Synopsys, Inc. SNPS reported third-quarter fiscal 2026 non-GAAP earnings of $3.91 per share, which increased 15.3% year over year and beat the Zacks Consensus Estimate by 6.5%. Broad-based strength, led by EDA and Ansys, supported the earnings outperformance.
Revenues rose 42.4% year over year to $2.48 billion, topping the consensus mark by 1.7%. Backlog remained strong at $10.9 billion, while Design IP returned to year-over-year growth.
SNPS Revenue Mix Shows Broad-Based Growth
Time-based product revenues were $1 billion, which increased 12.4% from the year-ago quarter. Upfront product revenues increased 28.8% to $665.2 million, reflecting higher product contributions during the quarter.
Maintenance and service revenues surged 144.4% year over year to $808.8 million. Ansys contributed approximately $711 million to total quarterly revenues.
Synopsys, Inc. Price, Consensus and EPS Surprise
Synopsys, Inc. price-consensus-eps-surprise-chart | Synopsys, Inc. Quote
Synopsys Segments Gain on EDA and IP Growth
Design Automation revenues were $2 billion, which increased 52.7% year over year, accounting for 80.9% of total revenues. Within the segment, EDA revenues increased 8.5%, supported by robust software performance and record hardware-assisted verification revenues.
Design IP revenues rose 10.8% to $473.8 million and represented 19.1% of revenues. Management cited broad AI infrastructure demand, including strength in interface, memory and die-to-die IP. The company said its die-to-die business is on pace to double year over year and has surpassed 100 cumulative design wins.
SNPS Margin Expansion Reflects Cost Discipline
The non-GAAP operating margin was 41.6% in the quarter. Design Automation’s adjusted operating margin expanded to 45.2% from 44.5% a year ago, while the Design IP adjusted margin improved to 26.5% from 20.1%.
Total non-GAAP costs and expenses were $1.45 billion, landing at the lower end of management’s guided range. Synopsys credited operational efficiency and Ansys cost synergies that are running ahead of schedule.
Synopsys Cash Flow and Balance Sheet Strengthen
Free cash flow was $746 million in the third quarter. For the first nine months of fiscal 2026, net cash provided by operating activities totaled $2.30 billion.
Synopsys ended the third quarter with $3.61 billion in cash, cash equivalents and short-term investments. Total debt was about $10 billion after the company repaid term loans earlier than planned.
Synopsys AI and Multiphysics Drive New Opportunities
Management highlighted AI-driven design complexity as a key demand driver across the portfolio. More than 30 customer engagements are underway for Synopsys’ agentic AI platform, which is designed to automate engineering workflows while increasing use of the company’s underlying EDA tools.
Synopsys also launched Multiphysics Fusion, its first joint Synopsys-Ansys solution. Early customer validations showed up to 10 times faster design closure and three times faster runtime. Management expects these add-on capabilities to begin contributing to EDA growth in fiscal 2027.
SNPS Raises Fiscal 2026 Outlook
Synopsys raised its fiscal 2026 revenue guidance to $9.69-$9.74 billion, with the midpoint up $50 million. The company expects Ansys to contribute about $2.98 billion, up $20 million from its previous outlook, and continues to expect Design IP revenues to grow sequentially in the fourth quarter.
The company lifted its fiscal 2026 non-GAAP earnings guidance to $15.04-$15.10 per share, a 31-cent increase at the midpoint from the prior forecast. Non-GAAP operating margin is now projected at about 41.5% at the midpoint, up 50 basis points from the previous guidance.
For the fourth quarter, SNPS projects revenues of $2.53-$2.58 billion and non-GAAP earnings of $4.10-$4.16 per share. Management expects EDA revenue growth to accelerate to double digits in the fourth quarter and for fiscal 2026.
SNPS’ Zacks Rank and Stocks to Consider
Currently, SNPS carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the broader Zacks Computer and Technology sector are Applied Materials AMAT, Lam Research LRCX and Palo Alto Networks PANW, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Applied Materials’ fiscal 2026 earnings is pegged at $12.73 per share, up by 4.9% over the past 30 days, indicating a year-over-year surge of 35.1%. Applied Materials shares have surged 87.5% year to date (YTD).
The Zacks Consensus Estimate for Lam Research’s fiscal 2027 earnings has moved northward by 17.8% to $9.32 per share over the past 30 days and calls for a year-over-year jump of 60.4%. Lam Research shares have soared 83.8% YTD.
The Zacks Consensus Estimate for Palo Alto Networks’ fiscal 2026 earnings has remained unchanged at $3.78 per share, over the past 30 days, implying a year-over-year increase of 13.2%. Palo Alto Networks shares have risen 94.1% YTD.
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