Episode Details

Synopsys (SNPS) Q3 FY2026 — Shares rose 13.4% to $464.89 the next session, the best day of the year, then handed 41% of it back to close at $442.61. Design IP - 19% of revenue, and the segment the 10-Q names as the one China export controls hurt - went -6.5%, -5.8%, then +10.8% year on year, with its margin off a 16.3% trough to 26.5%. THE CALL: BEARISH (3/5, MODERATE) — base-case value ~$373 vs ~$443 today. KEY METRICS: - Revenue $2.477B, +42.4% YoY; adjusted EPS $3.91 vs $3.39, above the guided ceiling - Design IP revenue +10.8% to $473.8M after -6.5% and -5.8% in the prior two quarters - Design IP adjusted operating margin 26.5%, off a 16.3% trough, vs 20.1% a year ago - Design Automation +52.7% to $2,003.0M, 80.9% of revenue, at a 45.2% adjusted margin - China revenue $255.5M, +3.3%, vs +48.8% everywhere else; now 10.3% of revenue vs 14.2% - Nine-month reported net income $627.9M, -29.2%, on revenue +49.2% - Adjusted net income +37.1% but adjusted EPS +15.3%; diluted shares +18.9% - Q3 reported EPS $2.84 carries $2.09 of acquisition amortisation and a $2.09 divestiture gain - Restructuring estimate raised to $425-500M from $300-350M in an 8-K/A the same day - FY26 guidance: revenue $9.715B, adjusted EPS $15.07, free cash flow ~$2.6B (from ~$2.0B) - FY26 reported operating margin guided 10.4% against an adjusted 41.5% - Backlog $10.9B including $1.9B of flexible spending commitments; 49% converts in 12 months - Balance sheet: $3.61B cash, $10.04B debt, $38.3B goodwill and intangibles of $47.7B assets - Valuation: owner DCF $373 blended - 40% DCF $311, 35% adjusted P/E $429, 25% EV/FCF $393 What to watch: Design IP holding above 8% growth for two more quarters, with China under 8% of revenue and the total growth rate intact, would break our thesis Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.