Synopsys Earnings Rise on AI Demand

Synopsys, Inc. (Nasdaq: SNPS) reported strong third-quarter fiscal 2026 results on Aug. 26, 2026, and raised full-year revenue and non-GAAP earnings-per-share (EPS) guidance. The company attributed the upgrade to surging AI-driven chip-design demand and an expanded partnership with Nvidia.

Quarter Results, Guidance, and Financials

Synopsys reported third-quarter revenue of $2.477 billion for the period ended July 31, 2026. GAAP net income was $545.8 million, or $2.84 per diluted share, while non-GAAP net income was $752.5 million, or $3.91 per diluted share. These results compare with revenue of $1.74 billion, GAAP net income of $242.5 million ($1.50 per share), and non-GAAP net income of $548.9 million ($3.39 per share) in the year-earlier quarter.

The company raised its full-year fiscal 2026 revenue guidance to a range of $9.69 billion to $9.74 billion and non-GAAP EPS guidance to $15.04 to $15.10 per share. Fourth-quarter revenue is expected between $2.53 billion and $2.58 billion, with non-GAAP EPS of $4.10 to $4.16. Synopsys also provided a GAAP EPS range for the full year of $3.84 to $4.08.

Design Automation, Synopsys’s core electronic-design-automation (EDA) business, generated approximately $2.003 billion, about 81% of the quarter’s revenue. Design IP, which licenses pre-designed chip building blocks, contributed $473.8 million, or 19%, returning to year-over-year growth with an expected sequential increase in the current quarter.

The company’s Form 8-K and related filings show a non-GAAP operating margin of about 41.6% for the quarter and reaffirm a full-year non-GAAP margin target near 41.5%. Fiscal 2026 operating cash flow is guided to about $2.8 billion, with free cash flow around $2.6 billion.

Despite strong adjusted results, year-to-date GAAP net income from continuing operations declined to $627.9 million from $887.4 million, and diluted GAAP EPS fell to $3.27 from $5.61. Synopsys attributes this to amortization, restructuring, and acquisition-related costs. An amended filing raised estimated restructuring-related pre-tax charges to $425 million–$500 million for severance, termination benefits, and site closures, which will reduce GAAP earnings as recognized.

The quarter’s release also noted post-merger revenue growth following Synopsys’s acquisition of ANSYS, with ANSYS shares converted to $199.91 in cash plus 0.3399 Synopsys shares per ANSYS share.

AI Demand and Nvidia Partnership

Synopsys linked its upgraded outlook to “continued AI-driven demand strength,” citing AI-related design projects at chipmakers and hyperscalers as key drivers. The company highlighted a reported $2 billion Nvidia investment expanding their AI partnership. This collaboration has produced an end-to-end autonomous verification workflow that compresses weeks of manual verification into hours of AI-driven execution.

Executives have said AI is delivering up to sixfold productivity gains in some design workflows. They described a shift from AI assistant tools toward autonomous, agentic engineering flows capable of managing complex design and verification processes end to end.

Synopsys’s roadmap centers on AI-powered, silicon-to-systems design. The expanded Nvidia investment and accelerating customer projects support a longer-term growth outlook focused on autonomous engineering platforms.

The company’s restructuring charges, estimated at $425 million to $500 million, will weigh on GAAP earnings as they are recognized but do not affect non-GAAP results.