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Can Synopsys' Design IP Business Return to Growth in Fiscal 2026?
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Key Takeaways
Synopsys' IP revenues fell 6% YoY to $407M in Q1 FY2026, with recovery expected later in FY26.
SNPS sees strong AI-driven design starts boosting demand for PCIe, SerDes, HBM and LPDDR solutions.
Over 40 PCIe wins and 224G SerDes traction highlight improving demand and long-term IP opportunity.
Synopsys’ (SNPS - Free Report) Design IP business remained soft in the first quarter of fiscal 2026. Revenues from the segment were $407 million, down 6% year over year and flat sequentially. Synopsys expects fiscal 2026 to be a transition year for the IP business and expects performance to improve sequentially as the year moves forward.
Here, AI-related design activity is expected to support the recovery in SNPS' IP business. In the first quarter of fiscal 2026, Synopsys noted that design starts in AI remained strong, which should help the company engage customers early and sell a broader IP portfolio. The management noted that industry standards are changing faster than before, with customers needing more bandwidth and lower power. This is creating demand for products such as PCIe, 224G SerDes, HBM, LPDDR and UCIe.
The company pointed to a few signs of demand strength in the first quarter. Synopsys recorded more than 40 PCIe design wins with HPC and automotive customers. It also achieved an industry-first demonstration of PCIe 8.0 and now has 10 lifetime wins for its 224G SerDes platform on advanced nodes and leading foundries. This supports the company's view that the long-term opportunity in the IP business remains intact.
Management said some of the expected improvement in the IP business is likely to come later in fiscal 2026, with part of it weighted toward the fourth quarter of fiscal 2026. Synopsys' IP business could show some recovery later in fiscal 2026 on the back of execution improvement and strong design wins. The Zacks Consensus Estimate for Synopsys’ fiscal 2026 and 2027 revenues indicates year-over-year growth of 36.4% and 10.3%, respectively.
How Do Competitors Fare Against Synopsys
Synopsys competes with companies like Cadence Design Systems, Inc. (CDNS - Free Report) and Rambus (RMBS - Free Report) in the semiconductor design tools and IP space.
Cadence has a broad Semiconductor IP portfolio, which includes controllers and physical interfaces used in computing, networking and embedded systems. Cadence's IP solutions include design architectures that customers integrate into SoC subsystems and chiplets, which are deployed across automotive, hyperscale, mobile computing, consumer electronics and AI chips.
Rambus provides chips and silicon IP for data-intensive computing systems, with a focus on data center and AI infrastructure. Rambus' Silicon IP portfolio includes HBM memory controller IP, GDDR memory controller IP, PCIe controllers, retimer and switch IP, CXL controller IP, as well as security IP. These solutions are used by chip makers in custom silicon, ASSPs and FPGA designs.
Synopsys’ Price Performance, Valuation and Estimates
Shares of Synopsys have plunged 21.6% over the past year compared with the Zacks Computer - Software industry’s decline of 34.8%.
Synopsys 6-Month Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, SNPS trades at a forward price-to-sales ratio of 7.27, higher than the industry’s average of 6.16.
Synopsys Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Synopsys’ fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 11.8% and 17.6%, respectively. Estimates for fiscal 2026 and 2027 have been revised upward in the past 30 days.
View the Zacks #1 Rank List
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Can Synopsys' Design IP Business Return to Growth in Fiscal 2026?
Key Takeaways
Synopsys’ (SNPS - Free Report) Design IP business remained soft in the first quarter of fiscal 2026. Revenues from the segment were $407 million, down 6% year over year and flat sequentially. Synopsys expects fiscal 2026 to be a transition year for the IP business and expects performance to improve sequentially as the year moves forward.
Here, AI-related design activity is expected to support the recovery in SNPS' IP business. In the first quarter of fiscal 2026, Synopsys noted that design starts in AI remained strong, which should help the company engage customers early and sell a broader IP portfolio. The management noted that industry standards are changing faster than before, with customers needing more bandwidth and lower power. This is creating demand for products such as PCIe, 224G SerDes, HBM, LPDDR and UCIe.
The company pointed to a few signs of demand strength in the first quarter. Synopsys recorded more than 40 PCIe design wins with HPC and automotive customers. It also achieved an industry-first demonstration of PCIe 8.0 and now has 10 lifetime wins for its 224G SerDes platform on advanced nodes and leading foundries. This supports the company's view that the long-term opportunity in the IP business remains intact.
Management said some of the expected improvement in the IP business is likely to come later in fiscal 2026, with part of it weighted toward the fourth quarter of fiscal 2026. Synopsys' IP business could show some recovery later in fiscal 2026 on the back of execution improvement and strong design wins. The Zacks Consensus Estimate for Synopsys’ fiscal 2026 and 2027 revenues indicates year-over-year growth of 36.4% and 10.3%, respectively.
How Do Competitors Fare Against Synopsys
Synopsys competes with companies like Cadence Design Systems, Inc. (CDNS - Free Report) and Rambus (RMBS - Free Report) in the semiconductor design tools and IP space.
Cadence has a broad Semiconductor IP portfolio, which includes controllers and physical interfaces used in computing, networking and embedded systems. Cadence's IP solutions include design architectures that customers integrate into SoC subsystems and chiplets, which are deployed across automotive, hyperscale, mobile computing, consumer electronics and AI chips.
Rambus provides chips and silicon IP for data-intensive computing systems, with a focus on data center and AI infrastructure. Rambus' Silicon IP portfolio includes HBM memory controller IP, GDDR memory controller IP, PCIe controllers, retimer and switch IP, CXL controller IP, as well as security IP. These solutions are used by chip makers in custom silicon, ASSPs and FPGA designs.
Synopsys’ Price Performance, Valuation and Estimates
Shares of Synopsys have plunged 21.6% over the past year compared with the Zacks Computer - Software industry’s decline of 34.8%.
Synopsys 6-Month Price Return Performance
Image Source: Zacks Investment Research
From a valuation standpoint, SNPS trades at a forward price-to-sales ratio of 7.27, higher than the industry’s average of 6.16.
Synopsys Forward 12-Month P/S Ratio
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Synopsys’ fiscal 2026 and 2027 earnings implies a year-over-year increase of approximately 11.8% and 17.6%, respectively. Estimates for fiscal 2026 and 2027 have been revised upward in the past 30 days.
Image Source: Zacks Investment Research
Synopsys currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.