SNPS · Q1 2026 Earnings

Cautious

Synopsys

Reported May 27, 2026

30-second summary

Synopsys posted Q2 FY2026 revenue of $2.276B (+41.9% YoY), with Design Automation up 62.3% and Ansys now in the numbers. Management raised FY26 revenue guidance to $9.665B midpoint (+$55M) and, per the press release, raised FY26 non-GAAP EPS guidance to $14.76 midpoint on "expanded operating margin driven by strong cost discipline and accelerating synergies." Q2 revenue and non-GAAP EPS both exceeded prior guidance per management. GAAP operating margin collapsed to 5.3% this quarter on deal-related charges (amortization step-up, restructuring, integration), and the gap between Design IP's -5.8% YoY print and last quarter's IP-led growth narrative is the most important unanswered question in the print.

Headline numbers

EPS

Q1 FY2026

$3.35

Revenue

Q1 FY2026

$2.28B

+41.9% YoY

Gross margin

Q1 FY2026

72.3%

Operating margin

Q1 FY2026

5.3%

Key financials

Q1 FY2026

Metric	Q1 FY2026	YoY	Q2 FY2025	QoQ
Revenue	$2.28B	+41.9%	$1.60B	+41.9%
EPS	$3.35	—	$3.67	-8.7%
Gross margin	72.3%	—	80.2%	-790bps
Operating margin	5.3%	—	23.5%	-1820bps

Guidance

Revenue guidance raised for FY2026 as Q2 beat prior expectations, but full-year non-GAAP EPS guidance significantly lowered despite the revenue raise, signaling Ansys integration costs and margin pressure offsetting acquisition gains.

Guidance is issued for both next quarter and the full year. Both may appear below.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
Revenue	Q2 FY2026	$1.755B–$1.785B	$2.276B	+$0.491B–$0.521B above guide	Beat
Non-GAAP EPS	Q2 FY2026	$3.82–$3.87	$3.35	-$0.47–$0.52 below guide	Missed

New guidance

Metric	Period	Guide	YoY
Non-GAAP Tax Rate	FY2026	18%	—
Revenue	Q3 FY2026	$2.410B–$2.460B	—
Non-GAAP EPS	Q3 FY2026	$3.63–$3.69	—
Operating Cash Flow	Q3 FY2026	~$2,300M	—
Free Cash Flow	Q3 FY2026	~$2,000M	—
Capital Expenditures	Q3 FY2026	~$300M	—

Changes to prior guidance

Metric	Period	Prior guide	New guide	Δ	Result
Revenue	FY2026	$9.610B (implied midpoint)	$9.625B–$9.705B	+$0.055B at midpoint	Raised
Non-GAAP EPS	FY2026	$15.11–$15.19	$14.72–$14.80	-$0.39–$0.47 at range midpoint	Lowered

Segment performance

Q1 FY2026

Segment	Q1 FY2026	YoY
Design Automation	$1.822B	+62.3%
Design IP	$0.454B	-5.8%

Platform metrics

Q1 FY2026

Segment	Q1 FY2026
Time-based Products Revenue	$945.6M
Upfront Products Revenue	$546.3M
Maintenance and Service Revenue	$784.1M
Deferred Revenue (Current)	$2.42B

Profitability

Q1 FY2026

Segment	Q1 FY2026
Design Automation Operating Margin	43.3%
Design IP Operating Margin	24.4%

Management tone

No transcript was available for this quarter; tone analysis is restricted to press-release language versus prior-quarter prepared remarks.

The press release narrative has shifted from "reaffirming" FY25 targets to "raising" across revenue, operating margin, EPS, and free cash flow for FY26. Prior-quarter language emphasized agentic AI as workflow re-architecting and put Design IP wins at the center of the growth story. This quarter's release pivots to "AI is scaling semiconductor demand, architectural diversity and complexity of chips and the systems they power — driving demand across our portfolio" — a broader, vaguer framing that conveniently sidesteps the Design IP decline.

The "greater efficiency across the business" and "accelerating synergies" language is new and load-bearing — it is the explicit justification offered for the operating margin expansion underpinning the EPS raise. Whether those synergies show up in the segment margin lines next quarter (Design IP at 24.4% is well below the prior 31.2%) is the test.

Answers to last quarter's watch list

SAMR clearance for Ansys — Resolved. Ansys is in the numbers; FY26 guidance includes $2.96B of Ansys revenue. Status: Resolved positively

Design IP growth rate above ~15% YoY — Design IP came in at -5.8% YoY, a sharp deceleration from +20.5% last quarter. The press release offered no explanation. Whether this is post-close noise, China softness intensifying, or genuine demand weakness in advanced interconnects is unanswered. Status: Resolved negatively

China revenue magnitude — Not disclosed in the press release; no explicit China dollar impact or BIS notice referenced. Status: Continue monitoring

Design Automation reacceleration — DA printed +62.3% YoY, but the comparison is contaminated by Ansys consolidation. Organic DA growth was not disclosed. The agentic-AI narrative remains forward-looking without a clean measurable inflection. Status: Not resolved

FY non-GAAP operating margin trajectory — Prior FY25 target was 40% midpoint. FY26 framework has been reset by the Ansys close; management characterizes the FY26 EPS raise as driven by "expanded operating margin." A specific non-GAAP operating margin number for FY26 was not provided in the press release. Status: Continue monitoring

What to watch into next quarter

Organic Design Automation growth ex-Ansys — the +62.3% headline is meaningless without the underlying organic figure. Watch for management to disclose pro-forma organic DA growth on the Q3 call; absence of that disclosure is itself a signal.

Design IP recovery — IP at -5.8% YoY is the single biggest deterioration. Watch whether Q3 IP revenue returns above $482M (the Q2 FY25 base) or whether the decline deepens. A second negative quarter would invalidate the PCIe 7.0 / UA-Link leadership narrative management built last year.

FY26 operating margin substantiation — management raised EPS on "expanded operating margin" and "accelerating synergies." Watch the Q3 call for explicit margin quantification by segment, and whether Design IP's compressed 24.4% margin rebuilds.

GAAP operating margin normalization — 5.3% this quarter on deal costs. Watch whether Q3 GAAP operating margin rebuilds toward double digits as restructuring and acquisition-related charges roll off, or whether amortization keeps it suppressed through FY26.

China and BIS commentary — silent in the press release. Either management addresses China explicitly on the Q3 call, or the silence itself becomes a deteriorating signal versus last quarter's open acknowledgment.

Sources

Synopsys Q2 FY2026 press release (Exhibit 99.1), filed with the SEC: https://www.sec.gov/Archives/edgar/data/883241/000119312526241911/d126227dex991.htm
Synopsys Q2 FY2025 press release and Tapebrief Q2-2025 brief (for prior-period reference).

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