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Synopsys (SNPS) Up 26.2% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Synopsys (SNPS - Free Report) . Shares have added about 26.2% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Synopsys due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Synopsys, Inc. before we dive into how investors and analysts have reacted as of late.
Synopsys Q3 Earnings and Revenues Miss Estimates
Synopsys delivered lower-than-expected third-quarter fiscal 2025 results. The company reported non-GAAP earnings of $3.39 per share for the fiscal third quarter, missing the Zacks Consensus Estimate of $3.84 and the guided range of $3.82-$3.87. The bottom line decreased 1.2% on a year-over-year basis.
Synopsys’ fiscal third-quarter revenues jumped 14% year over year to $1.74 billion, missing the Zacks Consensus Estimate of $1.768 billion. The top line was primarily driven by an increase in revenues of Time-Based Product and Upfront Product businesses.
Synopsys’ Q3 Details
In the license-type revenue group, Time-Based Product revenues (51.3% of the total) of $892.4 million were up 11.1% year over year. Upfront Product revenues (29.7%) increased 16.7% to $516.4 million. Maintenance and Service revenues (19%) increased 18.2% to $331 million from the year-ago quarter’s $280.1 million.
Segment-wise, Electronic Design Automation (“EDA”) revenues (68.6% of the total) were $1.19 billion, up 17% year over year. Design IP revenues (24.6%) amounted to $427.6 million, down from the year-ago quarter’s $463.1 million. Revenues from Simulation and Analysis were $77.7 million, representing 4.5% of total revenues. Simulation and Analysis segment was added to the segment after the acquisition of Ansys. Other revenues were $40.6 million, which represented 2.3% of the total revenues and decreased 4.5% year over year.
Geographically, Synopsys’ revenues in North America (47% of the total) and Europe (10%) were $824.7 million and $178.6 million, respectively. Revenues from Korea (12%), China (14%) and Other (16%) were $202.1 million, $247.3 million and $287 million, respectively.
The non-GAAP operating margin was 38.5%, down 150 basis points (bps) year over year.
EDA’s adjusted operating margin showed improvement of 300 bps to 44.5%. The Design IP segment’s margin contracted 1660 bps to 20.1% on a year-over-year basis.
Synopsys’ Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $2.59 billion as of July 31, 2025, compared with $14.26 billion as of April 30, 2025.
The total long-term debt was $14.32 billion at the end of the reported quarter, up from $10.03 billion reported in the previous quarter.
During the fiscal third quarter, Synopsys generated operating cash flow of $671 million. In the first three quarters of fiscal 2025, it generated operating cash flow of $879 million.
SNPS’ Guidance for Q4 and FY25
For fiscal 2025, SNPS now expects revenues between $7.03-$7.06 billion, up from $6.745 billion to $6.805 billion. Non-GAAP earnings are now expected in the range of $12.76-$12.80, down from $15.11-$15.19.
Non-GAAP expenses are expected in the range of $4.43-$4.44 billion, up from $4.045-$4.085 billion.
For the fourth quarter of fiscal 2025, Synopsys expects revenues between $2.23 billion and $2.26 billion. Management estimates non-GAAP earnings per share between $2.76 and $2.80.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -59.19% due to these changes.
VGM Scores
At this time, Synopsys has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock has a score of F on the value side, putting it in the fifth quintile for value investors.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Synopsys has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Synopsys (SNPS) Up 26.2% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Synopsys (SNPS - Free Report) . Shares have added about 26.2% in that time frame, outperforming the S&P 500.
But investors have to be wondering, will the recent positive trend continue leading up to its next earnings release, or is Synopsys due for a pullback? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Synopsys, Inc. before we dive into how investors and analysts have reacted as of late.
Synopsys Q3 Earnings and Revenues Miss Estimates
Synopsys delivered lower-than-expected third-quarter fiscal 2025 results. The company reported non-GAAP earnings of $3.39 per share for the fiscal third quarter, missing the Zacks Consensus Estimate of $3.84 and the guided range of $3.82-$3.87. The bottom line decreased 1.2% on a year-over-year basis.
Synopsys’ fiscal third-quarter revenues jumped 14% year over year to $1.74 billion, missing the Zacks Consensus Estimate of $1.768 billion. The top line was primarily driven by an increase in revenues of Time-Based Product and Upfront Product businesses.
Synopsys’ Q3 Details
In the license-type revenue group, Time-Based Product revenues (51.3% of the total) of $892.4 million were up 11.1% year over year. Upfront Product revenues (29.7%) increased 16.7% to $516.4 million. Maintenance and Service revenues (19%) increased 18.2% to $331 million from the year-ago quarter’s $280.1 million.
Segment-wise, Electronic Design Automation (“EDA”) revenues (68.6% of the total) were $1.19 billion, up 17% year over year. Design IP revenues (24.6%) amounted to $427.6 million, down from the year-ago quarter’s $463.1 million. Revenues from Simulation and Analysis were $77.7 million, representing 4.5% of total revenues. Simulation and Analysis segment was added to the segment after the acquisition of Ansys. Other revenues were $40.6 million, which represented 2.3% of the total revenues and decreased 4.5% year over year.
Geographically, Synopsys’ revenues in North America (47% of the total) and Europe (10%) were $824.7 million and $178.6 million, respectively. Revenues from Korea (12%), China (14%) and Other (16%) were $202.1 million, $247.3 million and $287 million, respectively.
The non-GAAP operating margin was 38.5%, down 150 basis points (bps) year over year.
EDA’s adjusted operating margin showed improvement of 300 bps to 44.5%. The Design IP segment’s margin contracted 1660 bps to 20.1% on a year-over-year basis.
Synopsys’ Balance Sheet & Cash Flow
Synopsys had cash and short-term investments of $2.59 billion as of July 31, 2025, compared with $14.26 billion as of April 30, 2025.
The total long-term debt was $14.32 billion at the end of the reported quarter, up from $10.03 billion reported in the previous quarter.
During the fiscal third quarter, Synopsys generated operating cash flow of $671 million. In the first three quarters of fiscal 2025, it generated operating cash flow of $879 million.
SNPS’ Guidance for Q4 and FY25
For fiscal 2025, SNPS now expects revenues between $7.03-$7.06 billion, up from $6.745 billion to $6.805 billion. Non-GAAP earnings are now expected in the range of $12.76-$12.80, down from $15.11-$15.19.
Non-GAAP expenses are expected in the range of $4.43-$4.44 billion, up from $4.045-$4.085 billion.
For the fourth quarter of fiscal 2025, Synopsys expects revenues between $2.23 billion and $2.26 billion. Management estimates non-GAAP earnings per share between $2.76 and $2.80.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -59.19% due to these changes.
VGM Scores
At this time, Synopsys has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock has a score of F on the value side, putting it in the fifth quintile for value investors.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Synopsys has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.