Synopsys, Inc. — Third Quarter Fiscal Year 2026 Earnings Summary

Financial Performance

• Quarterly revenue for Q3 FY2026 was $2.477 billion, a 42.4% increase from $1.740 billion in Q3 FY2025.
• GAAP net income for Q3 FY2026 was $545.8 million ($2.84 per diluted share), compared to $242.5 million ($1.50 per diluted share) in Q3 FY2025.
• Non-GAAP net income for Q3 FY2026 was $752.5 million ($3.91 per diluted share), compared to $548.9 million ($3.39 per diluted share) in Q3 FY2025.
• GAAP operating margin for Q3 FY2026 was 14.4%; Non-GAAP operating margin was 41.6%.
• Nine-month revenue ended July 31, 2026, was $7.162 billion, compared to $4.799 billion for the same period in 2025.
• Nine-month GAAP net income was $627.9 million, compared to $887.4 million in the prior year period.
• Nine-month Non-GAAP net income was $2.115 billion, compared to $1.595 billion in the prior year period.
• Cash and cash equivalents were $3.606 billion as of July 31, 2026, up from $2.888 billion as of October 31, 2025.
• Total debt (short-term and long-term) was $10.037 billion as of July 31, 2026, down from $13.485 billion as of October 31, 2025.
• Deferred revenue (current and long-term) totaled $2.715 billion as of July 31, 2026, up from $2.629 billion as of October 31, 2025.
• Operating cash flow for the nine months ended July 31, 2026, was $2.299 billion, compared to $878.9 million in the prior year period.

Guidance and Future Outlook

• Full-year FY2026 revenue guidance raised to a midpoint of $9.715 billion (range: $9.690 billion to $9.740 billion).
• Full-year FY2026 Non-GAAP EPS guidance raised to a midpoint of $15.07 (range: $15.04 to $15.10).
• Full-year FY2026 Non-GAAP operating margin guidance raised to a midpoint of approximately 41.5%.
• Full-year FY2026 Operating Cash Flow guidance is approximately $2.8 billion.
• Full-year FY2026 Free Cash Flow guidance is approximately $2.6 billion.
• Full-year FY2026 Capital Expenditures guidance is approximately $225 million.
• Q4 FY2026 revenue guidance range is $2.530 billion to $2.580 billion.
• Q4 FY2026 Non-GAAP EPS guidance range is $4.10 to $4.16.
• Guidance assumes no further changes to export control restrictions or U.S. government "Entity List" restrictions.

Business Segments and Product Lines

• Design Automation segment revenue was $2.003 billion in Q3 FY2026, up from $1.312 billion in Q3 FY2025, representing 80.9% of total revenue.
• Design IP segment revenue was $473.8 million in Q3 FY2026, up from $427.6 million in Q3 FY2025, representing 19.1% of total revenue.
• Design Automation adjusted operating margin was 45.2% in Q3 FY2026, compared to 44.5% in Q3 FY2025.
• Design IP adjusted operating margin was 26.5% in Q3 FY2026, compared to 20.1% in Q3 FY2025.
• The Design IP business returned to year-over-year growth.
• Ansys products contributed to strong performance in the Design Automation segment.
• Fiscal year 2026 revenue includes $2.98 billion of expected Ansys revenue.
• Revenue reflects the impact of approximately $110 million from divested Optical Solutions Group and PowerArtist RTL businesses, and $40 million from the divestiture of Processor IP Solutions.
• The Software Integrity business was sold on September 30, 2024, and is presented as a discontinued operation.

Market and Competitive Landscape

• AI is driving unprecedented complexity and increasing demand for silicon IP and engineering solutions for next-generation AI compute, infrastructure, and physical AI systems.
• Management expects double-digit growth in the EDA (Electronic Design Automation) segment.
• The company is executing with focus one year after the acquisition of Ansys to extend leadership and gain momentum.
• The industry is described as highly competitive.

Risks and Challenges

• Risks include macroeconomic conditions, geopolitical uncertainty, and uncertainty in the growth of the semiconductor and electronics industries.
• Potential impacts from U.S. and foreign trade regulations, including export control restrictions and tariffs.
• Risks related to the integration of Ansys, including realization of synergies and timing.
• Dependence on a relatively small number of large customers and potential customer consolidation.
• Risks associated with the One Big Beautiful Bill Act (OBBB) impacting taxable income and expensing of U.S. research expenditures.
• Potential variability in acquisition/divestiture related items, tax deductions, and fair value changes in non-qualified deferred compensation plans.

Management Commentary and Tone

• CEO Sassine Ghazi stated that AI is driving demand for solutions necessary to deliver next-generation AI compute and infrastructure.
• CFO Shelagh Glaser described the quarter as "outstanding," noting results exceeded the high end of guidance.
• Management expressed confidence in the strength of AI-driven demand and the integration of Ansys.
• Management raised full-year guidance for revenue, non-GAAP operating margin, EPS, and cash flow based on strong performance.

Other Key Points

• Synopsys completed the acquisition of Ansys one year prior to this report.
• The company divested the Optical Solutions Group, PowerArtist RTL, and Processor IP Solutions businesses during the fiscal year.
• The company transitioned to a normalized three-year non-GAAP tax rate of 18.0% for fiscal years 2026 through 2028.
• Stock-based compensation for the nine months ended July 31, 2026, was $712.6 million.
• Amortization of acquired intangible assets for the nine months ended July 31, 2026, was $1.21 billion.
• Restructuring charges for the nine months ended July 31, 2026, were $236.3 million.
• The company purchased $300 million of treasury stock during the nine-month period.
• A private placement of common stock generated $2.0 billion in proceeds during the nine-month period.
• The company repaid $3.46 billion in debt during the nine-month period.