Synopsys (SNPS) AI Stock Analysis

• Market Cap: $84.30B
• Dividend Yield: N/A
• Average Volume (3M): 2.75M
• Price to Earnings (P/E): 35.5
• Beta (1Y): 1.56
• Revenue Growth: 3.21%
• EPS Growth: 31.64%
• Country: US
• Employees: 20,000
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Infrastructure
• EPS (TTM): 3.39
• Shares Outstanding: 185,748,670
• 10 Day Avg. Volume: 1,869,170
• 30 Day Avg. Volume: 2,746,875
• PEG Ratio: 0.42
• Price to Book (P/B): 8.75
• Price to Sales (P/S): 12.84
• P/FCF Ratio: 61.26
• Enterprise Value/Market Cap: 1.36
• Enterprise Value/Revenue: 17.88
• Enterprise Value/Gross Profit: 22.99
• Enterprise Value/Ebitda: 62.36
• 1Y Price Target: $559.38
• Price Target Upside: 23.26% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 16

• Rating: 68 Neutral
• Price Target: $482.00 ▲(6.21% Upside)

Synopsys' overall stock score is primarily driven by strong financial performance and strategic growth initiatives, such as the ANSYS acquisition. However, technical indicators point to bearish momentum, and valuation metrics suggest the stock may be overvalued. Challenges in the IP business and geopolitical risks in China further temper the outlook.

Positive Factors

Revenue Growth

Strong revenue growth driven by design automation and ANSYS acquisition demonstrates Synopsys's expanding market reach and product adoption.

Strategic Acquisition

The acquisition of ANSYS positions Synopsys as a leader in engineering solutions, enhancing its competitive advantage and long-term growth potential.

Cash Generation

Strong cash generation capabilities underscore Synopsys's ability to fund operations, invest in growth, and maintain financial stability.

Negative Factors

IP Business Challenges

Underperformance in the IP business due to export restrictions and customer challenges could hinder profitability and growth in this segment.

Geopolitical Risks

Ongoing geopolitical issues in China disrupt operations and pose risks to Synopsys's market presence and revenue in this key region.

Profitability Challenges

Decreasing profitability margins suggest operational challenges, which could impact Synopsys's ability to sustain long-term profit growth.

Synopsys Business Overview & Revenue Model

Company Description

Synopsys, Inc. is a leading provider of electronic design automation (EDA) software and services, catering primarily to the semiconductor and electronics industries. Founded in 1986 and headquartered in Mountain View, California, Synopsys specializes in providing solutions for the design, verification, and testing of integrated circuits and systems-on-chip. The company operates in various sectors, including semiconductor design, software security, and quality, offering a comprehensive suite of products that encompasses design tools, verification solutions, and IP (intellectual property) cores.

How the Company Makes Money

Synopsys generates revenue primarily through the sale of software licenses, maintenance and support services, and professional services. Its key revenue streams include software licenses for EDA tools, which are sold on a subscription or perpetual basis, and recurring maintenance fees from existing customers. Additionally, Synopsys earns revenue from its extensive portfolio of IP offerings, which are critical for chip makers. The company also benefits from significant partnerships with leading technology firms and semiconductor manufacturers, which not only enhance its market reach but also contribute to collaborative development efforts. Furthermore, the growing demand for advanced technologies such as artificial intelligence, machine learning, and the Internet of Things (IoT) has expanded Synopsys's customer base, driving revenue growth.

Synopsys Financial Statement Overview

Summary

Synopsys demonstrates strong revenue growth and efficient cost management, as evidenced by a high gross profit margin. However, declining net profit and EBIT margins suggest potential profitability challenges. The balance sheet shows increased leverage, which could pose risks if not managed carefully. Cash flow metrics are strong, with significant free cash flow growth, underscoring the company's ability to generate cash effectively.

Income Statement

Synopsys has demonstrated consistent revenue growth with a TTM (Trailing-Twelve-Months) growth rate of 3.49%. The gross profit margin remains strong at 76.69%, indicating efficient cost management. However, the net profit margin has decreased from 36.96% in the previous year to 31.12% in the TTM, suggesting a decline in profitability. EBIT and EBITDA margins have also decreased, reflecting potential operational challenges.

Balance Sheet

The company's debt-to-equity ratio has increased significantly in the TTM, reaching 0.55, indicating higher leverage. Despite this, the return on equity remains healthy at 14.34%, although it has decreased from 25.17% in the previous year. The equity ratio is stable, suggesting a solid capital structure.

Cash Flow

Free cash flow growth has rebounded to 19.99% in the TTM, showing strong cash generation capabilities. The operating cash flow to net income ratio is 0.42, indicating a moderate conversion of income to cash. The free cash flow to net income ratio remains robust at 0.90, highlighting effective cash management.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	6.43B	6.13B	5.33B	4.62B	4.20B	3.68B
Gross Profit	5.00B	4.88B	4.10B	3.72B	3.30B	2.85B
EBITDA	1.84B	1.94B	1.65B	1.33B	1.10B	857.40M
Net Income	2.00B	2.26B	1.23B	984.59M	757.52M	664.35M
Balance Sheet
Total Assets	48.23B	13.07B	10.33B	9.42B	8.75B	8.03B
Cash, Cash Equivalents and Short-Term Investments	2.59B	4.05B	1.59B	1.57B	1.58B	1.24B
Total Debt	15.14B	684.46M	677.60M	656.37M	666.77M	663.49M
Total Liabilities	20.62B	4.05B	4.15B	3.86B	3.45B	3.12B
Stockholders Equity	27.61B	8.99B	6.15B	5.52B	5.30B	4.91B
Cash Flow
Free Cash Flow	1.30B	1.28B	1.51B	1.60B	1.40B	832.55M
Operating Cash Flow	1.44B	1.41B	1.70B	1.74B	1.49B	991.31M
Investing Cash Flow	-15.00B	1.22B	-482.10M	-572.62M	-549.03M	-360.42M
Financing Cash Flow	14.10B	-181.30M	-1.20B	-1.12B	-748.75M	-140.61M

Synopsys Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 453.82
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SNPS, the sentiment is Negative. The current price of 453.82 is below the 20-day moving average (MA) of 457.28, below the 50-day MA of 494.23, and below the 200-day MA of 501.72, indicating a bearish trend. The MACD of -10.48 indicates Negative momentum. The RSI at 44.77 is Neutral, neither overbought nor oversold. The STOCH value of 34.43 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SNPS.

Synopsys Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FTNT	―	$66.23B	34.49	165.17%	―	14.46%	48.06%
PANW	―	$147.74B	136.41	17.45%	―	14.87%	-57.43%
ADBE	―	$142.01B	21.13	52.87%	―	10.69%	35.19%
ZS	―	$52.42B	-1,234.68	-2.70%	―	23.31%	31.04%
SNPS	―	$84.30B	35.53	6.61%	―	3.21%	31.64%
ORCL	―	$748.65B	60.79	71.15%	0.72%	9.67%	11.23%
Sector *	―	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%

Synopsys Corporate Events

Synopsys Earnings Call: Growth Amid Challenges

Synopsys’ recent earnings call presented a mixed sentiment, highlighting robust performance in the design automation segment and strategic achievements like the ANSYS acquisition. However, these positives were tempered by significant challenges in the IP business, geopolitical issues in China, and a cautious outlook for the upcoming quarter due to persistent headwinds.

Synopsys Reports Strong Q3 2025 Revenue Growth

Synopsys, Inc. is a leading provider of engineering solutions, specializing in silicon design, IP, simulation, and analysis solutions, serving a broad range of industries to enhance R&D capabilities and productivity.