SNPS Stock Earnings Preview: How Will the Ansys Deal Shape Q3?

Synopsys [SNPS] is a supplier of semiconductor design and manufacturing software that chipmakers use to design and test integrated circuits.

SNPS stock has gained over 23% year-to-date, as of the September 5 close, supported by optimism surrounding its recent acquisition of simulation and analysis solutions company Ansys.

The company will report its Q3 earnings after the market closes on September 9 (image shows CEO Sassine Ghazi).

What To Expect from SNPS’ Q3 Report

Synopsys predicts revenue in the range of $1.755bn–1.785bn for the quarter ended July 31. Average Q3 revenue estimates from 16 Wall Street analysts covering SNPS stock, as reported by Yahoo Finance, came in at $1.77bn, indicating a year-over-year increase of nearly 16%.

The company’s estimate for Q3 non-GAAP EPS was between $3.82 and $3.87. Average analysts’ expectations stood at $3.75, compared to an EPS of $3.43 reported in Q3 2024.

Until July 2, Synopsys was forced to suspend Q3 earnings guidance due to new export restrictions to China imposed by US authorities in late May.

The company released an update on July 2 stating that US authorities had lifted the export restrictions and were working “to restore access to the recently restricted products in China”.

In FY 2024, Synopsys earned about 16% of its revenue from China. The US was the company’s core market, contributing 44.7% of its revenue in 2024.

Synopsys does not pay cash dividends on its common stock.

Recent Quarters: China in Focus

Over the last year, Synopsys has produced strong results, beating both earnings and revenue expectations in the preceding four quarters.

On May 28, the company reported a 10% year-over-year increase in revenue to $1.604bn for Q2 2025, supported by growth in the US and international markets such as Europe and Korea.

Revenue from China, however, dropped 29% year-over-year to $157.5m in Q2. China’s contribution to revenue fell to less than 10% in Q2, compared to 16% in fiscal 2024 and fiscal 2023.

Q2 net income jumped 19% year-over-year to $345.1m.

The company’s total long-term debt stood at $10.03bn as of April 30, while cash and cash equivalents came in at $14.12bn.

In March, Synopsys issued senior, unsecured and unsubordinated long-term notes worth $10bn to fund a portion of the cash consideration to acquire Ansys and to pay Ansys’ outstanding debt.

Despite reporting strong Q2 earnings, SNPS stock fell 9.6% on May 28 following media reports that US President Donald Trump had ordered US chip design software firms to cease sales to Chinese companies.

SNPS stock extended losses the next day after the company confirmed that it received a letter from US authorities with new export restrictions related to China.

Following a de-escalation of trade tensions between the US and China, chip design software developers such as Synopsys, Cadence Design Systems [CDNS] and Siemens [SIEGY] were allowed to restore technology access to Chinese customers in July.

SNPS jumped 4.9% on July 3 following the news, giving the stock enough momentum to hit an all-time high of $651.73 on July 30.

As of September 5, SNPS stock was up 23.24% in the year to date. 

Comparing Key Financial Metrics: SNPS vs CDNS vs SIEGY

Cadence Design Systems is an electronic design automation (EDA) software provider like Synopsys. The company’s products are used by semiconductor manufacturers to design chips, simulate electronic systems and test performance.

Siemens is a diversified technology conglomerate listed on the Frankfurt Stock Exchange. The company trades on the over-the-counter market in the US under the ticker symbol SIEGY.

Source: Yahoo Finance

SNPS Stock: Medium-Term Outlook

The $35bn deal to acquire Ansys was announced in January 2024. After months of uncertainty and antitrust scrutiny, the deal closed in July following regulatory approvals in the US, Europe and China.

Q3 earnings will mark the first time that Synopsys integrates Ansys’ financials into its report.

According to the company, the acquisition of Ansys will expand Synopsys’ total addressable market by $31bn. Ansys sells simulation and analysis software to clients in the structural engineering, automotive and defense industries, among others.

Ansys is expected bring at least $500m in revenue to the consolidated quarterly report. 

In Q1, Ansys reported an 8.2% year-over-year increase in revenue, to $504.9m. Quarterly non-GAAP net income rose 18.2% year-over-year to $144.15m. Non-GAAP operating profit margin in Q1 was 33.5%.

As for Synopsys’ existing operations, demand from artificial intelligence and high-performance computing markets is expected to be a core driver of revenue growth in Q3. 

In recent months, Synopsys has collaborated with major foundries, including Samsung [SSNLF], Intel [INTC] and Taiwan Semiconductor Manufacturing Co [TSM], to deliver advanced design and automation solutions, as the chip manufacturing industry approaches the “Angstrom Era”, which will see more transistors packed into a die.

Investor focus will also be on revenue from China. It remains to be seen whether the de-escalation of US-China economic tensions will lift regional revenue.

According to media reports, regulatory approval in China could hinge on commitments made by Synopsys to continue supplying EDA solutions to Chinese customers.

Conclusion

With the Synopsys-Ansys deal now closed, investors will watch how effectively Synopsys integrates Ansys while managing $10bn in new debt. Q3 results will be the first test.