Synopsys Faces Shareholder Lawsuit Amidst Strong Annual Results

Synopsys US8716071076

The stock of electronic design automation leader Synopsys is navigating turbulent waters. Despite reporting record annual revenue, the company is now confronting a significant class-action lawsuit, casting a shadow over its recent financial achievements.

Multiple law firms, including Kahn Swick & Foti and Levi & Korsinsky, are actively seeking Synopsys shareholders to join a securities fraud complaint. The action pertains to investors who incurred losses between December 4, 2024, and September 9, 2025. This group also encompasses those who received Synopsys stock in exchange for their Ansys shares during the recent acquisition.

The core allegations stem from the company's earnings release on September 9, 2025. The disclosed figures fell short of market expectations, revealing a quarterly revenue of $1.74 billion, which missed the projected range of $1.755 to $1.785 billion. Furthermore, net income was reported at $242.5 million, representing a 43% year-over-year decline. Performance in the Design IP segment was notably weak, with revenue dropping by 7.7%.

The market's reaction was severe. On September 10, 2025, Synopsys shares plummeted by 35.8%, closing at $387.78. The legal filing deadline for investors to join the suit is set for December 30, 2025.

Record Annual Performance and Forward Guidance

In a separate development on December 10, 2025, Synopsys announced its fourth-quarter and full-year results for fiscal 2025. The company achieved a record annual revenue of $7.054 billion, marking an increase of approximately 15% from the previous year's $6.127 billion. Fourth-quarter revenue alone reached $2.255 billion, which included a contribution of $667.7 million from Ansys.

CEO Sassine Ghazi expressed satisfaction with the annual outcome, stating the team had delivered a solid finish to a year that "redefined our company as the leading provider of engineering solutions from silicon to systems."

Looking ahead to fiscal 2026, management provided an optimistic revenue forecast of $9.61 billion, anticipating a $2.9 billion contribution from Ansys. However, the integration process will involve a workforce reduction of 10% to eliminate overlaps. The company also projects an operating margin of 40.5% for the coming year, an improvement of 320 basis points over 2025.

Segment-Specific Headwinds and Strategic Alliance

The company's Design IP business, accounting for roughly a quarter of total sales, continues to face challenges. Export restrictions affecting Chinese customers have led to market share losses to local competitors, with management acknowledging the "cumulative impact of the restrictions." Additionally, issues with a major foundry partner—widely believed by market observers to be Intel—are further pressuring this segment.

On a positive note, Synopsys secured a major strategic partnership in early December. NVIDIA invested $2 billion to acquire Synopsys stock at a price of $414.79 per share. This multi-year alliance aims to integrate NVIDIA's AI and compute acceleration technologies with Synopsys's engineering solutions.

Analyst Sentiment Remains Cautiously Positive

Despite recent volatility, analyst outlooks are generally favorable. Morgan Stanley raised its price target to $550, while KeyBanc set a target of $600. The average 12-month price target among analysts stands at approximately $546, suggesting confidence in the company's long-term trajectory despite the ongoing legal and operational challenges.