi

    2 min read6 chapters

    Detailed Narrative

    01

    AI-Driven Demand and Portfolio Expansion

    Synopsys is experiencing significant demand across its portfolio due to AI scaling semiconductor demand, architectural diversity, and system complexity. The company's EDA, IP, and multiphysics simulation solutions are essential capabilities in the AI supply chain, positioning Synopsys to capture opportunities from silicon to full-scale AI infrastructure and physical AI. This expanding opportunity reinforces the company's strategy and trajectory.

    02

    Design Automation Leadership

    The Design Automation segment saw strong performance driven by robust AI-driven design activity and sustained demand for advanced node and 3DIC solutions, where Synopsys EDA leads. Hardware-assisted verification, particularly for hyperscaler and semiconductor customers, was a key growth driver, leading to multiple strategic system wins. Synopsys' 3DIC Compiler platform achieved production-scale adoption with a leading HPC provider taping out a complex AI accelerator, demonstrating its proven capability.

    03

    Innovation in EDA

    Synopsys is extending its competitive advantage by pioneering new capabilities, including Multiphysics Fusion, GPU-accelerated computing, and AI-driven automation. Early trials of its forthcoming Multiphysics Fusion technology demonstrate meaningful productivity gains, with up to 3x faster design closure and 2x faster turnaround times for complex analog designs. Agentic EDA capabilities are gaining traction with 20 customers evaluating solutions across more than 25 specialized AI agents, representing a significant long-term monetization opportunity through a subscription-plus-consumption model.

    04

    Ansys Integration and System-Level Demand

    The Ansys integration is progressing well, extending Synopsys' reach into system-level design and multiphysics simulation, strengthening its position as a leader in engineering solutions. Continued demand for system-level digital engineering and physics-based simulation is observed across industries, including AI data centers (chip to grid simulation), aerospace and defense (for AI model training), and automotive (for safety-critical systems). These trends reinforce the opportunity to deliver differentiated value at the intersection of silicon, systems, and physics.

    05

    IP Business Recovery and Strategic Focus

    The Design IP segment bottomed in Q1 FY26 and is expected to see sequential quarterly improvement throughout the second half, supported by its roadmap, execution, and pipeline. Synopsys is focusing its IP business on high-value opportunities aligned with AI-driven demand and hyperscaler customization. These engagements involve deeper collaboration and customized IP solutions, enabling greater value capture. The pending sale of the Processor IP Solutions business is expected to close shortly, further streamlining the IP strategy.

    06

    Operational Efficiency and Shareholder Value

    Synopsys demonstrated strong financial discipline, exceeding non-GAAP operating margin guidance and raising its full-year outlook. The company initiated a $250 million accelerated share repurchase in March and executed a $50 million open market share repurchase. Management is committed to improving efficiency and realizing synergies from the Ansys acquisition, with approximately half of committed cost synergies expected by the end of FY26, contributing to margin expansion.

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