Is Synopsys Growing Faster, Or Just Bigger?

Synopsys (SNPS) sells chip design and verification software, and its revenue is now growing more than four times faster than its own long-run pace. The share price has done the opposite. For anyone holding it, one question is worth settling: is this new speed the pace you now own the company for?

What Synopsys Bought To Reach This Pace

In the June 2026 quarter, year-over-year revenue growth ran at 42% against a 10.2% history. The company’s own fiscal Q3 2026 report shows where the revenue came from. Revenue was $2.477 billion, and roughly $711 million of it was Ansys, the simulation business Synopsys closed a year earlier. Buying a business that size lifts the company-wide rate once, and then it laps.

The engine long-term holders actually bought is growing much closer to the 10.2% pace the whole company used to run at than to 46.3%. EDA revenue grew 8.5% year-over-year in fiscal Q3 2026, and Design IP returned to growth at $474 million, up about 11%. Those are respectable numbers for a software franchise. They describe how fast the business grows, while the company-wide figure describes how much bigger the company got.

You Now Own A More Leveraged Synopsys

That purchase also sits on the balance sheet. Debt as a share of total assets is 22.7% against a 6.4% history, and total debt at the end of fiscal Q3 2026 was about $10 billion against $3.6 billion of cash and short-term investments. Management says it has repaid the term loans ahead of plan, the one part of this going the right way.

Gross margin in the June 2026 quarter came in at 72.4% against a 77.6% history. Faster growth, a thinner gross margin and a far larger debt share have not lined up at Synopsys the way they do now at any point in the past 14 years, and the combination is the most unusual in that stretch. Three breaks at once is more than one odd quarter. Synopsys now carries more debt and earns a lower gross margin on every dollar of revenue than it used to.

Synopsys Has To Deliver Double-Digit Organic EDA Growth In Fiscal Q4

Synopsys has returned -35.6% over the past twelve months, 52.8 percentage points behind the market, and it trades about 35.6% below its 52-week high. The business got bigger while the shares fell.

Management raised full-year revenue guidance and guided EDA to double-digit organic growth in fiscal Q4 2026 and for full-year 2026. That EDA line is the one to hold them to. The case for owning the combination is the joint products rather than the revenue Ansys adds by arithmetic, and the first of those, Multiphysics Fusion, launched in fiscal Q3 2026. Management expects such add-on capabilities to begin contributing to EDA growth in 2027, so the fiscal Q4 2026 EDA line tests the base business, not the combination.

If double-digit EDA growth lands in fiscal Q4 2026, the core business is accelerating from its 8.5% third quarter and the story is worth re-underwriting. If it does not, you own a bigger and more indebted Synopsys growing at roughly its old rate. Before deciding Synopsys has changed gear, it is worth seeing which other companies are actually raising their guidance.

Owning Growth Without Owning The Debt That Bought It

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