Synopsys, Inc.

Q3 performance beat and signals accelerating EDA demand - Synopsys delivered revenue of $2.477B (+~42% YoY), non-GAAP operating margin 41.6%, and non-GAAP EPS $3.91, all above the high end of guidance. - Results were broad-based, led by EDA strength (including record hardware-assisted verification hardware revenue) and strong Ansys performance. - Management emphasized “fundamentals strengthening across the portfolio” with AI-driven chip complexity continuing to lift engineering demand.

Guidance raised for full-year 2026; EDA acceleration expected in Q4 and for the year - Company raised full-year guidance for revenue, non-GAAP operating margin, EPS, and cash flow. - EDA outlook: expects double-digit organic EDA revenue growth in Q4 and for full-year 2026, with momentum continuing into Q4. - IP outlook: expects the Design IP segment to grow sequentially in Q4. - Full-year revenue range: $9.69B–$9.74B (up at midpoint by $50M vs prior guidance). - Full-year non-GAAP operating margin: 41.5% at the midpoint (raised by 50 bps). - Full-year non-GAAP EPS: $15.04–$15.10 (raised by $0.31 at midpoint). - Cash flow / FCF: raised cash flow from operations guidance by ~$500M to ~$2.8B; reduced CapEx to ~$225M; free cash flow ~ $2.6B (up ~$600M vs prior).

Key EDA drivers: advanced packaging/3DIC, AI reengineering of design workflows, and agentic verification - EDA growth was 8.5% YoY in Q3 despite a tough prior-year comp (Q3’25 EDA was 16%), and management is confident enough to call for acceleration to double digits. - Drivers cited: - Advanced packaging and 3DIC/multi-die architecture (including customers using Synopsys tools for multi-die/advanced package co-design). - AI as a tailwind: customers are reengineering engineering workflows (EDA becomes the “ground truth” provider for physics/determinism beneath AI/agents). - Hardware-assisted verification remained very strong. - Agentic AI: autonomous long-running verification agent demonstrated up to 50x faster time to validated RTL and ~20% more coverage, plus “autonomous EDA workflows” (Microsoft Discovery) showing up to ~40% reduction in debug cycle time. - Monetization expectation: agentic workflows likely drive higher tool consumption (more underlying EDA runs) and could create incremental growth; business-model discussions include subscription + consumption flavors.