In a world where the seamless operation of technology drives our daily interactions, Synopsys, Inc. stands at the forefront of innovation within the electronic design automation industry. Renowned for its cutting-edge Fusion Design Platform and comprehensive Verification Continuum Platform, Synopsys empowers engineers to create and test complex integrated circuits with unmatched precision. As we examine the company’s robust market position and reputation for quality, it raises an important question: do Synopsys’s fundamentals still support its current market valuation and growth trajectory?
Table of contents
Company Description
Synopsys, Inc. (NASDAQ: SNPS), founded in 1986 and headquartered in Mountain View, California, is a leading player in the electronic design automation (EDA) industry. The company specializes in software solutions for designing and testing integrated circuits, with core offerings such as the Fusion Design Platform and Verification Continuum Platform. Synopsys serves diverse markets, including electronics, automotive, and healthcare, facilitating innovation through its robust portfolio of intellectual property (IP) solutions and security testing services. With a market cap of approximately $86.4B and over 20,000 employees, Synopsys plays a pivotal role in shaping the future of technology, particularly in enhancing security and efficiency within the software development lifecycle.
Fundamental Analysis
In this section, I will conduct a fundamental analysis of Synopsys, Inc., focusing on its income statement, key financial ratios, and dividend payout policy.
Income Statement
The following table summarizes the income statement for Synopsys, Inc. (SNPS) over the last five fiscal years, highlighting key financial metrics essential for evaluating the company’s performance.
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue | 4.20B | 4.62B | 5.33B | 6.13B | 7.05B |
| Cost of Revenue | 895M | 898M | 1.23B | 1.25B | 1.62B |
| Operating Expenses | 2.55B | 2.57B | 2.73B | 3.53B | 4.32B |
| Gross Profit | 3.30B | 3.72B | 4.10B | 4.88B | 5.43B |
| EBITDA | 1.10B | 1.33B | 1.65B | 1.94B | 914M |
| EBIT | 809M | 1.11B | 1.31B | 1.55B | 915M |
| Interest Expense | 3.37M | 1.70M | 1.18M | 35M | 447M |
| Net Income | 758M | 985M | 1.23B | 2.26B | 1.34B |
| EPS | 4.96 | 6.44 | 8.08 | 14.78 | – |
| Filing Date | 2021-12-13 | 2022-12-12 | 2023-12-12 | 2024-12-19 | 2025-12-10 |
Interpretation of Income Statement
Over the past five years, Synopsys, Inc. has demonstrated consistent revenue growth, increasing from 4.20B in 2021 to 7.05B in 2025, representing a strong upward trend. However, the most recent year saw a notable decline in EBITDA to 914M, indicating potential challenges in cost management. Despite a significant increase in net income in 2024, the 2025 net income dipped to 1.34B, suggesting that while revenue continued to grow, profitability faced pressures, possibly from rising operating expenses. Overall, while the revenue trajectory is promising, careful attention to margin management will be crucial going forward.
Financial Ratios
Here is a summary of the key financial ratios for Synopsys, Inc. (SNPS) over the years.
| Metrics | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Net Margin | 18.04% | 21.33% | 23.08% | 36.94% | 18.96% |
| ROE | 14.31% | 17.85% | 20.01% | 25.17% | – |
| ROIC | 10.90% | 14.98% | 17.11% | 12.04% | – |
| P/E | 66.49 | 45.46 | 58.07 | 34.75 | – |
| P/B | 9.51 | 8.12 | 11.62 | 8.75 | – |
| Current Ratio | 1.16 | 1.09 | 1.15 | 2.44 | 0 |
| Quick Ratio | 1.07 | 1.01 | 1.04 | 2.30 | 0 |
| D/E | 0.13 | 0.12 | 0.11 | 0.08 | – |
| Debt-to-Assets | 7.62% | 6.97% | 6.56% | 5.24% | 0% |
| Interest Coverage | 223.96 | 676.51 | 1159.09 | 38.56 | -2.05 |
| Asset Turnover | 0.48 | 0.49 | 0.52 | 0.47 | – |
| Fixed Asset Turnover | 4.35 | 4.43 | 4.80 | 5.43 | – |
| Dividend Yield | 0% | 0% | 0% | 0% | 0% |
Interpretation of Financial Ratios
In 2025, Synopsys, Inc. (SNPS) exhibits concerning financial ratios. The liquidity ratios, such as the current and quick ratios, are both at 0, indicating a potential inability to meet short-term obligations. The solvency ratio is also absent, raising serious concerns about the company’s long-term financial stability. Profitability ratios show a net profit margin of 18.96%, which is relatively strong and suggests effective cost management. However, the interest coverage ratio is negative at -2.05, indicating significant challenges in covering interest expenses. Overall, while profitability is evident, liquidity and solvency issues present substantial risks to investors.
Evolution of Financial Ratios
Over the past five years, Synopsys has experienced a decline in liquidity, with current and quick ratios falling to 0 in 2025 from 1.16 in 2021. Profitability has fluctuated, with the net profit margin showing an increase from 18.04% in 2021 to 18.96% in 2025, despite overall financial health deteriorating.
Distribution Policy
Synopsys, Inc. does not currently pay dividends, which is indicative of its strategy focused on reinvestment and growth, particularly in its high-tech sector. The company prioritizes research and development, potentially positioning itself for long-term value creation. Additionally, Synopsys engages in share buybacks, further enhancing shareholder value. Overall, this approach appears to align with sustainable long-term growth, although it comes with the inherent risks associated with high capital allocation in R&D.
Sector Analysis
Synopsys, Inc. operates in the Software – Infrastructure industry, providing essential electronic design automation tools and solutions, positioning itself as a leader against competitors like Cadence and Mentor Graphics.
Strategic Positioning
Synopsys, Inc. (SNPS) holds a significant position in the electronic design automation (EDA) software market, with a market cap of approximately 86.4B. Its flagship products, including the Fusion Design Platform and Verification Continuum Platform, are crucial in designing and testing integrated circuits. The company faces competitive pressure from firms like Cadence Design Systems and Mentor Graphics, yet it continuously innovates to mitigate risks from technological disruptions. With a beta of 1.15, investors should remain cautious, as market volatility can impact share performance.
Revenue by Segment
The following chart illustrates Synopsys, Inc.’s revenue distribution by segment for the fiscal year 2024, highlighting key trends and performance across various segments.
In fiscal year 2024, Synopsys experienced a slight decline in overall revenue from its segments compared to 2023. The “License and Maintenance” segment generated $3.22B, while “License” and “Technology Service” contributed $1.80B and $1.10B, respectively. Notably, the decline in “License and Maintenance” from $3.38B in 2023 indicates potential margin risks. Meanwhile, “Technology Service” shows relative stability, suggesting it remains a crucial revenue driver. Overall, while the company continues to perform well, the slowing growth in key segments warrants close monitoring for future investments.
Key Products
Below is a table summarizing the key products offered by Synopsys, Inc., which play a crucial role in electronic design automation and integrated circuit design.
| Product | Description |
|---|---|
| Fusion Design Platform | Provides digital design implementation solutions for integrated circuits. |
| Verification Continuum Platform | Offers virtual prototyping, static and formal verification, simulation, and emulation solutions. |
| FPGA Design Products | Specialized products programmed to perform specific functions in applications. |
| Intellectual Property (IP) Solutions | Includes IP for USB, PCI Express, DDR, Ethernet, SATA, and more. |
| Logic Libraries and Embedded Memories | Provides building blocks essential for integrated circuits and embedded applications. |
| Configurable Processor Cores | Tools designed for creating application-specific instruction-set processors. |
| Security Testing Solutions | Services and tools for detecting and remediating security vulnerabilities in software. |
| Platform Architect Solutions | Tools for analyzing and optimizing SoC architecture. |
These products reflect Synopsys’ commitment to providing robust solutions across various industries, including electronics, automotive, and medicine.
Main Competitors
The competitive landscape for Synopsys, Inc. is marked by several key players in the software infrastructure sector, each contributing to the electronic design automation market.
| Company | Market Cap |
|---|---|
| Cadence Design Systems, Inc. | 90B |
| NetEase, Inc. | 87B |
| Synopsys, Inc. | 86B |
| Corning Incorporated | 81B |
| Snowflake Inc. | 72B |
| TE Connectivity Ltd. | 72B |
| Cloudflare, Inc. | 72B |
| Autodesk, Inc. | 64B |
| Fortinet, Inc. | 63B |
| MicroStrategy Incorporated | 50B |
The main competitors in the electronic design automation industry include Cadence Design Systems and NetEase, among others, with a focus primarily on the North American market.
Competitive Advantages
Synopsys, Inc. (SNPS) boasts a strong competitive edge in the electronic design automation (EDA) sector, primarily due to its comprehensive Fusion Design and Verification Continuum Platforms, which streamline the design and testing of integrated circuits. The company is well-positioned for future growth with upcoming innovations in AI-driven design solutions and expansion into emerging markets like automotive and healthcare technology. Additionally, its diverse portfolio of intellectual property (IP) solutions enhances its attractiveness to a wide array of industries, ensuring sustained demand and long-term revenue stability.
SWOT Analysis
This analysis evaluates the strengths, weaknesses, opportunities, and threats facing Synopsys, Inc. (SNPS) to inform strategic decision-making.
Strengths
- Strong market position
- Diverse product offerings
- Robust R&D capabilities
Weaknesses
- High dependency on specific sectors
- Limited dividend policy
- Intense competition
Opportunities
- Growth in semiconductor industry
- Expansion into emerging markets
- Increasing demand for EDA solutions
Threats
- Economic downturns
- Rapid technological changes
- Regulatory challenges
Overall, Synopsys, Inc. has a solid foundation with notable strengths, but it must navigate potential vulnerabilities and external threats effectively. Leveraging opportunities in the growing semiconductor market while managing risks will be crucial for the company’s sustained growth and competitiveness.
Stock Analysis
In the past year, Synopsys, Inc. (SNPS) has experienced notable price movements, reflecting a bearish trading dynamic that warrants careful consideration for investors.
Trend Analysis
Over the past year, SNPS has seen a percentage change of -9.42%, indicating a bearish trend. The highest price during this period reached 621.3, while the lowest was 388.13. The trend has been characterized by deceleration, suggesting a slowing down in the rate of price decline, with a standard deviation of 58.73 indicating significant volatility.
Volume Analysis
Analyzing trading volumes over the last three months, total volume reached 793.03M, with seller volume at 406.80M, representing 51.68% of the total. This suggests a seller-driven market, and while the overall volume trend is increasing, recent data indicates that buyer volume accounted for only 37.25% of the activity, further confirming a seller-dominant sentiment among investors.
Analyst Opinions
Recent analyst recommendations for Synopsys, Inc. (SNPS) indicate a generally positive outlook. Analysts have assigned a rating of B+, reflecting a consensus leaning towards a “buy” for the current year. Key analysts highlight strong discounted cash flow metrics and solid returns on equity and assets. However, some caution is advised due to moderate scores in debt-to-equity and price-to-earnings. Overall, the consensus remains bullish, suggesting that SNPS is a favorable addition to investment portfolios.
Stock Grades
Synopsys, Inc. (SNPS) has received consistent evaluations from several reputable grading companies. Here’s a summary of the latest stock ratings:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Piper Sandler | Maintain | Overweight | 2025-12-11 |
| Keybanc | Maintain | Overweight | 2025-12-11 |
| Rosenblatt | Maintain | Buy | 2025-12-11 |
| B of A Securities | Upgrade | Buy | 2025-12-11 |
| Needham | Maintain | Buy | 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 |
Overall, the trend indicates a positive sentiment towards SNPS, with several upgrades and maintained grades reflecting confidence in the company’s performance. Notably, B of A Securities has recently upgraded its rating from Neutral to Buy, which may suggest growing optimism among analysts.
Target Prices
Based on the latest data, the consensus target price for Synopsys, Inc. (SNPS) is favorable.
| Target High | Target Low | Consensus |
|---|---|---|
| 602 | 425 | 540.33 |
Analysts expect the stock to reach an average price of approximately 540.33, indicating a positive outlook for investors.
Consumer Opinions
Consumer sentiment regarding Synopsys, Inc. (SNPS) reflects a blend of appreciation for its innovation and concerns about pricing.
| Positive Reviews | Negative Reviews |
|---|---|
| “Outstanding tools for software design!” | “Pricing is higher than competitors.” |
| “Excellent customer support!” | “Steep learning curve for new users.” |
| “Consistently delivers high-quality products.” | “Updates can be slow and cumbersome.” |
Overall, consumer feedback on Synopsys indicates a strong appreciation for product quality and support, while concerns about pricing and user experience persist.
Risk Analysis
In evaluating Synopsys, Inc. (SNPS), it’s crucial to understand the potential risks that may impact its performance. Below is a summary of identified risks:
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Risk | Fluctuations in demand for electronic design automation tools. | High | High |
| Regulatory Risk | Changes in regulations affecting technology patents and intellectual property. | Medium | High |
| Competitive Risk | Increased competition from emerging tech companies. | High | Medium |
| Cybersecurity Risk | Potential data breaches impacting client trust and operations. | Medium | High |
| Economic Risk | Global economic fluctuations affecting capital spending in tech. | Medium | Medium |
The most significant risks for SNPS are market and regulatory risks, given the critical nature of its products in a rapidly evolving tech landscape.
Should You Buy Synopsys, Inc.?
Synopsys, Inc. (SNPS) demonstrates solid profitability with a net profit margin of 18.96% and a revenue of 7.05B in FY 2025. The company’s rating stands at B+, indicating a generally favorable outlook, although its debt metrics are not specified. The fundamentals have shown consistent growth, with an increase in revenue by 15.12% year-over-year. However, without the specific WACC value, I cannot definitively assess whether the company is creating or destroying value.
Favorable signals
The data reveals several favorable elements for Synopsys, Inc. (SNPS). These include a revenue growth of 15.12%, a gross margin of 76.98%, and a net margin of 18.96%. Additionally, the company has a favorable interest expense percentage of -6.33% and a price-to-earnings (PE) ratio that is favorable as well. The debt-to-equity ratio and debt-to-assets ratio also reflect positively on the company’s financial stability.
Unfavorable signals
On the other hand, there are several unfavorable signals present in the data. The company’s operating expenses compared to revenue growth is unfavorable at 15.12%. The EBIT margin stands at 0.0%, and EBIT growth reflects a decline of 100.0%. Furthermore, both net margin growth and EPS growth show significant negative trends, at -48.68% and -100.0%, respectively. Additionally, the return on equity (ROE) and return on invested capital (ROIC) are unfavorable at 0%, while the current and quick ratios are also unfavorable, both at 0.
Conclusion
The overall evaluation presents a neutral opinion on the income statement, while the ratios evaluation is unfavorable, indicating a mixed outlook. Given the bearish stock trend and the recent seller volume exceeding buyer volume, it might be prudent to wait for buyers to return before making any investment decisions.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- Synopsys Inc (SNPS) Q4 2025 Earnings Call Highlights: Record Revenue and Strategic Growth Plans – Yahoo Finance (Dec 11, 2025)
- Synopsys jumps as Q4 revenue surges 38% on design automation gains (SNPS:NASDAQ) – Seeking Alpha (Dec 10, 2025)
- Synopsis Stock Climbs After Q4 Earnings: Here’s Why – Benzinga (Dec 10, 2025)
- Synopsys Posts Financial Results for Fourth Quarter and Fiscal Year 2025 – Synopsys (Dec 10, 2025)
- Synopsys gets rating upgrade at Rosenblatt ahead of earnings – Seeking Alpha (Dec 09, 2025)
For more information about Synopsys, Inc., please visit the official website: synopsys.com
