Synopsys makes the software chip companies use to design chips. It just posted a 42% revenue jump, the stock ripped 13.4%, and today it's giving some back. That 42% is worth pulling apart — most of it isn't growth.

What happened

Results landed after Wednesday's bell. The first reaction was a shrug: shares slipped about 4% after hours, per Quartz. Thursday reversed it completely — Synopsys closed at $464.89, up 13.39% from a $410.00 prior close on about 4.07 million shares, as reported by Yahoo Finance. Friday it's cooling: $448.08, down 3.62%, as reported by StockAnalysis around 10:09 am ET.

Why it moved

The beat and the raise were both real. Revenue $2.48 billion, up 42% year on year. Adjusted EPS $3.91 against a $3.67 consensus; GAAP EPS $2.84, up 89%. Full-year revenue guidance went to $9.69–9.74 billion (from $9.625–9.705 billion), adjusted EPS to $15.04–15.10 (from $14.72–14.80). Q4 adjusted EPS guidance of $4.10–4.16 beats the $4.00 street number. Backlog is $10.9 billion.

Now the part the headline hides. Synopsys closed its $35 billion purchase of Ansys — a simulation-software company — on 17 July 2025. Its fiscal Q3 last year ended right around that date, so the comparison quarter had almost no Ansys in it. This one has a full quarter: Ansys alone contributed $711 million. Strip that out and the underlying business grew nothing like 42%. Core EDA — the tools that actually lay out silicon — grew 8.5%. Design IP grew 11% to $474 million.

That's also why it's fading today. 8.5% is single-digit growth in exactly the segment that should be the direct AI-silicon beneficiary — if AI were causing a design boom, that's the line where it should shout. The company also flagged restructuring charges of $425–500 million.

Is it expensive?

Market cap $85.87 billion. Trailing P/E 82.43, which looks brutal. Forward P/E 27.54. That gap is the most useful thing here: a $35bn acquisition gets written down through years of amortisation of acquired intangibles, crushing reported GAAP profit without touching the cash. You can see it — free cash flow was $746 million in the quarter and over $2.1 billion year to date, more than three times reported GAAP profit. The trailing 82x is largely an accounting artefact; the forward 27.5x is the number that means something.

Against the obvious alternative, Cadence Design Systems: market cap $94.45 billion, trailing P/E 69.09, forward P/E 40.49, revenue $5.84 billion TTM growing 14.7%. Read that twice — Cadence is worth more than Synopsys on roughly 60% of the revenue, at a much higher forward multiple. Synopsys is the cheaper multiple with the messier books. Neither is cheap outright; a high-20s forward multiple still assumes years of compounding.

The business

Three things. Core EDA — design and verification software, plus hardware-assisted verification, which had a record quarter. Design IP, $474 million at a 26.5% adjusted operating margin: pre-built circuit blocks customers license instead of building from scratch. And Ansys, $711 million, physics simulation for cars, aircraft and medical devices — well beyond chips. That third piece is why "Synopsys is an AI stock" is only about two-thirds true.

Who it touches

• Cadence (CDNS) — the other half of the EDA duopoly. Synopsys' 8.5% core growth is a live datapoint on whether the design boom is as broad as Cadence's 40x forward multiple assumes.
• Every fabless designer — Nvidia, AMD, Qualcomm, Broadcom, the hyperscalers' in-house silicon teams. EDA is a toll booth: you can't tape out a modern chip without these licences, so it scales with design complexity, not chip volumes.
• India — Synopsys says roughly 20% of the world's chip-design experts are based here, across seven India locations. India's design-services and semiconductor-mission push sits on dollar-priced EDA licences, so this duopoly's pricing power is a domestic input cost.

What would flip it

The bull case needs design complexity to rise faster than customer budgets. The risk is the reverse: if AI silicon design consolidates around a handful of very large buyers, a duopoly supplier's pricing power gets tested at renewal, and 8.5% becomes the trend rather than a soft quarter. Watch the core EDA line next quarter, not headline revenue — the headline stops flattering from Q4, once Ansys sits on both sides of the comparison.

One thing to carry away: when a company buys a business the size of Ansys, its growth rate and its P/E both lie for about a year — in opposite directions.

As of 11:45 am ET, Friday 28 August 2026. Sources: Yahoo Finance, StockAnalysis, Benzinga, The Motley Fool, Quartz, Synopsys/PR Newswire. For discussion and education only — not investment advice. Verify before acting.