In the rapidly evolving technology landscape, Synopsys, Inc. (SNPS) and Arm Holdings plc (ARM) stand out as key players within the software and semiconductor industries, respectively. Both companies are at the forefront of innovation, focusing on design automation and microprocessor technologies. Their overlapping markets and complementary strengths make them compelling subjects for comparison. As an investor, I invite you to explore this analysis, which will reveal which of these two companies presents the most intriguing opportunity for your portfolio.
Table of contents
Company Overview
Synopsys, Inc. Overview
Synopsys, Inc. operates within the electronic design automation (EDA) sector, providing comprehensive software solutions for designing and testing integrated circuits. With a market cap of approximately $88.4B, Synopsys has positioned itself as a leader in the semiconductor design space. The company’s offerings include advanced platforms for design implementation, verification, and functional safety, catering to various industries such as automotive, healthcare, and finance. Founded in 1986 and headquartered in Mountain View, California, Synopsys emphasizes innovation and security in software development, helping clients to navigate the complexities of modern electronic systems.
Arm Holdings plc Overview
Arm Holdings plc is a prominent player in the semiconductor industry, specializing in designing and licensing CPU architecture and related technologies. With a substantial market cap of around $149.4B, Arm’s products are integral to a wide range of applications, including automotive, consumer electronics, and IoT devices. Founded in 1990 and based in Cambridge, UK, Arm provides essential tools, microprocessors, and software solutions that enable original equipment manufacturers to innovate effectively. As a subsidiary of Kronos II LLC, Arm continues to drive advancements in semiconductor technology while maintaining a focus on energy efficiency and performance.
Key similarities and differences
Both Synopsys and Arm operate within the technology sector, focusing on semiconductor solutions, but their business models differ. Synopsys primarily provides software for electronic design automation, while Arm specializes in CPU architecture and licensing. Additionally, Synopsys has a broader application across various industries, whereas Arm’s products are more focused on hardware integration and development.
Income Statement Comparison
The following table provides a comparison of key income statement metrics for Synopsys, Inc. (SNPS) and Arm Holdings plc (ARM) for the most recent fiscal year.
| Metric | Synopsys, Inc. | Arm Holdings plc |
|---|---|---|
| Market Cap | 88.36B | 149.45B |
| Revenue | 7.05B | 4.01B |
| EBITDA | 914M | 903M |
| EBIT | 915M | 720M |
| Net Income | 1.34B | 792M |
| EPS | 8.72 | 0.75 |
| Fiscal Year | 2025 | 2025 |
Interpretation of Income Statement
In 2025, Synopsys reported a notable revenue increase to 7.05B, reflecting a solid growth trend compared to previous years. In contrast, Arm’s revenue grew significantly from 2.70B in 2022 to 4.01B in 2025, showcasing consistent growth. However, while Synopsys maintained a healthy net income margin of 19%, Arm’s margin was lower at approximately 20%. The EBITDA margins for both companies remained stable, indicating effective cost management strategies. Overall, Synopsys shows stronger financial performance with higher revenue and net income, but Arm’s rapid growth trajectory may present an attractive opportunity for investors focusing on future potential.
Financial Ratios Comparison
The table below presents a comparative analysis of key financial ratios for Synopsys, Inc. (SNPS) and Arm Holdings plc (ARM) for the most recent fiscal year.
| Metric | SNPS | ARM |
|---|---|---|
| ROE | 25.17% | 11.58% |
| ROIC | 12.04% | 11.31% |
| P/E | 34.75 | 141.58 |
| P/B | 8.75 | 16.40 |
| Current Ratio | 2.44 | 5.20 |
| Quick Ratio | 2.30 | 5.20 |
| D/E | 0.08 | 0.05 |
| Debt-to-Assets | 0.05 | 0.04 |
| Interest Coverage | 38.56 | 0 |
| Asset Turnover | 0.47 | 0.45 |
| Fixed Asset Turnover | 5.43 | 5.61 |
| Payout Ratio | 0% | 0% |
| Dividend Yield | 0% | 0% |
Interpretation of Financial Ratios
The financial ratios indicate that Synopsys (SNPS) exhibits a stronger return on equity (ROE) and return on invested capital (ROIC) compared to Arm (ARM). Despite ARM’s higher current and quick ratios, suggesting better liquidity, SNPS maintains sound profitability metrics with a respectable interest coverage ratio. ARM, while having a solid asset turnover, suffers from a lack of interest coverage. Both companies have not yet initiated dividends, reflecting a focus on growth rather than returning capital to shareholders.
Dividend and Shareholder Returns
Synopsys, Inc. (SNPS) does not pay dividends, reflecting its strategy of reinvesting profits for growth, particularly in R&D. Instead, it engages in share buybacks to enhance shareholder value. Arm Holdings (ARM) also refrains from distributing dividends, prioritizing capital for expansion and innovation. Both companies seem to prioritize long-term value creation through strategic reinvestment, although potential risks include market volatility impacting growth plans.
Strategic Positioning
In the electronic design automation market, Synopsys, Inc. (SNPS) holds a significant share, leveraging its comprehensive software solutions like the Fusion Design and Verification Continuum Platforms. With a market cap of $88.4B, it faces competitive pressure from Arm Holdings plc (ARM), which commands a larger market cap of $149.4B in semiconductor technology. Both companies are navigating technological disruptions, such as the rise of AI and IoT, necessitating continuous innovation to maintain their competitive edge.
Stock Comparison
In examining the stock performance of Synopsys, Inc. (SNPS) and Arm Holdings plc (ARM) over the past year, we can observe significant price movements and trading dynamics that reflect the underlying market trends.
Trend Analysis
For Synopsys, Inc. (SNPS), the overall percentage change over the past year is -8.02%, indicating a bearish trend. The stock has experienced notable highs of 621.3 and lows of 388.13, with a standard deviation of 58.67 reflecting considerable volatility. More recently, from September 28, 2025, to December 14, 2025, the stock has seen a -2.45% change, further supporting the bearish sentiment. The trend shows signs of deceleration, with a slope of -3.07, suggesting a potential for continued downward movement.
In contrast, Arm Holdings plc (ARM) has shown a remarkable overall percentage change of 80.1%, classifying it as a bullish trend. The stock’s price has fluctuated between a high of 181.19 and a low of 71.0, with a standard deviation of 21.52 indicating lower volatility compared to SNPS. Over the recent period from September 28, 2025, to December 14, 2025, ARM’s stock has seen a slight increase of 1.36%, maintaining a bullish outlook, although the trend is decelerating, evidenced by a slope of -1.73.
In summary, while SNPS indicates a bearish trajectory with considerable volatility, ARM remains in a strong bullish position, albeit showing signs of deceleration. As I evaluate potential investments, these trends and their implications on risk management are crucial in guiding my decisions.
Analyst Opinions
Recent analyst recommendations show a positive outlook for Synopsys, Inc. (SNPS) with a rating of B+ from analysts who highlight strong return on assets and equity. They emphasize the company’s robust discounted cash flow and overall financial health. In contrast, Arm Holdings plc (ARM) has a B rating, with analysts noting solid returns on equity but expressing concerns over its price-to-earnings and price-to-book ratios. For 2025, the consensus seems to favor a buy for SNPS, while ARM leans towards a hold.
Stock Grades
In the current investment landscape, it’s essential to consider the ratings provided by reputable grading companies. Here’s a look at the latest stock grades for Synopsys, Inc. and Arm Holdings plc.
Synopsys, Inc. Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Piper Sandler | maintain | Overweight | 2025-12-11 |
| Rosenblatt | upgrade | Buy | 2025-12-09 |
| B of A Securities | upgrade | Neutral | 2025-12-08 |
| Keybanc | maintain | Overweight | 2025-12-03 |
| Wells Fargo | maintain | Equal Weight | 2025-11-25 |
| Morgan Stanley | maintain | Overweight | 2025-09-11 |
| Mizuho | maintain | Outperform | 2025-09-11 |
| Baird | downgrade | Neutral | 2025-09-10 |
| Piper Sandler | maintain | Overweight | 2025-09-10 |
| Keybanc | maintain | Overweight | 2025-09-10 |
Arm Holdings plc American Depositary Shares Grades
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Loop Capital | maintain | Buy | 2025-11-12 |
| JP Morgan | maintain | Overweight | 2025-11-06 |
| Mizuho | maintain | Outperform | 2025-11-06 |
| Barclays | maintain | Overweight | 2025-11-06 |
| UBS | maintain | Buy | 2025-11-06 |
| TD Cowen | maintain | Buy | 2025-11-06 |
| Rosenblatt | maintain | Buy | 2025-11-06 |
| Keybanc | maintain | Overweight | 2025-11-06 |
| Needham | maintain | Hold | 2025-11-06 |
| Benchmark | maintain | Hold | 2025-11-06 |
Overall, the grades for both Synopsys and Arm Holdings indicate a positive sentiment among analysts, with several upgrades and a consistent recommendation to maintain or buy. This could suggest a favorable outlook for both stocks in the near term.
Target Prices
The consensus target prices for the following companies indicate optimistic expectations from analysts.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Synopsys, Inc. (SNPS) | 630 | 425 | 529.17 |
| Arm Holdings plc (ARM) | 210 | 190 | 200 |
Analysts project Synopsys, Inc. will reach a consensus price of $529.17, significantly above its current price of $475.73. Arm Holdings has a consensus target of $200, also above its current price of $141.52, suggesting positive sentiment in the market.
Strengths and Weaknesses
The following table outlines the strengths and weaknesses of Synopsys, Inc. (SNPS) and Arm Holdings plc (ARM) based on the most recent data.
| Criterion | Synopsys, Inc. (SNPS) | Arm Holdings plc (ARM) |
|---|---|---|
| Diversification | Strong product suite across various sectors | Focused on semiconductor technology |
| Profitability | Net profit margin: 19% | Net profit margin: 20% |
| Innovation | High R&D investment | Strong IP portfolio |
| Global presence | Established in US and global markets | Growing presence in Asia |
| Market Share | Leading in EDA tools | Strong in mobile device CPUs |
| Debt level | Low debt-to-equity ratio (0.08) | Very low debt levels (0.052) |
Key takeaways indicate that Synopsys has a strong diversification and market presence, while Arm demonstrates higher profitability and a focused innovation strategy. Both companies maintain low debt levels, which enhances their financial stability.
Risk Analysis
The table below outlines the key risks associated with Synopsys, Inc. (SNPS) and Arm Holdings plc (ARM).
| Metric | Synopsys, Inc. (SNPS) | Arm Holdings plc (ARM) |
|---|---|---|
| Market Risk | Moderate | High |
| Regulatory Risk | Moderate | High |
| Operational Risk | Low | Moderate |
| Environmental Risk | Low | Moderate |
| Geopolitical Risk | Moderate | High |
In analyzing these risks, market and regulatory risks appear most significant for ARM, given its high exposure in the semiconductor industry and recent geopolitical tensions impacting supply chains. For Synopsys, operational and environmental risks are relatively lower, though market risks remain.
Which one to choose?
When comparing Synopsys, Inc. (SNPS) and Arm Holdings plc (ARM), both companies have unique strengths. SNPS exhibits strong profitability margins, with a net profit margin of about 19% and a solid return on equity (ROE) of 25%. However, its stock has recently shown a bearish trend, with a price change of -8% over the last year. In contrast, ARM has demonstrated impressive growth, with an 80% price increase and a better current ratio of 5.20, indicating strong liquidity. However, its high price-to-earnings ratio (over 141) raises valuation concerns.
For growth-oriented investors, ARM may be more appealing due to its strong upward momentum, while those seeking stability might favor SNPS for its established profitability metrics. Both companies face industry risks, including intense competition and fluctuating market demand.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Go further
I encourage you to read the complete analyses of Synopsys, Inc. and Arm Holdings plc American Depositary Shares to enhance your investment decisions:
