One-glance verdict
Overvalued
$188.99 our estimate vs market $393.84
Wall Street consensus: $544.97 (188.4% higher than our fair-value estimate)
108% above our estimate, beyond the bull case
Fundamentals snapshot
Synopsys, Inc.
SNPS · NMS · Technology · Software - Infrastructure
Current price
$393.84
52-week range
$366.00 - $615.79
Market cap
$75.47B
Balance sheet
Stretched
2.05x Stretched
Net debt $7.23B. Interest coverage shows how many times profit covers the interest bill.
What stands out
2 Rewards
2 Risks
2 rewards · 2 risks
- Reward Revenue grew 33.5% last year.
- Reward Free cash flow was positive in 10/10 years.
- Risk Stock trades 39.6% above its 5-year average P/E.
- Risk Operating margin compressed from 25.1% to 14.5% over 3 years.
What this company does
Synopsys, Inc.
Synopsys provides the highly specialized software and intellectual property (reusable, pre-made design blueprints) that engineers use to create the complex computer chips inside everything from smartphones to cars. The company makes money by licensing these essential design tools to chipmakers, creating a large amount of recurring revenue (income that is predictable and likely to continue in the future). This central role makes Synopsys a critical part of the technology supply chain (the entire network of companies that create and distribute a product), as nearly every advanced electronic device relies on chips designed with its software.
How the company got here
Synopsys started in 1986 when a team of engineers created a new way to automate parts of the complex process of designing computer chips. [3, 5, 11] This breakthrough technology, called logic synthesis, was a huge step forward, and the company was formed to sell it to the world's electronics makers. [3, 11] After becoming a public company in 1992, it grew by acquiring other companies with important technologies, steadily building the most complete set of tools for chip designers. [3, 5] A major recent move was the massive acquisition of Ansys, a company specializing in simulation software, which significantly expanded what Synopsys can offer its customers. [1, 10]
What it actually does
Imagine trying to design a city map with billions of streets and buildings by hand; it would be impossible. Synopsys makes the essential software that acts like an advanced city-planning tool for computer chips, which can have billions of tiny components called transistors. [7, 8] Companies like Apple, NVIDIA, and Samsung use Synopsys's software, known as Electronic Design Automation or EDA, to design, test, and verify their chips on a computer before spending millions to actually manufacture them. [2, 8] Synopsys also sells pre-designed, ready-to-use parts of a chip, much like a builder might use a prefabricated window frame instead of building one from scratch. [2, 4]
Design Automation
This is the company's largest and core business, making up the majority of its revenue. [2, 8] It's where Synopsys sells access to its powerful suite of software tools that chip engineers use every day. [1, 12] Customers, which are the world's biggest technology companies, pay Synopsys subscription or license fees (a fee for the right to use a product) to use this software. [1, 9] These tools help with every step of the chip creation process, from the initial blueprint to verifying that the final design will work correctly and efficiently. [7, 14]
Design IP
This part of the business sells intellectual property (IP), which are essentially pre-made, proven-to-work circuit designs that can be dropped into a larger chip. [12, 15, 29] For example, instead of designing the complex circuitry for a USB port from scratch, a company can license Synopsys's ready-made USB design. This saves engineers huge amounts of time and reduces the risk of errors. [29] Synopsys gets paid through licensing fees and often receives a royalty (a small payment for each unit sold) for every physical chip a customer produces that contains its IP. [2]
What management is betting on now
Synopsys is heavily focused on what it calls a 'silicon to systems' strategy, moving beyond just designing the chip to helping companies simulate how the chip will work inside a final product, like a car or a smartphone. [6, 28] The recent, very large acquisition of Ansys, a leader in simulation software, is the key to this strategy. [1, 28] The company is also embedding artificial intelligence (AI) into its design tools to help automate even more of the complex chip design process, making it faster for its customers to create more powerful chips. [1, 21] By selling its Software Integrity business, management has sharpened its focus on these core areas of chip and system design. [6, 24]
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q4
$558.43M
FY2025 Q1
$-108.17M
FY2025 Q2
$219.78M
FY2025 Q3
$632.36M
FY2025 Q4
$605.19M
FY2026 Q1
$821.51M
FY2026 Q2
$574.74M
FY2026 Q3
$746.27M
Revenue
$2.48B
Net income
$545.80M
Diluted EPS
2.84
Operating cash flow
$812.84M
Free cash flow
$746.27M
Fetching…
Sources
Revenue
$2.28B
Net income
$17.11M
Diluted EPS
0.09
Operating cash flow
$628.93M
Free cash flow
$574.74M
Fetching…
Sources
Revenue
$2.41B
Net income
$64.96M
Diluted EPS
0.34
Operating cash flow
$856.83M
Free cash flow
$821.51M
Fetching…
Sources
Revenue
$2.25B
Net income
$448.70M
Diluted EPS
2.44
Operating cash flow
$639.74M
Free cash flow
$605.19M
Fetching…
Sources
Revenue
$1.74B
Net income
$242.51M
Diluted EPS
1.50
Operating cash flow
$670.96M
Free cash flow
$632.36M
Fetching…
Sources
Revenue
$1.60B
Net income
$345.33M
Diluted EPS
2.21
Operating cash flow
$275.37M
Free cash flow
$219.78M
Fetching…
Sources
Revenue
$1.46B
Net income
$295.68M
Diluted EPS
1.89
Operating cash flow
$-67.45M
Free cash flow
$-108.17M
Fetching…
Sources
Revenue
$1.50B
Net income
$1.11B
Diluted EPS
7.13
Operating cash flow
$562.82M
Free cash flow
$558.43M
Fetching…
Sources
Is it cheap or expensive?
Fair value $188.99 vs current price $393.84
Wall Street consensus is the average analyst price target: $544.97 (188.4% higher than our fair-value estimate).
Our most-likely fair value is $188.99 a share — about 52.0% below today's price of $393.84, so the stock currently looks expensive (overvalued).
Is it drowning in debt?
Stretched
Net debt $7.2B. Interest coverage 2.0x.
Net debt
$7.23B
Interest coverage
2.05x
Synopsys, Inc.'s profit covers its interest bill about 2.0 times over. which is weaker than most peers shown here.
Stretched
Worse cushion
Baseline
Better cushion
SNPS
BASELINE
Synopsys, Inc.
Total debt $10.84B Interest coverage 2.05x This is the baseline the peer rows are being compared against.
Total debt $2.65B Interest coverage 14.16x +591% vs SNPS Carries about 6.9x more debt cushion than SNPS.
Total debt $2.77B Interest coverage 9.12x +346% vs SNPS Carries about 4.5x more debt cushion than SNPS.
Total debt $3.70B Interest coverage 25.27x +1,134% vs SNPS Carries about 12.3x more debt cushion than SNPS.
Total debt $3.92B Interest coverage 33.13x +1,517% vs SNPS Carries about 16.2x more debt cushion than SNPS.
What you should know
The case for and against SNPS
2 Rewards
2 Risks
Rewards
-
Revenue grew 33.5% last year.
-
Free cash flow was positive in 10/10 years.
Risks
-
Stock trades 39.6% above its 5-year average P/E.
-
Operating margin compressed from 25.1% to 14.5% over 3 years.
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
68.97x
Forward P/E
22.49x
P/B
2.42x
P/S
8.02x
EV/EBITDA
39.85x
PEG ratio
2.11x
Profitability
How much profit each dollar creates
Gross margin
82.9%
Operating margin
14.5%
Net margin
11.4%
ROE
3.7%
ROA
1.4%
Health
Liquidity and balance-sheet strength
Debt / equity
0.35x
Current ratio
1.34x
Quick ratio
1.17x
Total debt
$10.84B
Total cash
$3.61B
Growth
How the business has been compounding
Revenue TTM
$9.42B
Revenue 5Y CAGR
13.8%
EPS TTM
5.71
EPS 5Y CAGR
8.5%
Cash flow
How much cash the business throws off
Operating CF TTM
$2.94B
Free CF TTM
$1.35B
FCF margin
14.3%
Dividend
Shareholder payout
Yield
—
Payout ratio
0.0%
Last ex-div date
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