SNPS Bearish Setup: AI Flags Downtrend Potential

Synopsys is a global leader providing 'silicon to systems' design solutions, including electronic design automation (EDA) software and silicon intellectual property (IP). Its 'Design Automation' segment offers software and hardware for IC design, verification, and manufacturing, including digital and custom IC design tools and 'AI-driven EDA' solutions. The 'Design IP' segment provides pre-designed circuits, such as logic libraries, embedded memories, interface IP, and security IP. Synopsys serves semiconductor and electronics systems companies across various industries. The company differentiates itself by offering a comprehensive portfolio of EDA and IP solutions, augmented with AI and machine learning capabilities, to help customers accelerate time to market, improve design quality, and maximize profitability. They also provide customer service and technical support, including access to the 'SolvNet Plus' portal.

No relevant news was found for this stock today.

SNPS's technical outlook is bearish. The stock has experienced a significant downturn over the past 90 days, falling from approximately $612 on August 11th to $416.32 as of November 4th. The price is currently below its 21-day EMA of $459.91 and both the 50-day SMA ($490.94) and 200-day SMA ($501.36), which confirms a downtrend. Momentum indicators also reflect weakness. The MACD is negative (-10.47) and trending downward, although the MACDh is showing signs of a possible bullish divergence. The RSI is at 42.01, suggesting the stock is not yet oversold but is approaching that level, indicating continued selling pressure. The stochastic oscillator is at 36.02, confirming the downward momentum. The recent price action shows a sharp decline, and with the stock trading below key moving averages and momentum indicators showing weakness, the outlook for SNPS in the next 1-3 months is bearish. The ADX is at 22.63, suggesting the trend has moderate strength.

Synopsys' MD&A presents a mixed picture, influenced heavily by the recent acquisition of Ansys. Total `Revenues` increased by 14% to $1.7 billion for the three months ended July 31, 2025, but this was 'offset by weakness in our Design IP segment'. The Design IP segment was impacted by 'China export control restrictions', 'weaker than expected demand from a major foundry customer', and 'certain roadmap and resource decisions that did not yield their intended results'. For the nine months ended July 31, 2025, `Revenues` increased 7% to $4.8 billion. The Design Automation segment showed strength, but Design IP struggled with adjusted operating income decreasing 49% for the quarter and 33% for the nine-month period. The company reported `Cash provided by operating activities` of $878.9 million for the nine months ended July 31, 2025, an increase of $34.7 million compared to the same period in the prior year. However, this was impacted by 'lower net income of $255.4 million and the unrealized loss from settlement of the interest rate treasury lock of $121.6 million'. The company acknowledges uncertainty in the macroeconomic environment and geopolitical pressures, expecting growth across geographies in fiscal 2025 except for China. The company suspended its stock repurchase program to reduce debt levels following the Ansys acquisition. The acquisition significantly increased debt, with $4.3 billion outstanding under the Term Loan Agreement and $10.0 billion in Senior Notes issued.

The Synopsys Q3 earnings call reveals a mixed picture, with the acquisition of ANSYS overshadowed by significant challenges in the IP business. While design automation revenue saw a robust 23% increase, driven by hardware strength, IP revenue declined by 8% due to 'new export restrictions disrupted design starts in China,' and 'challenges at a major foundry customer.' Management's tone suggests concern, acknowledging that Q3 results were 'primarily impacted by underperformance in the IP business.' Consequently, the company is taking a 'more cautious view of Q4' and updating full-year 2025 targets. Specifically, free cash flow is now expected to be approximately $950 million, lower than prior expectations. Despite the headwinds, Synopsys is implementing a strategic portfolio review and plans to reduce global headcount by roughly 10% by the end of fiscal year 2026 to optimize costs. While the ANSYS acquisition is expected to diversify the portfolio and customer base, the near-term challenges in IP and the conservative Q4 outlook suggest potential pressure on the stock.

Synopsys (SNPS) demonstrates a generally positive financial trend, although certain aspects warrant attention. Revenue has increased from $1,466.5M in Q4 2023 to $1,739.7M in Q3 2025, indicating solid growth. The gross profit ratio has fluctuated, starting at 0.768 in Q4 2023, peaking at 0.788 in Q1 2024, and settling at 0.781 in Q3 2025. Operating cash flow has also shown variability, with a low of -$87.8M in Q1 2024, but a strong recovery to $671M in the most recent quarter (Q3 2025). Total debt has risen significantly from $677.6M in Q4 2023 to $15,140.3M in Q3 2025, a substantial increase potentially raising solvency concerns, though it may be linked to strategic acquisitions, as seen by the large -$16,825.6M used for acquisitions in the Q3 2025 cash flow statement. Overall, SNPS exhibits strong revenue growth and positive operating cash flow, but the increasing debt should be monitored closely.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting efficient cost management. Return on Equity (ROE) has shown positive movement, signaling enhanced profitability and efficient use of shareholder equity. The Price-to-Earnings (P/E) ratio, while elevated, might be justifiable given the growth trajectory and positive ROE trend. The Debt-to-Equity ratio shows a slight increase, which warrants monitoring, but is counterbalanced by a healthy Current Ratio, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable picture with growth and profitability, though the leverage should be watched closely. The combination of growth and profitability suggests potential for continued positive performance over the next 12 months.