Synopsys reported revenue of $2.477 billion in its third fiscal quarter of 2026 (natural quarter ending July 31, released on August 26), a year-on-year increase of 42%, surpassing both the upper end of guidance and market expectations. The AI-driven demand for chip design tools is indeed materializing.

Part 1 Deconstruction of Business

The revenue of the Design Automation (EDA) business was $2 billion, a year-on-year increase of 53%.

The revenue of core EDA software increased by 8.5%, but this 8.5% is based on a high base of+16% year-on-year in Q3 last year.

Hardware Assisted Verification (HAV) set a quarterly record with 12 new customers and 66 repeat orders.

AMD's latest Instinct MI455X GPU utilizes Synopsys' 3DIC Compiler platform for multi chip and advanced packaging collaborative design.

The design IP business amounted to $474 million, a year-on-year increase of 11%, with the highlight being the "return to growth". IP was a bit weak in the previous quarters, but now it has returned.

The company says PCIe 7 has a over 95% chance of winning, while LPDDR6 has won 25 design orders. Die to die IP is expected to double year-on-year, with over 100 design wins already accumulated. USB IP orders have accumulated over 2 billion US dollars.

The leader in the EDA industry is Synopsys, followed by Cadence and Siemens EDA. Synopsys' growth rate of+53% this season has left Cadence far behind, as Cadence's previous quarterly report had a growth rate of only a dozen points.

The gap lies deeper in Synopsys' cutting-edge fields such as advanced processes (3nm, 2nm) and Chiplet/3DIC. Leading chip manufacturers such as AMD, Intel, and Nvidia offer advanced packaging, and Synopsys is an indispensable supplier.

Ansys' acquisition is starting to take effect.

Q3 contributed approximately 711 million US dollars, with cost synergy running faster than expected. The management stated that the Synopsys Ansys joint solution "Multiphysics Fusion" is currently in the customer validation phase, and test results show a 10 fold improvement in design convergence speed and a 3-fold reduction in runtime.

This thing performs thermal analysis, power consumption analysis, and mechanical stress analysis on chips. With the increasing power density of AI chips, this demand will only become more demanding.

The annual guidance has been raised to 9.69-9.74 billion US dollars, with Non GAAP EPS of 15.04-15.10 US dollars. The order backlog is 10.9 billion US dollars.

Q4 guidance revenue ranges from 2.53 billion to 2.58 billion US dollars, and EDA growth is expected to return to double digits.

Part 2 EDA Business

The threshold for EDA business is quite high. Once a chip factory uses the entire process of Synopsys, from RTL synthesis to physical implementation to sign off, the switching cost is extremely high because the design database, process script, and engineer habits are all tied to the toolchain.

That's also why the three EDA companies can maintain a gross profit margin of over 80% in the long term. But domestic EDA in the Chinese market can already replace mature processes, while advanced processes are still being pursued.

If export controls are further tightened, Synopsys may shift from making money to keeping inventory in China. Ansys' collaboration perfectly fills this gap, as multi physics field analysis is a fundamental requirement for advanced packaging, and demand is not affected by single market policy fluctuations.

Looking ahead, the design complexity of AI chips is incremental to Synopsys.

Chiplet、3DIC、 Advanced packaging has doubled the design workload of a single chip, and the usage and unit price of design tools are increasing. Ansys' multi physics field analysis fills the gaps in power consumption, heat, and stress. The higher the power density of AI chips, the more essential this aspect is.

Synopsys' order reserves have accumulated to $10.9 billion, equivalent to over a year's revenue, which gives it the confidence to raise its annual guidance.

The market's pricing for Synopsys already includes the growth brought by Ansys collaboration and AI design. But EDA is a business in the later stage of the cycle. When chip factories cut capital expenditures, tool procurement is often the last to be cut, and its resilience is stronger than that of equipment factories. This is the confidence that its growth rate can remain stable at 50%.

Summary

Synopsys is a company that sells shovels in the AI infrastructure chain. As AI chip designs become increasingly complex (Chiplets, 3DICs, advanced packaging, multi physics fields), the demand for design tools is rigid. The synergy of Ansys' acquisition was an unexpected surprise, with cost savings running faster than expected.