Financial Trends -- 8.0/10
| Metric | FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | FY2026E |
|---|---|---|---|---|---|---|
| Revenue | $4.20B | $5.08B | $5.84B | $6.13B | $7.05B | $9.56-9.66B |
| YoY Growth | +14.1% | +20.9% | +15.0% | +4.9% | +15.1% | ~36% |
| Non-GAAP Op Margin | 30.5% | 33.0% | 35.1% | 38.5% | 37.3% | 40.5% |
| Non-GAAP EPS | $6.84 | $8.90 | $11.19 | $13.20 | $12.91 | $14.38-14.46 |
| YoY EPS Growth | +23.2% | +30.1% | +25.7% | +18.0% | -2.2% | ~11.5% |
| Free Cash Flow | — | — | — | — | $1.35B | ~$1.9B |
FY2024 organic revenue growth was ~5% (extra week in FY2024 inflated the prior year compare). FY2025 EPS declined YoY due to Ansys acquisition dilution (shares, interest, integration costs) despite 15% revenue growth. FY2026 includes full-year Ansys (~$2.9B at midpoint).
- Revenue compounding strongly: From $4.2B (FY2021) to $7.05B (FY2025), a 14% CAGR pre-Ansys. FY2026 guided at ~$9.6B represents a step-change with full-year Ansys inclusion
- Margin expansion: Non-GAAP operating margin expanded from 30.5% (FY2021) to 38.5% (FY2024), dipped to 37.3% in FY2025 on Ansys integration costs, then surged to 42.1% in FY26Q1. FY2026 guided at 40.5%
- EPS dilution from Ansys is temporary: FY2025 EPS declined 2.2% due to higher share count, interest expense, and integration costs. FY2026E of ~$14.40 represents recovery growth of ~11.5%
- FCF inflecting: $1.35B in FY2025, guided ~$1.9B in FY2026 as Ansys cost synergies and debt repayment improve cash generation
- 84% recurring revenue with $11.3B backlog provides exceptional visibility
| Metric | FY24Q2 | FY24Q3 | FY24Q4 | FY25Q1 | FY25Q2 | FY25Q3 | FY25Q4 | FY26Q1 |
|---|---|---|---|---|---|---|---|---|
| Total Revenue ($M) | $1,454.7M | $1,525.7M | $1,636.0M | $1,455.3M | $1,604.3M | $1,739.7M | $2,254.9M | $2,408.8M |
| YoY Growth | +4.3% | +2.6% | +2.3% | -11.8% | +10.3% | +14.0% | +37.8% | +65.5% |
| Design Automation ($M) | $1,054.9M | $1,062.6M | $1,118.2M | $1,020.2M | $1,122.3M | $1,312.1M | $1,847.7M | $2,001.8M |
| DA YoY Growth | +13.7% | +5.8% | +17.2% | +3.5% | +6.4% | +23.5% | +65.2% | +96.2% |
| Design IP ($M) | $399.8M | $463.1M | $517.8M | $435.1M | $482.0M | $427.6M | $407.2M | $407.0M |
| IP YoY Growth | +19.3% | +32.2% | +0.8% | -17.2% | +20.6% | -7.7% | -21.4% | -6.5% |
| Non-GAAP Op Margin | 37.3% | 40.0% | 36.9% | 36.5% | 38.0% | 38.5% | 36.5% | 42.1% |
| Margin YoY Change | +4.0pp | +4.7pp | +0.7pp | -2.2pp | +0.7pp | -1.5pp | -0.4pp | +5.6pp |
| Non-GAAP EPS | $3.00 | $3.43 | $3.40 | $3.03 | $3.67 | $3.39 | $2.90 | $3.77 |
| EPS YoY Growth | +18.1% | +19.1% | +7.3% | -14.9% | +22.3% | -1.2% | -14.7% | +24.4% |
FY25Q4 and FY26Q1 include Ansys (closed Jul 2025). Organic Design Automation growth ~8% in FY2025. Design IP declined as HPC title delays and resource prioritization created a transitional year.
China grew 21% YoY in FY26Q1 only due to Ansys inclusion; ex-Ansys China declined slightly per management. Cumulative export restrictions creating accelerating headwinds.
Design IP margins compressed sharply from FY2024 levels (~38%) to ~16% in FY26Q1 as revenue declined while R&D investment in HPC IP titles continued. Management expects recovery as titles ship in 2H FY2026.
| Metric | FY2026 Consensus | FY2026 Company Guide (Mid) |
|---|---|---|
| Revenue | ~$9.63B | $9.61B |
| Non-GAAP EPS | ~$14.39 | $14.42 |
| Free Cash Flow | N/A | ~$1.9B |
Company raised FY2026 Non-GAAP EPS guide by $0.06 after Q1 beat. Consensus roughly in line with guide. Analyst price targets range $425-$650.
Synopsys demonstrates strong financial fundamentals befitting an oligopoly with 80%+ recurring revenue. Revenue has compounded at ~14% CAGR from FY2021-FY2025 (pre-Ansys), with FY2026 guided at ~36% growth including full-year Ansys. Non-GAAP operating margins have expanded from 30.5% to the low-40s range, reflecting operating leverage and pricing power. The $11.3B backlog provides ~1.2x forward visibility, rare in enterprise software.
The primary headwind is the temporary EPS dilution from the $35B Ansys acquisition -- FY2025 EPS declined 2.2% YoY despite 15% revenue growth, due to higher share count, ~$500M+ annual interest expense, and integration costs. This is expected to normalize in FY2026 with ~11.5% EPS growth. FCF of $1.35B in FY2025 is improving toward ~$1.9B in FY2026 as cost synergies materialize.
The IP business is a modest negative -- margins compressed from ~38% to ~16% in a transitional year -- but at ~18% of revenue, it does not materially impair the overall financial profile.
Score: 8.0/10 -- Strong revenue growth, margin expansion, exceptional recurring revenue model, and improving FCF trajectory, gated modestly by temporary Ansys EPS dilution and IP business margin compression.