Synopsys makes the software that semiconductor companies must use to design chips, plus (since its 2025 Ansys acquisition) simulation software that lets manufacturers test complex products like cars and planes virtually — then charges manufacturing and tech companies worldwide an annual license fee to use it.
How Synopsys makes money
Synopsys pours about 35% of its revenue back into R&D to build software that semiconductor companies can't design chips without (EDA), pre-built chip building blocks (Design IP), and — since acquiring Ansys in 2025 — simulation software that lets manufacturers virtually test complex products before building them. Chip designers and foundries pay for EDA and IP; automotive, aerospace, and industrial companies pay for simulation software. Either way, customers pay annual license and maintenance fees, and IP customers additionally pay a royalty every time a chip using that IP actually sells.
Revenue flows back into R&D, sustaining the cycle. Source: 10-K FY2025, business overview and segment revenue disclosures.
Where the revenue comes from
| Segment | Revenue | Adjusted operating margin |
|---|---|---|
| Design Automation (EDA + Ansys) | $5.30B | 42% |
| Design IP | $1.75B | 24% |
Source: 10-K FY2025, Note 19 Segment Disclosure.
| Region | Revenue | Share |
|---|---|---|
| United States | $3.10B | 44% |
| Korea | $0.95B | 13% |
| China | $0.81B | 12% |
| Europe | $0.89B | 13% |
| All other | $1.30B | 18% |
Source: 10-K FY2025, Note 19 (geographic revenue).
Customers and competitors
A B2B business — chip designers and foundries buy EDA and IP; since the Ansys acquisition, automotive, aerospace, and industrial manufacturers buy simulation software too. One customer accounted for 13.5% of revenue in FY2023 and 12.6% in FY2024 — a concentration risk above the usual 10% threshold. That customer's share appears to have dropped below 10% in FY2025 (not separately disclosed), possibly the same customer behind the "major foundry customer demand slowdown" management referenced on earnings calls.
- Cadence Design Systems — Synopsys's biggest and most direct EDA competitor.
- Siemens EDA (formerly Mentor Graphics) — part of Siemens, with strength in integration with manufacturing hardware.
- Dassault Systèmes — a leader in engineering simulation software, now a direct rival following the Ansys acquisition.
Source: 10-K FY2025, Note 19, p.109 (customer concentration).
The metric that matters most in this sector
Backlog shows how much future revenue is already under contract but not yet recognized — a leading signal in a licensing business like this.
| FY2023 | FY2024 | FY2025 | |
|---|---|---|---|
| Backlog | $8.6B | $8.1B (-5.8%) | $11.4B (+40.7%) |
| R&D / revenue | 34.8% | 34.0% | 35.1% |
The FY2025 backlog jump reflects the Ansys acquisition's inclusion. R&D intensity has stayed remarkably stable around 34-35% for three straight years — a sign of consistent reinvestment discipline in a sector where technical edge is the main competitive weapon.
Source: 10-K FY2023–FY2025 MD&A, "Total Revenue" sections.
Leadership and ownership
CEO Sassine Ghazi has led the company since January 2024 (about 2.5 years) — an internal promotion who joined as an applications engineer in 1998 and rose through the COO role (2020-2024); he's a former Intel design engineer, not a founder. Co-founder Aart J. de Geus stepped down as CEO in January 2024 but remains Executive Chair, still involved in company direction. Insider and institutional ownership percentages aren't in the 10-K and require the DEF 14A for confirmation.
Source: 10-K FY2025, Item 1 (executive officer information, p.13).
Capital returns
Dividend: the company has never paid one since its founding. Buybacks collapsed and then stopped entirely — $1.16B (FY2023) → $45M (FY2024) → $0 (FY2025), suspended to help pay down Ansys acquisition debt. Shares outstanding actually rose 20.7% (154.11M → 185.99M) as new shares were issued to fund the acquisition — real dilution for shareholders through this period. In 2026, after the acquisition-related term loan was paid off in full, the board reauthorized a $2 billion buyback program, and actual repurchases resumed in Q2 FY2026.
Source: 10-K FY2025, Item 5 (dividends, p.32), Note 14 (Stock Repurchase Program, p.93-94); web search — Q1/Q2 FY2026 earnings calls.
How this company could fail
- China and geopolitical risk — China plus Korea makes up 25% of FY2025 revenue. Recent U.S. export restrictions cut China revenue 18% in FY2025 alone; a single policy shift can move results significantly.
- Ansys acquisition debt and integration risk — debt jumped from $15.6 million (FY2024) to $13.48 billion (FY2025). If integration doesn't go as planned, this burden could linger for years.
- Design IP execution risk — the company itself admitted "some of our roadmap and resource allocation decisions did not yield their intended results," as Design IP revenue (-8%) and margin (38% → 24%) both collapsed in FY2025. Shareholders subsequently filed two securities class-action lawsuits in October-November 2025 alleging material misstatements about Design IP performance.
Source: 10-K FY2025, Item 1A (Risk Factors, p.14-30), Item 7 (MD&A, p.40), Item 3 (Legal Proceedings, p.31).
Three-year financials
| FY2023 | FY2024 | FY2025 | |
|---|---|---|---|
| Revenue | 5.32 | 6.13 | 7.05 |
| YoY growth | — | +15.3% | +15.1% |
| Operating income, GAAP (margin) | 1.27 (23.9%) | 1.36 (22.2%) | 0.91 (12.9%) |
| Free cash flow | 1.51 | 1.27 | 1.35 |
| Total debt | 0.018 | 0.016 | 13.48 |
Source: 10-K FY2025, income statement (p.57), balance sheet (p.56), cash flow statement (p.61).
What we still don't know
- Exact insider and institutional ownership percentages aren't in this 10-K — the DEF 14A is needed for confirmation.
- Whether the Design IP business has genuinely turned a corner needs Q3-Q4 FY2026 results to confirm.
- How much of the promised Ansys integration synergy (cost savings, cross-selling) has actually been realized would need the company's planned September 2026 Investor Day materials.
Frequently asked questions
What does Synopsys do?
Synopsys makes the software that semiconductor companies must use to design chips, plus (since its 2025 Ansys acquisition) simulation software that lets manufacturers test complex products like cars and planes virtually — then charges an annual license fee to use it.
How much does Synopsys spend on R&D?
R&D spending runs about 35.1% of revenue, on FY2025 revenue of $7.05B — a high ratio typical of specialized engineering software.
What is Synopsys's market cap?
As of this article's data, Synopsys's market cap was about $79.1B.