SUNNYVALE, California, August 26, 2026, 17:27 (EDT) — Synopsys (SNPS.O) slipped 2.8%, losing $2.2 billion in market value, after the company raised its forecast bolstered by AI-related business.
- After closing at $410.00, Synopsys shares declined 2.8% in after-hours trading to $398.65.
- Adjusted EPS amounted to $3.91 for fiscal Q3, with revenue totaling $2.477 billion.
- The company lifted its revenue and profit outlooks for fiscal 2026 due to increased demand from AI.
Shares of Synopsys Inc. NASDAQ:SNPS dropped 2.8% after hours on Wednesday. The move came despite the company posting quarterly results that surpassed Wall Street forecasts and raising its full-year guidance.
The response highlights a tough valuation challenge. Synopsys raised its previous revenue outlook by just around $45 million at the midpoint. The drop after hours wiped out nearly $2.2 billion in market value.
Revenue for the third quarter climbed 42% to $2.477 billion, up from $1.740 billion. Adjusted earnings per share reached $3.91, compared to $3.39 previously. Both results surpassed analysts’ expectations of $2.44 billion in revenue and $3.67 per share.
| Investor metric | Q3 FY2026 / new outlook | Comparison | Signal |
|---|---|---|---|
| Revenue | $2.477 billion | $2.44 billion consensus | Beat by 1.6% |
| Adjusted EPS | $3.91 | $3.67 consensus | Beat by 6.5% |
| FY2026 revenue | $9.69–$9.74 billion | $9.63–$9.71 billion prior | Midpoint up roughly $45 million |
| FY2026 adjusted EPS | $15.04–$15.10 | $14.72–$14.80 prior | Midpoint increased 2.1% |
| After-hours stock | $398.65 | $410.00 close | Falls 2.8% |
Design Automation reported revenue of $2.003 billion, marking a 52.7% increase over the previous year. The segment accounted for 80.9% of overall revenue. It comprises the Ansys simulation business, which was added in July 2025.
Design IP revenue increased by 10.8% to $473.8 million, marking a return to year-on-year growth following previous declines. Its adjusted operating margin widened to 26.5% from 20.1%.
Design Automation posted an adjusted margin of 45.2%, an increase of 70 basis points. The company’s overall non-GAAP operating margin stood at 41.6%. The figures highlight that the more substantial software business is driving profit growth.
CFO Shelagh Glaser stated that AI is driving the robust design landscape. She told Reuters that customers are developing increasingly complex chips with tighter timelines.
Synopsys projected fourth-quarter revenue in the range of $2.53 billion to $2.58 billion. The company also aimed for approximately $2.6 billion in full-year free cash flow and set an adjusted operating margin target of 41.5%.
Valuation continues to be the central concern. As of Wednesday’s close, Synopsys was trading at almost 95 times its trailing earnings, while Cadence Design Systems Inc. NASDAQ:CDNS traded at about 66.6 times.
| Analyst overview | Buy | Hold | Sell | Mean price target | Potential upside from latest close |
|---|---|---|---|---|---|
| Synopsys | 11 | 3 | 0 | $571.92 | 39.5% |
| Cadence | 14 | 2 | 0 | $411.73 | 23.0% |
The share decline, despite the company raising guidance, indicates that investors may have been seeking greater underlying momentum. This interpretation is based on how the stock moved, rather than comments from management. Synopsys ended the regular session up 0.3%, with trading volume 39% above the usual level.
Risks: The forecast factors in $2.98 billion in projected Ansys revenue. Potential challenges include integration expenses, approximately $10.0 billion in debt, export limitations, and reliance on key customers, all of which may counterbalance AI-driven growth. The high valuation also offers limited tolerance for operational slips.
The upcoming test focuses on fourth-quarter Design IP growth. A rise from the previous quarter, with margins holding steady, will indicate if the forecast boost is driven by more than just acquired revenue.
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