Synopsys, Inc.

Synopsys reported Q2 fiscal 2026 revenue of $2.276 billion, above guidance, with non-GAAP operating margin of 39.5% and non-GAAP EPS of $3.35, also above guidance. GAAP EPS was $0.09. Year over year, Design Automation revenue was approximately $1.822 billion and Design IP revenue was $454 million, down approximately 6% YoY but up 12% sequentially; within Design Automation, EDA revenue grew slightly over 8% YoY. Ansys revenue was approximately $652 million, including a $12.5 million accounting impact from recognizing channel revenue on a gross basis. Free cash flow was approximately $575 million, cash and short-term investments were $2.48 billion, and total debt was approximately $10 billion. For fiscal 2026, Synopsys raised revenue guidance to $9.625 billion-$9.705 billion, non-GAAP operating margin guidance to 41% at the midpoint, and non-GAAP EPS guidance to $14.72-$14.80. Cash flow from operations is now expected to be approximately $2.3 billion, capital expenditures remain approximately $300 million, and free cash flow guidance is approximately $2 billion. Third-quarter guidance calls for revenue of $2.41 billion-$2.46 billion, GAAP EPS of $0.84-$0.98, and non-GAAP EPS of $3.63-$3.69.

Sassine Ghazi said Synopsys is in an “exceptional moment” as AI increases chip complexity and system-level design needs, which he argued expands demand across EDA, IP and multiphysics simulation. He highlighted strong execution on Ansys integration, renewed focus on higher-value IP, and early traction in agentic AI and Multiphysics Fusion. His tone was confident and forward-leaning, with repeated emphasis on value capture, margin expansion and long-term opportunity, while pointing investors to September Investor Day for more detail.

Shelagh Glaser said the quarter beat across revenue, margin and EPS reflected strong execution and financial discipline. She broke out the full-year guide lift as $35 million from stronger first-half performance, $60 million of Ansys channel accounting impact, and a roughly $40 million revenue reduction from the Processor IP Solutions divestiture, which netted to the new $9.625 billion-$9.705 billion revenue range. She also said Synopsys expects to be about halfway through committed Ansys cost synergies by fiscal year-end, which helped drive the non-GAAP operating margin midpoint up to 41% and non-GAAP EPS to $14.72-$14.80, while raising CFO guidance to approximately $2.3 billion and FCF to approximately $2 billion.

Analysts focused heavily on IP recovery, asking whether Q1 marked the bottom and what is driving second-half reacceleration. Management said IP sequential improvement is being driven by the existing pipeline and, more importantly, by early engagement around a new business model for hyperscalers and HPC/custom silicon customers that could capture more value than traditional usage-fee or NRE structures. Questions also centered on Ansys growth, the timing of Multiphysics Fusion monetization, and whether AI agents could change EDA pricing; management said the first revenue synergies from Synopsys-Ansys products should begin in FY27, and that agentic AI may support a subscription-plus-consumption model over time.