The design of Synopsys IP company is confronted with considerable headwind in the short term.
But the acquisition of Ansys has the potential to bring about a revolution in its profit potential.
It will take time to work through headwind, but the long -term case for Synopsys is powerful.
10 shares that we like than Synopsys ›
Investors in electronic design automation and engineering simulation software company Synopsys(Nasdaq: SNPS) Recently their shares crashed more than 35% on the day of the release of the third quarter. The decline brought Cathie Wood’s Ark Invest to double the shares by buying nearly 16,000 shares for his listed funds (ETFs).
Should investors Ark follow to buy Synopsys on a dip, or is this the start of a deeper movement down?
Before you delve into the details of the third quarter update, it is worth investigating the long -term investment case and why Ark is enthusiastic about the company. The Synopsys matter is based on the increase in interest in products with artificial intelligence (AI) and the growth of the market for companies that develop tailor -made chips to integrate into their products.
As products become smarter and the value quotient of a product that comes from its software/intelligence continues, there will be significant possibilities for Synopsys to go beyond its core customers. Synopsys is a leader in the Electronic Design Automation (EDA) who use semiconductor and electronics companies to design chips, including AI chip design.
Although semiconductors are the core base of customers, a growing number of electronics, technology, automotive, medical, industrial, space and defense companies design in-house. As such, Synopsys has an organic growth option and that has been reinforced by a controversial acquisition.
The recent acquisition of Engineering Simulation and Analysis software company Ansys will help to accelerate that growth, not least because the existing customer base of Ansys (companies that want to simulate and model) are much wider than the basis of SynopSys. In short, the acquisition of Ansys will enable Synopsys to strengthen its sales footprint to a customer base in which it is already expanding.
It will also create a so-called “silicon-to-systems” solution provider, whereby the EDA (Legacy Synopsys) sells to help customers design chips and simulation software (new Synopsys/Ansys) so that they can model how the chips and products with AI will perform.
While the long-term prospects for his EDA, Simulation and Analysis solutions (Ansys) remain excellent, the second business segment of the Company-Design Intellectual Property (IP) is contronted with significant challenges in the short term, and that turned out in the nearly 8% fall in the third quarter.
Synopsys -Income
Third quarter 2024
Third quarter 2025
Change
Design automation (in billions)
$ 1,063
$ 1,312
23.5%
Design IP (in billions)
$ 0.463
$ 0.428
(7.7%)
Total (in billions
$ 1,526
$ 1,740
14%
Data source: Synopsys.
Although EDA offers the tools to design and develop chips, Design IP IP blocks from third parties (license for use) offers that customers can include in their design. Intel is an old customer and employee. CEO Sassine Ghazi discussed the disappointing performance in the third quarter and limited it to three reasons:
Export restrictions have limited investment decisions for customers who invest in China.
“Challenges with a large Foundry customer also have a significant impact on the year,” said Ghazi about the win call.
Partly in connection with the problems with the Foundry customer (possibly Intel), Ghazi noted: “We have made certain route map and resources decisions that did not produce their intended results.”
Consequently, Ghazi said that he took a more cautious picture of the fourth quarter and re-concentrated resources in areas with higher growth in design-IP, while carrying out a strategic assessment of his portfolio.
Image source: Getty images.
On the one hand, the share race crash offers an interesting opportunity to buy in an exciting growth batum in the long term.
On the other hand, investors must be aware that the problems identified in the design -IP segment can take time to resolve. Although the restrictions on the sale of Synopsys have been lifted to China, the impact remains, where Ghazi notes that customers “wonder whether or not they will invest in a multi -year obligation with Synopsys, how broad will they make that investment?”
The problem with the Foundry customer is something that Synopsys has control over, and the adjustments to its design-IP company to opportunities with higher growth will take time to flourish. In the meantime, management is busy integrating the Ansys acquisition.
Although the sale seems exaggerated, it will take time for Synopsys to go through these issues, and careful investors will want to see some hard evidence of improvement before they purchase.
Consider this before you buy stock in Synopsys:
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Lee Samaha has no position in one of the aforementioned shares. The Motley Fool has positions and recommends Intel and Synopsys. The Motley Fool recommends the following options: Short November 2025 $ 21 sets Intel. The Motley Fool has a disclosure policy.
This technology supply has just crashed 35% in 1 day. Time to buy? was originally published by the Motley Fool
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