SNPS
SYNOPSYS INCNasdaqValuation snapshot
Above bull casePrice is above even the bull case.
Price as of Sep 4, 2026 · Valuation Sep 5, 2026
What drives SNPS's base case?
base-case thesisAnsys has made Synopsys much larger, but the reported growth rate overstates the underlying pace because the comparison period contained only part of Ansys. The backlog and renewed Design IP growth support continued expansion after that effect fades. Restructuring and acquisition costs decline gradually, allowing more revenue to become profit and cash.
What shapes the assumptions
Approximately 49% of backlog excluding flexible commitments is due within 12 months
Near-term backlog conversion
Raises revenue growth
Fiscal third-quarter Design IP revenue rose from $427.6 million to $473.9 million
Design IP quarterly revenue
Raises revenue growth
Total segment adjusted profitability increased from 0.38 to 0.42 of quarterly revenue
Adjusted segment profitability
Raises operating margin
Fiscal 2026 free cash flow is targeted near $2.6 billion with about $225 million of capital expenditure
Cash conversion after capital spending
Lowers reinvestment
Each driver links a business metric to the forecast assumption it shapes — the basis for this case, not investment advice.
Why the gap?
The market is pricing this as if revenue grows 37.0% a year. Over the last 5 years it grew 18.2% a year — so the price assumes far more than it has delivered.
What else could explain it?›
- Or, holding growth steady
- the price is also consistent with a 76.9% operating margin, against the 28.0% assumed here.
- How confident is this estimate?
- Robustness 41.0/10 (Fragile) — some of any gap is our own uncertainty rather than disagreement.
- What would change the answer?
- Which assumption this valuation swings on, and by how much.
- Share count is still growing
- Diluted shares grew 18.9% year on year. This valuation uses today's share count, not tomorrow's — continued dilution would spread the same value across more shares.
Many combinations of assumptions reproduce the same price. These are ways to read what the market might be expecting, not the market's actual view. How this is worked out
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
View details
Research & assumptions
Inspect the valuation thesis, cases, risks, evidence, and model inputs.
Three independently researched cases generated automatically from published financials. Every assumption is justified and cited; the discount rate is computed from researched market inputs.
Company value drivers
Ranked operating metrics and the valuation assumptions they influence.
1. Contracted backlog, period end
Contracted but unrecognized obligations measure forward revenue coverage and the durability of customer commitments.
$11B
reported2. Design Automation revenue, fiscal third quarter
Quarterly Design Automation sales track demand for EDA, Ansys simulation, hardware verification, and integrated engineering products.
$2B
reported3. Design IP revenue, fiscal third quarter
Quarterly Design IP sales show whether interface, memory, security, and processor intellectual property is recovering after customer and export-control weakness.
$474M
reported4. Total segment adjusted margin, fiscal third quarter
This measures profit from the operating segments before centrally managed acquisition, amortization, stock-compensation, and restructuring items.
42.0%
reported5. Time-based product revenue, fiscal third quarter
Revenue recognized over subscription periods indicates the scale and growth of the company's more predictable contracted software stream.
$1B
reportedBase inputs from financials
source period →Base revenue (TTM)
$9.4B
Diluted shares
192,319,000
Net cash
-$6.4B
Bear
low confidence$58.99
IV / share
-85.8% vs $416.31
- Explicit cash flows
- $25.43
- Terminal value
- $67.00
- Net cash
- -$33.44
- Intrinsic value / share
- $58.99
113.6% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth7.0% → 6.0% → 6.0% → 5.0% → 5.0%medium
How derived: The forecast starts from 0.42 reported quarterly growth but removes the $622.2 million Ansys comparison benefit and assumes weaker semiconductor design activity, export restrictions, and the recent decline in backlog limit organic expansion.
Why this confidence: Ansys contribution is disclosed separately ↑, Five-year semiconductor demand is uncertain ↓
Measured by
- Contracted backlog, period end$11Breported
- Design Automation revenue, fiscal third quarter$2Breported
- Design IP revenue, fiscal third quarter$474Mreported
- Time-based product revenue, fiscal third quarter$1Breported
Evidence for
- Most of the latest quarterly increase came from including Ansys for a full quarter, while backlog declined from $11.4 billion at fiscal 2025 year-end to $10.9 billion at July 31, 2026.[FY2026 Q3 Form 10-Q]· primary
Evidence against
- Design IP returned to growth in the third quarter, and management raised fiscal 2026 revenue targets to $9.69 billion-$9.74 billion.[FY2026 Q3 results]· primary
Operating margin22.0%medium
How derived: The target allows recovery from the latest 0.144 GAAP quarterly margin as restructuring subsides, but assumes acquired-intangible amortization, integration costs, and weaker Design IP economics prevent a return to pre-acquisition profitability.
Why this confidence: Current GAAP and segment margins are reported ↑, Future amortization and integration savings are uncertain ↓
Measured by
- Design Automation revenue, fiscal third quarter$2Breported
- Design IP revenue, fiscal third quarter$474Mreported
- Total segment adjusted margin, fiscal third quarter42.0%reported
- Time-based product revenue, fiscal third quarter$1Breported
Evidence for
- The latest quarter's GAAP margin was 0.144, and the nine-month period included $1.21 billion of acquired-intangible amortization and $236.3 million of restructuring charges.[FY2026 Q3 results]· primary
Evidence against
- The latest quarterly adjusted margin was 0.416, including a 0.45 adjusted margin in Design Automation, showing substantially better underlying economics than GAAP results imply.[FY2026 Q3 Form 10-Q]· primary
Tax rate21.0%medium
How derived: The assumption moves the reported nine-month 0.198 rate toward the 0.21 US statutory rate because lower foreign-derived intangible-income benefits and non-deductible compensation could offset research credits.
Why this confidence: Current effective rate is disclosed ↑, Geographic profit mix and tax law can change ↓
No tracked driver measures this assumption yet.
Evidence for
- Synopsys reported a 0.198 nine-month effective rate and said immediate domestic research expensing reduces its foreign-derived intangible-income deduction.[FY2026 Q3 Form 10-Q]· primary
Evidence against
- Federal research credits, foreign-derived intangible-income deductions, and foreign tax credits kept the nine-month effective rate below the statutory rate.[FY2026 Q3 Form 10-Q]· primary
Reinvestment rate35.0%low
How derived: A 0.35 share of after-tax operating profit is retained because integration, cloud infrastructure, product development, and working-capital needs remain elevated while slower growth reduces the payoff from those expenditures.
Why this confidence: Capital expenditure guidance is available ↑, Economic reinvestment includes expensed research and working capital ↓
Measured by
- Total segment adjusted margin, fiscal third quarter42.0%reported
Evidence for
- Nine-month research and development costs increased with Ansys employee and infrastructure costs, while management expects approximately $225 million of fiscal 2026 capital expenditure.[FY2026 Q3 results]· primary
Evidence against
- Management expects approximately $2.6 billion of fiscal 2026 free cash flow, indicating that the software business can convert substantial cash after capital spending.[FY2026 Q3 results]· primary
Terminal growth2.0%low
How derived: Long-run growth is held to 0.02 because mature EDA demand ultimately follows broad economic and semiconductor-design activity, with export controls and customer concentration limiting durable expansion.
Why this confidence: Industry dependence is disclosed ↑, Perpetual-horizon estimate ↓
Measured by
- Contracted backlog, period end$11Breported
- Time-based product revenue, fiscal third quarter$1Breported
Evidence for
- Synopsys states that its growth depends on semiconductor and electronics companies beginning new design projects and could slow or cease under weaker macroeconomic conditions.[FY2026 Q3 Form 10-Q]· primary
Evidence against
- Two-to-three-year subscription contracts, $10.9 billion of backlog, and expanding chip complexity provide unusually durable demand visibility.[FY2026 Q3 Form 10-Q]· primary
Base
low confidence$130.22
IV / share
-68.7% vs $416.31
- Explicit cash flows
- $40.44
- Terminal value
- $123.22
- Net cash
- -$33.44
- Intrinsic value / share
- $130.22
94.6% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
Revenue growth12.0% → 11.0% → 10.0% → 9.0% → 8.0%medium
How derived: The path normalizes the acquisition-inflated recent growth toward low-double-digit expansion, supported by $10.9 billion of backlog, 0.12 time-based product growth, 0.11 Design IP growth, and broader demand for integrated EDA and simulation.
Why this confidence: Backlog and segment results provide near-term visibility ↑, Acquisition distorts year-over-year comparisons ↓
Measured by
- Contracted backlog, period end$11Breported
- Design Automation revenue, fiscal third quarter$2Breported
- Design IP revenue, fiscal third quarter$474Mreported
- Time-based product revenue, fiscal third quarter$1Breported
Price implies: 37.0% vs our 10.0% — one of several sets that fit this price
Evidence for
- Time-based product revenue increased 0.12 and Design IP revenue increased 0.11 in the latest quarter, while management described broad-based organic strength beyond Ansys.[FY2026 Q3 Form 10-Q]· primary
Evidence against
- Ansys accounted for $622.2 million of the $737.1 million latest-quarter increase, and nine-month Design IP revenue was still down 0.01.[FY2026 Q3 Form 10-Q]· primary
Operating margin28.0%medium
How derived: The target bridges the 0.144 latest-quarter GAAP result and 0.416 adjusted result, assuming restructuring ends, acquired-intangible amortization declines, and some Ansys efficiencies are realized while stock compensation remains material.
Why this confidence: GAAP-to-adjusted reconciliation identifies temporary costs ↑, Synergy timing and stock compensation remain uncertain ↓
Measured by
- Design Automation revenue, fiscal third quarter$2Breported
- Design IP revenue, fiscal third quarter$474Mreported
- Total segment adjusted margin, fiscal third quarter42.0%reported
- Time-based product revenue, fiscal third quarter$1Breported
Price implies: 76.9% vs our 28.0% — one of several sets that fit this price
Evidence for
- Design Automation produced a 0.45 adjusted margin in the latest quarter, and Synopsys attributes Ansys goodwill partly to expected cost savings and operating efficiencies.[FY2026 Q3 Form 10-Q]· primary
Evidence against
- Fiscal 2026 midpoint targets imply only a 0.104 GAAP margin because acquired-intangible amortization, stock compensation, and restructuring remain substantial.[FY2026 Q3 results]· primary
Tax rate19.0%medium
How derived: The assumption is close to the reported 0.198 nine-month rate but allows recurring research, foreign-derived income, and foreign tax credits to keep the normalized burden modestly below the US statutory rate.
Why this confidence: Current GAAP and adjusted rates are disclosed ↑, Tax benefits depend on income geography and legislation ↓
No tracked driver measures this assumption yet.
Evidence for
- The nine-month GAAP effective rate was 0.198, while management's fiscal 2026 non-GAAP target was 0.18.[FY2026 Q3 results]· primary
Evidence against
- Synopsys expects immediate domestic research expensing to reduce its foreign-derived intangible-income deduction and thereby increase the effective rate.[FY2026 Q3 Form 10-Q]· primary
Reinvestment rate30.0%low
How derived: The model retains 0.30 of after-tax operating profit to fund research, cloud capacity, integration, and working capital, balanced against low physical capital needs and management's strong free-cash-flow target.
Why this confidence: Cash-flow and capital-spending targets are disclosed ↑, Expensed research is difficult to divide between maintenance and growth ↓
Measured by
- Total segment adjusted margin, fiscal third quarter42.0%reported
Evidence for
- Fiscal 2026 capital expenditure is targeted at approximately $225 million, while research and development costs increased because of Ansys personnel and infrastructure.[FY2026 Q3 results]· primary
Evidence against
- Management targets approximately $2.8 billion of operating cash flow and $2.6 billion of free cash flow for fiscal 2026, demonstrating low physical-capital intensity.[FY2026 Q3 results]· primary
Terminal growth2.5%low
How derived: The perpetual rate reflects durable subscription revenue and rising design complexity but stays well below the explicit forecast as the enlarged company matures.
Why this confidence: Multi-year contracts support durability ↑, Perpetual competitive and macroeconomic conditions are unknowable ↓
Measured by
- Contracted backlog, period end$11Breported
- Time-based product revenue, fiscal third quarter$1Breported
Evidence for
- Technology subscription contracts generally run for two to three years, and most backlog not due within 12 months is expected to be recognized over the following three years.[FY2026 Q3 Form 10-Q]· primary
Evidence against
- The company identifies semiconductor cycles, macroeconomic conditions, export restrictions, competition, and internally developed customer tools as long-run risks.[FY2026 Q3 Form 10-Q]· primary
Bull
low confidence$222.52
IV / share
-46.5% vs $416.31
- Explicit cash flows
- $57.81
- Terminal value
- $198.15
- Net cash
- -$33.44
- Intrinsic value / share
- $222.52
89.0% of the value rests on the terminal value — high dependency. A small change to terminal growth moves the valuation a lot — see terminal growth below.
bull operating margin (34%) sits well above the best recent margin (23%)
Revenue growth15.0% → 14.0% → 12.0% → 11.0% → 10.0%low
How derived: The path assumes recent broad-based strength persists after acquisition effects fade as integrated Ansys offerings, AI-driven design complexity, and a return to Design IP growth expand customer spending.
Why this confidence: Multiple operating categories showed current growth ↑, Sustained mid-teens organic growth is not yet demonstrated ↓
Measured by
- Contracted backlog, period end$11Breported
- Design Automation revenue, fiscal third quarter$2Breported
- Design IP revenue, fiscal third quarter$474Mreported
- Time-based product revenue, fiscal third quarter$1Breported
Evidence for
- Management reported broad-based organic strength, 0.12 growth in time-based products, 0.11 growth in Design IP, and a strong full quarter from Ansys.[FY2026 Q3 Form 10-Q]· primary
Evidence against
- The full-quarter Ansys comparison supplied most of the latest reported growth, and backlog was lower than at fiscal 2025 year-end.[FY2026 Q3 Form 10-Q]· primary
Operating margin34.0%low
How derived: The target assumes Ansys cost savings, the 2026 restructuring, declining acquisition amortization, and a richer mix of scalable subscription software move GAAP economics substantially toward the current 0.416 adjusted margin.
Why this confidence: Current adjusted segment economics support the ceiling ↑, Requires substantial GAAP cost normalization ↓
Measured by
- Design Automation revenue, fiscal third quarter$2Breported
- Design IP revenue, fiscal third quarter$474Mreported
- Total segment adjusted margin, fiscal third quarter42.0%reported
- Time-based product revenue, fiscal third quarter$1Breported
Evidence for
- The latest adjusted margin was 0.416, Design Automation's adjusted margin was 0.45, and the Ansys purchase accounting identifies expected cost savings and operating efficiencies.[FY2026 Q3 Form 10-Q]· primary
Evidence against
- The latest GAAP margin was only 0.144, stock compensation was 0.094 of quarterly revenue, and acquired-intangible amortization was 0.162 of revenue.[FY2026 Q3 results]· primary
Tax rate17.0%low
How derived: The assumption requires research, foreign-income, and foreign-tax credits to push the burden modestly below management's 0.18 adjusted target as acquisition-related tax effects normalize.
Why this confidence: Tax-credit mechanisms are identified in the filing ↑, Assumption is below current results and guidance ↓
No tracked driver measures this assumption yet.
Evidence for
- Synopsys identifies federal research credits, foreign-derived intangible-income deductions, and foreign tax credits as recurring reasons its rate is below 0.21.[FY2026 Q3 Form 10-Q]· primary
Evidence against
- The reported nine-month rate was 0.198, and new immediate research expensing reduces the foreign-derived intangible-income deduction, increasing the effective rate.[FY2026 Q3 Form 10-Q]· primary
Reinvestment rate25.0%low
How derived: Only 0.25 of after-tax operating profit is retained because subscription software, integrated product reuse, and Ansys cost efficiencies allow faster growth without proportional physical investment.
Why this confidence: Software has low reported capital intensity ↑, High growth with low reinvestment requires exceptional returns on research ↓
Measured by
- Total segment adjusted margin, fiscal third quarter42.0%reported
Evidence for
- Management expects approximately $2.6 billion of fiscal 2026 free cash flow against approximately $225 million of capital expenditure.[FY2026 Q3 results]· primary
Evidence against
- The company continues to incur higher research, employee, information-technology, and facility costs following Ansys, while rapid product growth normally requires sustained engineering investment.[FY2026 Q3 Form 10-Q]· primary
Terminal growth3.0%low
How derived: A 0.03 perpetual rate assumes chip complexity, AI-assisted engineering, and integrated silicon-to-systems simulation keep Synopsys growing near nominal economic output after explicit growth fades.
Why this confidence: Mission-critical products and design complexity support endurance ↑, High perpetual growth is sensitive to distant assumptions ↓
Measured by
- Contracted backlog, period end$11Breported
- Time-based product revenue, fiscal third quarter$1Breported
Evidence for
- Synopsys describes its EDA software as mission-critical and is combining semiconductor design expertise with Ansys simulation capabilities to serve integrated silicon-to-systems development.[FY2026 Q3 Form 10-Q]· primary
Evidence against
- The filing warns that semiconductor demand can slow, customers can build internal tools, and competitors or export restrictions can reduce growth.[FY2026 Q3 Form 10-Q]· primary
Valuation robustness
reliability of the estimate, not a stock rating41 / 100 · Fragile
Formula v1.0.0. Higher means a more reliable estimate — not a recommendation.
Quality checks
Automated model-risk flags — warnings, not recommendations.
- 95% of the intrinsic value rests on the terminal value — a small change to terminal growth moves the valuation a lot.→ terminal growth
- The reinvestment assumption is low-confidence.→ reinvestment
- The terminal growth assumption is low-confidence.→ terminal growth
- Diluted share count grew 19% year over year, which reduces per-share participation in business growth.→ per-share economics
Per-share economics
Business growth after changes in the diluted share count.
| Period | Revenue growth | FCF/share | FCF/share growth | Shares | Share growth |
|---|---|---|---|---|---|
| Q1 2025 | -3.7% | -0.69 | 16.1% | 156.19M | 0.6% |
| Q2 2025 | 10.3% | 1.41 | -49.9% | 156.09M | 0.2% |
| Q3 2025 | 14.0% | 3.91 | 47.0% | 161.68M | 3.6% |
| Q1 2026 | 65.5% | 4.31 | 721.8% | 190.76M | 22.1% |
| Q2 2026 | 41.9% | 2.99 | 112.4% | 192.14M | 23.1% |
| Q3 2026 | 42.4% | 3.88 | -0.8% | 192.32M | 18.9% |
Valuation history every run
Why intrinsic value changed
Why
Contracted backlog, period end moved from an unreported prior value to $10.9B, as reported in FY2026 Q3 Form 10-Q.
Measured by
- Contracted backlog, period end$11Breported
- Design Automation revenue, fiscal third quarter$2Breported
- Design IP revenue, fiscal third quarter$474Mreported
- Time-based product revenue, fiscal third quarter$1Breported
Why
No sourced event is linked to this change yet — the researched assumption moved without a cited driver observation behind it.
Why
Total segment adjusted margin, fiscal third quarter moved from an unreported prior value to 42.0%, as reported in FY2026 Q3 Form 10-Q.
Measured by
- Total segment adjusted margin, fiscal third quarter42.0%reported
Why
Contracted backlog, period end moved from an unreported prior value to $10.9B, as reported in FY2026 Q3 Form 10-Q.
Measured by
- Contracted backlog, period end$11Breported
- Time-based product revenue, fiscal third quarter$1Breported
Sequential deterministic bridge · order-dependent contributions · exactly reconciled
Material event timeline
7/31/2026
Contracted backlog, period end moved from an unreported prior value to $10.9B, as reported in FY2026 Q3 Form 10-Q.
FY2026 Q3 Form 10-Q ↗7/31/2026
Total segment adjusted margin, fiscal third quarter moved from an unreported prior value to 42.0%, as reported in FY2026 Q3 Form 10-Q.
FY2026 Q3 Form 10-Q ↗Market inputs researched
The value is the US Treasury's 10-year nominal constant-maturity yield reported for September 3, 2026.
The market-data service reports a 1.23 equity beta for SNPS, used without reference to analyst forecasts or valuation targets.
The value is Professor Aswath Damodaran's September 1, 2026 trailing-12-month adjusted-payout implied premium for the US equity market.
The value is SNPS's regular-session closing price on September 4, 2026.
Generated 9/5/2026, 1:07:58 AM · pipeline v1.2.0