Third quarter fiscal year 2026
Filed Aug 26, 2026Synopsys Posts Financial Results for Third Quarter Fiscal Year 2026
Third-quarter revenue was $2.477 billion versus $1.740 billion in the prior-year quarter, while GAAP diluted EPS of $2.84 and non-GAAP diluted EPS of $3.91 exceeded the high end of prior guidance. Management raised full-year revenue, non-GAAP operating margin, EPS and cash flow guidance, citing AI-driven demand, Design Automation strength and a strong Ansys quarter.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total revenueGAAP | $2.477 billion | – | – |
| Time-based products revenueGAAP | $1,002.792 million | – | – |
| Upfront products revenueGAAP | $665.223 million | – | – |
| Total products revenueGAAP | $1,668.015 million | – | – |
| Maintenance and service revenueGAAP | $808.807 million | – | – |
| Total cost of revenueGAAP | $679.388 million | – | – |
| Gross marginGAAP | $1,797.434 million | – | – |
| Research and development expenseGAAP | $719.737 million | – | – |
| Sales and marketing expenseGAAP | $385.889 million | – | – |
| General and administrative expenseGAAP | $176.979 million | – | – |
| Total operating expensesGAAP | $1,439.943 million | – | – |
| Operating incomeGAAP | $357.491 million | – | – |
| GAAP operating marginGAAP | 14.4% | – | – |
| Non-GAAP operating marginnon-GAAP | 41.6% | – | – |
| Net income from continuing operations attributed to SynopsysGAAP | $545.8 million | – | – |
| GAAP diluted EPS from continuing operations attributed to SynopsysGAAP | $2.84 per diluted share | – | – |
| Non-GAAP net income from continuing operations attributed to Synopsysnon-GAAP | $752.5 million | – | – |
| Non-GAAP diluted EPS from continuing operations attributed to Synopsysnon-GAAP | $3.91 per diluted share | – | – |
| Diluted shares used in computing GAAP EPSGAAP | 192.319 million | – | – |
| Nine-month net cash provided by operating activitiesGAAP | $2,298.603 million | – | – |
| Nine-month purchases of property and equipment, netGAAP | $156.089 million | – | – |
| Design Automation adjusted operating incomeother | $905.0 million | – | – |
| Design Automation adjusted operating marginother | 45.2% | – | – |
| Design IP adjusted operating incomeother | $125.4 million | – | – |
| Design IP adjusted operating marginother | 26.5% | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Design AutomationBroad-based strength and outperformance in Design Automation; management cited EDA leadership, a strong quarter from Ansys and expectations for double-digit growth in EDA. The segment represented 80.9% of total revenue. | $2,003.0 million | – | – |
| Design IPManagement said the Design IP business returned to year-over-year growth. The segment represented 19.1% of total revenue. | $473.8 million | – | – |
Fourth quarter ending October 31, 2026 and fiscal year ending October 31, 2026 outlook
- RevenueFourth quarter: $2,530 million to $2,580 million; fiscal year: $9,690 million to $9,740 million.
- Operating expensesFourth-quarter GAAP expenses: $2,225 million to $2,300 million; fourth-quarter non-GAAP expenses: $1,450 million to $1,480 million. Fiscal-year GAAP expenses: $8,667 million to $8,742 million; fiscal-year non-GAAP expenses: $5,670 million to $5,700 million.
- Tax rateNon-GAAP tax rate: 18% for the fourth quarter and fiscal year.
- NoteFourth-quarter GAAP EPS: $0.60 to $0.85; fiscal-year GAAP EPS: $3.84 to $4.08.
- NoteFourth-quarter non-GAAP EPS: $4.10 to $4.16; fiscal-year non-GAAP EPS: $15.04 to $15.10.
- NoteNon-GAAP interest and other income (expense), net: $(119) million to $(115) million for the fourth quarter and $(485) million to $(481) million for the fiscal year.
- NoteOutstanding shares, fully diluted: 192 million to 194 million for the fourth quarter and fiscal year.
- NoteFiscal-year GAAP operating margin midpoint: ~10.4%; fiscal-year non-GAAP operating margin midpoint: ~41.5%.
- NoteFiscal-year operating cash flow: ~$2,800 million; free cash flow: ~$2,600 million; capital expenditures: ~$225 million.
- NoteFiscal year 2026 revenue includes $2.98 billion of expected Ansys revenue and reflects the impact of approximately $110 million of the divested Optical Solutions Group and PowerArtist RTL businesses, and $40 million related to the recently completed divestiture of the Processor IP Solutions business.
- NoteTargets assume no further changes to export control restrictions or current U.S. government Entity List restrictions.
Capital returns
- Purchases of treasury stock were $300.000 million during the nine months ended July 31, 2026.
What drove it
- Management attributed results to broad-based strength across the business, led by EDA, a strong quarter from Ansys and Design IP returning to year-over-year growth.
- Management said AI is increasing demand for silicon IP and engineering solutions for next-generation AI compute, infrastructure and physical AI systems.
- Maintenance and service revenue was $808.807 million, compared with $330.969 million in the prior-year quarter.
- Design Automation revenue was $2,003.0 million and accounted for 80.9% of total revenue.
- Non-GAAP operating margin was 41.6%, compared with the fiscal-year non-GAAP operating-margin midpoint target of ~41.5%.
Concerns
- GAAP operating margin was 14.4%, substantially below non-GAAP operating margin of 41.6% after exclusions that included acquired-intangible amortization, stock-based compensation, restructuring charges, acquisition/divestiture-related items and deferred-compensation-plan effects.
- Third-quarter GAAP results included $402.426 million of acquired-intangible amortization, $231.604 million of stock-based compensation and $2.164 million of restructuring charges.
- Fourth-quarter guidance includes $145.000 million to $175.000 million of restructuring charges in the reconciliation from GAAP to non-GAAP expenses.
- The fiscal-year revenue target reflects approximately $110 million associated with divested Optical Solutions Group and PowerArtist RTL businesses and $40 million related to the Processor IP Solutions divestiture.
- Guidance assumes no further changes to export control restrictions or current U.S. government Entity List restrictions.
What to watch
- Delivery against fourth-quarter revenue guidance of $2,530 million to $2,580 million and non-GAAP EPS guidance of $4.10 to $4.16.
- Execution toward expected fiscal-year Ansys revenue of $2.98 billion and management's stated Ansys integration and joint-solution objectives.
- Whether EDA achieves management's expectation for double-digit growth and whether Design IP sustains its stated return to year-over-year growth.
- Progress toward fiscal-year operating cash flow of ~$2,800 million and free cash flow of ~$2,600 million.
- The magnitude of restructuring charges, forecast at $145.000 million to $175.000 million in the fourth quarter, and the effect of acquisition/divestiture-related items on GAAP results.
Balance sheet and cash flow
- Cash and cash equivalents were $3,606.286 million as of July 31, 2026, compared with $2,888.030 million as of October 31, 2025.
- Total cash, cash equivalents and short-term investments were $3,607.669 million as of July 31, 2026, compared with $2,960.959 million as of October 31, 2025.
- Short-term debt was $1,020.247 million as of July 31, 2026, compared with $22.117 million as of October 31, 2025.
- Long-term debt was $9,017.113 million as of July 31, 2026, compared with $13,462.398 million as of October 31, 2025.
- Net cash provided by operating activities was $2,298.603 million for the nine months ended July 31, 2026, compared with $878.870 million in the prior-year period.
- Nine-month financing activity included $3,463.726 million of debt repayment, $2,000.000 million of common stock issuance for private placement, $300.000 million of treasury-stock purchases, and $262.761 million of payments for taxes related to net share settlement of equity awards.
- Deferred revenue was $2,331.173 million current and $383.936 million long-term as of July 31, 2026, compared with $2,245.961 million current and $382.557 million long-term as of October 31, 2025.
Analysis
Synopsys reported a strong third quarter, with revenue of $2.477 billion compared with $1.740 billion in the third quarter of fiscal 2025. Product revenue was $1,668.015 million and maintenance and service revenue was $808.807 million. Management characterized demand as broad-based and AI-driven, citing heightened demand for silicon IP and engineering solutions. Design Automation generated $2,003.0 million, or 80.9% of revenue, while Design IP generated $473.8 million and management said that business returned to year-over-year growth.
Profitability improved in the reported year-over-year comparisons. GAAP operating income was $357.491 million versus $165.269 million, GAAP net income attributed to Synopsys was $545.8 million versus $242.5 million, and GAAP diluted EPS was $2.84 versus $1.50. Non-GAAP net income was $752.5 million versus $548.9 million and non-GAAP diluted EPS was $3.91 versus $3.39. The company reported a 14.4% GAAP operating margin and a 41.6% non-GAAP operating margin, with the difference reflecting substantial acquired-intangible amortization, stock-based compensation and other excluded items.
The filing does not provide second-quarter fiscal 2026 operating results, so sequential changes in revenue, earnings, margins and segment results cannot be assessed from this document. The quarter's reported mix nevertheless shows Design Automation at 80.9% of revenue, compared with 75.4% in the prior-year quarter, while Design IP represented 19.1%, compared with 24.6%. Segment adjusted operating margins were 45.2% in Design Automation and 26.5% in Design IP. The company cautioned that it manages the business on a long-term, annual basis and considers quarterly revenue and profitability fluctuations normal.
Cash generation was substantial over the first nine months, with net cash provided by operating activities of $2,298.603 million, and the company repurchased $300.000 million of treasury stock. At July 31, cash and cash equivalents were $3,606.286 million, short-term debt was $1,020.247 million and long-term debt was $9,017.113 million. Management raised fiscal-year guidance to revenue of $9,690 million to $9,740 million, non-GAAP EPS of $15.04 to $15.10, operating cash flow of ~$2,800 million and free cash flow of ~$2,600 million. The fourth-quarter setup calls for $2,530 million to $2,580 million of revenue and $4.10 to $4.16 of non-GAAP EPS, while including $145.000 million to $175.000 million of restructuring charges in the GAAP-to-non-GAAP expense reconciliation.
Management, verbatim
AI is driving unprecedented complexity and increasing demand for the silicon IP and engineering solutions necessary to deliver next-generation AI compute, infrastructure and physical AI systems.
Sassine Ghazi, president and CEO
Synopsys delivered an outstanding third quarter, with revenue and earnings per share exceeding the high end of our guidance range. Results were driven by broad-based strength across the business, led by EDA, a strong quarter from Ansys, and our design IP business returned to year-over-year growth.
Shelagh Glaser, CFO of Synopsys
Given our strong performance and expectations for double-digit growth in EDA, we are raising our full year revenue, non-GAAP operating margin, EPS and cash flow guidance.
Shelagh Glaser, CFO of Synopsys
Not in the filing
stated, not guessed- Previous-quarter fiscal 2026 financial results and sequential comparisons were not provided.
- Previous-quarter outlook was not provided, so comparisons of actual results with prior guidance cannot be made.
- Actual third-quarter operating cash flow, free cash flow and capital expenditures were not provided; cash-flow statement figures cover the nine months ended July 31, 2026.
- A quarterly gross-margin percentage was not provided.
- Dividend information was not provided.
- Total debt as a single reported figure was not provided; short-term and long-term debt were reported separately.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.