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Synopsys Sets FY2025 Revenue Target Amid Ansys Acquisition Integration
ByAinvest
Tuesday, Sep 9, 2025 7:50 pm ET2min read
Synopsys has outlined a revenue target of $7.03B-$7.06B for FY2025, driven by the integration of Ansys acquisition. CEO Sassine Ghazi described Q3 as a "transformational milestone quarter" with revenue of $1.74B and non-GAAP EPS of $3.39. However, results were impacted by underperformance in certain areas. The acquisition of Ansys has led to a strategic pivot for Synopsys.
Synopsys (NASDAQ: SNPS) reported its Q3 2025 financial results, highlighting a significant transformation driven by the closure of the Ansys acquisition on July 17, 2025. The company posted revenue of $1.74 billion, up 14% year-over-year, and non-GAAP earnings per share (EPS) of $3.39, a modest decline of 1.2% compared to the previous year [1].The quarter marked a strategic milestone for Synopsys, as the acquisition of Ansys expanded its product portfolio beyond traditional electronic design automation (EDA) into simulation and analysis solutions. However, the results also revealed mixed signals, with the Design Automation segment demonstrating strength, but offset by weakness in the Design IP business [1].
GAAP earnings per share declined substantially to $1.50, down 43% from $2.73 in the year-ago quarter, reflecting integration costs and expenses related to the Ansys acquisition. The company incurred $120 million in acquisition-related expenses for the quarter alone, with additional stock-based compensation increases of over $100 million compared to the prior year period [1].
Synopsys updated its full-year 2025 guidance, projecting revenue between $7.03 billion and $7.06 billion, with Q4 2025 revenue expected to be between $2.23 billion and $2.26 billion, and non-GAAP EPS of $2.76 to $2.80 [1]. The company's projected free cash flow for fiscal 2025 is $950 million, demonstrating financial strength despite the increased debt load from the Ansys acquisition [1].
KeyBanc analyst Jason Celino raised Synopsys' price target to $660 from $610, maintaining an Overweight rating ahead of Q2 results. Celino expects Ansys to contribute approximately $100 million in Q3 2025 and $750 million in FY2025 [2]. Despite robust financials, Synopsys faces strategic risks, including China’s regulatory uncertainty, AI-driven competition from Siemens EDA, and integration challenges in its ANSYS merger [2].
The semiconductor design tools sector is at a crossroads, with Synopsys facing a stark valuation divergence from its peers despite strong financial performance. While Synopsys reported Q2 2025 revenue of $1.604 billion, its stock has lagged behind industry leaders like Cadence Design Systems (CDNS) and Siemens EDA (SIEGY) [2].
Synopsys' forward P/E ratio of 38.56 and P/S ratio of 11.92 position it as "fairly valued" relative to historical benchmarks, but these metrics pale in comparison to Cadence’s astronomical P/E of 92.15 and Siemens EDA’s P/S of 2.25 [2]. The disparity is even starker when considering enterprise value: Cadence’s EV/EBITDA of 53.57 dwarfs Synopsys’ 25.09 [2].
The underperformance in the Design IP segment occurring simultaneously with the major integration presents a complex operational challenge. The company must balance addressing competitive issues in the existing business while simultaneously managing the substantial organizational changes from the Ansys acquisition [1].
The financial outlook reflects these integration realities. The projected $179-181 million in quarterly non-GAAP interest and other expenses indicates the significant debt burden taken on to finance the acquisition. Additionally, the expected dilution in share count (rising to 187-188 million in Q4 from 161.7 million in Q3) shows the equity component of the transaction [1].
Management's "more conservative view" of Q4 likely reflects both the IP segment challenges and typical integration uncertainties as they fully incorporate Ansys operations. The relatively modest projected non-GAAP EPS growth for the full year suggests this integration will require several quarters to fully realize potential synergies and operational efficiencies [1].
Synopsys faces integration challenges following the Ansys acquisition amid IP segment weakness and geopolitical headwinds. The integration of Ansys into Synopsys represents a significant strategic transformation, diversifying the company's portfolio beyond traditional EDA into simulation and analysis solutions. However, this acquisition comes with substantial short-term financial impacts that are evident in the Q3 results [1].
References:
[1] https://www.stocktitan.net/news/SNPS/synopsys-posts-financial-results-for-third-quarter-fiscal-year-uogx0cbk1u78.html
[2] https://www.ainvest.com/news/keybanc-raises-synopsys-pt-660-strong-q2-results-ansys-deal-2509/
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