AI Takeaway
Synopsys reported a dramatic revenue surge of 65.5% YoY to $2.41B in Q1 FY2026, largely driven by its acquisition of Ansys, but net income collapsed 78% to $65M due to surging costs, higher D&A, and integration expenses.
Revenue
$2.41B
++65.52% YoY
EPS (Basic)
$0.34
-82.20% YoY
Gross Margin
73.5%
-7.91% YoY
Operating Income
$203.05M
-19.37% YoY
Filed · Analysis updated · Source: SEC EDGAR 10-Q filing
Revenue jumped 65.5% YoY from $1.46B to $2.41B in Q1 FY2026, a growth rate far exceeding Synopsys's organic historical pace and strongly suggesting the consolidation of Ansys revenues following the completion of that acquisition. Total assets also ballooned 262% YoY to $47.2B, consistent with a major acquisition closing.
Source: Source: 10-Q Income Statement & Balance Sheet
Gross margin declined approximately 7.9 percentage points YoY to 73.5%, as Cost of Revenue surged 136.1% YoY to $637M — growing at more than double the rate of revenue. This reflects the inclusion of Ansys's product mix, which likely carries lower margins than Synopsys's legacy EDA software business.
Source: Source: 10-Q Income Statement
Operating income fell 19.4% YoY to $203M despite the large revenue increase, as operating expenses — including R&D up 29.2% to $715M and significantly higher D&A of $451M (up 840% YoY) — absorbed the gross profit gains. Operating margin compressed sharply from 17.3% to 8.4%.
Source: Source: 10-Q Income Statement & Cash Flow Statement
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Upgrade to unlockSynopsys completed a transformative acquisition of Ansys, taking on approximately $10B in long-term debt and dramatically expanding its balance sheet to $47.2B in total assets. Integration of a company of this scale introduces significant execution risk, and the $10B debt load creates substantial interest expense that is already compressing net income to just $65M on $2.4B in revenue.
Source: Source: 10-Q Balance Sheet
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Upgrade to unlockReported EPS of $3.77 versus the $3.63 analyst consensus — a +3.9% beat for Q1 FY2026.
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Revenue | $2.41B | $1.46B | +65.52% |
Cost of Revenue | $637.38M | $269.98M | +136.09% |
Gross Profit | $1.77B | $1.19B | +49.44% |
Operating Income | $203.05M | $251.84M | -19.37% |
Net Income | $64.96M | $295.68M | -78.03% |
EPS (Basic) | $0.34 | $1.91 | -82.20% |
EPS (Diluted) | $0.34 | $1.89 | -82.01% |
R&D Expense | $714.99M | $553.22M | +29.24% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Total Assets | $47.24B | $13.04B | +262.22% |
Current Assets | $5.37B | $6.32B | -15.02% |
Total Liabilities | $16.69B | $3.74B | +346.71% |
Current Liabilities | $3.94B | $2.36B | +67.16% |
Stockholders' Equity | $30.55B | $9.3B | +228.31% |
Cash & Equivalents | $2.13B | $3.65B | -41.72% |
Long-Term Debt | $10.04B | — | — |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Operating Cash Flow | $856.83M | $-67.45M | +1370.23% |
Investing Cash Flow | $-36.51M | $-21.98M | -66.09% |
Financing Cash Flow | $-1.58B | $-141.84M | -1016.18% |
D&A | $450.69M | $47.93M | +840.23% |
| Metric | Current | Previous | YoY Change |
|---|---|---|---|
Gross Margin | 73.5% | 81.4% | -7.91% |
Operating Margin | 8.4% | 17.3% | -8.88% |
Net Margin | 2.7% | — | — |
ROE | 0.2% | — | — |
ROA | 0.1% | — | — |
Current Ratio | $1.363 | — | — |
Debt to Equity | $0.546 | — | — |
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Synopsys reported Q1 FY2026 revenue of $2.41B, up 65.5% YoY, driven by the consolidation of Ansys. However, net income fell 78% to $65M and diluted EPS dropped from $1.89 to $0.34, as acquisition-related costs including $451M in D&A and $10B in debt interest weighed heavily on GAAP profitability.
The dramatic 65.5% revenue increase to $2.41B in Q1 FY2026 is primarily attributable to the completion of Synopsys's acquisition of Ansys, which added significant simulation software revenues to the combined company. Total assets also surged 262% to $47.2B, confirming the scale of the acquisition's impact on the balance sheet.
Despite the revenue surge, net income fell 78% YoY to $65M because acquisition-related costs dramatically increased expenses: D&A alone jumped 840% to $451M (reflecting amortization of Ansys intangibles), R&D rose 29% to $715M, and interest expense on $10B in long-term debt further reduced earnings. These non-cash and financing charges overwhelmed the gross profit growth.
Synopsys's balance sheet is significantly larger but more leveraged post-acquisition, with $47.2B in total assets, $10B in long-term debt, and a debt-to-equity ratio of 0.55. Liquidity is adequate with a current ratio of 1.36 and $2.13B in cash, and operating cash flow is strong at $857M, but the company carries substantially more financial risk than before the deal.
Yes, Synopsys's gross margin declined approximately 7.9 percentage points YoY to 73.5% in Q1 FY2026, down from 81.4% in the prior year period. This compression reflects the inclusion of Ansys's simulation products and services, which carry a higher cost structure than Synopsys's legacy EDA software business, causing Cost of Revenue to surge 136% YoY.