# SNPS: the toll road of chip design, now with a physics engine bolted on

Research memo, not a recommendation. Capture timestamp for every figure below unless stated: 2026-10-31T12:00+01:00 (Europe/Luxembourg). Tags: **confirmed** (company filing or release), **est.** (our arithmetic), **speculated** (analyst, press or third-party figure).

## Investment memo: our current view

- Synopsys sells the software (EDA) and licensed circuit blocks (Design IP) that almost every leading-edge chip is designed with. Since the Ansys deal it also sells simulation software. Q3 FY2026 revenue was USD 2.477B, up 42% y/y, mostly from Ansys (confirmed, Q3 FY2026 release, 26 Aug 2026).
- At USD 467.61 (30 Oct 2026 close) the shares trade at 31.0x the FY2026 non-GAAP EPS guide midpoint of 15.07 (est.) and about 24.5x FY2027 (est., from the FY2027 framing in press reports). Net debt is about USD 6.4B after Ansys (est., 31 Jul 2026 balance sheet).
- The question that matters: can Ansys plus AI-driven design complexity deliver the Investor Day path of about 15% CAGR to FY2030 at about 50% non-GAAP margin (press reports, 1 Oct 2026, speculated)? Or does growth settle near 8 to 12%?
- Our values today: USD 263 bust, 448 base, 676 boom (est.). The three-source average fair value is USD 519.69: Morningstar 520 (28 May 2026, via IBKR), LSEG consensus 591.08 and our base case 448. That is 11.1% above the price, so the meter shows green (est., FAIR_VALUE.json). The price sits close to our base case. Most of the gap to the average comes from the analyst consensus.

## Listing and timestamps

| Field | Value | Source date | Tag |
|---|---|---|---|
| Issuer | Synopsys, Inc., Sunnyvale, California; files 10-K, 10-Q, 8-K | n/a | confirmed |
| Listing | Nasdaq, ticker SNPS, ISIN US8716071076 | n/a | confirmed |
| Currency | USD | n/a | confirmed |
| Fiscal year | Ends around 31 Oct; Q3 FY2026 ended 31 Jul 2026 | 2026-08-26 | confirmed |
| Last close | USD 467.61 | 2026-10-30 | confirmed (Yahoo chart API) |
| 52-week range | USD 362.55 to 539.48 | 2026-10-30 | confirmed (Yahoo meta) |
| Shares outstanding | 191.605M | 2026-07-31 | confirmed (Q3 release) |
| Market cap | USD 89.6B (191.605M x 467.61) | mixed dates | est. |
| Cash and short-term investments | USD 3.608B | 2026-07-31 | confirmed |
| Debt | USD 10.037B (short-term 1.020B, long-term 9.017B) | 2026-07-31 | confirmed |
| Net debt | USD 6.43B | 2026-07-31 | est. |
| EV | about USD 96.0B | mixed dates | est. |

Three-month path (Yahoo, confirmed): USD 388.76 on 31 Jul 2026. A jump to 464.89 on 27 Aug, the day after Q3. A low of 367.70 on 15 Sep. USD 490.54 on 1 Oct, the day after Investor Day. A high close of 509.99 on 9 Oct. A dip to 422.48 on 22 Oct, then 467.61 on 30 Oct.

## What the business actually sells

- **Design Automation** (USD 2,003.0M in Q3 FY2026, +53% y/y, 80.9% of revenue, adjusted segment margin 45.2%; confirmed): EDA software for synthesis, place and route, verification, signoff, and emulation and prototyping hardware. Ansys simulation (multiphysics, thermal, structural, electromagnetic) is now included here. Customers sign multi-year time-based licences.
- **Design IP** (USD 473.8M, +11% y/y, 19.1% of revenue, adjusted segment margin 26.5% from 20.1%; confirmed): licensed interface blocks such as PCIe, UCIe, HBM and Ethernet, plus foundation IP. Chip designers buy these blocks so they do not have to design them.
- **Divestitures** (confirmed, Q3 release): the Optical Solutions Group and PowerArtist RTL take about USD 110M out of FY2026 revenue. The Processor IP Solutions sale, recently completed, takes out about USD 40M. Net divestiture proceeds over nine months were USD 440.0M.
- FY2026 revenue includes about USD 2.98B of expected Ansys revenue (confirmed, Q3 release).

## Where the tools sit in one AI chip program, and the money that reaches Synopsys

Reference unit: one leading-edge AI accelerator program at 3 nm or 2 nm (all est. or speculated; Synopsys does not disclose revenue per program).

- A 1 GW AI campus costs USD 35 to 50B to build (speculated). Accelerators are about USD 15 to 25B of that (speculated).
- One chip program costs USD 0.5 to 1B to design over 2 to 3 years (speculated).
- EDA tools, emulation and simulation in that program cost USD 50 to 100M (est.). The vendors are Synopsys (with Ansys), Cadence and Siemens (confirmed).
- If Synopsys wins the whole flow plus the interface IP, it collects USD 60 to 110M per program (est.). That is 0.6 to 1.1% of the FY2026 revenue guide of about USD 9.7B.
- Conclusion: Synopsys is a toll collected on hundreds of programs, not a bet on any one chip.

## The financial starting point (Q3 FY2026)

| Line (USD M) | Q3 FY2026 | Q3 FY2025 | y/y | Tag |
|---|---|---|---|---|
| Total revenue | 2,476.8 | 1,739.7 | +42.4% | confirmed |
| Design Automation | 2,003.0 | 1,312.1 | +52.7% | confirmed |
| Design IP | 473.8 | 427.6 | +10.8% | confirmed |
| GAAP operating income | 357.5 (14.4%) | | | confirmed |
| Non-GAAP operating margin | 41.6% | | | confirmed |
| Adjusted segment operating income | 1,030.4 | 669.8 | +53.8% | confirmed |
| Diluted EPS GAAP / non-GAAP | 2.84 / 3.91 | 1.50 / 3.39 | | confirmed |
| Diluted shares | 192.3M | 161.7M | +19% | confirmed |

Nine months to 31 Jul 2026 (confirmed): revenue USD 7.162B, non-GAAP EPS 11.02, operating cash flow USD 2.299B, capex USD 156M. Over the same period Synopsys bought back USD 300M of stock, repaid USD 3.464B of debt and issued USD 2.0B of stock in a private placement.

Guidance (confirmed, 26 Aug 2026):
- Q4 FY2026: revenue USD 2.53 to 2.58B, GAAP EPS 0.60 to 0.85, non-GAAP EPS 4.10 to 4.16.
- FY2026: revenue USD 9.69 to 9.74B, GAAP EPS 3.84 to 4.08, non-GAAP EPS 15.04 to 15.10. GAAP operating margin about 10.4%, non-GAAP about 41.5%. Operating cash flow about USD 2.8B, free cash flow about USD 2.6B, 192 to 194M diluted shares.

GAAP and non-GAAP margins are far apart (14.4% vs 41.6%). The gap is Ansys amortisation, stock-based pay and restructuring. Our scenarios deduct stock pay.

## Competitors and market share (31 October 2026)

| Company | Role | Overlap | Tag |
|---|---|---|---|
| Synopsys (with Ansys) | EDA leader plus the largest third-party interface IP vendor plus simulation | full | confirmed segments |
| Cadence | EDA number two, also IP and system simulation | EDA, IP, simulation | speculated share |
| Siemens EDA (formerly Mentor) | EDA number three, strong in verification and PCB | EDA | speculated |
| Arm, Alphawave, in-house teams | Interface and processor IP | Design IP | speculated |
| Dassault, Altair (Siemens) | Simulation | Ansys side | speculated |

Industry summaries usually put the EDA market as a Synopsys and Cadence duopoly, with Siemens a clear third and the three together at roughly three quarters or more of the market. That split is speculated: no primary share data was captured, and the 2026 market size is a gap.

## Scenarios: FY2030 revenue under bust, base and boom (31 October 2026)

Starting point: FY2026 guide midpoint USD 9.7B (confirmed). The FY2027 framing of USD 11.10 to 11.20B, midpoint 11.15B, comes from press reports of the 30 Sep 2026 Investor Day (speculated).

- **Bust, USD 13.2B (8% CAGR, est.)**: Ansys cross-selling stalls, China export limits bite, and AI chip starts plateau. Value USD 263 per share (20x EPS).
- **Base, USD 15.3B (12% CAGR, est.)**: steady EDA growth, Ansys at high single digits, IP in double digits. Margin climbs towards the mid 40s. Value USD 448 per share (25x EPS).
- **Boom, USD 17.0B (15% CAGR, the company's target, speculated as press-reported)**: about 50% margin, AI-agent design tools priced on usage. Value USD 676 per share (30x EPS).

Method (est.): FY2030 EPS after stock pay, times the multiple, discounted four years at 9%.

## Valuation: market data and scenario values as of 31 October 2026

- Price USD 467.61 (30 Oct close). 191.6M shares, market cap USD 89.6B, net debt about USD 6.4B, EV about USD 96.0B (all est.).
- P/E on the FY2026 non-GAAP EPS guide midpoint: 467.61 / 15.07 = 31.0x (est.). EV/sales on the FY2026 guide: 96.0 / 9.715 = 9.9x (est.). IBKR shows a P/E excluding items of 86.71 on a trailing basis, which mixes in the pre-Ansys share count and costs (third party).
- Dilution: diluted shares rose from 161.7M to 192.3M y/y because of the Ansys stock consideration and the USD 2.0B private placement (confirmed). Press reports say Nvidia bought the placement (speculated).
- Per-share values (est.): bust USD 263, base USD 448, boom USD 676.
- External fair values:
  - Morningstar USD 520, valued 28 May 2026, 3 stars, wide moat, high uncertainty (IBKR, captured 31 Oct 2026).
  - LSEG consensus mean target USD 591.08 from 24 analysts (IBKR, 31 Oct 2026).
  - TipRanks average USD 588.44 (IBKR).
  - S&P Global consensus USD 586.95 (StockAnalysis aggregator, speculated).
  - Broker targets: Morgan Stanley 574 (20 Oct), Needham 620 (12 Oct), Bank of America 600 (9 Oct) (aggregator, speculated). These are drawn but not averaged.
- FAIR_VALUE.json average: (520 + 591.08 + 448) / 3 = USD 519.69. That is 11.1% above the price, so the meter shows green.

## IBKR ratings

**Fair value update (31 Oct 2026, after this capture):** the average shown on the price chart is now **USD 519.69**, 11.1% above the 2026-10-30 close of 467.61 (green). Inputs: Morningstar fair value via IBKR Mobile (Analyst Equity Report; 3 stars, moat Wide, uncertainty High) 520.0 (2026-05-28); LSEG (Refinitiv) consensus target, 24 analysts, via IBKR Mobile 591.08 (2026-10-31); The Claude Trader base case 448.0 (2026-10-31). Where an earlier section quotes a different average, this one is current.

Captured 2026-10-31 15:19 to 15:22 Europe/Luxembourg from IBKR Mobile (read-only, emulator). Markets were closed, so the quote is the frozen 30 Oct session. The data comes from third parties (LSEG, Morningstar, TipRanks). Full table: `ibkr/ibkr_snps_2026-10-31.md`.

| Field | Value | IBKR as-of | Capture (Lux) | Screenshot |
|---|---|---|---|---|
| Quote (last, change, day range) | 473.30 USD, -16.89 (-3.45%), day range 460.13 to 482.78, frozen | 30 Oct 2026 close (frozen, market closed) | 2026-10-31T15:19:30+01:00 | 20261031T151930+0100_quote.png |
| Morningstar rating | 3 stars | 2026-10-27 | 2026-10-31T15:21:41+01:00 | 20261031T152141+0100_morningstar_1.png |
| Morningstar economic moat | Wide | 2026-10-27 | 2026-10-31T15:21:41+01:00 | 20261031T152141+0100_morningstar_1.png |
| Morningstar fair value | 520.00 USD | 2026-05-28 | 2026-10-31T15:21:41+01:00 | 20261031T152141+0100_morningstar_1.png |
| Morningstar uncertainty | High | 2026-10-27 | 2026-10-31T15:21:41+01:00 | 20261031T152141+0100_morningstar_1.png |
| Morningstar capital allocation | Exemplary | 2026-10-27 | 2026-10-31T15:21:41+01:00 | 20261031T152141+0100_morningstar_1.png |
| Morningstar report type | Analyst Equity Report | | 2026-10-31T15:21:41+01:00 | 20261031T152141+0100_morningstar_1.png |
| LSEG (Refinitiv) consensus | Buy, 24 ratings (Buy 7, Outperform 16, Hold 1, Underperform 0, Sell 0); mean target 591.08 (+20.58%); high 700.00, median 600.00, low 475.00; mean score 1.75 | 2026-10-31 screen | 2026-10-31T15:22:03+01:00 | 20261031T152203+0100_lseg_1.png |
| TipRanks consensus | Strong Buy, 18 ratings last 3 months (17 Buy, 1 Hold, 0 Sell); average target 588.44 (+25.84%), high 700, low 420 | 2026-10-31 screen, last 3 months | 2026-10-31T15:22:22+01:00 | 20261031T152222+0100_tipranks_1.png |
| Ownership | Institutions 92.96%, strategic entities 2.99%, others 4.06% | 2026-10-31 screen | 2026-10-31T15:20:36+01:00 | 20261031T152036+0100_company_4.png |
| Other | ESG: E 7, S 7, G 6, overall 6, highest controversy score 2. P/E excl. items 86.71, ROI 2.46%, TTM revenue 9.42B. Morningstar bulls and bears dated 27 Aug 2026. LSEG log: Morgan Stanley Overweight 574 (20 Oct), Needham Buy 620 (12 Oct), StoneX Buy 570, Stifel Buy 600, Rosenblatt Buy 620 (1 Oct) | as listed | 2026-10-31T15:21:41+01:00 | 20261031T152141+0100_morningstar_1.png |

Latest IBKR news (capture 2026-10-31T15:22:47+01:00):
- 30 Oct 2026, IB Market Signals: SNPS price spike down, last 472.29 (-3.65%); option volume spike up.
- 30 Oct 2026, Benzinga: software shares lower after Amazon and Intel Q3 results.
- 30 Oct 2026, Dow Jones: Akamai slides 6.7% (tagged SNPS).
- 30 Oct 2026, Zacks: VICR vs SNPS growth comparison.

## Leadership and governance (31 October 2026)

### Who runs it
- CEO **Sassine Ghazi**, a long-time Synopsys executive. He took over from co-founder Aart de Geus at the start of 2024 and leads the Ansys integration (speculated as to exact dates; captured sources do not include a primary filing for them).
- CFO **Shelagh Glaser**, quoted in the Q3 FY2026 release (confirmed).
- Morningstar rates capital allocation Exemplary (IBKR, 27 Oct 2026).

### Promises vs delivery
| Date | Promise | What came next | Tag |
|---|---|---|---|
| 27 May 2026 (Q2) | FY2026 guide with Ansys | Q3 non-GAAP EPS 3.91; FY non-GAAP EPS now 15.04 to 15.10 | confirmed (Q3 release) |
| 26 Aug 2026 | Q4 revenue USD 2.53 to 2.58B, non-GAAP EPS 4.10 to 4.16 | Pending, 9 Dec 2026 | confirmed guide |
| 26 Aug 2026 | Deleverage after Ansys | USD 3.46B of debt repaid in nine months | confirmed |
| 30 Sep 2026 (Investor Day) | FY2027 revenue USD 11.10 to 11.20B; about 15% CAGR to FY2030; about 50% margin | Pending | speculated (press) |

### Revenue-quality test
- Organic growth is hidden by Ansys. Design IP at +10.8% is the cleanest organic line, and divestitures depress it by about USD 40M for FY2026 (confirmed).
- Nine-month operating cash flow of USD 2.30B against non-GAAP net income near USD 2.1B (est.) points to cash conversion near 1x.
- Backlog of USD 10.9B is from press reports, not the Q3 release (speculated).
- Not captured: customer concentration, China share for FY2026 (audit gap).

### Insider register
Not captured in this pass. Pending the Form 4 pull. IBKR shows strategic entities at 2.99%.

### Red flags
- July 2026 drawdown of about 17.8% over 30 days (Tickeron, speculated), followed by a securities class action, Kim v. Synopsys (law-firm notice, speculated; status not verified).
- State breach notices about a data incident in April 2026 (ClaimDepot, speculated).
- The GAAP operating margin of 14.4% is far below the 41.6% non-GAAP figure.
- About USD 10.0B of gross debt (confirmed).
- No restatement or auditor change found (not exhaustive).

### Next hard test
Q4 FY2026 results, expected 9 Dec 2026 (aggregator date, unconfirmed by the company). The bar:
- revenue USD 2.53 to 2.58B;
- non-GAAP EPS 4.10 to 4.16;
- FY2026 revenue near USD 9.7B;
- a formal FY2027 guide consistent with USD 11.10 to 11.20B;
- any Ansys growth figure and a backlog disclosure.

## Fact-audit notes

An adversarial audit ran on 2026-10-31 (Europe/Luxembourg) against the Q3 FY2026 8-K exhibit 99.1, the Q2 FY2026 release and the Yahoo chart API. It checked 24 claims in the data files and found no corrections. The items below remain unverifiable from primary sources and stay tagged.

| Claim | Finding | Action |
|---|---|---|
| S&P Global consensus USD 586.95 | Aggregator only (StockAnalysis) | speculated; not averaged, LSEG 591.08 used instead |
| Morningstar fair value USD 379 (11 Dec 2025) | Superseded: the IBKR capture gives a dated value of USD 520 (28 May 2026) | 520 used in the average. The earlier undated 520 figure is now dated through IBKR. The scenario diagram still shows the old 379 point |
| Q4 FY2026 report date 9 Dec 2026 | Aggregator only | speculated until Synopsys confirms |
| Investor Day 15% CAGR to FY2030 and about 50% margin, FY2027 USD 11.10 to 11.20B | Press reports (Reuters via syndication, 1 Oct 2026) | speculated |
| Backlog USD 10.9B | Press reports; not in the Q3 release | speculated |
| Nvidia as buyer of the USD 2.0B placement | Release confirms a USD 2.0B private placement, not the buyer | placement confirmed, buyer speculated |
| Average fair value in METADATA (471.3, +0.8%) | Out of date: it used Morningstar 379 and S&P consensus | replaced by 519.69 (+11.1%) per FAIR_VALUE.json |

## What is still open
- A confirmed Q4 FY2026 date and a formal FY2027 guide.
- Ansys organic growth, backlog and China mix from the FY2026 10-K.
- Insider Form 4 register, plus the status of the class action and the data incident.

## Sources
See SOURCES.json. Primary sources:
- Q3 FY2026 8-K exhibit 99.1 (SEC EDGAR, 26 Aug 2026)
- Q2 FY2026 release (27 May 2026)
- Yahoo Finance chart API (closes through 30 Oct 2026)
- IBKR Mobile capture (31 Oct 2026)

Secondary: StockAnalysis (consensus, statistics), the Reuters Investor Day report, Morningstar (link only), Tickeron, the class-action notice and the data-breach notices.