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Synopsys (SNPS) Down 5.7% Since Last Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for Synopsys (SNPS - Free Report) . Shares have lost about 5.7% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synopsys due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent catalysts for Synopsys, Inc. before we dive into how investors and analysts have reacted as of late.
Synopsys reported non-GAAP earnings of $3.77 per share for the first quarter of fiscal 2026, which beat the Zacks Consensus Estimate by 5.6%. The bottom line increased 24.4% on a year-over-year basis.
Synopsys’ fiscal first-quarter revenues jumped 65.5% year over year to $2.41 billion, beating the Zacks Consensus Estimate by 0.8%. The top line was primarily driven by an increase in revenues of Time-Based Product, Upfront Product and Maintenance and Service businesses.
Synopsys’ Q1 Details
In the license-type revenue group, Time-Based Product revenues of $951.5 million (representing 39.5% of total revenues) increased 14.9% year over year. Upfront Product revenues (30.8% of total) rose 101.4% to $741.5 million. Maintenance and Service revenues (29.7% of total) surged to $715.7 million, up sharply from the year-ago quarter’s $258.9 million.
Segment-wise, Design Automation revenues, which include EDA, Ansys and Other, were $2 billion, representing 83.1% of total revenues and up 96.2% from the prior-year quarter. Design IP revenues were $407 million, representing 16.9% of total revenues and down from $435.1 million a year ago. With the addition of Ansys, the Simulation & Analysis group is now incorporated into the EDA segment, beginning the third quarter of fiscal 2025. Other revenues were $17.4 million, representing 0.7% of total revenues. Ansys contributed 36.8% of the total revenues.
Geographically, Synopsys generated $1.12 billion from North America (47% of total) and $467 million from Europe (19%). Revenues from Korea (10%), China (9%) and Other regions (15%) were $246.6 million, $211.1 million and $360.4 million, respectively.
The non-GAAP operating margin for the quarter was 42.1%, which expanded 560 basis points from the year-ago period.
Within segments, Design Automation’s adjusted operating margin improved to 47.3%, up from 39.7% a year earlier, while the Design IP segment’s adjusted margin contracted to 16.2%, down from 29.1% last year.
Synopsys’ Balance Sheet & Cash Flow
Synopsys ended the first quarter of fiscal 2026 with $2.20 billion in cash, cash equivalents and short-term investments, down from $2.96 billion in the prior quarter. Total long-term debt was $10.02 billion.
During the first quarter of fiscal 2026, Synopsys generated $856.83 million in operating cash flow.
SNPS’ Guidance for FY26
For fiscal 2026, Synopsys expects revenues in the range of $9.56-$9.66 billion, including $2.9 billion of expected Ansys revenues. Non-GAAP EPS is expected between $14.38 and $14.46, up from the prior range of $14.32-$14.40. Non-GAAP expenses are projected to be in the range of $5.69-$5.75 billion.
For the second quarter of fiscal 2026, Synopsys expects revenues between $2.225 billion and $2.275 billion. Management expects non-GAAP EPS between $3.11 and $3.17.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in estimates review.
The consensus estimate has shifted 6.5% due to these changes.
VGM Scores
At this time, Synopsys has a average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a score of F on the value side, putting it in the bottom 20% quintile for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Synopsys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Synopsys (SNPS) Down 5.7% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for Synopsys (SNPS - Free Report) . Shares have lost about 5.7% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Synopsys due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent catalysts for Synopsys, Inc. before we dive into how investors and analysts have reacted as of late.
Synopsys Q1 Earnings Surpass Estimates, Revenues Rise Y/Y
Synopsys reported non-GAAP earnings of $3.77 per share for the first quarter of fiscal 2026, which beat the Zacks Consensus Estimate by 5.6%. The bottom line increased 24.4% on a year-over-year basis.
Synopsys’ fiscal first-quarter revenues jumped 65.5% year over year to $2.41 billion, beating the Zacks Consensus Estimate by 0.8%. The top line was primarily driven by an increase in revenues of Time-Based Product, Upfront Product and Maintenance and Service businesses.
Synopsys’ Q1 Details
In the license-type revenue group, Time-Based Product revenues of $951.5 million (representing 39.5% of total revenues) increased 14.9% year over year. Upfront Product revenues (30.8% of total) rose 101.4% to $741.5 million. Maintenance and Service revenues (29.7% of total) surged to $715.7 million, up sharply from the year-ago quarter’s $258.9 million.
Segment-wise, Design Automation revenues, which include EDA, Ansys and Other, were $2 billion, representing 83.1% of total revenues and up 96.2% from the prior-year quarter. Design IP revenues were $407 million, representing 16.9% of total revenues and down from $435.1 million a year ago. With the addition of Ansys, the Simulation & Analysis group is now incorporated into the EDA segment, beginning the third quarter of fiscal 2025. Other revenues were $17.4 million, representing 0.7% of total revenues. Ansys contributed 36.8% of the total revenues.
Geographically, Synopsys generated $1.12 billion from North America (47% of total) and $467 million from Europe (19%). Revenues from Korea (10%), China (9%) and Other regions (15%) were $246.6 million, $211.1 million and $360.4 million, respectively.
The non-GAAP operating margin for the quarter was 42.1%, which expanded 560 basis points from the year-ago period.
Within segments, Design Automation’s adjusted operating margin improved to 47.3%, up from 39.7% a year earlier, while the Design IP segment’s adjusted margin contracted to 16.2%, down from 29.1% last year.
Synopsys’ Balance Sheet & Cash Flow
Synopsys ended the first quarter of fiscal 2026 with $2.20 billion in cash, cash equivalents and short-term investments, down from $2.96 billion in the prior quarter. Total long-term debt was $10.02 billion.
During the first quarter of fiscal 2026, Synopsys generated $856.83 million in operating cash flow.
SNPS’ Guidance for FY26
For fiscal 2026, Synopsys expects revenues in the range of $9.56-$9.66 billion, including $2.9 billion of expected Ansys revenues. Non-GAAP EPS is expected between $14.38 and $14.46, up from the prior range of $14.32-$14.40. Non-GAAP expenses are projected to be in the range of $5.69-$5.75 billion.
For the second quarter of fiscal 2026, Synopsys expects revenues between $2.225 billion and $2.275 billion. Management expects non-GAAP EPS between $3.11 and $3.17.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed a upward trend in estimates review.
The consensus estimate has shifted 6.5% due to these changes.
VGM Scores
At this time, Synopsys has a average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a score of F on the value side, putting it in the bottom 20% quintile for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Synopsys has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.