In the fast-evolving software infrastructure sector, Synopsys, Inc. and Cloudflare, Inc. stand out as leaders with distinct yet overlapping market footprints. Synopsys specializes in electronic design automation and IP solutions for integrated circuits, while Cloudflare focuses on cloud-based security and performance services. Comparing their innovation strategies and growth potential provides valuable insight. Join me as we explore which company offers the most compelling investment opportunity for your portfolio.
Table of contents
Companies Overview
I will begin the comparison between Synopsys, Inc. and Cloudflare, Inc. by providing an overview of these two companies and their main differences.
Synopsys, Inc. Overview
Synopsys, Inc. specializes in electronic design automation software used for designing and testing integrated circuits. The company provides a broad range of solutions, including digital design implementation, verification platforms, and intellectual property for various applications. Synopsys serves diverse sectors such as electronics, automotive, and financial services, positioning itself as a key player in the semiconductor and SoC infrastructure market.
Cloudflare, Inc. Overview
Cloudflare, Inc. operates as a cloud services provider offering integrated security and performance solutions for public and private clouds, SaaS applications, and IoT devices. Its portfolio includes cloud firewalls, DDoS protection, content delivery, and serverless computing. Cloudflare targets a wide range of industries, including technology, healthcare, and government, focusing on improving internet security and reliability at a global scale.
Key similarities and differences
Both companies operate in the software infrastructure industry but focus on distinct market segments: Synopsys emphasizes electronic design automation and IP solutions for semiconductor design, whereas Cloudflare concentrates on cloud-based security and web performance services. While Synopsys serves hardware-centric sectors, Cloudflare’s business model revolves around internet security and cloud computing, reflecting their complementary but different technological domains.
Income Statement Comparison
The table below presents the key income statement metrics for Synopsys, Inc. and Cloudflare, Inc. for their most recent fiscal years, offering a direct financial comparison.
| Metric | Synopsys, Inc. (SNPS) | Cloudflare, Inc. (NET) |
|---|---|---|
| Market Cap | 98.8B | 64.5B |
| Revenue | 7.05B | 1.67B |
| EBITDA | 2.50B | 62.0M |
| EBIT | 1.84B | -65.7M |
| Net Income | 1.33B | -78.8M |
| EPS | 8.13 | -0.23 |
| Fiscal Year | 2025 | 2024 |
Income Statement Interpretations
Synopsys, Inc.
Synopsys showed steady revenue growth from 4.2B in 2021 to 7.05B in 2025, with net income rising overall but dipping notably in 2025 to 1.33B from 2.26B the prior year. Margins remained strong, with a favorable 77% gross margin and 19% net margin in 2025. Despite solid revenue and EBIT growth, net margin and EPS declined sharply in the latest year, indicating margin pressure.
Cloudflare, Inc.
Cloudflare’s revenue expanded rapidly from 431M in 2020 to 1.67B in 2024, with net losses narrowing from -119M to -78M. Gross margin stayed favorable at 77%, but EBIT and net margins remained negative, though improving. The firm reported significant improvements in net margin and EPS growth in 2024, reflecting progress toward profitability amid rapid top-line expansion.
Which one has the stronger fundamentals?
Both companies demonstrated favorable overall income statement trends, but Synopsys maintains positive net income with strong margins despite recent margin pressure, while Cloudflare shows accelerating revenue growth but sustained losses. Synopsys’s net margin and EPS remain positive, contrasting Cloudflare’s negative profitability metrics, suggesting Synopsys currently has more stable earnings fundamentals.
Financial Ratios Comparison
The table below presents a side-by-side comparison of key financial ratios for Synopsys, Inc. and Cloudflare, Inc. based on their most recent fiscal year data.
| Ratios | Synopsys, Inc. (2025) | Cloudflare, Inc. (2024) |
|---|---|---|
| ROE | 4.72% | -7.53% |
| ROIC | 1.97% | -6.06% |
| P/E | 54.36 | -466.54 |
| P/B | 2.57 | 35.14 |
| Current Ratio | 1.62 | 2.86 |
| Quick Ratio | 1.52 | 2.86 |
| D/E | 0.50 | 1.40 |
| Debt-to-Assets | 29.64% | 44.32% |
| Interest Coverage | 2.05 | -29.78 |
| Asset Turnover | 0.15 | 0.51 |
| Fixed Asset Turnover | 5.04 | 2.63 |
| Payout ratio | 0 | 0 |
| Dividend yield | 0 | 0 |
Interpretation of the Ratios
Synopsys, Inc.
Synopsys shows a mixed financial profile with strong liquidity ratios, such as a current ratio of 1.62 and quick ratio of 1.52, which are favorable. However, returns on equity (4.72%) and invested capital (1.97%) are low, and valuation multiples like PE at 54.36 are considered unfavorable. The company does not pay dividends, reflecting a potential reinvestment or growth strategy.
Cloudflare, Inc.
Cloudflare’s ratios reveal significant challenges with negative profitability metrics including a net margin of -4.72% and return on equity of -7.53%. Liquidity ratios are strong, with a current and quick ratio of 2.86 each, but leverage is high, with debt-to-equity at 1.4 and interest coverage negative. The company does not distribute dividends, likely due to its ongoing investment phase and negative net income.
Which one has the best ratios?
Between the two, Synopsys presents a more balanced ratio set with a neutral overall evaluation, supported by favorable liquidity and some profitability metrics. Cloudflare’s ratios are largely unfavorable, mainly due to negative returns and high leverage, leading to a less attractive financial profile from a ratios perspective.
Strategic Positioning
This section compares the strategic positioning of Synopsys and Cloudflare, focusing on market position, key segments, and exposure to technological disruption:
Synopsys, Inc.
- Leading software infrastructure provider for electronic design automation, facing competitive pressure in tech sector.
- Key segments include license and maintenance, technology services, and IP solutions for integrated circuit design across multiple industries.
- Exposure to technological disruption through evolving semiconductor design tools and security/testing services.
Cloudflare, Inc.
- Cloud services provider with strong presence in cloud security and performance, in a competitive cloud market.
- Focus on cloud security, content delivery, performance, reliability, and developer-based solutions serving diverse industries.
- Faces disruption risks from rapid cloud technology changes and evolving cybersecurity threats.
Synopsys vs Cloudflare Positioning
Synopsys relies on a diversified product portfolio across semiconductor design and testing, while Cloudflare concentrates on cloud security and performance services. Synopsys benefits from broad industry applications, whereas Cloudflare’s focus offers specialization with evolving cloud technologies.
Which has the best competitive advantage?
Both companies are currently shedding value, but Synopsys shows a very unfavorable moat with declining profitability, while Cloudflare has a slightly unfavorable moat with improving profitability, indicating a modestly better competitive advantage for Cloudflare.
Stock Comparison
The stock price movements of Synopsys, Inc. and Cloudflare, Inc. over the past 12 months reveal distinct trading dynamics, with Synopsys experiencing an overall decline and recent recovery, while Cloudflare shows strong gains tempered by a recent downturn.
Trend Analysis
Synopsys, Inc. stock displayed a bearish trend over the past year with a -10.31% price change, showing acceleration in its downward movement, hitting a high of 621.3 and a low of 388.13. Recently, it reversed with a 13.77% gain over the last two and a half months.
Cloudflare, Inc. experienced a bullish trend over the past year with an 87.07% price increase but showed deceleration. The stock reached a high of 253.3 and a low of 67.69. Recently, it declined by 27.29% from early November 2025 to mid-January 2026.
Comparing both, Cloudflare delivered the highest market performance over the past year with strong overall gains, despite its recent pullback, while Synopsys has struggled but showed positive momentum in the latest period.
Target Prices
Analysts present a confident target price consensus for Synopsys, Inc. and Cloudflare, Inc.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Synopsys, Inc. | 600 | 425 | 530 |
| Cloudflare, Inc. | 300 | 210 | 249 |
Synopsys’ target consensus of 530 is slightly above its current price of 516.31, indicating moderate upside potential. Cloudflare’s consensus target of 249 also suggests a significant price appreciation from its current 184.17.
Analyst Opinions Comparison
This section compares analysts’ ratings and grades for Synopsys, Inc. and Cloudflare, Inc.:
Rating Comparison
SNPS Rating
- Rating: B-, considered very favorable by analysts.
- Discounted Cash Flow Score: Moderate at 3, indicating balanced valuation based on future cash flows.
- ROE Score: Moderate at 3, showing average efficiency in generating profit from equity.
- ROA Score: Moderate at 3, reflecting effective asset utilization.
- Debt To Equity Score: Moderate at 2, implying moderate financial risk from debt levels.
- Overall Score: Moderate at 3, summarizing a balanced financial standing.
NET Rating
- Rating: D+, also marked very favorable despite lower scores.
- Discounted Cash Flow Score: Very unfavorable at 1, suggesting weaker cash flow projections.
- ROE Score: Very unfavorable at 1, indicating less efficient profit generation.
- ROA Score: Very unfavorable at 1, showing poor asset utilization.
- Debt To Equity Score: Very unfavorable at 1, indicating higher financial risk.
- Overall Score: Very unfavorable at 1, reflecting weaker overall financial metrics.
Which one is the best rated?
Based strictly on the provided data, Synopsys, Inc. (SNPS) is better rated than Cloudflare, Inc. (NET) across all key financial scores, showing moderate and more balanced performance compared to NET’s very unfavorable scores.
Scores Comparison
Here is a comparison of the Altman Z-Score and Piotroski Score for Synopsys, Inc. and Cloudflare, Inc.:
Synopsys Scores
- Altman Z-Score: 3.54, indicating a safe zone with low bankruptcy risk.
- Piotroski Score: 4, classified as average financial strength.
Cloudflare Scores
- Altman Z-Score: 9.47, showing a strong safe zone status with minimal risk.
- Piotroski Score: 2, categorized as very weak financial strength.
Which company has the best scores?
Cloudflare has a significantly higher Altman Z-Score than Synopsys, suggesting stronger financial safety. However, Synopsys’ Piotroski Score is higher, indicating better financial strength. Each company excels in different score categories based on the data provided.
Grades Comparison
The following section compares the latest available grades for Synopsys, Inc. and Cloudflare, Inc.:
Synopsys, Inc. Grades
The table below summarizes recent grades and rating actions from notable grading companies for Synopsys, Inc.:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Piper Sandler | Downgrade | Neutral | 2026-01-13 |
| Morgan Stanley | Maintain | Overweight | 2025-12-12 |
| Rosenblatt | Maintain | Buy | 2025-12-11 |
| Keybanc | Maintain | Overweight | 2025-12-11 |
| Piper Sandler | Maintain | Overweight | 2025-12-11 |
| Needham | Maintain | Buy | 2025-12-11 |
| B of A Securities | Upgrade | Buy | 2025-12-11 |
| JP Morgan | Maintain | Overweight | 2025-12-11 |
| Wells Fargo | Maintain | Equal Weight | 2025-12-11 |
| Rosenblatt | Upgrade | Buy | 2025-12-09 |
Overall, Synopsys shows a predominantly positive rating trend with multiple Buy and Overweight grades, though a recent downgrade to Neutral from Piper Sandler indicates some caution.
Cloudflare, Inc. Grades
Below is a summary of the latest grades and rating actions for Cloudflare, Inc.:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Citigroup | Maintain | Buy | 2026-01-16 |
| UBS | Maintain | Neutral | 2026-01-13 |
| Piper Sandler | Maintain | Neutral | 2026-01-05 |
| Argus Research | Maintain | Buy | 2025-11-10 |
| Susquehanna | Maintain | Neutral | 2025-11-03 |
| Citigroup | Maintain | Buy | 2025-11-03 |
| Cantor Fitzgerald | Maintain | Neutral | 2025-10-31 |
| Stifel | Maintain | Buy | 2025-10-31 |
| UBS | Maintain | Neutral | 2025-10-31 |
| Keybanc | Maintain | Overweight | 2025-10-31 |
Cloudflare’s ratings are steady with a mix of Buy, Neutral, and one Overweight rating, reflecting moderate bullish sentiment but some caution.
Which company has the best grades?
Synopsys, Inc. has received more consistent Buy and Overweight grades compared to Cloudflare, Inc., which features a larger proportion of Neutral ratings. This suggests that analysts are somewhat more confident in Synopsys’s near-term performance, potentially affecting investor sentiment and portfolio allocation decisions.
Strengths and Weaknesses
Below is a comparative table of key strengths and weaknesses for Synopsys, Inc. (SNPS) and Cloudflare, Inc. (NET) based on their most recent financial and operational data.
| Criterion | Synopsys, Inc. (SNPS) | Cloudflare, Inc. (NET) |
|---|---|---|
| Diversification | High: Multiple revenue streams including License, Maintenance, and Technology Services totaling over 3.5B USD in License and Maintenance alone (2025). | Moderate: Primarily one segment with 1.67B USD revenue (2024). |
| Profitability | Moderate: Net margin 18.96% favorable; ROIC 1.97% unfavorable, indicating some profitability but value destruction overall. | Low: Negative net margin (-4.72%) and ROIC (-6.06%), shedding value but ROIC is improving. |
| Innovation | Strong: Focus on technology services and licensing suggests continuous product development. | Growing: Increasing ROIC trend implies improving operational efficiency and potential innovation gains. |
| Global presence | Strong: Large customer base with diversified product offerings globally. | Moderate: Growing presence but less diversified revenue streams. |
| Market Share | Established: Significant market share in electronic design automation industry. | Emerging: Competitive cloud services market with ongoing growth. |
In summary, Synopsys shows solid diversification and profitability but is currently facing declining returns on invested capital, signaling caution. Cloudflare is less diversified and currently unprofitable but shows signs of improving profitability, reflecting potential growth opportunities. Investors should weigh Synopsys’s stability versus Cloudflare’s growth prospects while managing risk carefully.
Risk Analysis
Below is a comparative risk assessment table for Synopsys, Inc. (SNPS) and Cloudflare, Inc. (NET) based on the most recent data available.
| Metric | Synopsys, Inc. (SNPS) | Cloudflare, Inc. (NET) |
|---|---|---|
| Market Risk | Moderate (Beta 1.12) | High (Beta 1.97) |
| Debt Level | Moderate (D/E 0.5) | High (D/E 1.4) |
| Regulatory Risk | Moderate | Moderate |
| Operational Risk | Moderate | Moderate |
| Environmental Risk | Low | Low |
| Geopolitical Risk | Moderate | Moderate |
Synopsys shows balanced financial health with moderate market and debt risks, but a relatively high P/E ratio suggests valuation risk. Cloudflare faces higher market volatility and debt risk, compounded by weak profitability and financial scores, increasing its investment risk.
Which Stock to Choose?
Synopsys, Inc. (SNPS) shows a favorable income evolution with 15.12% revenue growth in the last year and a strong overall 67.79% increase over five years. Its financial ratios present a balanced profile, with positive net margin (18.96%) and current ratio (1.62), though return on equity (4.72%) and return on invested capital (1.97%) are less favorable. Debt levels are moderate, and the company carries a very favorable B- rating. However, its MOAT evaluation signals value destruction with declining ROIC compared to WACC.
Cloudflare, Inc. (NET) reported robust revenue growth of 28.76% last year and a remarkable 287.33% over the five-year period, yet profitability remains negative with a net margin of -4.72%. Most financial ratios are unfavorable, including negative returns on equity and assets, high debt-to-equity ratio (1.4), and an unfavorable rating of D+. Its MOAT status is slightly unfavorable despite improving ROIC trends, reflecting ongoing value erosion but growing profitability.
Investors prioritizing stable profitability and moderate financial health might find Synopsys’ profile more aligned with their preferences due to its favorable income statement and balanced ratios despite some drawbacks in capital returns. Conversely, those focused on rapid growth potential could view Cloudflare’s strong revenue expansion and improving MOAT trend as indicative of future opportunities, albeit with higher financial risks and weaker current profitability.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of Synopsys, Inc. and Cloudflare, Inc. to enhance your investment decisions:
