Synopsys Stock Drops 34% Following Q1 Earnings Miss

Synopsys stock plummeted 34% after earnings, missing adjusted earnings of $3.39 a share, below the $3.80 a share forecast, and revenue of $1.74 billion, below the $1.77 billion forecast. CEO Sassine Ghazi attributed the underperformance to an 8% drop in revenue within the semiconductor intellectual property business.

Synopsys Inc. (SNPS) stock experienced a significant decline of 34% on Wednesday, marking its worst single-day drop in over three decades. The decline was primarily driven by the company's third-quarter earnings report, which fell short of analysts' expectations. The stock traded at $401.50 in morning trading before plummeting to its current price of $265.50.

Synopsys reported adjusted earnings of $3.39 per share, falling short of the $3.80 per share forecast by analysts. Revenue came in at $1.74 billion, below the $1.77 billion expected by Wall Street. CEO Sassine Ghazi attributed the underperformance to an 8% drop in revenue within the semiconductor intellectual property (IP) business, which was disrupted by US export restrictions and challenges with a major foundry customer, likely Intel Synopsys (SNPS) Stock: Plunges 34% on China Trade Restrictions and Earnings Miss^[1].

The export controls have compounded existing weakness in China, the world's largest semiconductor market. These restrictions are part of ongoing US government efforts to limit Chinese access to advanced chip technology. Ghazi also mentioned challenges with a major foundry customer that will continue affecting results for the remainder of the year.

In response to the weak performance, Synopsys announced plans to reduce its workforce by about 10% and refocus resources away from underperforming areas. The company expects continued headwinds and described the upcoming year as "transitional and muted."

The disappointing results prompted immediate analyst downgrades. Baird downgraded Synopsys from Buy to Neutral, citing the below-consensus outlook and weak expectations for intellectual property growth in fiscal 2026. BofA Securities took an even more bearish stance, double-downgrading the stock from Buy to Underperform. The firm slashed its price target to $525 from $625 BofA downgrades Synopsys on weak outlook and Ansys costs^[2].

The sharp sell-off in SNPS stock reflects investor concerns about execution issues in a historically strong segment during a period when Synopsys is also integrating its massive $35 billion Ansys acquisition. The company expects continued headwinds and described the upcoming year as "transitional and muted" Synopsys Stock Sinks 22% As Revenue and Earnings Miss Estimates in Q3^[3].

Synopsys shares had gained 25% year-to-date through Tuesday’s close before Wednesday’s massive selloff. The stock traded at $401.50 in morning trading, representing a dramatic reversal of fortune for the chip design software leader.