SYNOPSYS INC

Synopsys, Inc. is the leader in engineering solutions from silicon to systems, enabling customers to rapidly innovate AI-powered products. The company delivers trusted and comprehensive solutions spanning silicon design, silicon intellectual property (IP), simulation and analysis (S&A) as well as design services. Synopsys is a global leader in supplying the mission-critical electronic design automation (EDA) solutions that engineers use to design and test integrated circuits (ICs), also known as chips or silicon, and is pioneering artificial intelligence (AI) driven chip design across the full-stack EDA suite. Following the completion of the Ansys Merger, Synopsys is also the global leader in engineering S&A software, with its Ansys solutions portfolio widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including high-tech, aerospace and defense, automotive, energy, industrial equipment, materials and chemicals, consumer products, healthcare and construction. The company operates in the highly competitive EDA, semiconductor IP, and engineering simulation and analysis industries, where technology evolves rapidly and is characterized by frequent product introductions and improvements as well as changes in industry standards and customer requirements. The growth of the EDA industry as a whole and Synopsys' sales in its Design Automation and Design IP segments are primarily dependent on the semiconductor and electronics industries, and a substantial portion of the company's business and revenue depends upon the commencement of new design projects by semiconductor manufacturers, systems companies and their customers.

Within its Design Automation segment, Synopsys competes against other EDA vendors and against customers' own design tools and internal design capabilities, with the EDA industry being highly competitive. The company competes principally on technology leadership, product quality and features, license terms, price and payment terms, post-contract customer support, flexibility of tool use, and interoperability with its own and other vendors' products. For its Ansys S&A software solutions, competitors include publicly traded companies, small geographically-focused firms, startups, and solutions produced in-house by end users. Within its Design IP segment, Synopsys competes against numerous other IP providers and customers' internally developed IP, generally competing on the basis of product quality, reliability, features, availability of titles for new manufacturing processes, ease of integration with customer designs, compatibility with design tools, license terms, price and payment terms, and customer support. The company has a diversified portfolio of more than 3,800 ¹ United States and foreign patents issued, with expiration dates through 2044 ² and generally a term of 20 years from filing. Synopsys derives roughly half of its revenue from sales outside the United States and expects orders and revenue to continue to depend on sales to customers outside the U.S.

Synopsys generates revenue from the licensing of its EDA software, IP products and S&A software solutions, as well as the sale of hardware products, and maintenance and services. The majority of arrangements for EDA software are Technology Subscription License (TSL) contracts, which are time-based licenses for a finite term that generally provide the customer with limited rights to receive unspecified future technology, and revenue for the combined performance obligation under TSL contracts is recognized ratably over the term of the license. For Design IP, arrangements generally have two distinct performance obligations consisting of transferring the licensed IP and providing related support, with revenue allocated to the IP license recognized at a point in time upon the later of the delivery date or the beginning of the license period. S&A software solutions are offered as subscription solutions and also as perpetual licenses, with time-based software license revenue presented as upfront products revenue recognized at a point in time and support service revenue recognized over the term of the arrangement. Hardware products are either sold or leased, with the portion of the transaction price allocated to the hardware product generally recognized as revenue at the time of shipment. The company's customer arrangements can involve multiple products and various license rights, and customers generally negotiate the total value of the arrangement rather than just unit pricing or volumes.

Revenue from Synopsys' products and services is categorized into four groups: EDA, which includes digital and custom IC design software, verification hardware and software products, manufacturing-related design products, FPGA design software, AI driven EDA solutions and professional services; Design IP, which includes interface, foundation, security, and embedded processor IP, IP subsystems, and IP implementation services; Ansys, which includes SoC and IC analysis and simulation solutions, solutions used to virtually test and optimize designs across various physics domains such as structural analysis, thermal analysis, and CFD; and Other, which includes university programs, mechatronic simulation and the impact of gains and losses from foreign currency hedges. For fiscal 2025, EDA represented 62.0% ³ of total revenue, Design IP represented 24.8% ⁴, Ansys represented 10.7% ⁵, and Other represented 2.5% ⁶. The Design Automation segment includes the EDA, Ansys and Other revenue groups, while the Design IP segment includes Design IP solutions. The Design Automation segment's adjusted operating margin was 42% ⁷ in fiscal 2025, compared to 39% ⁸ in fiscal 2024, while the Design IP segment's adjusted operating margin was 24% ⁹ in fiscal 2025, compared to 38% ¹⁰ in fiscal 2024.

The Design Automation segment includes advanced silicon design, verification products and services, Ansys products, and system integration products and services, as well as digital, custom and FPGA IC design software, verification software and hardware products, and manufacturing software products. Key EDA product families include the Digital Design Family with products like Fusion Compiler RTL to GDSII design implementation, Design Compiler NXT logic synthesis, and PrimeTime static timing analysis; the Custom Design Family with Custom Compiler layout and schematic editor and PrimeSim simulation technologies; the Verification Family with VCS functional verification, ZeBu emulation systems, and HAPS FPGA-based prototyping systems; and manufacturing solutions including TCAD, mask synthesis and manufacturing analytics. The Synopsys.ai suite of AI-driven solutions includes DSO.ai for Design Space Optimization, VSO.ai for Verification Space Optimization, and TSO.ai for Test Space Optimization. The Ansys S&A portfolio spans structures, electronics, fluids, and optics, VR and photonics modeling, with products including Ansys Mechanical, Ansys HFSS, Ansys Fluent, and Ansys Lumerical. The Design IP segment provides the broadest, most comprehensive portfolio of high-quality, silicon-proven IP solutions for SoCs, including pre-verified and silicon-proven IP solutions for widely used and emerging interfaces such as UCIe, UALink, HBM, CXL, USB, PCI Express, DDR/LPDDR, Ethernet, Ultra Ethernet, MIPI and HDMI; logic libraries and embedded memories; processor solutions including configurable ARC processors; security IP solutions; and IP offerings for the automotive market optimized for functional safety standards such as ISO 26262 and ISO 21434.

On July 17, 2025 ¹¹, Synopsys completed its acquisition of ANSYS, Inc. (the Ansys Merger) for aggregate purchase consideration of approximately $34.9 billion ¹², consisting of cash of $17.6 billion ¹³, Synopsys Common Stock with a fair value of $17.1 billion ¹⁴, and the balance related to the assumption of certain outstanding Ansys equity awards and the settlement of pre-existing relationships. The company funded the Cash Consideration through a combination of cash on hand, the net proceeds from the issuance of the Senior Notes, and the borrowings under the Term Loan Agreement. In March 2025, Synopsys issued $10.0 billion ¹⁵ in aggregate principal amount of senior notes (the Senior Notes), with total proceeds of approximately $9.9 billion ¹⁶, net of original issuance discount of $17.0 million ¹⁷ and total issuance costs of $70.2 million ¹⁸. On July 17, 2025 ¹⁹, the company borrowed the full $4.3 billion ²⁰ available under the Term Loan Agreement to fund a portion of the Cash Consideration. On October 17, 2025 ²¹, Synopsys made an early repayment of $850.0 million ²² on the Tranche 1 Term Loan. The company also completed the Regulatory Divestitures on October 17, 2025 ²³, selling its Optical Solutions Group and Ansys' PowerArtist RTL business to Keysight Technologies, Inc. for cash consideration of $604.0 million ²⁴, recognizing a pre-tax gain on sale of $548.9 million ²⁵. In fiscal 2022, the Board of Directors approved a stock repurchase program with authorization to purchase up to $1.5 billion ²⁶ of common stock, and as of October 31, 2025, $194.3 million ²⁷ remained available for future repurchases, though the program has been suspended in connection with the Ansys Merger until debt levels are reduced. In November 2025 ²⁸, Synopsys initiated a restructuring plan (the 2026 Plan) for involuntary employee terminations, with total charges expected to be in the range of $300.0 million ²⁹ and $350.0 million ³⁰, consisting primarily of severance costs, other one-time termination benefits and facility exit costs.

For fiscal 2025, total revenue was $7,054.2 million ³¹, an increase of $926.8 million ³² or 15% ³³ compared to fiscal 2024 revenue of $6,127.4 million ³⁴, which included revenues from Ansys of $756.6 million ³⁵. Net income from continuing operations attributed to Synopsys was $1,336.1 million ³⁶ in fiscal 2025, compared to $1,441.7 million ³⁷ in fiscal 2024. Diluted net income per share from continuing operations was $8.07 ³⁸ in fiscal 2025, compared to $9.25 ³⁹ in fiscal 2024. Operating income was $914.9 million ⁴⁰ in fiscal 2025, compared to $1,355.7 million ⁴¹ in fiscal 2024. Total cost of revenue and operating expenses was $6.1 billion ⁴², an increase of $1.4 billion ⁴³ or 29% ⁴⁴, primarily due to an increase of $664.5 million ⁴⁵ in employee-related costs from headcount increases as a result of the Ansys Merger of $432.1 million ⁴⁶ and the balance from organic growth, as well as $457.8 million ⁴⁷ of amortization expense related to intangible assets acquired from the Ansys Merger. Cash provided by operating activities was $1,518.6 million ⁴⁸ in fiscal 2025, compared to $1,407.0 million ⁴⁹ in fiscal 2024. As of October 31, 2025, the company held $3.0 billion ⁵⁰ in cash, cash equivalents and short-term investments, and had approximately $13.5 billion ⁵¹ of total debt.

Synopsys expects growth across its geographies in fiscal 2026; however, the company is expecting a challenging near-term environment, including in China, due to macroeconomic factors and Trade Restrictions. The company has begun taking actions to sharpen its execution and reallocate resources to the highest growth opportunities in its Design IP segment, but expects to see muted growth in fiscal 2026. The company anticipates additional changes to the U.S. Export Regulations or other U.S. or non-U.S. export, sanctions, or similar trade requirements in the future, but cannot forecast the scope or timing of such changes, nor the impact on its business.

A key growth vector for Synopsys is the expansion of its total addressable market by maximizing the capabilities of R&D teams across industries spanning semiconductor, high-tech, industrial, aerospace, and more with engineering solutions from silicon to systems, following the completion of the Ansys Merger. The company's priorities are to maintain and expand its technology leadership, drive sustainable growth and efficiently scale to accelerate its strategy. Synopsys is pioneering AI-driven chip design across the full-stack EDA suite through its Synopsys.ai suite of solutions, which includes DSO.ai, VSO.ai, TSO.ai, ASO.ai, and other AI-driven capabilities, to improve efficiency and accelerate the design, verification testing and manufacturing of advanced digital and analog chips. The company's Synopsys Cloud offering provides customers additional options for accessing EDA products in their own cloud environments and in the industry's first EDA Software-as-a-Service solution developed in partnership with Microsoft Azure.

Another major growth vector is the Design IP segment, where Synopsys provides the broadest, most comprehensive portfolio of high-quality, silicon-proven IP solutions for SoCs, including IP optimized for AI/data center, automotive, edge AI, digital home, Internet of Things and mobile markets. However, the company has experienced weakness in its Design IP segment due to several headwinds, including China export control restrictions such as the Q3 2025 BIS Restrictions, which disrupted customer design starts in China, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results. Synopsys has begun taking actions to reallocate resources in its IP business to certain higher growth opportunities, though these efforts may not succeed or generate expected returns.

Synopsys' total cost of revenue and operating expenses increased by $1.4 billion ⁵² or 29% ⁵³ in fiscal 2025 compared to fiscal 2024, primarily due to increases in employee-related costs from headcount increases as a result of the Ansys Merger and organic growth, as well as amortization expense related to intangible assets acquired from the Ansys Merger. The company's effective tax rate for fiscal 2025 was 4.0% ⁵⁴, which included $64.8 million ⁵⁵ of U.S. federal research tax credit benefit, $106.9 million ⁵⁶ of foreign derived intangible income (FDII) deduction benefit, and $148.0 million ⁵⁷ of tax benefit for the reduction in valuation allowance. In November 2025 ⁵⁸, Synopsys initiated a restructuring plan (the 2026 Plan) for involuntary employee terminations as part of a business reorganization upon approval by the Board of Directors, with total charges expected to be in the range of $300.0 million ⁵⁹ and $350.0 million ⁶⁰, consisting primarily of severance costs, other one-time termination benefits and facility exit costs, to allow the company to invest in key growth opportunities and drive business efficiencies following the completion of the Ansys Merger.

As of fiscal 2025 year-end, Synopsys had approximately 28,000 ⁶¹ employees, with about 23% ⁶² in the United States and 77% ⁶³ in other locations worldwide, and approximately 75% ⁶⁴ of employees are engineers, with over half holding Master's or PhD degrees. In fiscal 2025, total employee headcount grew by approximately 40% ⁶⁵ primarily as a result of the Ansys Merger. The company's voluntary turnover rate was 5.7% ⁶⁶ as of fiscal 2025 year-end. Synopsys has 189 ⁶⁷ offices worldwide and currently leases approximately 1.7 million ⁶⁸ square feet of space in 45 offices throughout the United States, of which it sublets 340,000 ⁶⁹ square feet to third parties, and owns approximately 176,000 ⁷⁰ square feet across four sites in the United States. The company also leases approximately 4 million ⁷¹ square feet of space in 35 countries other than the United States.

In fiscal 2025, research and development expenses were $2,479.3 million ⁷², or 35% ⁷³ of total revenue, compared to $2,082.4 million ⁷⁴ in fiscal 2024. The increase was primarily due to increases of $319.7 million ⁷⁵ in employee-related costs as a result of headcount increases from organic growth of $172.9 million ⁷⁶ and $146.8 million ⁷⁷ from the Ansys Merger, $57.1 million ⁷⁸ in IT and facility costs, and $39.1 million ⁷⁹ in consultant and contractor costs. As of October 31, 2025, $194.3 million ⁸⁰ remained available for future stock repurchases under the stock repurchase program, though the program has been suspended in connection with the Ansys Merger until the company reduces its expected debt levels. The company has not paid cash dividends on its common stock.

Structural headwinds explicitly flagged by management include the uncertain macroeconomic environment, which has resulted in some customers postponing their decision-making, delaying their drawdowns under non-cancellable commitments, decreasing their spending and/or delaying their payments to Synopsys. The company noted that while it has seen continued strength in the artificial intelligence and high-performance computing sectors, certain industries such as industrial, automotive and consumer electronics have recovered more slowly from recent macroeconomic uncertainty. Additionally, the company faces headwinds from U.S. export control restrictions, including the Q3 2025 BIS Restrictions which disrupted customer design starts in China, and anticipates additional changes to Trade Restrictions in the future that could create delays in the introduction of products or services in international markets or prevent customers with international operations from deploying products globally.

Geographic and regulatory constraints identified by management include the ongoing geopolitical and economic uncertainty between the U.S. and China, the unknown impact of current and future U.S. and Chinese trade regulations including tariffs, and other geopolitical risks with respect to China and Taiwan that may cause disruptions in the markets and industries served and the supply chain. The company noted that China export control restrictions have negatively impacted its business in China, including in its Design IP segment, and may continue to impact design starts or other aspects of its business in China in the future. Synopsys also faces risks from the evolving nature of U.S. Export Regulations, including the potential for new and expanded license requirements, which creates uncertainty regarding current and future impacts on its business.

The company faces material risks from the uncertain macroeconomic environment, which has led some customers to postpone decision-making and decrease spending, and if economic conditions deteriorate, the semiconductor and electronics industries that are core customers for the Design Automation and Design IP segments could see their growth slow or fail to grow at all. Synopsys is subject to governmental export and import requirements, and the U.S. government has implemented controls on advanced computing ICs and certain semiconductor manufacturing items, with China export control restrictions including the Q3 2025 BIS Restrictions having negatively impacted the Design IP segment and disrupted customer design starts in China. The company's significant debt, including approximately $13.5 billion ⁸¹ of total debt as of October 31, 2025, may limit financial flexibility, increase vulnerability to changing economic conditions, and require a substantial portion of cash flow from operations to service debt payments. Consolidation among customers in the semiconductor and electronics industries could lead to fewer customers, increased customer bargaining power, or reduced customer spending, and challenges with a major foundry customer negatively impacted financial results for fiscal 2025. The company may not realize the potential financial or strategic benefits of the Ansys Merger, which poses risks including difficulties integrating acquired products, failure to achieve projected sales, and the incurrence of substantial debt at potentially higher than anticipated interest rates.

Management's message emphasizes that fiscal 2025 results reflect continued strong execution and the resiliency of the business, including 15% ⁸² revenue growth compared to fiscal 2024, primarily due to revenue growth across a majority of product groups and geographies and the closing of the Ansys Merger, which contributed $756.6 million ⁸³ in revenue, offset by weakness in the business in China, which saw revenue decrease 22% ⁸⁴ compared to fiscal 2024, excluding Ansys. Management highlighted strength in the Design Automation segment, including strong demand for hardware products, offset by weakness in the Design IP segment due to several headwinds including China export control restrictions, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results. The company has begun taking actions to sharpen its execution and reallocate resources to the highest growth opportunities in its Design IP segment, but expects to see muted growth in fiscal 2026. Management's strategic priorities for the period ahead are to maintain and expand technology leadership, drive sustainable growth, and efficiently scale to accelerate the company's strategy following the completion of the Ansys Merger.