Synopsys Posts Downbeat Q3 Results, Shares Tumble 21.4% in Pre-Market Trading

Synopsys reported Q3 adjusted EPS of $3.39, missing the $3.74 estimate, and revenue of $1.73 bln, below the $1.76 bln consensus. The company lowered its FY25 adjusted EPS guidance to $12.76-$12.80 from $15.11-$15.19. Shares fell 21.4% in pre-market trading. Other stocks moving lower include QMMM Holdings, Epsium Enterprise, Kindly MD, NIO, Chewy, Holley, and Rubrik.

Synopsys Inc. (SNPS) reported its financial results for the third quarter of 2025, revealing earnings per share (EPS) of $3.39, which fell short of analyst expectations of $3.74. Revenue for the quarter was $1.73 billion, also below the forecast of $1.76 billion. The company's shares fell 21.4% in pre-market trading, closing at $599.14. Synopsys also lowered its fiscal year 2025 (FY25) adjusted EPS guidance to $12.76-$12.80 from $15.11-$15.19.

The earnings miss was primarily driven by underperformance in the IP business, with new export restrictions disrupting design starts in China and challenges at a major foundry customer. Despite these headwinds, Synopsys reported a 14% year-over-year increase in total revenue, reaching $1.73 billion. The Design Automation segment grew by 23%, while Design IP revenue declined by 8%.

Synopsys' CEO, Sassine Ghazi, emphasized the company's leadership in engineering solutions and the transformative potential of physical AI. He highlighted the integration of NVIDIA Omniverse technology into Ansys simulation solutions, enabling faster development and validation of autonomous systems.

The company's stock experienced a significant decline following the earnings announcement, reflecting investor concerns about the earnings miss and broader market trends. However, Synopsys remains a leader in engineering solutions, bolstered by its recent acquisition of Ansys.

Looking ahead, Synopsys provided revenue guidance for Q4 2025, projecting between $2.23 billion and $2.26 billion. The company is focusing on higher-value IP solutions and subsystem delivery, aiming to capitalize on the evolving semiconductor IP landscape. Despite the challenges, Synopsys maintains strong financial health with a 7.02x current ratio, indicating robust liquidity.

In aftermarket trading, Synopsys shares saw a modest increase, reflecting a cautious investor sentiment. The stock has shown remarkable strength with a 34% return over the past six months, though it currently appears to be overvalued, trading at a P/E ratio of 68.9x.

The company is undergoing a strategic review, including a 10% global headcount reduction by the end of fiscal 2026. This move aims to address efficiency goals and capitalize on higher-value opportunities.

Synopsys' stock decline and lowered guidance have also impacted other stocks in the semiconductor and technology sectors, with QMMM Holdings, Epsium Enterprise, Kindly MD, NIO, Chewy, Holley, and Rubrik also seeing lower share prices.

In conclusion, Synopsys' Q3 earnings miss and lowered guidance reflect the company's challenges in the IP business and broader industry dynamics. However, Synopsys remains a leader in engineering solutions, and its focus on higher-value IP solutions and subsystem delivery positions it well for the future.