Synopsys drops 10.4% to 15-month low as Ansys amortization hits earnings

Synopsys Inc. shares tumbled 10.4% on Friday to their lowest since April 2025, extending a year-long decline as acquisition-related charges from the Ansys deal continue to depress reported earnings.

The electronic design automation (EDA) software maker has lost 19% over the past 12 months even as revenue surged 42% year over year in the fiscal second quarter. GAAP net income collapsed to $17.1 million in the period ended April 30, down 95% from a year earlier, weighed down by $403.6 million in quarterly amortization of acquired intangibles from the $35 billion Ansys acquisition.

"AI is scaling semiconductor demand, architectural diversity and complexity of chips and the systems they power, driving demand across our portfolio," Chief Executive Officer Sassine Ghazi said on the earnings call. Management raised its non-GAAP EPS guidance to a midpoint of $14.76 for fiscal 2026, signaling confidence in the underlying business despite the accounting drag.

The stock closed near $443, roughly 14% below its 52-week high of $651.73. Design IP revenue weakness has added pressure, with segment margins contracting to 20.1% in the fiscal third quarter of 2025 from 36.7% a year earlier on foundry customer softness. The company carries $10 billion in long-term debt, and its beta of 1.22 amplifies moves in the AI trade.

Wall Street remains broadly bullish, with 17 of 25 analysts rating the stock a Buy and a consensus price target of $563.74, implying 27% upside from current levels. But the near-term earnings picture is dominated by Ansys integration costs, and export-control uncertainty adds a layer of regulatory risk for a company whose tools are used to design chips sold globally.

The bull case hinges on Ansys synergies compounding against a semiconductor research and development backdrop that keeps accelerating. Synopsys trades at roughly 30 times forward non-GAAP EPS, a discount to its five-year average multiple, reflecting the market's wait-and-see posture until the amortization headwind begins to fade in fiscal 2027. Rival Cadence Design Systems Inc., which trades at 32 times forward earnings, faces similar end-market dynamics but lacks the acquisition-related earnings drag, making the relative valuation gap a point of debate among investors.

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