Analyst(s): Ray Wang
Publication Date: September 11, 2025
Synopsys posted Q3 results that underscore resilience in its Design Automation segment and initial contributions from Ansys, offset by underperformance in Design IP. The company is taking steps to address headwinds and drive transformation across its portfolio.
What is Covered in this Article:
- Synopsys’ Q3 FY 2025 financial results
- Growth in Design Automation and Ansys’ contribution
- Weakness in Design IP from China and foundry challenges
- Portfolio transformation and cost realignment measures
- FY 2025 guidance and long-term margin targets
The News: Synopsys Inc. (NASDAQ: SNPS) reported Q3 FY 2025 revenue of $1.74 billion, up 14% year over year (YoY) and slightly above consensus expectations of $1.73 billion. By segment, Design Automation revenue rose 23% YoY to $1.31 billion, and Design IP revenue declined 7.7% YoY to $428 million. Non-GAAP operating income was $669.8 million (+10% YoY), reflecting a margin of 38.5% (Q3 FY 2024: 40%). Net income on a non-GAAP basis was $548.9 million (consensus: $602.2 million), or $3.39 per diluted share, compared with $535.5 million, or $3.43 per diluted share, a year earlier.
“Q3 was a transformational quarter. Against a challenging geo-political backdrop, we closed the Ansys acquisition – expanding our portfolio, customer base, and opportunity. Now more than ever, Synopsys is the mission-critical partner technology R&D needs to design and deliver AI-powered products,” said Sassine Ghazi, president and CEO of Synopsys. “While I’m proud of how our team navigated external challenges in the quarter, our IP business underperformed expectations. We are taking action to enhance our competitive advantage and drive resilient, long-term growth.”
Synopsys Q3 FY 2025: IP Business Weakness and Transformation Pose Concerns, But Long-Term Thesis Unchanged
Analyst Take: Synopsys’ Q3 FY 2025 results reflect a mixed performance, with strong momentum in Design Automation and the initial contribution from Ansys offset by a notable shortfall in Design IP. While revenue growth underscored the resilience of its EDA and hardware portfolio, headwinds from China export restrictions, challenges at a major foundry customer, and missed roadmap outcomes pressured earnings and outlook. Management’s commentary and updated guidance suggest a transitional period for the business as Synopsys realigns resources and accelerates its Silicon-to-Systems strategy.
While we acknowledge the headwinds facing the company, we believe the market is overreacting to challenges (shares down over 30% since the September 9 earnings call). On China specifically, Synopsys’s established leadership means that while prior export controls have pressured recent and near-term performance, we do not see these challenges undermining its long-term dominance or eroding the structural moat it has built in the market.
Regarding its foundry partner, we view this as a more concerning factor, given the partner’s critical role in Synopsys’s IP business. The mentioned foundry partner (likely Intel) has faced well-documented struggles in its foundry operations, alongside ongoing cost-cutting initiatives under new leadership, which in turn reduces the IP engagement with Synopsys.
It is understandable that some investors have concerns about the growth trajectory of Synopsys’s IP business, particularly on the foundry side. However, we believe Synopsys’s strong leadership in IP, coupled with the increasing demand for IP in ever-more complex process technologies, should provide long-term upside for the company—even as some of its key foundry customers continue to face challenges.
Regarding the “business transformation,” we believe it is still too early to draw firm conclusions about the success of Synopsys’s evolving business model. That said, we will closely monitor upcoming quarters for signals that could validate—or challenge—this transition.
Design Automation and Ansys Integration Drive Strength
Design Automation delivered 23% YoY growth to $1.31 billion, supported by strong hardware demand, including record shipments of ZeBu Server 5 and HAPS-200 systems. Synopsys also reported multiple competitive wins with leading hyperscalers, underscoring the importance of its full-flow digital implementations. The addition of Ansys, contributing $78 million in its first partial quarter, extended Synopsys’ reach into simulation and analysis markets. Early synergies were highlighted through initiatives such as embedding NVIDIA Omniverse technology into Ansys solutions to accelerate autonomous systems testing and validation. Together, these moves reinforce Synopsys’ positioning as a leader from silicon to systems and broaden its addressable market beyond semiconductors into aerospace, automotive, and industrial sectors.
Design IP Under Pressure Amid China Headwinds and Foundry Challenges
Design IP revenue fell 7.7% YoY to $428 million, around $120 million below consensus, with management citing three key headwinds: disruption from U.S. export restrictions in China, challenges with a major foundry customer, and roadmap missteps tied to resource allocation. The impact of the China restrictions extended well beyond the official six-week ban, as customers hesitated on multi-year commitments. Synopsys also confirmed that foundry-related delays weighed on revenue recognition in H2 FY 2025. These issues highlight the IP segment’s vulnerability, representing roughly a quarter of total revenue. Management is pivoting resources toward higher-growth areas such as high-speed protocol IP, subsystems, and chiplet-based solutions. It also explores adjustments to its IP monetization model, including potential royalties to capture greater value.
Portfolio Transformation and Cost Realignment
Synopsys emphasized its transformation journey, beginning with the divestiture of Software Integrity and now accelerated through the Ansys acquisition. The company is conducting a strategic portfolio review to focus investment on the highest-growth opportunities, particularly in AI-driven design automation and system-level simulation. A global headcount reduction of ~10% by FY 2026 will support scale and efficiency gains, with Gen AI deployment already enhancing productivity internally. Management reiterated that Ansys diversifies revenue and reduces customer concentration risks, as Ansys brings stronger exposure in Europe and verticals such as aerospace and automotive. Integration work continues, with regulatory approval for the divestiture of Optical Solutions and PowerArtist still pending, but Synopsys confirmed confidence in achieving targeted synergies.
Guidance and Final Thoughts
For FY 2025, Synopsys guided revenue between $7.03 and $7.06 billion (consensus: $6.75 billion), non-GAAP EPS of $12.76–$12.80 (consensus: $15.11), and free cash flow of about $950 million (consensus: $1.33 billion). For Q4 FY 2025, management expects revenue to be between $2.23 and $2.26 billion (consensus: $2.1 billion) and non-GAAP EPS of $2.76 to $2.80, well below the consensus estimate of $4.54.
While adding Ansys offsets some of the drag from IP weakness, guidance was viewed as conservative relative to consensus, reflecting management’s cautious stance on geopolitical and foundry-related risks. Management reaffirmed its commitment to achieving long-term operating margins in the mid-40s, supported by portfolio realignment and efficiency initiatives.
Despite all these headwinds, we believe the long-term investment thesis for Synopsys should remain intact, underpinned by the rise of chiplet architectures, heterogeneous integration, and custom-designed silicon that drives demand for a broader set of reusable IP blocks and advanced design tools. Key things to watch in the coming quarters will be the company’s execution in navigating these headwinds and better integrating Anys’s business to boost Synopsys’ overall business portfolio. It’s also important to see how successful the company’s business transformation of its IP business is.
See the complete press release on Synopsys’ Q3 FY 2025 financial results on the Synopsys website.
Disclosure: Futurum is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum as a whole.
Other insights from Futurum:
Synopsys Q2 FY 2025 Results Show AI-Led Growth, Design IP Surge
Ansys and Synopsys Expand Simulation Capabilities with NVIDIA Omniverse Integration
Synopsys Demonstrates PCIe 6.x Interoperability With Broadcom at PCI-SIG DevCon 2025
Author Information
Ray Wang is the Research Director for Semiconductors, Supply Chain, and Emerging Technology at Futurum. His coverage focuses on the global semiconductor industry and frontier technologies. He also advises clients on global compute distribution, deployment, and supply chain. In addition to his main coverage and expertise, Wang also specializes in global technology policy, supply chain dynamics, and U.S.-China relations.
He has been quoted or interviewed regularly by leading media outlets across the globe, including CNBC, CNN, MarketWatch, Nikkei Asia, South China Morning Post, Business Insider, Science, Al Jazeera, Fast Company, and TaiwanPlus.
Prior to joining Futurum, Wang worked as an independent semiconductor and technology analyst, advising technology firms and institutional investors on industry development, regulations, and geopolitics. He also held positions at leading consulting firms and think tanks in Washington, D.C., including DGA–Albright Stonebridge Group, the Center for Strategic and International Studies (CSIS), and the Carnegie Endowment for International Peace.
