Synopsys Stock Falls Amid Design IP Segment Issues

Synopsys' stock price declined 2.27% due to challenges in its design IP segment, which saw an 8% YoY decline in Q3. CEO Sassine Ghazi cited export restrictions, end-market challenges for a major foundry customer, and the need to reallocate resources to high-growth markets as key obstacles. However, the company's core EDA business reported a 23.5% YoY growth in Q3. Despite recent challenges, Synopsys has a 5-year revenue growth rate of 12.6% and an expanding operating margin.

Synopsys' stock price plummeted 22% following the release of its third-quarter earnings, which missed Wall Street expectations. The primary driver behind the decline was the underperformance of the company's Design IP segment, which saw an 8% year-over-year (YoY) drop in revenue. CEO Sassine Ghazi attributed the weak performance to three key factors: new export restrictions disrupting design starts in China, challenges at a major foundry customer, and internal roadmap and resource allocation decisions that didn't yield the intended results Synopsys Stock Sinks 22% As Revenue and Earnings Miss Estimates in Q3^[1].

The chip design software provider reported revenue of $1.74 billion, falling short of analyst estimates of $1.77 billion. Adjusted earnings per share came in at $3.39, below the expected $3.74. The Design IP segment, which contributes about a quarter of Synopsys' sales, experienced a significant setback with the failure of expected deals, primarily due to the aforementioned factors Synopsys Stock Sinks 22% As Revenue and Earnings Miss Estimates in Q3^[1].

Despite the challenges in the Design IP segment, Synopsys' core Electronic Design Automation (EDA) business reported a robust 23.5% YoY growth in Q3, driven by the recent $35 billion acquisition of Ansys. The acquisition has strengthened Synopsys' AI capabilities and product portfolio, but the timing couldn't have been worse given the current geopolitical and market headwinds Why Shares in Synopsys Tumbled This Week - Yahoo Finance^[2].

Synopsys' stock price decline reflects broader concerns about how US-China trade tensions are affecting tech companies. The company is facing persistent export restrictions, particularly in China, which represents a significant market for semiconductor design tools Synopsys stock tanks 33% on Wednesday: why analysts are pressing SELL^[3].

Looking ahead, Synopsys expects continued headwinds and has described the upcoming year as "transitional and muted" for the IP business. The company has also announced plans to reduce global headcount by approximately 10% by the end of fiscal 2026 to improve efficiency and realign resources toward higher-growth opportunities Synopsys Stock Sinks 22% As Revenue and Earnings Miss Estimates in Q3^[1].