Key Takeaways:
- Synopsys is navigating near-term IP headwinds while capitalizing on AI-powered EDA tools, the transformative Ansys acquisition, and the accelerating complexity of chip design.
- SNPS stock could reasonably reach $607 per share by October 2029, based on our valuation assumptions.
- This implies a total return of 48% from today’s price of $410, with an annualized return of 11% over the next 3.9 years.
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Synopsys (SNPS) is strengthening its position as the leader in electronic design automation through AI-powered design tools, the game-changing Ansys acquisition for physics simulation, and strategic investments in customized IP subsystems for hyperscalers and advanced chipmakers.
The EDA leader serves semiconductor companies and system designers through three core segments: Design EDA software, IP solutions, and the newly acquired Simulation and Analysis business from Ansys, enabling customers to design increasingly complex chips for AI, automotive, and data center applications.
Core offerings include AI-enhanced design automation tools, verification hardware, including emulation and prototyping systems, customized IP subsystems for advanced packaging, and now physics simulation capabilities that address thermal, mechanical, and electromagnetic challenges in 3D chip designs.
The company faces near-term challenges in its IP business due to uncertainty in the China market and a foundry customer investment that hasn’t materialized as expected.
However, CEO Sassine Ghazi emphasized that the core EDA and hardware businesses remain healthy and are performing exactly in line with expectations.
Synopsys demonstrates strong execution on long-term strategic initiatives under Ghazi’s leadership. It closed the transformative $35 billion Ansys acquisition in Q3, is accelerating $400 million in cost synergies through a 10% headcount reduction by fiscal 2026, and continues embedding AI capabilities across its product portfolio to drive customer productivity gains.
SNPS stock has delivered solid long-term returns despite recent volatility following earnings guidance adjustments. Here’s why Synopsys stock could provide strong returns through 2029 as it capitalizes on exploding chip complexity and integrates physics simulation into the design workflow.
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What the Model Says for Synopsys Stock
We analyzed the upside potential for Synopsys stock using valuation assumptions based on its leadership position in EDA, the Ansys integration opportunity, and accelerating demand for AI-optimized design tools.
Analysts recognize a significant opportunity ahead for Synopsys given its mission-critical role in chip design, the irreplaceable nature of its tools in an increasingly complex semiconductor landscape, and the massive addressable market expansion from combining electronic and physics simulation.
Synopsys’ diversified growth strategy provides multiple vectors. The EDA business benefits from customers racing to advanced nodes and AI-accelerated designs, while the Ansys combination opens immediate opportunities in advanced packaging, where thermal and mechanical failures are causing costly field issues.
Based on estimates of 14.8% annual revenue growth, 27.8% net income margins, and a normalized P/E multiple of 28x, the model projects Synopsys stock could rise from $410 to $607 per share.
That would be a 24% total return, or a 12% annualized return over the next 1.9 years.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for SNPS stock:
1. Revenue Growth: 15%
Synopsys has delivered impressive historical growth with revenue expanding 12.8% annually over the past five years and 11.5% over the past decade, driven by increasing chip complexity and the company’s expanding product portfolio.
The Ansys acquisition adds approximately $2 billion in annual revenue and is performing in line with expectations.
Management is committed to delivering a physics simulation integrated into the Synopsys design platform in the first half of fiscal 2026, addressing critical thermal and mechanical failures in advanced packaging.
AI is embedded throughout the product portfolio. Reinforcement learning has been deployed since 2020 with uplift pricing.
Generative AI capabilities for creating test benches and RTL documentation are being developed. Agentic AI is progressing from individual task automation to the orchestration of multiple agents across the workflow.
We used a 15% forecast, reflecting Synopsys’ ability to capture increasing chip design complexity, scale the Ansys integration, and monetize AI capabilities, balanced against near-term IP headwinds that should normalize by fiscal 2027.
2. Net margins: 28%
Synopsys has demonstrated strong profitability with net income margins averaging 20.9% over the past five years, though fiscal 2025 saw elevated margins of 29.7% that may not be sustainable at that level.
The company is accelerating its cost synergy program from the Ansys acquisition. The $400 million run rate that was initially planned for year three is being pulled forward through a 10% headcount reduction by the end of fiscal 2026.
Management emphasized that its long-term operating margin target remains in the mid-40s, demonstrating confidence in the business model’s leverage and profitability potential as revenue scales.
We forecast 28% net income margins, reflecting management’s proven operational discipline, the Ansys synergies being pulled forward, and the high-margin nature of mission-critical software, balanced against near-term investments in AI capabilities and organizational scaling.
3. Exit P/E Multiple: 28x
Synopsys stock currently trades at a next-twelve-months P/E multiple of 31.6x, though the stock has experienced significant volatility recently following guidance adjustments related to IP business headwinds.
Historical P/E multiples show the stock has averaged 33.1x over the past year, 36.3x over three years, 37.7x over five years, and 31x over the past decade, reflecting consistent premium valuations for its mission-critical role in semiconductor design.
We maintain a 28x exit multiple given Synopsys’ irreplaceable position in chip design workflows, the strategic value of the Ansys combination, and long-term growth drivers from increasing complexity and AI adoption in semiconductor development.
Long-term competitive advantages from product leadership, customer entrenchment, and the Ansys combination should support reasonable valuations as the company executes its vision of combining electronic design with physics simulation for the next era of semiconductor innovation.
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What Happens If Things Go Better or Worse?
Different scenarios for SNPS stock through 2030 show varied outcomes based on on IP business recovery timing and Ansys integration execution (these are estimates, not guaranteed returns):
- Low Case: IP headwinds persist longer, and Ansys synergies disappoint → 4% annual returns
- Mid Case: IP returns to mid-teens growth in fiscal 2027 and Ansys integration delivers first-wave products → 11% annual returns
- High Case: China normalizes faster and advanced packaging drives accelerated Ansys adoption → 17% annual returns
Even in the conservative case, Synopsys stock offers positive returns supported by its mission-critical positioning, the irreplaceable nature of design tools as chip complexity increases, and the structural growth in semiconductor content across all end markets.
The upside scenario for SNPS stock could deliver exceptional performance if China restrictions ease meaningfully.
At the same time, hyperscalers are accelerating investments in custom chips, and the Ansys integration delivers new must-have capabilities for managing thermal and mechanical challenges in advanced 3D packaging designs.
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How Much Upside Does SNPS Stock Have From Here?
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All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
