Synopsys

Synopsys has solid pricing power backed by the inelastic, sticky nature of its products. Semiconductor customers typically negotiate multi-year license agreements (sometimes even "all-you-can-eat" deals) that can run into the hundreds of millions.

As demand for chip design tools grows with R&D budgets, Synopsys can incrementally raise software fees at renewal. The industry’s complexity tailwinds drive clients to accept price increases.

For example, when major customers sign fixed-price, multi-year deals (Intel and Samsung have famously paid ~$1B for full-suite licenses), Synopsys still realizes higher per-project revenue as scope expands. The company earned record margins through improving non-GAAP operating margin in FY2024, indicating that pricing and efficiency have aligned.

While competition with Cadence limits unilateral hikes, Synopsys’s indispensability in design flows means meaningful price moves are sustainable. Overall, Synopsys should be able to maintain and even improve profitability, supporting a pricing-power score in the upper range.