AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 4/6 · 18/10/2026
Moat63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Critical EDA updates, iterative customer interaction, complex product portfolios and non-cancellable commitments demonstrate meaningful customer dependence. Switching friction is inferred from these operating and contractual features rather than quantified migrations.
durability · 2/4 · Historical revenue growth and multiyear arrangements support persistence, but continuing innovation is necessary. Actual IP roadmap failures and potential AI displacement limit confidence in long-term durability.
customer dependency · 3/4 · EDA customers require continuing updates and technical interaction for advanced-product deadlines, backed by substantial non-cancellable commitments. This is strong dependency evidence, without demonstrating equivalent dependence across S&A products.
erosion resilience · 2/4 · Organic growth and stronger Design Automation results coexist with continuing IP weakness. Internal development and restricted-market alternatives are potential erosion channels, not demonstrated broad displacement.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · — · Highly variable bundled pricing and negotiated favorable terms reveal pricing structure and bargaining, but do not establish actual comparable price increases or reductions. Revenue and margin movements cannot isolate realized pricing.
retention · 3/4 · Assessed indirectly from continuing technical dependence, multiyear arrangements, non-cancellable commitments and disclosed organic growth. These support sustained demand and switching friction; no renewal or churn rate is inferred.
margin resilience · 2/4 · Nine-month 2026 Design Automation adjusted margin improved to 45% from 42%, while Design IP fell to 23% from 27%. Consolidated operating income declined as acquisition amortization and restructuring weighed on results. Resilience is mixed and does not independently establish pricing power.
contractual freedom · 2/4 · Synopsys negotiates product portfolios and restricts licensed use and geography, with meaningful non-cancellable commitments. Customer negotiation of favorable terms and variable bundled pricing indicate bilateral bargaining rather than demonstrated unilateral repricing rights.
Predictability96
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 100.00
- Revenue growth volatility (pp)
- 5.76
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 5.59
Financial strength20
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 0.00
- netDebtEbitGrade
- 0.00
- interestCoverageGrade
- 9.53
- currentRatioGrade
- 69.21
- Debt / FCF (x)
- 9.99
- Net debt / operating income (x)
- 11.58
- Interest coverage (x)
- 2.05
- Current ratio (x)
- 1.62
Capital allocation—
Missing required inputs: operatingReturn. Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year average dilution (%)
- 2.38
- 3-year average SBC / revenue (%)
- 11.20
- cashConversionGrade
- 85.93
Management63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · Fiscal 2025 operating cash flow of approximately $1.52 billion and $850 million of term-loan repayment are positive. Acquisition financing raised $14.3 billion, acquisition shares materially expanded equity issuance, and 2026 repurchases occurred alongside employee share reissuance. Spending and financing are documented, but acquisition returns remain unproven.
incentive alignment · 3/4 · Actual fiscal 2025 NEO equity grants included PRSUs with three-year performance conditions, and continuing NEOs complied with ownership guidelines. These demonstrate alignment mechanisms. Conversion of assumed Ansys performance awards to time-only vesting weakens that alignment; grant conditions do not prove subsequent achievement or vesting.
execution · 2/4 · Assessed from operating outcomes: organic growth and stronger Design Automation results are positive, while Design IP underperformance persists. Fiscal 2025 revenue and non-GAAP margin achievement were below target, despite backlog goals exceeding target. Execution is mixed rather than exceptionally demonstrated.
governance · 3/4 · Independent audit committee membership, executive sessions actually held, an existing compensation recovery policy and hedging restrictions demonstrate substantive oversight practices. Board opposition to written consent limits shareholder flexibility. These disclosures support strong mechanisms without proving exceptional governance effectiveness.
Evidence
We have concluded that (1) our EDA software licenses in TSL contracts and software licenses in certain Ansys' semiconductor industry subscription products are not distinct from our obligation to provide unspecified software updates to the licensed software throughout the license term, because those promises represent inputs to a single, combined performance obligation, and (2) where unspecified additional software product rights are part of the contract with the customer, such rights are accounted for as part of the single performance obligation that includes the licenses, updates, and technical support, because such rights are provided for the same period of time and have the same time-based pattern of transfer to the customer.
Revenue recognition: combined EDA license and update obligations · Filed 22/12/2025
As EDA customers operate in a rapidly changing and competitive environment, satisfying the obligation requires providing critical updates to the existing software products, including ongoing iterative interaction with customers to make the software relevant to customers’ ability to meet the time to go to market with advanced products.
Revenue recognition: critical updates and iterative customer interaction · Filed 22/12/2025
Our contracts with customers can involve hundreds of products and various license rights.
Revenue recognition: customer contract complexity · Filed 22/12/2025
We achieved these results because of our solid execution, leading technologies and strong customer relationships, and because we generally recognize our revenue for software licenses over the arrangement period, which typically approximates two to three years.
MD&A: management attribution of results and typical arrangement periods · Filed 22/12/2025
We have consistently grown our revenue since 2005, despite periods of global economic uncertainty.
MD&A: historical revenue growth · Filed 22/12/2025
2024 2024 vs. 2023 (dollars in millions) Adjusted operating income $ 419.3 $ 730.2 $ 514.1 $ (310.9) (43) % $ 216.1 42 % Adjusted operating margin 24 % 38 % 33 % (14) % (37) % 5 % 15 % The decrease in adjusted operating income for fiscal 2025 compared to fiscal 2024 was primarily due to lower revenue from the impact of China export control restrictions, including the Q3 2025 BIS Restrictions, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results, as well as an increase in employee-related costs due to headcount increases.
MD&A: Design IP performance and unsuccessful roadmap decisions · Filed 22/12/2025
We have concluded that the updates to time-based software licenses are not considered integral to maintaining the utility of the software and hence the license and support services as separate performance obligations.
Revenue recognition: S&A license updates and software utility · Filed 22/12/2025
Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) were approximately $11.4 billion as of October 31, 2025, which includes $2.0 billion in non-cancellable FSA commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date.
Revenue note: October 2025 backlog and non-cancellable commitments · Filed 22/12/2025
We do not believe the amount of unsatisfied performance obligations is indicative of future sales or revenue, or that such obligations at the end of any given period correlates with actual sales performance of a particular geography or particular products and services.
MD&A: limitations of backlog as a sales indicator · Filed 22/12/2025
Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) were approximately $10.9 billion as of July 31, 2026, which includes $1.9 billion in non-cancellable Flexible Spending Account (FSA) commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date.
Revenue note: July 2026 backlog and non-cancellable commitments · Filed 26/08/2026
29 Information by reportable segment is as follows: Three Months Ended July 31, Nine Months Ended July 31, 2026 2025 2026 2025 (in thousands) Total Segments: Revenue $ 2,476,822 $ 1,739,737 $ 7,161,605 $ 4,799,318 Cost of revenue and operating expenses 1,446,402 1,069,959 4,217,817 2,989,053 Adjusted operating income 1,030,420 669,778 2,943,788 1,810,265 Adjusted operating margin 42 % 38 % 41 % 38 % Design Automation: Revenue $ 2,002,971 $ 1,312,166 $ 5,826,565 $ 3,454,617 Cost of revenue and operating expenses 1,097,943 728,411 3,184,947 2,007,436 Adjusted operating income 905,028 583,755 2,641,618 1,447,181 Adjusted operating margin 45 % 44 % 45 % 42 % Design IP: Revenue $ 473,851 $ 427,571 $ 1,335,040 $ 1,344,701 Cost of revenue and operating expenses 348,459 341,548 1,032,870 981,617 Adjusted operating income 125,392 86,023 302,170 363,084 Adjusted operating margin 27 % 20 % 23 % 27 % Certain operating expenses are not allocated to the segments and are managed at a consolidated level.
Segment note: quarterly and nine-month operating results · Filed 26/08/2026
The unallocated expenses managed at a consolidated level, including amortization of acquired intangible assets, stock-based compensation, restructuring charges, acquisition/divestiture related items, and changes in the fair value of deferred compensation plan, are presented in the table below to provide a reconciliation of the total adjusted operating income from segments to our consolidated operating income: Three Months Ended July 31, Nine Months Ended July 31, 2026 2025 2026 2025 (in thousands) Total segment adjusted operating income $ 1,030,420 $ 669,778 $ 2,943,788 $ 1,810,265 Reconciling items: Amortization of acquired intangible assets (402,426) (74,941) (1,210,292) (99,193) Stock-based compensation expense (231,604) (267,723) (712,631) (655,909) Restructuring charges (2,164) — (236,340) — Acquisition/divestiture related items (22,850) (118,428) (62,091) (218,680) Deferred compensation plan (13,885) (43,417) (41,471) (42,949) Total operating income $ 357,491 $ 165,269 $ 680,963 $ 793,534 The CODM does not use total assets by segment to evaluate segment performance or allocate resources.
Segment note: adjusted income reconciliation to GAAP operating income · Filed 26/08/2026
For example, in response to recent market trends and the underperformance of our Design IP segment, we are in the process of reallocating resources in our IP business to certain higher growth opportunities.
Competition risks: actual Design IP underperformance and resource reallocation · Filed 26/08/2026
At the same time, our customers and potential customers continue to demand a lower total cost of design, which can lead to the consolidation of their purchases from one vendor or displacement of their purchases by internal development.
Competition risks: customer cost demands and internal development · Filed 26/08/2026
Current and potential customers who are concerned or affected by such tariffs or restrictions may respond by developing their own products or replacing our solutions, including seeking alternatives from foreign competitors or open-source solutions not subject to these restrictions, which would have an adverse effect on our business.
Trade restriction risks: potential replacement and alternative solutions · Filed 26/08/2026
If we fail to develop and timely offer products with AI features, if such products fail to meet our customers’ demands, if these products fail to operate as expected, or if our competitors incorporate AI into their products more quickly or more successfully than we do, we may experience brand or reputational harm and lose our competitive position, our products may become obsolete, and our business, operating results or financial condition could be adversely affected.
AI risks: potential technological displacement · Filed 26/08/2026
The increase in net cash provided by operating activities for the nine months ended July 31, 2026 compared to the same period in fiscal 2025 was primarily due to contributions from Ansys, organic growth in our business (excluding Ansys), higher accounts receivable collections, and the non-recurring unrealized loss from settlement of the interest rate treasury lock of $121.6 million in the second quarter of fiscal 2025, partially offset by higher disbursements for operations, including vendor payments, and lower net income of $257.5 million.
MD&A: operating cash flow drivers, including organic growth · Filed 26/08/2026
Customers often negotiate a broad portfolio of solutions, and favorable terms along with future purchase options to manage their overall costs.
Revenue recognition: customer negotiation of portfolio terms · Filed 19/12/2024
SSP for license (and related updates and support) in a contract with multiple performance obligations is determined by applying a residual approach whereby all other non-software performance obligations within a contract are first allocated a portion of the transaction price based upon their respective SSP, using observable prices, with any residual amount of the transaction price allocated to the license because we do not sell the license separately, and the pricing is highly variable.
Revenue recognition: highly variable bundled license pricing · Filed 19/12/2024
We typically license our software to customers under non-exclusive license agreements that restrict use of our software to specified purposes within specified geographical areas.
Product sales and licensing: purpose and geographical restrictions · Filed 22/12/2025
The cash provided by financing activities for fiscal 2025 was primarily driven by proceeds of $14.3 billion from the issuance of Senior Notes and the borrowing under the Term Loan Agreement, partially offset by the repayment of $850.0 million of the Term Loan.
MD&A: acquisition financing proceeds and term-loan repayment · Filed 22/12/2025
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands) Capital in Excess of Par Value Retained Earnings Treasury Stock Accumulated Other Comprehensive Income (Loss) Total Synopsys Stockholders’ Equity Non-controlling Interest Stockholders' Equity Common Stock Shares Amount Balance at October 31, 2022 152,375 $ 1,524 $ 1,487,126 $ 5,534,307 $ (1,272,955) $ (234,277) $ 5,515,725 $ 4,801 $ 5,520,526 Net income 1,229,888 1,229,888 (1,761) 1,228,127 Other comprehensive income (loss), net of tax effects 37,863 37,863 37,863 Purchases of treasury stock (2,992) (30) 30 (1,160,724) (1,160,724) (1,160,724) Equity forward contract, net (45,000) (45,000) (45,000) Common stock issued, net of shares withheld for employee taxes 2,670 27 (725,211) (19,108) 758,029 13,737 13,737 Stock-based compensation 558,078 558,078 5,214 563,292 Adjustments to redeemable non-controlling interest (3,388) (3,388) (3,388) Recognition of non-controlling interest upon issuance of subsidiary stock 1,129 1,129 (2,304) (1,175) Balance at October 31, 2023 152,053 $ 1,521 $ 1,276,152 $ 6,741,699 $ (1,675,650) $ (196,414) $ 6,147,308 $ 5,950 $ 6,153,258 Net income 2,263,380 2,263,380 (5,552) 2,257,828 Other comprehensive income (loss), net of tax effects 16,034 16,034 16,034 Purchases of treasury stock (74) (1) 1 (45,000) (45,000) (45,000) Equity forward contract, net 45,000 45,000 45,000 Common stock issued, net of shares withheld for employee taxes 2,133 21 (799,210) 694,880 (104,309) (104,309) Stock-based compensation 687,765 687,765 4,551 692,316 Adjustments to redeemable non-controlling interest (20,974) (20,974) (20,974) Recognition of non-controlling interest upon issuance of subsidiary stock 1,498 1,498 (2,445) (947) Balance at October 31, 2024 154,112 $ 1,541 $ 1,211,206 $ 8,984,105 $ (1,025,770) $ (180,380) $ 8,990,702 $ 2,504 $ 8,993,206 Net income 1,332,220 1,332,220 1,870 1,334,090 Other comprehensive income (loss), net of tax effects (52,034) (52,034) (52,034) Common stock issued upon the acquisition of Ansys 29,955 300 17,105,238 17,105,538 17,105,538 Assumption of equity awards in connection with the acquisition of Ansys 130,963 130,963 130,963 Common stock issued, net of shares withheld for employee taxes 1,927 19 (704,679) 627,492 (77,168) (77,168) Stock-based compensation 892,585 892,585 709 893,294 Adjustments to redeemable non-controlling interest (838) (838) (838) Deconsolidation of non-controlling interest upon the sale of subsidiary 5,634 5,634 (5,670) (36) Balance at October 31, 2025 185,994 $ 1,860 $ 18,640,947 $ 10,315,487 $ (398,278) $ (232,414) $ 28,327,602 $ (587) $ 28,327,015 See the accompanying Notes to Consolidated Financial Statements.
Stockholders' equity statement: acquisition issuance and stock compensation · Filed 22/12/2025
Stock repurchase activities as well as the reissuance of treasury stock for employee stock-based compensation purposes are as follows: Three Months Ended July 31, Nine Months Ended July 31, 2026 2025 2026 2025 (in thousands) Shares repurchased 51 — 691 — Aggregate purchase price $ 37,500 $ — $ 300,000 $ — Reissuance of treasury stock 212 359 1,480 1,393 27 Note 15.
Stock repurchase note: repurchases and treasury share reissuance · Filed 26/08/2026
Financial Results Our fiscal 2025 financial results included: •Record revenue of $7.054 billion, up approximately 15% year-over-year; •GAAP operating margin of 13.0% and non-GAAP operating margin of 37.3%; •Approximately $1.52 billion of operating cash flow; •Free cash flow of approximately $1.35 billion; and •Backlog of $11.4 billion.
Stockholder letter: fiscal 2025 cash generation and reported results · Filed 19/02/2026
FISCAL 2025 EQUITY AWARDS – ANNUAL EQUITY AWARDS Our Compensation Committee granted the following annual equity awards in the first quarter of fiscal 2025 to each of our NEOs other than Ms.
Compensation discussion: actual fiscal 2025 annual equity grants · Filed 19/02/2026
Lee under our Equity Incentive Plan: Annual performance-based restricted stock units (Annual PRSUs), which are eligible to vest only upon the achievement of pre-established performance criteria over a three-year performance period.
Compensation discussion: three-year performance conditions on granted PRSUs · Filed 19/02/2026
All of our continuing NEOs are in compliance with our Share Ownership Guidelines ü Independent Compensation Committee.
Compensation governance: continuing NEO ownership guideline compliance · Filed 19/02/2026
Any Ansys performance-based RSUs that were assumed by us will only be subject to time-based vesting.
Acquisition note: assumed Ansys performance awards converted to time-based vesting · Filed 22/12/2025
ACHIEVED Threshold Performance Goal for Non-GAAP Operating Margin Corporate Financial Performance Goals Performance Weight (%) Fiscal 2025 Achieved (%) Fiscal 2025 Revenue 50.0 92.6 Fiscal 2025 Non-GAAP Operating Margin(1) 50.0 90.8 Average Achievement 91.7 Revenue Growth Goals Fiscal 2025 Target Fiscal 2025 Achieved (%) Fiscal 2026 Revenue Backlog(2) (Referred to elsewhere as Revenue Growth Goal) 100.5 Fiscal 2027 Revenue Backlog(2) (Referred to elsewhere as Long-Term Revenue Growth Goal) —(3) 112.3 (1)Please see Appendix B for a reconciliation of non-GAAP operating margin and non-GAAP EPS growth to operating margin and EPS, the most directly comparable measures reported under U.S.
Compensation discussion: actual achievement against fiscal 2025 goals · Filed 19/02/2026
The independent directors met four times in such sessions during fiscal 2025.
Corporate governance: independent director executive sessions held · Filed 19/02/2026
We maintain a compensation recovery policy for the recovery of incentive compensation paid to executive officers in the event of a financial restatement that is compliant with the Nasdaq Listing Standards and SEC requirements ü Robust Share Ownership Guidelines.
Compensation governance: existing compensation recovery policy · Filed 19/02/2026
All employees, including our NEOs, and our directors are prohibited from engaging in hedging or pledging our stock as collateral for a loan or using margin accounts û No Repricing or Cash-out of Underwater Options.
Compensation governance: prohibition on hedging and pledging · Filed 19/02/2026
Each member of the Audit Committee is considered independent under our Corporate Governance Guidelines, applicable federal securities laws and the Nasdaq Listing Standards.
Audit committee report: member independence · Filed 19/02/2026
Our Board unanimously recommends that you vote AGAINST Proposal 5 because it is not in the best interests of Synopsys’ stockholders and is unnecessary given Synopsys’ existing special meeting right and strong corporate governance practices, the lack of safeguards and current market practice, as described below.
Stockholder proposal: board opposition to written consent · Filed 19/02/2026
