Synopsys, Inc.
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Company and Segment Overview
Synopsys, Inc. (Synopsys, we, our or us) is the leader in engineering solutions from silicon to systems, enabling customers to rapidly innovate AI-powered products. We deliver trusted and comprehensive solutions spanning silicon design, silicon intellectual property (IP), simulation and analysis (S&A) as well as design services. We partner closely with our customers across a wide range of industries to maximize their R&D capability and productivity, powering innovation today that ignites the ingenuity of tomorrow.
We are a global leader in supplying the mission-critical EDA solutions that engineers use to design and test integrated circuits (ICs), also known as chips or silicon, and we are pioneering artificial intelligence (AI) driven chip design across the full-stack EDA suite to improve efficiency and accelerate the design, verification testing and manufacturing of advanced digital and analog chips. We provide software and hardware used to validate the electronic systems that incorporate chips and the software that runs on them, including cloud-based digital and analog design flow to boost chip-design development productivity. We also provide technical services and support to help our customers develop advanced chips and electronic systems.
Synopsys is also the global leader in engineering S&A software. Our Ansys® solutions portfolio is widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including high-tech, aerospace and defense, automotive, energy, industrial equipment, materials and chemicals, consumer products, healthcare and construction. These products enable customers to analyze designs on-premises and/or via the cloud, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing, validation and deployment. S&A products and services are part of our Design Automation segment.
We also offer a broad and comprehensive portfolio of semiconductor IP solutions, which are pre-designed circuits that engineers use as components of larger chip designs to reduce development risk and speed time to market. Our high quality, silicon-proven semiconductor IP includes logic libraries, embedded memories, wired interface IP, memory interface IP, security IP, and embedded processors. To accelerate IP integration and silicon bring-up, our IP Accelerated initiative provides architecture design expertise, customized IP subsystems, hardening, and signal and power integrity analysis. These products and services are part of our Design IP segment.
Corporate Information
Our headquarters are located at 675 Almanor Avenue, Sunnyvale, California 94085, and our headquarters’ telephone number is (650) 584-5000. Our website is https://www.synopsys.com/. We have 189 offices worldwide.
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, including those relating to our Annual Meeting of Stockholders, and any amendments to such reports or other information filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available through the Investor Relations page of our website (https://investor.synopsys.com/overview/default.aspx) free of charge as soon as reasonably practicable after we file them with, or furnish them to, the SEC (www.sec.gov). We use our Investor Relations page as a routine channel for distribution of important information, including, among other things, news releases, investor presentations and financial information and to comply with our disclosure obligations under Regulation Fair Disclosure. The contents of our website are not part of this Annual Report and shall not be deemed to be incorporated by reference.
Background
In today’s era of pervasive intelligence, we have seen an acceleration in innovation cycles and a growing opportunity for Synopsys. The proliferation of silicon to power our digital world, where technology is omnipresent and interconnected, means computing is being reinvented with the rise of AI and software-defined systems. In turn, this is driving an increase in the activity of new and existing chip and system design companies around the world.
These developments are accompanied by increasing complexity. It is now common for a single chip to combine many components (processor, communications, memory, custom logic, input/output) and embedded software into a single system-on-chip (SoC), requiring highly complex chip designs. The most complex chips today contain more
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than a billion transistors. Transistors are the basic building blocks for ICs, each of which may have features that are less than 1/1,000th the diameter of a human hair.
These devices are manufactured using masks to direct beams of light onto a wafer of silicon. At such small dimensions, the wavelength of light itself can become an obstacle to production, proving too big to create such dense features and requiring creative and complicated new approaches. Designers have turned to new manufacturing techniques to solve these problems, such as multiple-patterning lithography, FinFET 3D transistors and Gate-All-Around Field-Effect transistor structures, which in turn have introduced new challenges to design and production.
The rise of silicon-powered intelligent devices and AI has increased demand for chips and systems with greater functionality and performance, reduced size and lower power consumption. Our customers, who design silicon and software-defined systems, are facing intense pressure to deliver innovative offerings in shorter timeframes and at lower prices. In other words, innovation in chip and systems design often hinges on providing products “better,” “sooner,” and “cheaper” than competitors. The design of these chips and systems is extremely complex and demands engineering solutions with a deeper integration of electronics and physics, enhanced by AI. Over the past several years, market verticals including AI, 5G, automotive and cloud computing infrastructure have contributed to the ongoing demand for our products and services. With ANSYS, Inc, (Ansys) now part of Synopsys, we can maximize the capabilities of product R&D teams broadly enabling them to rapidly innovate AI-powered products.
Our Role—As the Silicon to Systems Engineering Solutions Partner
Synopsys' silicon to systems engineering solutions are designed to help our customers—chip and system engineers and software developers—speed up time to market, achieve the highest quality of results, mitigate risk, and maximize profitability.
Chip and systems designers must determine how best to design, locate and connect the building blocks of intelligent systems, and to verify that the resulting design behaves as intended and can be manufactured efficiently and cost-effectively. This is a complex, multi-step process that is expensive and time-consuming. Our wide range of products help at different steps in the overall design process, from the design of individual ICs to the design and simulation of larger systems. Our EDA products increase designer productivity and efficiency by automating tasks, keeping track of large amounts of data, adding intelligence to the design process, facilitating reuse of past designs and reducing errors. Our S&A products give engineers the ability to explore and predict how products will work in the real world, helping them speed time-to-market, lower manufacturing costs, improve quality, and decrease risk. Our silicon IP products offer proven, high-quality pre-configured circuits that are ready to use in a chip design, saving customers time and enabling them to direct resources to features that differentiate their products. Our global service and support engineers provide expert technical support and design assistance to our customers.
Products and Services
Design Automation Segment
Our Design Automation segment includes the EDA, Ansys and Other revenue groups.
EDA
Designing ICs involves many complex steps, including, among others architecture definition, register transfer level (RTL) design, functional/RTL verification, logic design or synthesis, gate-level verification, floorplanning, place and route, and physical verification. Designers use our EDA products to accelerate and automate the chip design process, reduce errors and enable more powerful and robust designs, with improved productivity for faster time to market.
As the availability and amount of cloud-based data storage grows, customer interest in accessing EDA on the cloud is also increasing as customers seek to benefit from the scalability and flexibility that cloud computing can offer to their flows and engineering teams. Our Synopsys Cloud offering provides customers additional options for accessing our EDA products in their own cloud environments and in the industry’s first EDA Software-as-a-Service solution developed in partnership with Microsoft Azure.
Our solutions comprehensively address the design process, featuring a large number of EDA products that generally fall into the following categories:
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•Digital and custom IC design tools are used for designing and verifying complex chips, and for designing the advanced processes and models required to manufacture those chips;
•Field programmable gate array (FPGA) design, which accelerate time-to-shipping hardware with deep debug visibility, incremental design, broad language support, and optimal performance and area for FPGA-based products.
•Verification, which includes technology to verify that an IC design behaves as intended;
•Manufacturing, which includes products that both enable early manufacturing process development and convert IC design layouts into the masks used to manufacture the chips; and
•AI-driven EDA solutions, which include AI and machine learning capabilities to boost productivity and improve efficiency throughout the EDA flow.
Digital and Custom IC Design
Our Digital Design Family provides customers with a comprehensive digital design implementation solution that includes industry-leading products and redefines conventional design tool boundaries to deliver a more integrated flow than ever before, with better quality and time to results. The platform gives designers the flexibility to integrate internally developed tools as well as those from third parties. With innovative technologies, a common foundation, and flexibility, our Digital Design Family helps reduce design times, decrease uncertainties in design steps, and minimize the risks inherent in advanced, complex IC design. The platform supports advanced nodes with collaborations on next-generation process technologies.
Key design products are available as part of the Digital Design Family and include Fusion CompilerTM RTL to GDSII design implementation, Design Compiler® NXT logic synthesis, IC CompilerTM II physical design, Synopsys TestMAXTM test and diagnosis, PrimeTime® static timing analysis, PrimePowerTM power analysis, PrimeLib library characterization, StarRCTM parasitic extraction, IC ValidatorTM physical verification and 3DIC Compiler, the industry’s only unified exploration-to-signoff platform for multi-die/package co-design and co-optimization, aimed at enabling customers to integrate multiple dies in a single package.
Our Custom Design Family is a unified suite of design and verification tools that accelerates the transistor-level design of robust analog, mixed-signal, and custom-digital ICs. This product family features visually assisted layout automation, high-performance circuit simulation, reliability-aware verification, and natively integrated parasitic RC extraction and physical verification. It includes Custom CompilerTM layout and schematic editor, StarRC parasitic extraction, IC Validator physical verification and PrimeSimTM. The PrimeSim solution provides a unified workflow of next-generation simulation technologies to accelerate the design and signoff of IC designs including PrimeSim SPICE, PrimeSimPro, PrimeSim HSPICETM and PrimeSimXA. The PrimeWaveTM design environment provides comprehensive analysis and improved productivity and ease of use across all tools in PrimeSim.
Our Silicon Lifecycle Management (SLM) family of products improves silicon health and operational metrics at every phase of the device lifecycle. This family of products is built on a foundation of enriched in-chip observability, analytics and integrated automation. Synopsys' SLM in-chip monitoring enables deep insights from silicon to systems by providing meaningful data for continuous analysis and actionable feedback. The solution is integrated with the Digital Design Family for design calibration and analytics and includes Yield Explorer® for product ramp analytics, Silicon.da for AI-driven test and production analytics, TestMAX ALE (adaptive learning engine) for intelligent data extraction and communication to the SLM database and PVT IP for in-chip monitoring and sensing.
FPGA Design
FPGAs are complex chips that can be customized or programmed to perform a specific function after they are manufactured. For the process of converting a high-level hardware description language design into an FPGA netlist, a process known as FPGA-logic synthesis, we offer Synplify® FPGA synthesis tools that provide fast runtime, performance, area optimization for cost and power reduction, multi-FPGA vendor support, and incremental synthesis capabilities for faster FPGA design development.
Verification
Our Verification Family is built from our industry-leading verification technologies and provides virtual prototyping, static and formal verification, simulation, emulation, FPGA-based prototyping and debug in a unified environment with verification IP, planning, and coverage technology. By providing consistent compile, runtime and debug environments across the flow of verification tasks and by enabling seamless transitions across functions, the
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platform helps our customers accelerate chip verification, bring up software earlier, and get to market sooner with advanced SoCs.
The individual products and solutions included in the Verification Family include the following:
•VC SpyGlassTM family of static verification technologies including lint, CDC (clock domain crossing), RDC (reset domain crossing), Constraint Checking, Synopsys TestMAX Advisor, and low-power analysis and verification;
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Financial statements
data from SEC XBRL filings. Values are as-reported; restatements supersede originals. Values reported in .
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||||
This Quarterly Report on Form 10-Q (this Quarterly Report) includes forward-looking statements, which involve risks, uncertainties and other factors that could cause Synopsys, Inc.'s (Synopsys, we, our or us) actual results, time frames or achievements to differ materially from those expressed or implied in such forward-looking statements. Readers are urged to carefully review and consider the various disclosures regarding these risks and uncertainties made in this Quarterly Report, including those identified below in Part II, Item 1A, Risk Factors, and in other documents we file from time to time with the Securities and Exchange Commission (SEC). Forward-looking statements include any statements that are not statements of historical fact and include, but are not limited to, statements concerning our short-term and long-term financial targets, expectations and objectives; our businesses, business segments, strategies, partnerships, initiatives and opportunities, including, among other things, the reallocation of resources in our Design IP segment to higher growth opportunities and planned restructuring activities; industry growth and technological trends, such as artificial intelligence (AI), including our development and planned commercialization thereof; business and market outlook; the potential impact of the uncertain macroeconomic environment and global economic conditions on our financial results; the impact of current and future U.S. and foreign trade regulations, government actions and regulatory changes, such as export control restrictions and tariffs; the ANSYS, Inc. (Ansys) integration and its expected impact, including expected synergies and the timing thereof, our ability to create joint solutions as a combined company, and related accounting changes; planned acquisitions or divestitures, including the expected completion of the sale of the Processor IP Solutions (Processor IP) business, and their anticipated timing and impact; our key customers, customer concentration, customer engagement, customer demand and market expansion; results and strategies related to our products, technology and services, including product development and our planned product releases and capabilities; the expected realization of our contracted but unsatisfied or partially unsatisfied performance obligations (backlog); planned stock repurchases; our expected tax rate; and the status, expected outcome or expected impact of litigation and/or regulatory investigations. Forward-looking statements may be identified by words including, but not limited to, “may,” “will,” “could,” “would,” “can,” “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” “project,” “continue,” “forecast,” "likely," "potential," "seek," or the negatives of such terms and similar expressions. The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. All subsequent written or oral forward-looking statements attributable to Synopsys or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.
The following summary and overview of our financial condition and results of operations are qualified in their entirety by the more complete discussions and should be read together with our condensed consolidated financial statements and the related notes thereto contained in Part I, Item 1 of this Quarterly Report, the risk factors set forth in Part II, Item 1A of this Quarterly Report, and with our audited consolidated financial statements and the related notes thereto contained in our Annual Report on Form 10-K for the fiscal year ended October 31, 2025, as filed with the SEC on December 22, 2025 (our Annual Report).
Overview
Financial Performance Summary
For the second quarter of fiscal 2026, our results reflect continued, strong execution and the resiliency of our business, including 42% revenue growth compared to the second quarter of fiscal 2025, primarily due to strength across our business and Ansys' contribution of $652.4 million in revenue, partially offset by weakness in our Design IP segment.
The following table sets forth some of our key quarterly unaudited financial information:
| Three Months Ended April 30, | Six Months Ended April 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
(in millions, except per share amounts) | |||||||||||||||||||||||
| Revenue | $ | 2,276.0 | $ | 1,604.3 | $ | 4,684.8 | $ | 3,059.6 | |||||||||||||||
| Cost of revenue | $ | 629.9 | $ | 318.3 | $ | 1,267.2 | $ | 588.3 | |||||||||||||||
| Operating expenses | $ | 1,525.7 | $ | 909.5 | $ | 3,094.1 | $ | 1,843.0 | |||||||||||||||
| Operating income | $ | 120.4 | $ | 376.4 | $ | 323.5 | $ | 628.3 | |||||||||||||||
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| Net income from continuing operations attributed to Synopsys | $ | 17.1 | $ | 349.2 | $ | 82.1 | $ | 644.9 | ||||||||
Net loss from discontinued operations attributed to Synopsys | $ | — | $ | (3.9) | $ | — | $ | (3.9) | ||||||||
| Diluted net income (loss) per share attributed to Synopsys: | ||||||||||||||||
| Continuing operations | $ | 0.09 | $ | 2.24 | $ | 0.43 | $ | 4.13 | ||||||||
| Discontinued operations | $ | — | $ | (0.03) | $ | — | $ | (0.03) | ||||||||
Financial performance summary for the three months ended April 30, 2026 compared to the same period of fiscal 2025:
•Revenues were $2.3 billion, an increase of $671.7 million or 42%, which includes revenues from Ansys of $652.4 million. The remaining growth came organically due to strength across our business, partially offset by weakness in our Design IP segment.
•Total cost of revenue and operating expenses was $2.2 billion, an increase of $927.8 million or 76%, reflecting $394.2 million of amortization expense related to intangible assets acquired from the acquisition of Ansys (the Ansys Merger), as well as an increase of $244.5 million in employee-related costs primarily due to the headcount increases as a result of the Ansys Merger.
Financial performance summary for the six months ended April 30, 2026 compared to the same period of fiscal 2025:
•Revenues were $4.7 billion, an increase of $1.6 billion or 53%, which includes revenues from Ansys of $1.5 billion. The remaining growth came organically due to strength across our business, partially offset by weakness in our Design IP segment.
•Total cost of revenue and operating expenses was $4.4 billion, an increase of $1.9 billion or 79%, reflecting $788.3 million of amortization expense related to intangible assets acquired from the Ansys Merger, as well as an increase of $594.7 million in employee-related costs primarily due to the headcount increases as a result of the Ansys Merger.
Business Summary
Synopsys delivers industry-leading silicon design, IP, simulation and analysis (S&A) solutions and design services. We partner closely with our customers across a wide range of industries to maximize their R&D capability and productivity, powering innovation today that ignites the ingenuity of tomorrow. For more information about our business segments and product groups, see Part I, Item 1, Business in our Annual Report.
We have consistently grown our revenue since 2005, despite periods of global economic uncertainty. 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. See Note 2. Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements in our Annual Report for a discussion on our revenue recognition policy. The revenue we recognize in a particular period generally results from selling efforts in prior periods rather than the current period. As a result, decreases as well as increases in customer spending do not immediately affect our revenue in a significant way.
Our growth strategy is focused on expanding our total addressable market by maximizing the capabilities of R&D teams across industries spanning semiconductor, high-tech, industrial, aerospace, and more with engineering solutions from silicon to systems. Our priorities are to maintain and expand our technology leadership, drive sustainable growth and efficiently scale to accelerate our strategy. Our revenue growth from period to period is expected to vary based on the mix of our time-based and upfront products. Our upfront products have grown at a faster rate than our time-based products in recent periods, which has resulted in, and may in the future result in, increased fluctuation in our business, operating results and overall financial position on a quarterly basis. Such fluctuation may be more pronounced depending on demand from our larger customers. See Part II, Item 1A, Risk Factors, "Our operating results may fluctuate in the future, which may adversely affect our stock price" of this Quarterly Report for further discussion on potential fluctuations in our operating results. Based on our leading
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technologies, customer relationships, business model, diligent expense management, and acquisition strategy, we believe that we will continue to execute our strategies successfully.
Acquisition of Ansys
On July 17, 2025 (the Acquisition Date), we completed our acquisition of ANSYS, Inc. (Ansys) pursuant to the terms of the previously announced Agreement and Plan of Merger, dated as of January 15, 2024 (the Merger Agreement) by and among Synopsys, Ansys and ALTA Acquisition Corp. (Merger Sub), a Delaware corporation and a wholly owned subsidiary of Synopsys (the Ansys Merger). See Note 4. Acquisition of Ansys of the Notes to Condensed Consolidated Financial Statements for more information on the Ansys Merger.
See Part II, Item 1A, Risk Factors for more on risks related to the Ansys Merger.
Impact of the Current Macroeconomic Environment
The current macroeconomic environment reflects the effects of, among other things, changes in U.S. and global trade policy, including the tariffs enacted beginning in 2025 by the U.S. and other governments and subsequent tariff and trade policy revisions, sustained global inflationary pressures and elevated interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures and instability, and fluctuations in foreign exchange rates. This uncertain macroeconomic environment has resulted in increased volatility in global markets. While we have seen continued strength in the artificial intelligence and high-performance computing sectors, certain industries such as industrial, automotive and consumer electronics have experienced more modest growth. The current uncertain macroeconomic environment has led some of our customers to postpone their decision making, delay their drawdowns under non-cancellable commitments, decrease their spending and/or delay their payments to us.
We expect growth across most geographies in fiscal 2026; however, we are expecting a challenging near-term environment, including in China, due to macroeconomic factors and Trade Restrictions (as defined below). See the discussion below under the heading "Impact of Global Trade Policy and the Current Geopolitical Environment" and in Part II, Item 1A, Risk Factors, "We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets" for further discussion of the impact of Trade Restrictions, including export control regulations and geopolitical events, on Synopsys.
While our time-based model provides stability to our business, operating results and overall financial position, the broader implications of these macroeconomic or geopolitical events, particularly in the long term, remain uncertain. Further, the negative impact of these events or disruptions may be deferred due to our business model. See Part II, Item 1A, Risk Factors, “Uncertainty in the macroeconomic environment, and its potential impact on the semiconductor and electronics industries, may negatively affect our business, operating results and financial condition” and "Our operating results may fluctuate in the future, which may adversely affect our stock price" for further discussion of the impact of global economic uncertainty on our business, operations and financial condition and potential fluctuations in our operating results, respectively.
Impact of Global Trade Policy and the Current Geopolitical Environment
We are actively monitoring changes to global trade policy, such as changes to U.S. Export Regulations (as defined below) and developments related to the tariffs enacted by the U.S. government. Beginning in fiscal 2025, the U.S. government has imposed a number of new and higher U.S. tariffs on imports from countries around the world. Certain countries responded to the U.S. tariffs by imposing or threatening retaliatory tariffs. There may be additional changes to tariffs or new tariffs and other aspects of global trade policy in fiscal 2026 in the U.S. and other countries due to global trade negotiations and other factors. These changes in global trade policy have not had a material impact on our business, operating results or financial condition to date.
The Bureau of Industry and Security of the U.S. Department of Commerce (BIS) has continued to publish changes to U.S. export control regulations (the U.S. Export Regulations), including, among other things, the inclusion of certain Chinese technology companies on the Entity List, restrictions on the export of electronic computer-aided design (ECAD) software specially designed for the development of certain ICs, as well as controls on ECAD software for advanced semiconductor packaging involving multiple chips or chiplets, and certain other restrictions on China’s access to certain semiconductor and advanced computing technology. U.S.-China relations remain fluid, in particular with respect to trade policy and export restrictions relating to dual-use technologies. China export control restrictions, including certain BIS restrictions that were imposed in the third quarter of 2025 and
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subsequently rescinded as disclosed in our prior filings, negatively impacted our business in China, including in our Design IP segment, and may continue to impact design starts or other aspects of our business in China in the future. The evolving nature of U.S. Export Regulations, including the potential for new and expanded license requirements of this or similar nature, creates uncertainty regarding the current and future impacts on our business. We anticipate additional changes to the U.S. Export Regulations or other U.S. or non-U.S. export, sanctions, or similar trade requirements (collectively, the Trade Restrictions) in the future, but we cannot forecast the scope or timing of such changes, nor the impact on our business. We will continue to monitor such developments, including potential additional Trade Restrictions, new or expanded license requirements, and other regulatory or policy changes by the U.S. and foreign governments.
For more on risks related to government export and import restrictions such as the U.S. government’s Entity List and other U.S. Export Regulations, see Part II, Item 1A, Risk Factors, “We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets.”
We are also monitoring other geopolitical pressures around the world, including, among others, changes in China-Taiwan and U.S.-China relations, the conflicts in Ukraine and the Middle East and other regional or global military conflicts or instability. Any significant disruption caused by these or other geopolitical pressures or conflicts could materially affect our employees, business, operating results, financial condition or customers in those regions of the world. For example, Synopsys has employees, operations, customers and strategic partners in the Middle East. While we are actively monitoring the ongoing conflicts, they have not had a material impact on our business, operating results or financial condition to date.
See Part II, Item 1A, Risk Factors for further discussion of the impact of global economic and geopolitical uncertainty on our business, operations and financial condition.
Business Segments
Design Automation. This segment includes our advanced silicon design, verification products and services, and Ansys products, and system integration products and services. This segment also includes digital, custom and field programmable gate array (FPGA) integrated circuit (IC) design software, verification software and hardware products, and manufacturing software products. Designers use our electronic design automation (EDA) products to accelerate and automate the chip design process, reduce errors and enable more powerful and robust designs, with improved productivity for faster time to market. Engineers use our S&A solutions to virtually test and optimize designs across various physics domains, such as structural analysis, thermal analysis, and computational fluid dynamics (CFD).
Design IP. This segment includes our logic libraries, embedded memories, wired interface IP, memory interface IP, security IP, and embedded processors that serve companies primarily in the semiconductor and electronics industries. We are a leading provider of high-quality, silicon-proven IP solutions for system-on-chips (SoCs). This includes IP that has been optimized to address specific application requirements for the mobile, automotive, digital home, Internet of Things and AI/data center markets, enabling designers to quickly develop SoCs in these areas.
Critical Accounting Estimates
A critical accounting estimate is defined as one that has a material impact on our financial condition and results of operations and requires us to make difficult, complex or subjective judgments, often as a result of the need to make estimates about matters that are inherently uncertain. Where applicable, we base these estimates and assumptions on historical experience and evaluate them on an ongoing basis to ensure that they remain reasonable under current conditions. Actual results could differ from those estimates.
We believe the critical accounting policies that reflect more significant judgments and estimates used in the preparation of our consolidated financial statements regarding critical accounting estimates are Revenue Recognition and Business Combinations. There have been no material changes in our critical accounting estimates during the six months ended April 30, 2026 since our Annual Report for fiscal 2025.
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Results of Operations
Our results of operations for the three and six months ended April 30, 2026 reflect the inclusion of Ansys' results of operations. As discussed above, we completed the Ansys Merger on July 17, 2025 and therefore our results of operations for the three and six months ended April 30, 2025 do not include Ansys' results of operations for such time periods, impacting the period comparisons discussed below.
Revenue
Our revenues are generated from two business segments: the Design Automation segment and the Design IP segment. See Note 17. Segment Disclosure of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for more information about our reportable segments and revenue by geographic regions.
Further disaggregation of the revenues into various products and services within these two segments is summarized as follows:
Design Automation Segment
•EDA solutions include digital, custom and FPGA IC design software, verification software and hardware products, Ansys semiconductor products, system integration products and services, and obligations to provide unspecified updates and support services. EDA products and services are typically sold through Technology Subscription License (TSL) arrangements that grant customers the right to access and use all of the licensed products at the outset of an arrangement; software updates are generally made available throughout the entire term of the arrangement. The duration of our TSL contracts is generally two to three years, though it may vary for specific arrangements. We have concluded that the software licenses in TSL contracts are not distinct from the obligation to provide unspecified software updates to the licensed software throughout the license term, because the multiple software licenses and support represent inputs to a single, combined offering, and timely, relevant software updates are integral to maintaining the utility of the software licenses. We recognize revenue for the combined performance obligation under TSL contracts ratably over the term of the license.
•In the case of arrangements involving the sale of hardware products, we generally have two performance obligations. The first performance obligation is to transfer the hardware product, which includes software integral to the functionality of the hardware product. The second performance obligation is to provide maintenance on the hardware and its embedded software, which includes rights to technical support, hardware repairs and software updates that are all provided over the same term and have the same time-based pattern of transfer to the customer. The portion of the transaction price allocated to the hardware product is generally recognized as revenue at the time of shipment because the customer obtains control of the product at that point in time. We have concluded that control generally transfers at that point in time because the customer has the ability to direct the use of the asset and an obligation to pay for the hardware. The portion of the transaction price allocated to the maintenance obligation is recognized as revenue ratably over the maintenance term.
•S&A solutions allow engineers to virtually test and optimize designs across various physics domains, such as structural analysis, thermal analysis, and CFD. S&A software solutions are offered as subscription solutions and also as perpetual licenses. Software subscription arrangements include bundles of time-based software licenses with support services, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. In such subscription arrangements, the updates to time-based software licenses are not considered integral to maintaining the utility of the software. We consider the license and support services as separate performance obligations. In these instances, we allocate the total consideration received for the revenue arrangement to the separate performance obligations based on the standalone selling prices of the time-based software license and support service. The time-based software license revenue is presented as upfront products revenue, recognized at a point of time upon the later of the delivery date or the beginning of the license period, and the revenue related to the support service is presented as maintenance and service revenue and is recognized over the term of the arrangement. Perpetual license arrangements typically include a perpetual license sold with support services, which includes a stand-ready obligation to provide technical support and software updates over the support term. We allocate the total consideration received for the bundled perpetual and support service arrangements based on the standalone selling prices of the perpetual license and support service. Revenue from perpetual licenses is presented as upfront product revenue and is
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recognized at a point in time upon the later of the delivery date or the beginning of the license period. Revenue from support service is classified as maintenance and service revenue and is recognized ratably over the term of the contract, as we satisfy the support service performance obligation. For our reseller business, we evaluate whether we are the principal or agent for reporting purposes. Beginning in the second quarter of fiscal 2026, we have enhanced our channel partner arrangements to improve oversight and pricing visibility. Specifically, we now have visibility into end-customer pricing, improved delivery control over key distributors, and are able to provide routine maintenance to the end customers. As a result, we report our revenue from reseller arrangements on a gross basis beginning in the second quarter of fiscal 2026.
•Revenue from professional service contracts is recognized over time, generally using costs incurred or hours expended to measure progress. We have a history of reasonably estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes.
Design IP Segment
•Design IP includes our logic libraries, embedded memories, wired interface IP, memory interface IP, security IP, and embedded processors. These arrangements generally have two performance obligations which consist of transferring of the licensed IP and providing related support, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. Revenue allocated to the IP licenses is recognized at a point in time upon the later of the delivery date or the beginning of the license period, and revenue allocated to support is recognized over the support term. Royalties are recognized as revenue in the quarter in which the applicable customer sells its products that incorporate our IP. Payments for IP contracts are generally received upon delivery of the IP. Revenue related to the customization of certain IP is recognized over time, generally using costs incurred or hours expended to measure progress.
Our customer arrangements can involve multiple products and various license rights, and our customers negotiate with us over many aspects of these arrangements. For example, they generally request a broader portfolio of solutions, support and services and seek more favorable terms such as expanded license usage, future purchase rights and other unique rights at an overall lower total cost. No single factor typically drives our customers’ buying decisions, and we compete on all fronts to serve customers in highly competitive markets. Customers generally negotiate the total value of the arrangement rather than just unit pricing or volumes.
Total Revenue
| April 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Three months ended | |||||||||||||||||||||||
| Design Automation | $ | 1,821.8 | $ | 1,122.3 | $ | 699.5 | 62 | % | |||||||||||||||
| Design IP | 454.2 | 482.0 | (27.8) | (6) | % | ||||||||||||||||||
| Total | $ | 2,276.0 | $ | 1,604.3 | $ | 671.7 | 42 | % | |||||||||||||||
| Six months ended | |||||||||||||||||||||||
| Design Automation | $ | 3,823.6 | $ | 2,142.5 | $ | 1,681.1 | 78 | % | |||||||||||||||
| Design IP | 861.2 | 917.1 | (55.9) | (6) | % | ||||||||||||||||||
| Total | $ | 4,684.8 | $ | 3,059.6 | $ | 1,625.2 | 53 | % | |||||||||||||||
Our revenues are subject to fluctuations, primarily due to customer requirements including customer demand, timing requirements and the value of contract renewals. For example, we experience fluctuations in our revenues due to factors such as the timing of IP product sales, Flexible Spending Account (FSA) drawdowns, royalties, and hardware products sales. As revenues from sales of IP products, hardware products and S&A product licenses are recognized upfront, customer demand and timing requirements for such IP products, hardware products and S&A product licenses could result in increased variability of our total revenues.
Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) were $11.0 billion as of April 30, 2026, which includes $1.8 billion in non-cancellable FSA commitments from customers where actual product
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selection and quantities of specific products or services are to be determined by customers at a later date. We have elected to exclude future sales-based royalty payments from the remaining performance obligations. Approximately 49% of the backlog as of April 30, 2026, excluding non-cancellable FSA, is expected to be recognized as revenue over the next 12 months, with the remainder to be recognized thereafter. The majority of the remaining backlog is expected to be recognized in the following three years.
The amount and composition of unsatisfied performance obligations will fluctuate period to period. 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. For more information regarding our revenue during the three and six months ended April 30, 2026, including our contract balances as of such date, see Note 5. Revenue of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report.
The increase in total revenues for the three and six months ended April 30, 2026 compared to the same periods in fiscal 2025 was primarily due to Ansys' contribution of $652.4 million and $1.5 billion in revenue, respectively, for the three and six months ended April 30, 2026, including a $12.5 million increase due to the accounting change in Ansys' channel partner business, and strength across our business, partially offset by weakness in our Design IP segment.
For a discussion of revenue by geographic areas, see Note 17. Segment Disclosure of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report.
Time-Based Products Revenue
| April 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Three months ended | $ | 945.6 | $ | 828.3 | $ | 117.3 | 14 | % | |||||||||||||||
| Percentage of total revenue | 42 | % | 52 | % | |||||||||||||||||||
| Six months ended | $ | 1,897.2 | $ | 1,656.6 | $ | 240.6 | 15 | % | |||||||||||||||
| Percentage of total revenue | 41 | % | 54 | % | |||||||||||||||||||
The increase in time-based products revenue for the three and six months ended April 30, 2026 compared to the same periods in fiscal 2025 was primarily attributable to Ansys' contribution of $78.7 million and $157.1 million in time-based products revenue, respectively for the three and six months ended April 30, 2026, and an increase in TSL license revenue from arrangements booked in prior periods.
Upfront Products Revenue
| April 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Three months ended | $ | 546.3 | $ | 510.7 | $ | 35.6 | 7 | % | |||||||||||||||
| Percentage of total revenue | 24 | % | 32 | % | |||||||||||||||||||
| Six months ended | $ | 1,287.8 | $ | 878.8 | $ | 409.0 | 47 | % | |||||||||||||||
| Percentage of total revenue | 27 | % | 29 | % | |||||||||||||||||||
Changes in upfront products revenue are generally attributable to normal fluctuations in the extent and timing of customer requirements, which can drive the amount of upfront orders and revenue in any particular period.
The increase in upfront products revenue for the three and six months ended April 30, 2026 compared to the same periods in fiscal 2025 was primarily due to Ansys' contribution of $149.3 million and $532.3 million, respectively for the three and six months ended April 30, 2026 in upfront products revenue, partially offset by a decrease in license revenue due to timing of customer requirements for IP products and the Optical Solutions Group divestiture.
Upfront products revenue as a percentage of total revenue will likely fluctuate based on the timing of IP, hardware and S&A product sales. Such fluctuations will continue to be impacted by the timing of shipments and FSA drawdowns due to customer requirements.
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Maintenance and Service Revenue
| April 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Three months ended | |||||||||||||||||||||||
| Maintenance revenue | $ | 539.9 | $ | 117.8 | $ | 422.1 | 358 | % | |||||||||||||||
| Professional service and other revenue | 244.2 | 147.4 | 96.8 | 66 | % | ||||||||||||||||||
| Total | $ | 784.1 | $ | 265.2 | $ | 518.9 | 196 | % | |||||||||||||||
| Percentage of total revenue | 34 | % | 16 | % | |||||||||||||||||||
| Six months ended | |||||||||||||||||||||||
| Maintenance revenue | $ | 1,077.6 | $ | 235.0 | $ | 842.6 | 359 | % | |||||||||||||||
| Professional service and other revenue | 422.2 | 289.2 | 133.0 | 46 | % | ||||||||||||||||||
| Total | $ | 1,499.8 | $ | 524.2 | $ | 975.6 | 186 | % | |||||||||||||||
| Percentage of total revenue | 32 | % | 17 | % | |||||||||||||||||||
The increase in maintenance revenue for the three and six months ended April 30, 2026 compared to the same periods in fiscal 2025 was primarily due to an increase in the volume of arrangements that include maintenance largely due to Ansys' contribution of $402.9 million and $807.3 million in maintenance revenue, respectively, for the three and six months ended April 30, 2026.
The increase in professional service and other revenue for the three and six months ended April 30, 2026 compared to the same periods in fiscal 2025 was primarily due to Ansys' contribution of $21.5 million and $41.3 million in professional service and other revenue, respectively, for the three and six months ended April 30, 2026 and the timing of IP customization projects.
Cost of Revenue
| April 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Three months ended | |||||||||||||||||||||||
| Cost of products revenue | $ | 232.9 | $ | 216.2 | $ | 16.7 | 8 | % | |||||||||||||||
| Cost of maintenance and service revenue | 148.6 | 94.4 | 54.2 | 57 | % | ||||||||||||||||||
Amortization of acquired intangible assets | 248.4 | 7.7 | 240.7 | 3,126 | % | ||||||||||||||||||
| Total | $ | 629.9 | $ | 318.3 | $ | 311.6 | 98 | % | |||||||||||||||
| Percentage of total revenue | 28 | % | 20 | % | |||||||||||||||||||
| Six months ended | |||||||||||||||||||||||
| Cost of products revenue | $ | 475.3 | $ | 385.0 | $ | 90.3 | 23 | % | |||||||||||||||
| Cost of maintenance and service revenue | 295.3 | 187.0 | 108.3 | 58 | % | ||||||||||||||||||
| Amortization of acquired intangible assets | 496.6 | 16.3 | 480.3 | 2,947 | % | ||||||||||||||||||
| Total | $ | 1,267.2 | $ | 588.3 | $ | 678.9 | 115 | % | |||||||||||||||
| Percentage of total revenue | 27 | % | 19 | % | |||||||||||||||||||
Our cost of revenue is comprised of three categories: cost of products revenue, cost of maintenance and service revenue, and amortization of acquired intangible assets.
Cost of products revenue. Cost of products revenue includes costs related to products sold and software licensed, hardware-related costs including inventory provisions, allocated operating costs related to product support and distribution, and royalties paid to third-party vendors.
Cost of maintenance and service revenue. Cost of maintenance and service revenue includes costs to deliver our maintenance services, such as hotline and on-site support, production services and documentation of maintenance updates.
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Amortization of acquired intangible assets. Amortization of acquired intangible assets, included in cost of revenue, consists of the amortization of core/developed technology and certain contract rights intangible assets related to acquisitions.
The increase in costs of products revenue and costs of maintenance and service revenue for the three months ended April 30, 2026 compared to the same period in fiscal 2025 was primarily due to increases in employee-related costs as a result of headcount increases from the Ansys Merger, which contributed $25.9 million, $16.1 million in costs to fulfill IP consulting arrangements, and $10.2 million in IT and facility costs. The increase in amortization of acquired intangible assets for the three months ended April 30, 2026 compared to the same period in fiscal 2025 was primarily due to an increase of $242.3 million in connection with the Ansys Merger.
The increase in costs of products revenue and costs of maintenance and service revenue for the six months ended April 30, 2026 compared to the same period in fiscal 2025 was primarily due to increases in employee-related costs as a result of headcount increases from the Ansys Merger, which contributed $54.6 million, $31.0 million in costs to fulfill IP consulting arrangements, $22.3 million in IT and facility costs and $22.3 million in hardware-related costs including inventory provisions. The increase in amortization of acquired intangible assets for the six months ended April 30, 2026 compared to the same period in fiscal 2025 was primarily due to an increase of $484.4 million in connection with the Ansys Merger.
Operating Expenses
Research and Development
| April 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Three months ended | $ | 700.1 | $ | 554.0 | $ | 146.1 | 26 | % | |||||||||||||||
| Percentage of total revenue | 31 | % | 35 | % | |||||||||||||||||||
| Six months ended | $ | 1,415.1 | $ | 1,107.2 | $ | 307.9 | 28 | % | |||||||||||||||
| Percentage of total revenue | 30 | % | 36 | % | |||||||||||||||||||
The increase in research and development expenses for the three months ended April 30, 2026 compared to the same period in fiscal 2025 was primarily due to increases of $116.2 million in employee-related costs due to headcount increases from the Ansys Merger, $36.7 million in IT and facility costs, and $20.5 million in the change in the fair value of our executive deferred compensation plan assets, partially offset by a decrease in employee-related costs due to headcount decreases as a result of the 2026 Plan (as defined in Restructuring Charges below).
The increase in research and development expenses for the six months ended April 30, 2026 compared to the same period in fiscal 2025 was primarily due to increases of $243.2 million in employee-related costs due to headcount increases from the Ansys Merger, $74.3 million in IT and facility costs and $15.8 million in the change in the fair value of our executive deferred compensation plan assets, partially offset by a decrease in employee-related costs due to headcount decreases as a result of the 2026 Plan.
Sales and Marketing
| April 30, | |||||||||||||||||||||||
| 2026 | 2025 | $ Change | % Change | ||||||||||||||||||||
| (dollars in millions) | |||||||||||||||||||||||
| Three months ended | $ | 382.0 | $ | 215.0 | $ | 167.0 | 78 | % | |||||||||||||||
| Percentage of total revenue | |||||||||||||||||||||||
Next expected filings
- ~2026-09-13 10-Q expected by 2026-09-30 (in 90 days)
- ~2026-12-22 10-K expected by 2027-01-07 (in 190 days)
- ~2027-03-01 10-Q expected by 2027-03-18 (in 259 days)
- ~2027-05-31 10-Q expected by 2027-06-17 (in 350 days)
Predicted from historical filing cadence; not an SEC commitment.
Recent SEC filings
- 2026-05-27 8-K Earnings Release; Financial Statements and Exhibits
- 2026-05-27 8-K Material Agreement Entered; Officer/Director Change; Regulation FD Disclosure
- 2026-05-27 10-Q Quarterly Report
- 2026-04-20 8-K Officer/Director Change; Shareholder Vote Results; Financial Statements and Exhibits
- 2026-03-02 8-K Other Events; Financial Statements and Exhibits
- 2026-02-25 10-Q Quarterly Report
- 2026-02-25 8-K Earnings Release; Other Events; Financial Statements and Exhibits
- 2026-02-19 8-K Officer/Director Change; Regulation FD Disclosure
- 2025-12-22 10-K Annual Report
- 2025-12-10 8-K Earnings Release; Financial Statements and Exhibits
- 2025-12-01 8-K Unregistered Equity Sale; Regulation FD Disclosure; Financial Statements and Exhibits
- 2025-11-12 8-K Costs Associated with Exit
- 2025-11-04 8-K Officer/Director Change; Regulation FD Disclosure
- 2025-09-18 8-K/A Officer/Director Change
- 2025-09-09 10-Q Quarterly Report