Last Update 31 Oct 25

Analysts have lowered their price targets on Synopsys, with recent adjustments ranging from $550 to $630 per share. Concerns about persistent headwinds in the company’s IP business, along with ongoing challenges in China and with key customers, are impacting the near-term growth outlook.

Analyst Commentary

Recent analyst notes reflect a mixed outlook on Synopsys, with heightened attention on ongoing challenges within the company’s IP segment, as well as external factors shaping growth prospects. While price targets were broadly lowered, analysts offered both constructive optimism and points of caution regarding Synopsys's future performance.

Bullish Takeaways

Bullish analysts maintain positive long-term views on Synopsys’s non-IP business segments. These areas are tracking in line with previous expectations and are seen as likely to support steadier growth through FY26.
There is an expectation that current headwinds related to China and certain large customers are temporary and should eventually subside. This could potentially restore investor confidence and stabilize revenue growth.
Analysts note ongoing internal efforts, such as resource reallocation within the IP business and operational streamlining. These actions could accelerate profitability targets and better position the company as industry dynamics evolve.
Despite short-term pressure on shares, improvements in operational clarity and execution could create upside scenarios, especially if international demand and customer spending recover as anticipated.

Bearish Takeaways

Bearish analysts flag persistent weakness in the IP segment, noting that muted performance is now expected to last through FY26. This significantly dampens near-term growth outlooks and weighs on valuation.
Export restrictions and uncertainty in China continue to impact customer confidence and design starts. This is leading to reduced spending and a more cautious approach to resource allocation in key geographic markets.
Strategic pivots by large foundry customers mean existing IP investments may no longer yield results. This adds further uncertainty to Synopsys’s revenue stream and requires adjustments to forecasts.
Analysts highlight limited visibility into major partner roadmaps, which complicates projections on when key opportunities will materialize and further pressures stock performance in the near term.

What's in the News

Tata Technologies and Synopsys have entered a strategic partnership to accelerate the shift towards software-defined mobility. The companies are combining deep vehicle engineering expertise and virtualization solutions to support OEMs worldwide. (Key Developments)
Synopsys unveiled a digital twin racetrack experience, utilizing NVIDIA Omniverse, at the Aramco STEM Racing World Finals. This initiative gives over 400,000 students globally complimentary access to advanced CFD simulation tools. (Key Developments)
Synopsys and TSMC expanded their collaboration by certifying Ansys simulation solutions for advanced manufacturing nodes and developing AI-assisted design flows to optimize chip design for AI, communications, and automotive applications. (Key Developments)
Synopsys announced growth in its generative AI Copilot capabilities for semiconductor design. The aim is to accelerate development, boost engineer productivity, and help address workforce shortages across customer organizations. (Key Developments)
Synopsys joined the JOINT3 consortium, a global partnership of 27 companies focused on developing advanced panel-level organic interposers for next-generation semiconductor packaging. Pilot manufacturing is slated for 2026. (Key Developments)

Valuation Changes

Fair Value: Remains unchanged at $556.4 per share, indicating stable analyst consensus despite recent business headwinds.
Discount Rate: Marginally decreased from 8.98% to 8.97%. This reflects slightly lower perceived risk in future cash flows.
Revenue Growth: Holds steady at approximately 21.47%, which signals maintained expectations for top-line expansion.
Net Profit Margin: Edged down from 15.77% to 15.75%. This suggests a slight moderation in profitability projections.
Future P/E: Increased modestly from 89.85x to 89.95x. This indicates a minor rise in expectations for future earnings multiples.

Expansion into new markets and integration of advanced simulation and EDA tools strengthen Synopsys' leadership and drive growth in sectors demanding complex product development.
Strategic focus on SaaS, cloud, and high-value integrated IP solutions enhances margin improvement, revenue stability, and operational efficiency amid industry transformation.
Geopolitical tensions, customer concentration risk, costly business transitions, financial strain from acquisitions, and operational challenges threaten Synopsys' growth, profitability, and market adaptability.

Catalysts

About Synopsys

Provides electronic design automation software products used to design and test integrated circuits.What are the underlying business or industry changes driving this perspective?

The acquisition and integration of Ansys positions Synopsys as the global leader in engineering solutions from silicon to systems, dramatically expanding its addressable market into sectors like automotive, industrial, and aerospace. This should drive long-term top-line growth as more sophisticated and complex products (especially AI-powered and smart devices) require robust simulation, analysis, and EDA tools.
The accelerating complexity and proliferation of AI, high-performance computing, and multi-die/chiplet-based architectures are increasing customer demand for Synopsys' advanced design, verification, and simulation solutions, solidifying its role as a mission-critical partner in next-generation chip and system development-supporting both revenue growth and opportunities for higher-margin recurring licensing.
Synopsys is executing a strategic shift by pivoting its IP business resources and R&D roadmap towards higher growth, higher value opportunities (such as advanced interface IP, subsystems, and customizable/chiplet solutions). This focus is expected to improve net margins over time as the company capitalizes on industry trends favoring sophisticated and integrated IP offerings rather than commoditized, standalone products.
The ongoing transformation towards SaaS/cloud-based EDA and Ansys product integration is expected to increase customer stickiness and shift more revenues to subscription and service models, improving revenue visibility and earnings consistency-this directly addresses operational headwinds and is likely underappreciated if the stock is undervalued.
The announced 10% reduction in global headcount and ongoing AI-driven productivity initiatives are expected to optimize the cost structure, accelerate operating synergies from the Ansys deal, and help restore operating margins towards the company's target in the mid-40s, positively impacting earnings growth and free cash flow in the medium to long-term.

Synopsys Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Synopsys's revenue will grow by 24.7% annually over the next 3 years.
Analysts assume that profit margins will increase from 21.7% today to 22.3% in 3 years time.
Analysts expect earnings to reach $2.7 billion (and earnings per share of $12.07) by about September 2028, up from $1.4 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $3.5 billion in earnings, and the most bearish expecting $1.7 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 59.3x on those 2028 earnings, down from 82.8x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to grow by 1.01% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.68%, as per the Simply Wall St company report.

Synopsys Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent and potentially long-term export restrictions and geopolitical tensions with China have led to customer uncertainty, contract delays, and a weaker-than-expected performance in the Chinese market, putting sustained pressure on Synopsys' revenue and regional growth outlook.
Large investments in IP for a major foundry customer did not yield the anticipated returns due to market-driven factors beyond Synopsys' control, highlighting ongoing revenue concentration risk and the vulnerability of future earnings to key customer decisions or failures.
The transition of the IP segment from discrete licensing to highly customized subsystems and complex delivery models requires significant resource allocation and may structurally increase development costs; if monetization and business model changes lag this trend, long-term net margins and profitability could erode.
The company's integration of Ansys includes increased debt and delayed divestitures, raising financial complexity and interest expense-at the same time, the need for a 10% global headcount reduction and portfolio realignment could slow organic innovation and pose execution risk, further impacting earnings and cash flows in the near to medium term.
Extended muted growth in the IP business, combined with aggressive guidance resets and the inability to fully capture all market opportunities due to resource limitations, points to operational challenges; failure to rapidly scale or adapt amidst rising customization and a shifting competitive landscape could dampen both revenue growth and long-term shareholder returns.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $652.736 for Synopsys based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $715.0, and the most bearish reporting a price target of just $550.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $12.1 billion, earnings will come to $2.7 billion, and it would be trading on a PE ratio of 59.3x, assuming you use a discount rate of 8.7%.
Given the current share price of $604.37, the analyst price target of $652.74 is 7.4% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

SNPS: Non-IP Segments And China Recovery Will Drive Upside Through FY26