SNPS' AI-Based EDA Tools Gain Traction: Is it the Next Growth Catalyst?

Synopsys’ SNPS AI-driven electronic design automation (EDA) tools like Synopsys.ai, Fusion Compiler, PrimeTime, IC Validator, and StarRC are being rapidly adopted as customers are experiencing massive productivity gains from their implementation.

Numerous companies have selected Synopsys as their primary EDA partner. Relationships with companies, such as Advanced Micro Devices, Juniper Networks, Realtek, Teradici, NetLogic Microsystems, Toshiba and Wolfson stand as evidence.

Synopsys’ software-based verification tools are gaining traction at both traditional semiconductor and emerging system companies. Since advanced nodes require precise verification, sign-off, and simulation, directly boosting software demand and licensing revenues, many companies are adopting SNPS’ EDA products.

AI-chip developers are implementing the ZeBu Server 4 design emulation system for speeding up their System-on-Chip verification (SoC). Acquisitions are also playing a major role as the acquisition of ANSYS has added engineering simulation software to its portfolio. The integration of ANSYS’ capabilities with SNPS’ EDA will create a synergistic powerhouse.

In the SoC verification and IP space, Synopsys has expanded its Physical Unclonable Function IP capability with the acquisition of Intrinsic ID, offering SoC designers worldwide to protect their SoCs by generating a unique identifier on chip utilization.

How Competitors Fare Against Synopsys

Synopsys faces competition from EDA vendors, such as Cadence Design Systems Inc. CDNS and Siemens SIEGY. Siemens EDA, which is Siemens' electronic design automation division and Cadence Design System both provide EDA tools, such as software, hardware, and services essential for designing chips and semiconductor devices.

These EDA Vendors, including Cadence and Siemens, offer products focused on distinct phases of the IC design process and provide a range of services to companies worldwide to help optimize their product development process, among other things. Their facilities could increase competition, leading to lower prices and profits for Synopsys.

SNPS’ Price Performance, Valuation and Estimates

Shares of SNPS have lost 8.5% year to date against the Computer - Software industry’s growth of 19.8%.

From a valuation standpoint, SNPS trades at a forward price-to-sales ratio of 8.58X, higher than the industry’s average of 8.55X.

The Zacks Consensus Estimate for SNPS’ fiscal 2025 earnings implies a year-over-year decline of 2.8%, while the consensus estimate for 2026 earnings implies year-over-year growth of 9.5%. The consensus estimate for fiscal 2025 and 2026 has been revised upward in the past 30 days.

SNPS currently carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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