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    SNPS
    Earnings call· Oct 2025(Q4 FY25)

    SYNOPSYS INC SNPS

    Dec 10, 2025 Source

    Executive summary

    Synopsys Q4 FY25 — Transformational Year with Ansys Integration and Strong Backlog

    Synopsys completed a transformational FY25 with the Ansys acquisition, redefining its position from EDA to engineering solutions. The company achieved record revenue and strong backlog, driven by AI infrastructure build-out and demand for advanced chip design. While navigating a challenging China market and a transitional year for its IP business, Synopsys is focused on integrating Ansys, accelerating cost synergies, and delivering joint solutions to drive sustainable growth and margin expansion.

    Highlights

    5

    • Achieved record annual revenue of $7.05 billion, up approximately 15% year-over-year.

    • Exited FY '25 with more than $11 billion in backlog, an increase from $10.1 billion last quarter.

    • FY26 non-GAAP operating margin is guided to 40.5% at the midpoint, representing a 320 basis point increase versus FY25.

    • Free cash flow for FY25 was approximately $1.35 billion, coming in ahead of expectations.

    • Secured 13 PCIe 7.0 design wins during FY '25 and 10 competitive wins for LPDDR6 and MRDIMM2 memory IP.

    Concerns

    4

    • China revenue was down 18% in FY25 (22% excluding Ansys), with the environment expected to remain challenging.

    • Design IP segment revenue was down 8% in FY25 due to a challenging second half.

    • The IP business is expected to have muted growth in FY26, described as a "transitional year."

    • FY26 cash flow includes non-recurring outflows of approximately $225 million for restructuring costs and $135 million for incremental cash taxes from divestitures.

    Guidance & targets

    23
    CategoryTargetConfidence
    Total Revenue
    $9.56 billion to $9.66 billion
    high materiality
    High
    Ansys Revenue Contribution
    $2.9 billion
    medium materiality
    High
    Revenue Split
    48% H1 / 52% H2
    low materiality
    High
    Total GAAP Costs and Expenses
    $8.47 billion to $8.61 billion
    medium materiality
    High
    Total Non-GAAP Costs and Expenses
    $5.69 billion to $5.75 billion
    medium materiality
    High
    Non-GAAP Operating Margin
    40.5%
    high materiality
    High
    Normalized Non-GAAP Tax Rate
    18%
    low materiality
    High
    GAAP Earnings Per Share
    $2.49 to $2.90 per share
    high materiality
    High
    Non-GAAP Earnings Per Share
    $14.32 to $14.40 per share
    high materiality
    High
    EPS Split
    46% H1 / 54% H2
    low materiality
    High
    Cash Flow from Operations
    approximately $2.2 billion
    high materiality
    High
    Capital Expenditure (CapEx)
    approximately $300 million
    medium materiality
    High
    Free Cash Flow
    approximately $1.9 billion
    high materiality
    High
    Fully Diluted Shares Outstanding
    192 million and 194 million shares
    low materiality
    High
    Term Loan Repayment
    $2.55 billion
    medium materiality
    High
    Q1 FY26 Total Revenue
    $2.365 billion and $2.415 billion
    high materiality
    High
    Q1 FY26 Total GAAP Costs and Expenses
    $2.165 billion and $2.23 billion
    medium materiality
    High
    Q1 FY26 Total Non-GAAP Costs and Expenses
    $1.395 billion and $1.425 billion
    medium materiality
    High
    Q1 FY26 GAAP Earnings Per Share
    $0.22 to $0.41 per share
    high materiality
    High
    Q1 FY26 Non-GAAP Earnings Per Share
    $3.52 to $3.58 per share
    high materiality
    High
    Long-term IP Business Growth
    mid-teens
    high materiality
    High
    Long-term EDA Business Growth
    double digits
    high materiality
    High
    Long-term Unleveled Free Cash Flow Margin
    mid-30s
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Design Automation
    Full year 2025 revenue, which includes EDA, Ansys and other. Excluding Ansys, Design Automation revenue grew approximately 8% with steady growth in EDA software and a record year in hardware. Adjusted operating margin for FY25.
    		$5.3 billion26%—approximately 42%
    Design IP
    Full year 2025 revenue, down due to challenging second half. Adjusted operating margin for FY25. Expect muted growth in FY26.
    		$1.75 billion-8%—24%
    Ansys
    Contribution to total revenue for full year 2025. Q4 revenue was $668 million. Expected to contribute $2.9 billion at midpoint in FY26, growing double digits.
    		$757 million—$668 million—

    Operational metrics

    15
    Non-GAAP Operating Margin
    37.3%
    FY25

    Full year 2025.

    Non-GAAP Operating Margin
    36.5%
    Q4 FY25

    Q4 2025.

    Non-GAAP EPS
    $2.90
    Q4 FY25

    Ahead of guidance on lower expenses.

    Non-GAAP EPS
    $12.91
    FY25

    Ahead of guidance on lower expenses.

    Cash and Investments Balance
    $2.96 billion
    Q4 FY25 end

    Includes approximately $600 million in proceeds from the sale of the Optical Solutions Group and Ansys PowerArtist business.

    Total Debt
    $13.5 billion
    Q4 FY25 end

    Total debt at quarter end.

    Term Loan Repayment
    $850 million
    Q4 FY25

    Repaid in Q4 FY25.

    Term Loan Repayment
    $900 million
    November 2025

    Repaid in November.

    China Revenue
    -18%YoY
    FY25

    China continued to be challenged. Absolute value of $814 million for FY25 was analyst-stated and acknowledged by management.

    Total Non-GAAP Costs and Expenses
    $4.42 billion
    FY25

    Full year 2025.

    Total Non-GAAP Costs and Expenses
    $1.43 billion
    Q4 FY25

    Q4 2025.

    Workforce Reduction
    10%
    FY26

    Previously announced workforce reduction, encompassing work on synergies.

    Divestiture Revenue Impact
    $110 million
    FY26

    Impact on FY26 guidance from the divestiture of Optical Solutions Group and PowerArtist Group.

    Total Revenue
    $2.25 billionhigh end of guidance
    Q4 FY25

    Q4 revenue came in at the high end of guidance.

    NVIDIA Investment
    $2 billion
    Q4 FY25

    Investment from NVIDIA as part of strategic partnership, welcomed by Synopsys to accelerate strategy and debt payment.

    Industry KPIs

    4
    MetricValueDetails
    Revenue growth$7.05 billionUSD
    Rpo current rpo$11.4 billionUSD
    Operating FCF margin rule of 4037.3%%
    Ai product adoption monetizationNearly 5,000users

    Orderbook & backlog

    1
    Backlog$11.4 billionFY25 end

    up from $10.1 billion last quarter

    Represents total backlog, driven by strength in bookings across the business.

    Product announcements

    6
    ProductTypeDetails
    AWS Graviton5milestone
    Synopsys.aiupdate
    AgentEngineer technologyroadmap
    Synopsys-Ansys joint solutionslaunch
    PCIe 7.0 IPmilestone
    LPDDR6 and MRDIMM2 memory IPmilestone

    Deals & partnerships

    3
    AnsysTransformed Synopsys from an EDA leader to the leader in engineering solutions from silicon to systems.

    The combination allows bridging digital and physical design to help engineering teams deliver better products faster and at lower cost.

    N/ADivestiture of non-core assets to accelerate strategy and drive efficiency.approximately $600 million

    Completed planned divestitures of the Optical Solutions and PowerArtist businesses in October.

    NVIDIAStrategic partnership to revolutionize design and engineering with AI and accelerated computing.$2 billion

    Discussion started around accelerating computational level with GPU and modernizing engineering with Omniverse, leading to NVIDIA's investment to endorse the partnership.

    Risks & headwinds

    4
    Challenging China market environmentFY25, expected to continue in FY26

    China revenue down 18% in FY25 (22% excluding Ansys).

    Mitigation: Pragmatic view in FY26 guidance, assuming the environment remains challenging; focus on serving customers not restricted; Synopsys classic facing inability to sell to market needing most advanced solutions due to restrictions.

    Muted growth and transitional year for IP businessFY26

    Design IP segment revenue down 8% in FY25; muted growth expected in FY26.

    Mitigation: Repositioning workforce to build out HPC titles; changes in development and sales leadership; closing gaps on specific titles by mid-FY26; renewed focus on highest value opportunities and exploring new business models (NRE + use fee + royalty) for customization.

    Non-recurring cash outflows impacting FY26 cash flowFY26

    Restructuring costs of approximately $225 million; $135 million incremental cash taxes from recent divestitures.

    Mitigation: These are considered one-time items; company is focused on driving to long-term unlevered free cash flow margin in the mid-30s.

    Impact of divestitures on FY26 revenueFY26

    Approximately $110 million

    Mitigation: Already factored into FY26 guidance; represents a mechanical headwind.

    What to watch in Q1 FY26

    5

    IP Business Recovery

    H2 FY26 and beyond
    CurrentMuted growth expected in FY26, down 8% in FY25
    TargetProgress towards mid-teens long-term growth; availability of HPC titles

    Why it matters

    IP is a key segment, and its recovery is crucial for overall growth targets and long-term financial performance.

    2026 is a transitional year for the IP business, and we expect growth to be muted. However, given our leadership position in essential interconnect and foundation IP, our healthy sales pipeline and a renewed focus on the highest value opportunities, we are confident in our long-term mid-teens growth target.

    Q&A highlights

    8

    Analyst calculated ~8% organic growth for FY26, asking for confirmation and implications for IP.

    Shelagh confirmed the ballpark, noting a $110 million impact from divestitures and muted IP growth due to repositioning for HPC titles. The IP business is expected to be in transition for the year.

    “we do anticipate a muted year of growth for IP. We are very much well into repositioning workforce to build out the HPC title so that we've got those fully available for customers.”

    asked by Jason Celino · answered by Shelagh Glaser

    2 min read5 chapters

    Detailed Narrative

    01

    Ansys Integration and Strategic Vision

    Synopsys completed a transformational FY25 with the Ansys acquisition, redefining its position from an EDA leader to a leader in engineering solutions from silicon to systems. The integration is well underway, with planned divestitures of the Optical Solutions and PowerArtist businesses completed. Restructuring actions have been initiated to drive efficiency and accelerate committed synergies, aiming to bridge digital and physical design for complex AI-powered systems.

    02

    AI-Driven Design and Ecosystem Partnerships

    The multitrillion-dollar AI infrastructure build-out is driving robust semiconductor demand and design starts for specialized and general-purpose compute. Synopsys.ai has nearly 5,000 active users among Tier 1 semi customers, leveraging its assistive and creative capabilities. The company is also advancing AgentEngineer technology with partners like NVIDIA and Microsoft, aiming to revolutionize engineering workflows. A strategic partnership with NVIDIA, including a $2 billion investment, further positions Synopsys in AI and accelerated computing.

    03

    Design Automation Strength and Market Dynamics

    The Design Automation segment saw continued strong demand in hardware-assisted verification (HAV), ending a record year with 12 competitive wins in Q4. Virtual prototyping also experienced demand from automotive and high-performance compute customers. Synopsys tools were critical to the design of the new AWS Graviton5 chip, showcasing the company's leadership in advanced node, multi-die, and AI design. However, the EDA business faces headwinds from the China environment and a 'tale of two markets' where some industries outside AI infrastructure have muted demand.

    04

    IP Business Transition and Long-Term Confidence

    The Design IP business experienced a challenging FY25 with an 8% decline in revenue, and FY26 is expected to be a transitional year with muted growth. This is attributed to headwinds in China, a specific foundry customer, and the need to reposition resources for HPC titles. Despite these short-term challenges, management expressed strong confidence in achieving long-term mid-teens growth, citing leadership in essential interconnect and foundation IP, a healthy sales pipeline, and a renewed focus on high-value opportunities, including potential changes to the business model for customization.

    05

    Financial Discipline and Margin Expansion

    Synopsys is focused on executing with financial discipline, with workforce reductions underway to accelerate cost synergies. The company guided to a 40.5% non-GAAP operating margin for FY26, a 320 basis point increase from FY25, and is committed to achieving mid-40s long-term. Free cash flow is expected to improve significantly in FY26 to approximately $1.9 billion, despite non-recurring📎 outflows such as restructuring costs and incremental cash taxes from divestitures.

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