QS Research · Michael Burry's Scion Capital analyst template · 2006
SYNOPSYS INC (SNPS)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction medium · base case none · downside -27% · upside +16%
Using section 13's TTM-to-Jul-31-2026 base, Synopsys at 35.9x EV/EBITDA on $2.61B EBITDA is already at $450.46; a 25% EBITDA cut to ~$1.96B gives ~$328 (-27%), while a 15% lift to ~$3.01B gives ~$525 (+17%). The market is not missing the cash generation: TTM FCF is $2.75B and the FCF yield is 3.2%, but the multiple plus $7.45B net debt leaves downside larger than upside. The FY2026 guidance raise, $10.9B backlog, Amazon IP deal and Nvidia investment are real catalysts, but they do not make the base case +30% at today's 35.9x multiple. Hence watch, not long or short.
Key numbers
- Share price: $450.46
- Market cap: $86.32B
- Latest financial period: TTM to Jul 31, 2026
- Revenue (TTM): $9.42B
- EV / EBITDA (TTM): 35.9x
- P/E (TTM): 80.2x
- Price / book: 2.77x
The 15 boxes
- ✓ 1. Long-form business notes
Synopsys sells design software, hardware and IP on license and subscription to chip and systems engineers; revenue compounded from $3.69B in FY2020 to $7.05B in FY2025 while operating income fell to $914.9M in FY2025 from $1.36B in FY2024 as the Ansys merger added staff, intangibles and amortization. Between the FY2020 and FY2025 10-Ks the company went from two segments (Semiconductor & System Design, Software Integrity) to two different ones (Design Automation, which now houses EDA, Ansys and Other, plus Design IP), and it divested its Optical Solutions Group to Keysight in October 2025. Licenses are non-exclusive, largely network-based for EDA, subscription or perpetual for Ansys S&A, and per-design plus royalty for IP; hardware is sold or leased. FY2025 cash generation was $1.52B of operating cash flow against $169.5M of capex, with zero buybacks in FY2024 and FY2025.
- ✓ 2. Competitive advantage
The sources support a partial moat, not a clean one. FY2020-FY2025 revenue roughly doubled to $7.05B and gross profit held at $2.89B to $5.43B (77% of revenue in FY2025, computed from the XBRL facts), and the 10-K describes competition on technology, features, license terms, interoperability and support rather than price alone, backed by 3,800+ patents. But FY2025 operating income fell to $914.9M from $1.36B on higher revenue, operating cash flow of $1.52B was only slightly above FY2021's $1.49B, buybacks were zero in FY2024 and FY2025, and the sources cite Chinese state-backed EDA efforts, a major foundry customer that hurt FY2025 results, and a Design IP segment described as underperforming.
- ✓ 3. 10-Q takeaways
Q3 FY2026 (quarter ended 2026-07-31) revenue rose 42% to $2.477B, with Ansys contributing $622.2M in the full quarter versus a partial quarter a year earlier; nine-month revenue was $7.162B, up 49%. Q3 GAAP operating income was $357.5M and non-GAAP EPS was $3.91, while nine-month GAAP operating income fell to $681.0M from $793.5M amid Ansys amortization and $236.3M of restructuring charges. Management raised FY2026 revenue guidance to $9.690–$9.740B and non-GAAP EPS to $15.04–$15.10; the 10-Q excerpt gives no cash balance, buyback amount, inventory balance, or substantive 10-Q risk-factor detail.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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