Can Synopsys Stock Drop From Here? Trefis Team Thu, October 8, 2026 at 12:56 PM EDT 4 min read SNPS +0.16% ^GSPC -0.59% OPAI.PVT CDNS -1.68% KEYS -1.54% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Over the past month, stock in chip design software maker Synopsys (SNPS) has returned 28%, significantly outpacing the 1.4% return for the S&P 500. Part of that gain arrived after September 30, when the company outlined updated long-term growth targets at its Investor Day. On the same day, Synopsys struck a deal with OpenAI to develop an AI model for chip design work. Buyers appear to be betting that growth will speed up. A target is a forecast, however, and not a result. So how fast are Synopsys's chip design tools growing today?
Synopsys's Chip Design Tools Grew In Single Digits
In fiscal Q3 2026, revenue from Synopsys's chip design tools, its software and verification hardware, rose 8.5% from a year earlier. The company posted total revenue growth of about 42% for that quarter. That broader total includes Ansys, which Synopsys acquired a year earlier. Out of the $2.477 billion in total revenue, Ansys contributed about $711 million.
Looking ahead, management expects growth in chip design tools to reach double digits in fiscal Q4 2026 and for the full fiscal year. The case for that pickup rests on AI demand. During the fiscal Q3 2026 call in August, management noted that new AI chip design projects keep accelerating. The risk lies in the rest of the market. New design projects for non-AI chips had been slowing, management said, and have only stabilized over the last two quarters.
How Profitable Is Synopsys After Buying Ansys?
Based on reported figures, Synopsys is less profitable than the broader market. The company recorded an operating margin of 11.0% over the last twelve months, against 18.5% for the S&P 500. Additionally, Synopsys carried about $10 billion of total debt at the end of fiscal Q3 2026, compared with $3.6 billion of cash and short-term investments.
Cash flow is the stronger part of the financial picture. On the August call, management raised its fiscal 2026 forecast for cash flow from operations by $500 million, bringing the expected total to about $2.8 billion. Management also said that cost savings from Ansys are arriving ahead of schedule. On October 5, Synopsys agreed to repurchase $1 billion of its own stock.
Synopsys Stock Has Dropped More Than The Market Before
The stock fell 28% from peak to trough in the 2022 inflation shock, against 24% for the S&P 500. During the selloff of July and August 2024, it fell 21%, while the index lost 7.8%. In two shocks in 2023, however, the stock fell less than the index.
Today the stock is priced at 89.9 times earnings, well above the 21.5 multiple for the S&P 500. Reported profit is thin next to that valuation. Synopsys generated net income of $1.1 billion over the last twelve months on revenue of $9.4 billion, a figure lifted by a gain from the sale of its processor IP business. Buyers paying this price appear to expect both faster growth and a higher margin.
Synopsys's next report covers fiscal Q4 2026, a period for which management guided to revenue of $2.53 billion to $2.58 billion. Chip design tools grew 8.5% in fiscal Q3 2026, and management's double-digit forecast applies to fiscal Q4 2026, which has not been reported. Double-digit growth in chip design tools for that quarter would show that the pickup management forecast in August has arrived. Single-digit growth would show that it has not.
Now you know SNPS better. And that's our purpose: to make you informed before you invest your money. However, making a bet on a single stock carries its own risks.
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