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Synopsys Misses Q3 Revenue Estimates, Shares Plunge 18%

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Chip design software provider Synopsys (SNPS.O) reported third-quarter revenue that fell short of Wall Street expectations, dragged down by weakness in its Design IP business, sending its stock down nearly 18.5% after hours.

Results and Outlook

  • Q3 Revenue: $1.74 billion vs. $1.77 billion expected (LSEG data)

  • Adjusted EPS: $3.39 vs. $3.74 expected

  • Q4 Guidance: $2.23–$2.26 billion revenue (above $2.09 billion consensus)

Key Pressures

  • Design IP Weakness: Includes interface, security, and embedded processor IP, plus implementation services.

  • Deal Fallout: Several deals failed to close due to:

    • U.S. export restrictions on China disrupting design starts

    • A major foundry customer canceling projects amid market and client-related challenges

  • CEO Sassine Ghazi: Said Synopsys had invested heavily in building IP for the foundry, but returns expected in 2H 2025 will now not materialize.

Strategic Moves

  • Ansys Acquisition: Completed $35B cash-and-stock purchase of engineering design firm Ansys in July after global antitrust reviews, including conditional approval in China.

  • Customer Base: Partners include Nvidia, Intel, and Qualcomm, among others.

Market Context

  • Rival Cadence Design Systems (CDNS.O): Raised its 2025 sales and profit forecast in July, highlighting diverging performance in the EDA software sector.

  • Synopsys’ miss underscores ongoing geopolitical risks and dependence on key customers in a competitive industry where regulatory headwinds are reshaping chip design markets.