Shares Fall, Targets Rise—Markets and Analysts Diverge on Synopsys

Key Points

• The performance of Synopsys shares has fallen far behind many other stocks in the AI trade.
• The company's latest earnings report did not provide any relief—shares plunged, although analysts' price targets rose.
• As Synopsys looks to change the negative sentiment around its stock, the company's Investor Day in September could be an inflection point.

Synopsys NASDAQ: SNPS is one of the world’s two leading players in the electronic design automation (EDA) industry, along with Cadence Design Systems NASDAQ: CDNS. The company plays a critical role in advanced semiconductor development. Without top-tier EDA software, creating leading-edge semiconductor designs is nearly impossible.

Despite Synopsys’s importance, the stock has struggled to gain traction even as the artificial intelligence boom is in full swing. Since the beginning of 2025, Synopsys shares are essentially flat. This comes after the stock dived 8.6% following the company's latest earnings report.

Although Synopsys shares fell significantly, analyst price targets moved in the opposite direction—implying a potential opportunity in shares. As the stock continues to underperform, all eyes will be on Synopsys’s Investor Day in September.

Synopsys Posts Beats and Lifts Guidance, But Ansys Drives Growth

In its fiscal Q2 2026, Synopsys posted revenue of $2.28 billion. (Note that Synopsys’s fiscal reporting period is slightly ahead of the standard reporting period used by most companies.) This equated to revenue growth of 42% year-over-year (YOY) and beat estimates of $2.25 billion.

However, the vast majority of this growth was not organic but a product of Synopsys’s Ansys acquisition. Per the earnings call, growth would have been just 3% to 4% YOY excluding Ansys.

Meanwhile, Synopsys’s adjusted earnings per share (EPS) fell by nearly 9% YOY to $3.35, beating estimates of $3.15 substantially. This figure is tricky as well, as despite adjusted EPS falling, adjusted net income rose by 11% YOY. This difference came as Synopsys’s share count increased by around 23% YOY.

Synopsys issued a significant number of shares to fund the Ansys deal, as well as directly to NVIDIA NASDAQ: NVDA, which invested $2 billion in Synopsys. Long story short, Synopsys’s adjusted profit rose, even though it fell on a per-share basis.

Synopsys also raised its full-year guidance across multiple fronts. Based on midpoint figures:

• Revenue guidance increased by $65 million to $9.665 billion.

• Adjusted operating margin guidance increased by 50 basis points to 41%.

• Adjusted EPS guidance increased by 34 cents to $14.76.

• Free cash flow guidance increased by $100 million to $2 billion.

Despite strong postings on many headline metrics, investors likely viewed the fact that Ansys drove nearly all of Synopsys’s growth as a significant negative.

Analysts Move Targets Up as Shares Fall

After earnings, MarketBeat tracked several analyst price target upgrades on Synopsys, while not seeing any targets move lower. Among updates for which MarketBeat had previous price target data, the average price target moved up by approximately 7%. This was a near inverse to the 8.6% hit shares took following the report. Still, analysts at BNP Paribas Exane placed an Underweight rating on the stock, while Piper Sandler issued a Hold rating.

Overall, the average price target among those issued after earnings was approximately $538. This is considerably lower than the MarketBeat consensus price target of $564, indicating that older targets are holding up the consensus figure. The updated $538 average implies moderate upside of about 10%.

Synopsys and Cadence Shares Are Lagging Big-Time

It is a bit concerning to see Synopsys underperform the market so significantly. This comes as many semiconductor and AI-related stocks have surged. Since the start of 2025, the S&P 500 has delivered a return above 25%. Meanwhile, the iShares Semiconductor ETF NASDAQ: SOXX, a commonly used proxy for semiconductor industry performance, is up more than 150%.

Near-term issues, such as its Ansys acquisition clouding visibility and complications at Intel’s NASDAQ: INTC foundry (a key customer), have negatively affected Synopsys. However, Cadence—which has not suffered from the same issues—has also underperformed. Cadence shares are up only around 25% since the start of 2025.

Thus, the two top EDA stocks are experiencing significant underperformance, even as the industry in which they sit booms. This raises questions about their ability to capture value in the same way they have in the past.

Synopsys’s Investor Day: Its Key Opportunity to Reinspire Investors

Despite Synopsys’s poor performance, its products continue to be essential to the semiconductor ecosystem. Additionally, Ansys visibility and Intel’s issues can smooth out over time.

On its earnings call, Synopsys repeatedly mentioned that it is looking for ways to capture more of the value its products offer customers. This includes new pricing methods for its intellectual property. Synopsys says it will have a few signed customer agreements under this model by the end of the fiscal year.

Additionally, as AI agents are increasingly used in chip design, Synopsys is working to capture more consumption-based revenue. However, the company said it would give more details about these strategies at its Investor Day at the end of September.

The firm’s Investor Day will likely be critical to convincing markets that Synopsys can alter its monetization strategies in a way that maximizes the value it captures. Evaluating its plan is critical before materially changing the positive long-term thesis on this stock.