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SNPS
Earnings call · Jul 2026 (Q3 FY26)

SYNOPSYS Q3 FY26 earnings call SNPS

Aug 26, 2026 Source

Executive summary

Synopsys Q3 FY26 — Strong Outperformance Driven by EDA, ANSYS, and IP Growth

Synopsys delivered an outstanding quarter, with broad-based strength across its portfolio, exceeding guidance across key financial metrics. The company is capitalizing on AI-driven demand for advanced silicon and system-level engineering, with EDA accelerating, IP returning to growth, and ANSYS performing strongly. Management is focused on integrating capabilities and leveraging AI to drive sustainable growth and margin expansion, with an upcoming Investor Day to detail long-term strategy.

Highlights

5

  • Revenue, non-GAAP operating margin, and EPS all exceeded the high end of guidance, with Q3 revenue at $2.477 billion, non-GAAP operating margin at 41.6%, and non-GAAP EPS at $3.91.

  • EDA growth is expected to accelerate to double digits in Q4 and for the full year 2026, driven by strong software performance and record hardware revenue.

  • Design IP returned to growth, up approximately 11% year-on-year to $474 million, fueled by AI infrastructure demand and strong design wins.

  • ANSYS continues strong performance, contributing approximately $711 million in Q3 revenue, and cost synergies are ahead of schedule.

  • Full-year cash flow from operations guidance raised by $500 million to approximately $2.8 billion, and free cash flow guidance raised by $600 million to approximately $2.6 billion.

Concerns

2

  • Backlog modestly down quarter-over-quarter to $10.9 billion due to the divestiture of the processor IP solutions business.

  • GAAP EPS guidance for Q4 FY26 is significantly lower than non-GAAP, ranging from $0.60 to $0.85 per share, indicating ongoing non-GAAP adjustments.

Guidance & targets

CategoryTargetConfidence
Total Revenue
$9.69 billion to $9.74 billion
high materiality
High
ANSYS Revenue Contribution
approximately $2.98 billion
medium materiality
High
Total GAAP Costs and Expenses
$8.667 billion and $8.742 billion
medium materiality
High
Total Non-GAAP Costs and Expenses
$5.67 billion and $5.70 billion
medium materiality
High
Non-GAAP Operating Margin
41.5% at the midpoint
high materiality
High
GAAP Earnings Per Share
$3.84 to $4.08 per share
medium materiality
High
Non-GAAP Earnings Per Share
$15.04 to $15.10 per share
high materiality
High
Cash Flow from Operations
approximately $2.8 billion
high materiality
High
Capital Expenditure
approximately $225 million
medium materiality
High
Free Cash Flow
approximately $2.6 billion
high materiality
High
Organic EDA Revenue Growth
double-digit growth
high materiality
High
IP Business Growth
grow sequentially
medium materiality
High
Total Revenue
$2.53 billion and $2.58 billion
high materiality
High
Total GAAP Costs and Expenses
$2.225 billion and $2.3 billion
medium materiality
High
Total Non-GAAP Costs and Expenses
$1.45 billion and $1.48 billion
medium materiality
High
GAAP Earnings Per Share
$0.60 to $0.85 per share
medium materiality
High
Non-GAAP Earnings Per Share
$4.10 to $4.16 per share
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Design Automation
Adjusted operating margin. Excludes the Optical Solutions Group, which was divested in Q4 FY25.
EDA revenue growth: 8.5% YoYHardware-assisted verification solutions: record quarter
approximately $2 billion——45.2%
Design IP
Adjusted operating margin. Represents continued sequential growth as the portfolio was repositioned to focus on highest value opportunities.
$474 millionapproximately 11%—26.5%
ANSYS
1 year into the combination, ANSYS continues to perform strongly. Contributes to total revenue growth of 42%.
approximately $711 million———

SNPS operating KPIs by quarter

SNPS operating KPIs stated on its earnings calls, by fiscal quarter
KPI Jan 2025 Q1 FY25 Apr 2025 Q2 FY25 Jul 2025 Q3 FY25 Oct 2025 Q4 FY25 Jan 2026 Q1 FY26 Apr 2026 Q2 FY26This call Jul 2026 Q3 FY26Change vs prior quarter
Backlog
$7.7B The backlog exiting Q1 is $7.7 billion. Source transcript
$8.1B Backlog came in at $8.1 billion, up $400 million quarter-on-quarter. Source transcript
$10.1B Backlog came in at $10.1 billion, including Ansys, underscoring the resilience of our business. Source transcript
$11.4B Backlog came in at $11.4 billion, up from $10.1 billion last quarter, driven by strength in bookings across the business. Source transcript
$11.3B Backlog ended at $11.3 billion, underscoring our strong and resilient business model. Source transcript
$11B Backlog ended at $11 billion. Source transcript
$10.9B Backlog remained very strong at $10.9 billion, modestly down quarter-over-quarter due to the divestiture of the processor IP solutions business that closed in Q3. Source transcript
-0.9%

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Backlog $10.9 billion end of Q3 FY26

modestly down quarter-over-quarter

Due to the divestiture of the processor IP solutions business that closed in Q3.

Product announcements

ProductTypeDetails
Multiphysics Fusionlaunch
Autonomous long-running design verification agentmilestone
Autonomous EDA workflows on Microsoft Discoverymilestone

Deals & partnerships

Processor IP solutions business Sale of a business segment

The divestiture of the processor IP solutions business closed in Q3 FY26.

Risks & headwinds

Backlog reduction due to divestiture Q3 FY26

Backlog of $10.9 billion, modestly down quarter-over-quarter

Mitigation:Divestiture was a strategic move to focus on higher value opportunities; management expects continued momentum.

Non-AI design start slowdown Last two quarters

Non-AI segment design starts stabilized over the last two quarters, not declining anymore.

Mitigation:AI design starts are accelerating, providing a balancing tailwind and overall growth opportunity.

What to watch in Q4 FY26

Multiphysics Fusion contribution to EDA growth

FY27
Current Not expected to contribute until 2027
Target Initial signs of revenue contribution

Why it matters

Verifies the monetization of the key joint Synopsys-ANSYS product and its impact on EDA growth.

We expect these add-on capabilities to begin contributing to EDA growth in 2027.

Q&A highlights

What specific factors are driving the expected acceleration of EDA growth to double digits in Q4 and for the full year?

Sassine Ghazi attributed the acceleration to increased chip design complexity, the move to advanced packaging (3D-IC), AI acting as a tailwind for re-engineering chip design, and record hardware revenue. Shelagh Glaser added that the 8.5% Q3 EDA growth was strong given a tough 16% comparable in Q3 FY25.

“The complexity of chip design, the move to advanced package 3D-IC... AI is definitely a tailwind... And hardware, we had a record revenue year on hardware.”

asked by Jason Celino · answered by Sassine Ghazi

2 min read 6 chapters

Detailed narrative

AI-Driven Design Complexity

AI demands are fueling unprecedented design complexity, requiring advanced IP and design solutions for next-gen AI compute, infrastructure, and physical AI systems. Synopsys' portfolio, including 3DIC compiler and hardware-assisted verification, is critical for specialized chips, multi-die architectures, and complex packaging. The company noted that the forecast for 30% of EDA software demand from multi-die efforts by 2027 has accelerated, driving significant opportunities in IP and EDA.

Multiphysics Fusion Launch

Synopsys launched its first joint solution with ANSYS, Multiphysics Fusion, integrating thermal analysis into the chip design flow. This innovation has been validated by customers like NVIDIA, Cisco, MediaTek, and Samsung Foundry, showing up to 10x faster design closure and 3x faster run time. This drives greater value for customers by reducing iteration and improving design quality, and is expected to begin contributing to EDA growth in 2027.

Agentic AI and Autonomous Workflows

Synopsys is making strong progress in Agentic AI, showcasing autonomous design verification agents and EDA workflows with NVIDIA, Microsoft, and AMD. These agents can orchestrate the entire chip verification cycle, reducing debug cycle time by up to 40% and achieving 20% additional coverage improvement. Management sees this as creating incremental growth opportunities by increasing the consumption of underlying EDA tools, with over 30 active customer engagements underway.

ANSYS Integration and Digital Engineering

One year post-acquisition, ANSYS continues to see strong demand across various industries, accelerating innovation through digital engineering and simulation. Examples include a leading automaker using ANSYS SIM AI for roughly 98% prediction accuracy in crash analysis and a heavy equipment manufacturer achieving more than 10x faster motor design. The company is ahead of schedule on cost synergy commitments and has repaid term loans earlier than planned.

Design IP Growth and Factory II Strategy

Design IP returned to growth, driven by AI infrastructure demand, with strong wins in PCIe 7 (over 95% of opportunities) and LPDDR 6 (25 design wins year-to-date). The die-to-die business is on pace to double year-over-year with over 100 cumulative design wins. Synopsys is expanding its IP strategy with 'Factory II,' moving beyond licensing to customized IP subsystems, including royalties, to capture the fast-growing custom silicon opportunity with hyperscalers and ASIC vendors.

EDA Momentum and Market Dynamics

EDA is experiencing accelerating double-digit growth, supported by robust software performance and record hardware-assisted verification solutions. While AI-driven chip starts continue to accelerate, the non-AI segment has stabilized in design starts over the last two quarters, providing a balanced growth opportunity. Management expressed confidence in the software component of EDA and its ability to deliver double-digit growth.

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