Synopsys Misses Forecast, Cuts 10% Staff, Stock Down 35%
On September 9, Synopsys, a global leader in EDA tools and semiconductor IP, released its financial results for the third quarter of fiscal year 2025, ending July 31. The report fell short of market expectations, with both quarterly earnings and forward guidance missing analyst forecasts. Combined with the announcement of a 10% global workforce reduction, the news sent the company's stock tumbling—dropping nearly 19% in pre-market trading and sliding over 35% after the U.S. market opened the following day.
The company reported revenue of $1.74 billion, up 14% year-over-year but below the expected $1.77 billion. GAAP net income dropped sharply by 43% to $242.5 million, with diluted EPS down 44.6% to $1.50. On a Non-GAAP basis, net income was $548.9 million, up just 2.5% year-over-year, with EPS at $3.39, still below analyst expectations of $3.80.
This quarter also marked Synopsys' completion of its $35 billion acquisition of Ansys on July 17, though only about two weeks of Ansys' financial results were included. Most of Ansys' revenue was recorded under simulation and analysis products, with the rest falling into the EDA segment. By business line, EDA revenue rose 23% year-over-year to $1.31 billion, beating market estimates, while IP revenue declined nearly 8% to $427.6 million, missing forecasts.
Looking ahead, Synopsys expects fourth-quarter revenue between $2.23 billion and $2.26 billion, above last year's $1.64 billion, but EPS guidance of $2.76–$2.80 remains far below analyst expectations of $4.50. For the full fiscal year, revenue is projected between $7.03 billion and $7.06 billion, above estimates, though EPS guidance of $12.76–$12.80 is notably weaker than the forecasted $15.13.
The weaker outlook reflects challenges in its proprietary IP business and ongoing restructuring. While Synopsys has emphasized reallocating resources to higher-growth areas, the 10% workforce reduction is seen by some as part of post-acquisition integration with Ansys.
