Synopsys management expects growth in its chip design tools to reach double digits in the fourth quarter of fiscal 2026 and for the full fiscal year. This forecast follows an 8.5% year-over-year increase in revenue from these tools during the third quarter of fiscal 2026. The company attributes the anticipated acceleration to new AI chip design projects that have been accelerating, while noting that non-AI design projects have only stabilized after a period of slowing.
In the third quarter of fiscal 2026, Synopsys reported total revenue growth of approximately 42%, a figure that includes the impact of its acquisition of Ansys. Of the $2.477 billion in total revenue for that quarter, Ansys contributed about $711 million. The stock, which has returned 28% over the past month compared to a 1.4% return for the S&P 500, saw part of its gain after September 30, when the company outlined updated long-term growth targets at its Investor Day and struck a deal with OpenAI to develop an AI model for chip design work.
Despite the revenue growth, Synopsys remains less profitable than the broader market. The company recorded an operating margin of 11.0% over the last twelve months, compared to 18.5% for the S&P 500. At the end of the third quarter of fiscal 2026, Synopsys carried about $10 billion in total debt against $3.6 billion in cash and short-term investments. Net income over the last twelve months stood at $1.1 billion on revenue of $9.4 billion, a figure boosted by a gain from the sale of its processor IP business.
Cash flow presents a stronger aspect of the financial picture. During its August earnings call, management raised its fiscal 2026 forecast for cash flow from operations by $500 million to approximately $2.8 billion. The executive team also reported that efficiencies derived from the Ansys integration are materializing faster than originally planned. Separately, on October 5, the firm authorized a program to buy back $1 billion worth of its equity.
The stock is currently priced at 89.9 times earnings, significantly above the S&P 500's multiple of 21.5. Historical performance shows mixed results during market downturns; in the 2022 inflation shock, Synopsys shares fell 28% from peak to trough compared to a 24% drop for the S&P 500. In July and August 2024, the stock declined 21% while the index lost 7.8%, though in two shocks during 2023, Synopsys fell less than the index.
Investors will look to the upcoming report for fiscal fourth quarter 2026, where management has guided revenue between $2.53 billion and $2.58 billion. The reported growth rate for chip design tools in that quarter will serve as a key indicator of whether the double-digit growth forecast announced in August has materialized.