Synopsys NASDAQ: SNPS reported fiscal second-quarter results above its own guidance and raised its full-year outlook, citing solid execution, demand tied to artificial intelligence chip development and early benefits from its integration of Ansys.
President and CEO Sassine Ghazi said Synopsys delivered a “strong second quarter” with revenue, non-GAAP operating margin and non-GAAP earnings per share all exceeding guidance. He said electronic design automation, intellectual property and multiphysics simulation have become “essential capabilities in the AI supply chain” as customers design more complex chips, systems and AI infrastructure.
Chief Financial Officer Shelagh Glaser said second-quarter revenue was $2.276 billion, including approximately $652 million from Ansys. Non-GAAP operating margin was 39.5%, and non-GAAP earnings per share were $3.35. Backlog ended the quarter at $11 billion.
On a GAAP basis, total costs and expenses were $2.156 billion, which Glaser said came in higher than expected primarily due to accelerated timing of restructuring costs. GAAP earnings per share were $0.09.
Synopsys Raises Full-Year Guidance
Glaser said Synopsys is raising its fiscal 2026 guidance for revenue, operating margin, earnings per share and free cash flow after a strong first half and continued confidence across the business.
The company now expects full-year revenue of $9.625 billion to $9.705 billion. Glaser said the updated outlook reflects three factors: a $35 million increase at the midpoint from stronger first-half performance and business confidence, a $60 million increase tied to Ansys channel revenue accounting, and a roughly $40 million reduction from the expected divestiture of the processor IP solutions business.
Synopsys expects Ansys to contribute approximately $2.96 billion in fiscal 2026 revenue, including the accounting impact. Glaser said the channel accounting change requires Synopsys to recognize certain Ansys channel revenue on a gross basis, which adds an equal amount to revenue and expenses and is neutral to earnings per share and cash flow.
For the full year, Synopsys now expects non-GAAP operating margin of 41% at the midpoint, up 50 basis points from prior guidance. Non-GAAP earnings per share are expected to range from $14.72 to $14.80, up $0.34 at the midpoint from prior guidance. The company also raised its operating cash flow outlook to approximately $2.3 billion and its free cash flow outlook to approximately $2 billion.
For the third quarter, Synopsys guided for revenue of $2.41 billion to $2.46 billion and non-GAAP earnings per share of $3.63 to $3.69.
Design Automation Strength Led by AI and Verification Demand
Design Automation revenue was approximately $1.822 billion in the quarter, including Ansys. Within the segment, Glaser said EDA revenue grew slightly more than 8% year over year, with strength in hardware-assisted verification. The segment’s adjusted operating margin was 43.3%.
Ghazi said demand remained strong for advanced-node and 3D IC solutions, with hardware-assisted verification benefiting from hyperscaler and leading semiconductor customers scaling emulation and prototyping for complex AI designs. He cited strategic wins across ZS5, ZeBu and HAPS-200.
Ghazi also highlighted 3D IC adoption, saying a leading high-performance computing provider taped out a next-generation AI accelerator using Synopsys’ unified multiphysics-aware design-to-sign-off solution. He said Synopsys recorded more than 30 full-flow technical wins in advanced nodes during the quarter.
The company is also developing Multiphysics Fusion technology, which Ghazi said has shown early results including up to 3x faster design closure and up to 2x faster turnaround times for complex analog designs compared with traditional flows. He said the technology is in expanding trials with leading customers and is expected to begin ramping into commercial availability in the second half of 2026.
IP Segment Shows Sequential Recovery
Design IP revenue was $454 million, down approximately 6% year over year but up 12% sequentially. The segment’s adjusted operating margin was 24.4%.
Ghazi said Synopsys continues to expect muted IP growth for fiscal 2026, but believes the segment bottomed in the first quarter and has begun to recover. He said the company expects sequential quarterly improvements throughout the second half.
During the quarter, Synopsys reported more momentum in high-speed interconnect and connectivity IP. Ghazi said PCIe 7.0 IP achieved a win rate above 90%, with 18 new licenses, and that the company saw multiple wins in 224G technology. Synopsys also secured additional UCIe design wins and completed a 64-gig tapeout on a two-nanometer process, bringing total lifetime UCIe wins to more than 150.
In response to analyst questions, Ghazi said the company is pursuing higher-value IP opportunities tied to hyperscalers and custom AI silicon. He said Synopsys expects to have “few customers” signed to a new business model by the end of the fiscal year that could allow the company to capture more revenue than traditional use fees or some level of non-recurring engineering payments.
Ansys Integration and Synergies Remain in Focus
Ghazi said Ansys delivered another strong quarter and expands Synopsys’ reach into system-level design and multiphysics simulation. He cited demand tied to AI data centers, aerospace and defense, automotive and industrial markets.
Glaser said integration work is well underway and that Synopsys expects to have achieved about half of its committed cost synergies by the end of fiscal 2026. She said the company is reducing overlap and duplication in headcount and third-party vendor contracts while continuing to invest in the multiphysics portfolio and go-to-market resources.
Synopsys ended the quarter with $2.48 billion in cash and short-term investments and approximately $10 billion in total debt. Glaser said the company initiated a $250 million accelerated share repurchase in March and also executed a $50 million open-market share repurchase during the quarter.
Board Update and Investor Day
Ghazi also announced a cooperation agreement with Elliott Management and the appointment of Jesse Cohn to Synopsys’ board as an independent director. He said Cohn has a “deep appreciation” for the company and its mission and said he looks forward to working with him.
Synopsys plans to host an investor day on September 30, 2026. Ghazi said the company will discuss its strategy to increase value capture and expand margins, including opportunities in IP, EDA, Ansys-related offerings and agentic AI.
“The expansion of AI positions Synopsys for sustainable growth and margin expansion,” Ghazi said, adding that the company’s portfolio across EDA, IP and multiphysics simulation gives it an opportunity to capture a larger share of demand as chip and system complexity rises.
About Synopsys NASDAQ: SNPS
Synopsys, Inc is a leading provider of electronic design automation (EDA) software and semiconductor intellectual property (IP) used to design, verify and manufacture integrated circuits and complex systems-on-chip (SoCs). Its product portfolio spans tools and technologies for front‑end design and synthesis, simulation and verification, physical implementation and signoff, and design-for-manufacturability, enabling chip designers to move from architecture through tape‑out.
In addition to core EDA offerings, Synopsys supplies a broad set of semiconductor IP building blocks — such as interface, memory and analog/mixed-signal cores — that customers integrate into SoCs to accelerate development.
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