Synopsys beats Q3 estimates, raises full-year revenue outlook to $9.7B

Synopsys reported Q3 fiscal 2026 revenue of $2.48 billion, up 42% year over year, beating the high end of guidance.

"The key takeaway from Q3 is that the fundamentals across our portfolio are strengthening," Sassine Ghazi, president and CEO, said. "EDA is accelerating, design IP has returned to growth, and Ansys is performing strongly while beginning to create new growth opportunities across the combined portfolio."

Non-GAAP EPS came in at $3.91, beating the $3.67 consensus by 6.5%. GAAP EPS was $2.84, including a gain tied to the sale of the Processor IP Solutions business. The company raised full-year revenue guidance to $9.69 billion to $9.74 billion, including an expected Ansys contribution of approximately $2.98 billion, with non-GAAP EPS of $15.04 to $15.10.

Shares have fallen about 13% this year even as the S&P 500 gained 12.2%, leaving the stock lagging the broader market despite the earnings beat. The raised guidance implies fourth-quarter revenue of $2.53 billion to $2.58 billion and non-GAAP EPS of $4.10 to $4.16.

The EDA segment generated about $2 billion in revenue with a 45.2% adjusted operating margin. EDA revenue grew 8.5% year over year, supported by software demand and a record quarter for hardware-assisted verification. The company secured 12 new and 66 repeat customer wins for hardware-assisted verification, with AMD using Synopsys' 3DIC Compiler for its Instinct MI455X GPU series.

Design IP revenue rose about 11% to $474 million, returning the segment to growth. The company won more than 95% of PCIe 7.0 opportunities and has secured 25 LPDDR6 design wins year to date. Its die-to-die business is on pace to double year over year with more than 100 cumulative design wins.

Ansys contributed approximately $711 million in revenue during the quarter, marking one year since the acquisition closed. Synopsys launched Multiphysics Fusion, combining thermal analysis into chip-design workflows, with customers including NVIDIA, Cisco, MediaTek and Samsung Foundry validating up to 10 times faster design closure. Management does not expect the offering to meaningfully contribute to EDA growth until fiscal 2027.

The company ended the quarter with $10.9 billion in backlog, $3.6 billion in cash and about $10 billion in total debt. Free cash flow was $746 million. Full-year operating cash flow guidance was raised by $500 million to approximately $2.8 billion, with free cash flow now expected at approximately $2.6 billion.

Ghazi said Synopsys has more than 30 active customer engagements involving its agentic AI platform, with the company considering subscription and consumption-based models for AI agents.

The guidance raise shows management expects AI-driven chip design demand to accelerate into fiscal 2027. Investors will watch the fourth-quarter earnings call for updates on Multiphysics Fusion adoption and the transition of the IP business toward royalty-based models.

This article is for informational purposes only and does not constitute investment advice.