SNPS 10-K & 10-Q changes, risk factors and insider trading

UncertaintyThe in thecurrent macroeconomic environment,environment includingdemonstrates the effects of, among other things, changes in U.S. and global trade policy, including the tariffs enacted in 2025 by the U.S. and other governments, sustained global inflationary pressures and elevated interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures,pressures and fluctuations in foreign exchange ratesrates. andThis associateduncertain globalmacroeconomic economicenvironment conditions, havehas resulted in volatility in credit, equity and foreign currency markets.markets Thisand uncertainhas macroeconomic environment could leadled some of our customers to postpone their decision-making, delay their drawdowns under non-cancellable commitments, decrease their spending and/or delay their payments to us. Such caution by customers could,has, among other things, limitlimited our ability to maintain or increase our sales or recognize revenue from committed contracts.

Adverse economic conditions affect demand for devices that our products help create, such as the ICs incorporated in personal computers, smartphones, automobiles, servers and more. Longer-term reduced demand for these or other products could result in reduced demand for design solutions and significant decreases in our average selling prices and product sales over time. Future economic downturns could also adversely affect our business, operating results and financial condition. In addition, if our customers or distributors build elevated inventory levels, we could experience a decrease in demand for our products. If any of these events or disruptions were to occur, the demand for our products and services could be adversely affected along with our business, operating results and financial condition. Additionally, due to our business model, the negative impact of these events or disruptions may not be immediately realized.

Further economic uncertainty could also adversely affect the banking and financial services industry and result in bank failures or credit downgrades of the banks we rely on for foreign currency forward contracts, credit and banking transactions, and deposit services, or cause them to default on their obligations. Additionally, the banking and financial services industries are subject to complex laws and are heavily regulated. There is uncertainty regarding how proposed, contemplated or future changes to the laws, policies and regulations governing the banking and financial services industry could affect our business. A deterioration of conditions in worldwide credit markets could limit our ability to obtain external financing to fund our operations, capital expenditures or pending acquisitions, such as the Ansys Merger.acquisitions. In addition, difficult economic conditions may also result in a higher rate of losses on our accounts receivable due to credit defaults. Any of the foregoing could cause adverse effectsaffects on our business, operating results and financial condition, and could cause our stock price to decline.

The growth of the EDA industry as a whole and our sales in our Design Automation and Design IP segments are primarily dependent on the semiconductor and electronics industries. A substantial portion of our business and revenue depends upon the commencement of new design projects by semiconductor manufacturers, systems companies and their customers. The increasing complexity of designs of SoCs, ICs, electronic systems and customers’ concerns about managing costs have previously led to, and in the future could lead to, a decrease in design starts and design activity in general. For example, in response to this increasing complexity, some customers have chosen to focus on one discrete phase of the design process or opt for less advanced, but less risky, manufacturing processes that may not require the most advanced EDA products. If growth in the semiconductor and electronics industries or certain sectors within these industries slows or stalls, including, among other things, due to sustainedthe globalfactors inflationarycreating pressuresan anduncertain elevatedmacroeconomic interestenvironment rates,as adiscussed continued or worsening global supply chain disruption, geopolitical pressures or economic slowdowns or recessionsabove, then demand for our products and services could decrease and our business, operating results and financial condition could be adversely affected. Additionally,For example, while we have seen continued strength in the artificial intelligence and high-performance computing sectors, certain industries such as theindustrial, EDAautomotive industryand hasconsumer matured,electronics strongerhave competitionrecovered hasmore emergedslowly from companiesrecent bettermacroeconomic able to compete as sole source vendors. This increased competition could cause our revenue growth rate to decline and exert downward pressure on our operating margins,uncertainty, which would have an adverse effect onaffected our business and financialoperating condition.results.

In our Design Automation segment, we compete against a variety of different EDA vendorsvendors, including publicly traded companies that offer a variety of products and services, suchservices as Cadencewell Design Systems, Inc. and Siemens EDA. We also compete withas other EDA vendors, including new entrants to the marketplace,market, that offer products focused on one or more discrete phases of the IC design process. Moreover, some of our customers internally develop design tools and capabilities that compete with our products. For our Ansys S&A software solutions, our competitors include publicly traded companies, small, geographically-focused firms, startups, and solutions produced in-house by the end users. In our Design IP segment, we compete against a growing number of silicon IP providers as well as our customers’ internally developed IP.

The industries in which we operate are highly competitive, with new competitors entering these markets both domestically and internationally. For example, China has implemented national policies favoring Chinese companies and has formed government-backed investment funds as it seeks to build independent EDA capabilities and compete internationally in the semiconductor industry. The demand for our products and services is dynamic and depends on a number of factors, including, among other things, demand for our customers’ products, design starts and our customers’ budgetary constraints. Technology in these industries evolves rapidly and is characterized by frequent product introductions and improvements as well as changes in industry standards and customer requirements. For example, the adoption of cloud computing and AI technologies may bring new demands and also challenges in terms of disruption to both our business models and existing technology offerings. Our efforts in developing such new technology solutions, including, for example, our current efforts in creating cloud computing and AI solutions, may not succeed. Semiconductor device functionality requirements continually increase while feature widths decrease, which substantially increases the complexity, cost and risk of chip design and manufacturing. At the same time, our customers and potential customers continue to demand a lower total cost of design, which can lead to the consolidation of their purchases from one vendor. In order to succeed in this environment, we must successfully meet our customers’ technology requirements and increase the value of our products, while also striving to reduce their overall costs and our own operating costs.

We are subject to export controls, laws and regulations that restrict selling, shipping or transmitting certain of our products and services and transferring certain of our technology outside the United States. We are also subject to certain requirements for enhanced denied party screening processes, which have led to, and, in the future may continue to lead to, elongated transaction cycles with certain customers. These requirements also restrict domestic release of software and technology to certain foreign nationals. In addition, we are subject to customs and other import requirements that regulate imports that may be important for our business.

Any failure to comply with the U.S. Export Administration Regulations or other U.S. or non-U.S. exportexport, sanctions, or similar trade requirements (collectively, the ExportTrade RegulationsRestrictions) could subject us to substantial civil and criminal penalties, including fines and the possible loss of the ability to engage in exporting and other international transactions. Due to the nature of our business and technology, governmental agencies from time to time review certain transactions for compliance with applicable ExportTrade Regulations.Restrictions. For example, we have received administrative subpoenas from the U.S. Bureau of Industry and Security (the BIS) requesting production of information and documentation relating to transactions with certain Chinese entities.

WeThe believeTrade Restrictions have evolved significantly and may continue to evolve in ways that themay Export Regulations do not materiallyadversely impact our business at this time, but we cannot predictor the impactbusiness that additional regulatory changes may have onof our businesscustomers. inIn particular, the future. The United States has published significant changes to theTrade Export Regulations with respect to China and Russia,Restrictions and we anticipate additional changes to theTrade Export RegulationsRestrictions in the future. For example, the United States government has implemented controls on advanced computing ICs, computer commodities that contain such ICs, and certain semiconductor manufacturing items, as well as controls on transactions involving items for supercomputer and semiconductor manufacturing end-users. These controls expand the scope of foreign-produced items subject to license requirements for certain entities on the U.S. government's Entity List.List maintained by the BIS. Future changes to the ExportTrade Regulations,Restrictions, including changes in the enforcement and scope of such regulations, or the implementation of new or expanded license requirements, may create delays in the introduction of our products or services in international markets or could prevent our customers with international operations from deploying our products or services globally. In some cases, such changes also could prevent the export or import of our products.products to certain destinations or persons. Trade Restrictions also may encourage customers or other parties to substitute or develop alternative products that are not subject to such restrictions.

A number of business combinations and strategic partnerships among our customers in the semiconductorsemiconductor, electronics and electronicsS&A-targeted industries have occurred over the last several years, and more could occur in the future. Consolidation among our customers could lead to fewer customers or the loss of customers, increased customer bargaining power or reduced customer spending on products and services. Further, we depend on a relatively small number of large customers, and on such customers continuing to renew licenses and purchase additional products from us, for a large portion of our revenues. For example, challenges with a major foundry customer negatively impacted our financial results for fiscal year 2025. Consolidation among our customers, particularly our large customers, could also reduce demand for our products and services if customers streamline research and development or operations, or reduce or delay purchasing decisions. Our customers operate in highly competitive industries due to, among other factors, continued pressure from current and new competitors and technological change in their industries. Failure by our customers to successfully manage these competitive factors could adversely affect their business, operating results and financial condition, which could result in reduced spending on our products or services. Reduced customer spending or the loss of customers, particularly our large customers, could adversely affect our business, operating results and financial condition.

•Economic slowdowns, recessions or uncertainty in financial markets, including, among other things, the impact of sustained global inflationary pressures and elevated interest ratesmarkets;

•Uncertain economic, legal and political conditions in China, Europe, the Middle East and other regions where we do business, including, for example, changes in China-Taiwan relations, regional or global military conflicts, and related sanctions and financial penalties imposed on participants in such conflictsbusiness;

•Government trade restrictions, including tariffs, export controlscontrols, economic sanctions or other trade barriers, and changes to existing trade arrangements, including the unknown impact of current and future U.S. and Chinese trade regulationsarrangements;

Furthermore, if any of the foreign economies in which we do business deteriorate or if we fail to effectively manage our global operations, our business and operating results will be harmed. There is inherent risk, based on the complex relationships between certain Asian countries such as China, where we derive a growing percentage of our revenue,China and the United States, that political, diplomatic or military events could result in trade disruptions, including tariffs, trade embargoes, export restrictions and other trade barriers. A significant trade disruption, export restriction, or the establishment or increase of any trade barrier in any area where we do business could reduce customer demand and cause customers to search for substitute products and services, make our products and services more expensive or unavailable for customers, increase the cost of our products and services, have a negative impact on customer confidence and spending, make our products less competitive, or otherwise have an adverse impact on our backlog, future revenue and profits and our customers’ and suppliers’ business, operating results and financial condition. For example and as described above, the ongoing geopolitical and economic uncertainty between the U.S. and China, the unknown impact of current and future U.S. and Chinese trade regulations, including tariffs, and other geopolitical risks with respect to China and Taiwan may cause disruptions in the markets and industries we serve and our supply chain, decreased demand from customers for products using our solutions or other disruptions, which could, directly or indirectly, materially harm our business, operating results and financial condition. For more on risks related to government export and import restrictions see “We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets.”

In response to the U.S. adoptingimposing tariffs and trade barriers or taking other actions, other countriescountries, such as China, have in the past and may alsoin adoptthe future impose tariffs and trade barriers that could limit our ability to offer our products and services.services in such jurisdictions. Current and potential customers who are concerned or affected by such tariffs or restrictions may respond by developing their own products or replacing our solutions, including seeking alternatives from foreign competitors or open-source solutions not subject to these restrictions, which would have an adverse effect on our business. In addition, government or customer efforts, attitudes, laws or policies regarding technology independence may lead to non-U.S. customers favoring their domestic technology solutions that could compete with or replace our products, which would also have an adverse effect on our business.

In addition to tariffs and other trade barriers, ourOur global operations are subject to numerous U.S. and foreign laws and regulations such as those related to anti-corruption, tax, corporate governance, imports and exports, government contracts, economic sanctions, financial and other disclosures, privacy and labor relations. These laws and regulations are complex and may have differing or conflicting legal standards, making compliance difficult and costly. In addition, there is uncertainty regarding how proposed, contemplated or future changes to these complex laws and regulations could affect our business. We may incur substantial expense in complying with the new obligations to be imposed by these laws and regulations, and we may be required to make significant changes in our business operations, all of which may adversely affect our revenues and our business overall. IfAny weviolation violateof these laws and regulations, weregulations could be subject tous to, among other things, investigations, fines, enforcement actions, disgorgement of profits, damages, civil or criminal penalties or criminal sanctions,injunctions, and mayresult bein prohibitedour frominability conductingto conduct business in one or more countries. AnyFurthermore, any violation individually or in the aggregate could have a material adverse effect on our operations and financial condition.

•Changes in demand for our products and services—especially products, such as hardware,hardware and IP, generating upfront revenue—due to fluctuations in demand for our customers’ products and due to constraints in our customers’ budgets for research and development as well as EDAEDA, IP and IPS&A products and services;

•Product competition in the EDA, IPIP, semiconductor or semiconductorS&A-targeted industries, which can change rapidly due to industry or customer consolidation and technological innovationindustries;

•Our ability to innovate and introduce new products and services or effectively integratereallocate productsresources across our businesses to target the highest growth opportunities and technologiesmeet thatcustomer we acquiredemand;

Unless otherwise noted, this Management’s Discussion and Analysis of Financial Condition and Results of Operations relates solely to our continuing operations and does not include the operations of our former Software Integrity business. See “Software Integrity Divestiture” below and Note 3. Discontinued Operations of the Notes to Consolidated Financial Statements in this Annual Report for additional information about the sale of our former Software Integrity Divestiture.business (the Software Integrity Divestiture).

Synopsys delivers trustedindustry-leading silicon design, simulation and comprehensiveanalysis silicon(S&A) toand systemsIP solutions as well as design solutions, from EDA, including system verification and validation solutions, to silicon IP.services. We partner closely with semiconductor and systemsour customers across a wide range of industries to maximize their engineeringR&D capability and research and development capacity. We are catalyzing the era of pervasive intelligence,productivity, powering innovation today that ignites the ingenuity of tomorrow. For more information about our business segments and product groups, see Part I, Item 11, Business ofin thisour Annual Report.

We have consistently grown our revenue since 2005, despite periods of global economic uncertainty. We achieved these results because of our solid execution, leading technologies and strong customer relationships, and because we generally recognize our revenue for software licenses over the arrangement period, which typically approximates two to three years. See Note 2. Summary of Significant Accounting PolicesPolicies and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report for a discussion on our revenue recognition policy. The revenue we recognize in a particular period generally results from selling efforts in prior periods rather than the current period. As a result, decreases as well as increases in customer spending do not immediately affect our revenue in a significant way.

Pending Acquisition of Ansys

Impact of the Current Macroeconomic and Geopolitical Environment

UncertaintyThe in thecurrent macroeconomic environment, including the effects of, among other things, changes in U.S. and global trade policy, including the tariffs enacted in 2025 by the U.S. and other governments, sustained global inflationary pressures and elevated interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, and fluctuations in foreign exchange rates, and associated global economic conditions, have resulted in increased volatility in credit, equity and foreign currencyglobal markets. In fiscal 2024, whileWhile we sawhave seen continued strength in the artificial intelligence and high-performance computing sectors, certain industries such as industrial, automotive and consumer electronics arehave recoveringrecovered more slowly from recent macroeconomic uncertainty. WeThe expectcurrent growthuncertain acrossmacroeconomic environment has led some of our geographies in fiscal 2025; however, we are expecting a challenging near-term growth environment, including in China, duecustomers to macroeconomicpostpone factorstheir asdecision-making, welldelay as,their drawdowns under non-cancellable commitments, decrease their spending and/or delay their payments to a lesser degree, Entity List and other global trade restrictions. For more on the anticipated impact of export control regulations, see the discussion below and in Part I, Item 1A, Risk Factors of this Annual Report.us.

While our time-based model provides stability to our business, operating results and overall financial position, the broader implications of these macroeconomic or geopolitical events, particularly in the long term, remain uncertain. Further, the negative impact of these events or disruptions may be deferred due to our business model. See Part I, Item 1A, Risk Factors, “Uncertainty in the macroeconomic environment, and its potential impact on the semiconductor and electronics industries, may negatively affect our business, operating results and financial condition” and "Our operating results may fluctuate in the future, which may adversely affect our stock price" of this Annual Report for further discussion of the impact of global economic uncertainty on our business, operations and financial condition and potential fluctuations in our operating results, respectively.

The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce published(BIS) has continued to publish changes to U.S. export control regulations (the U.S. Export Regulations), including, among other things, the inclusion of certain Chinese technology companies on the Entity List, restrictions on the export of electronic computer-aided design (ECAD) software specially designed for the development of ICscertain withICs, Gate-All-Aroundas Field-Effectwell Transistoras structures,controls on ECAD software for advanced semiconductor packaging involving multiple chips or chiplets, and certain other restrictions toon China’s access to certain semiconductor and advanced computing technology. WeU.S.-China currentlyrelations believeremain fluid, in particular with respect to trade policy and export restrictions relating to dual-use technologies. For example, on May 29, 2025, Synopsys received a so-called “is-informed” letter from the BIS imposing a license requirement for the export, reexport, or in-country transfer of EDA software and technology classified under export control classification numbers (ECCNs) 3D991 and 3E991 when a party to the transaction is located in China or is a Chinese “military end user,” wherever located (such restrictions, the Q3 2025 BIS Restrictions). The Q3 2025 BIS Restrictions were subsequently rescinded on July 2, 2025. China export control restrictions, including the Q3 2025 BIS Restrictions, have negatively impacted our business in China, including in our Design IP segment, and may continue to impact design starts or other aspects of our business in China in the future. The evolving nature of U.S. Export RegulationsRegulations, willincluding notthe havepotential afor materialnew impactand expanded license requirements of this or similar nature, creates uncertainty regarding the current and future impacts on our business. We anticipate additional changes to the U.S. Export Regulations or other U.S. or non-U.S. export, sanctions, or similar trade requirements (collectively, the Trade Restrictions) in the future, but we cannot forecast the scope or timing of such changes, nor the impact on our business. We will continue to monitor such developments, including potential additional tradeTrade restrictions,Restrictions, new or expanded license requirements, and other regulatory or policy changes by the U.S. and foreign governments.

Design Automation. This segment includes our advanced silicon design, verification products and servicesservices, and Ansys products, and system integration products.products and services. This segment also includes digital, custom and field programmable gate array (FPGA) integrated circuit (IC) design software, verification software and hardware products, system integration products and services, and manufacturing software products. Designers use our EDA products to accelerate and automate the chip design process, reduce errors and enable more powerful and robust designs, with improved productivity for faster time to market. Engineers use our S&A solutions to virtually test and optimize designs across various physics domains, such as structural analysis, thermal analysis, and computational fluid dynamics (CFD).

We have changed our fiscal year end from the Saturday nearest to October 31 and consisting of 52 or 53 fiscal weeks to a fiscal year end of October 31 each year. The fiscal year change becomesbecame effective with our fiscal year 2025, which began on November 3, 2024. Our fiscal quarters will end on January 31, April 30, July 31 and October 31 of each year.

We have concluded that our EDA software licenses in Technology Subscription License (TSL) contracts and software licenses in Ansys semiconductor products are not distinct from our obligation to provide unspecified software updates to the licensed software throughout the license term, because those promises represent inputs to a single, combined performance obligation. Where unspecified additional software product rights are part of the contract with the customer, those rights are accounted for as part of the single performance obligation that includes the licenses, updates, and technical support, because such rights are provided during the same period of time and have the same time-based pattern of transfer to the customer.

We allocate the purchase price of acquired companies to the tangible assets acquired, liabilities assumed and intangible assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date with the exception of contract assets and contract liabilities (deferred revenue) which are recognized and measured on the acquisition date in accordance with our "Revenue Recognition" policy in Note 2. Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report, as if we had originated the contracts. The excess of the purchase price over the fair values of these net tangible and intangible assets acquired is recorded as goodwill.

Accounting for business combinations requires management to make significant estimates and assumptions includingfor ourthe estimatesvaluation forof goodwill and intangible assets. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions and information obtained from management of the acquired companies and are inherently uncertain. Changes in our estimates and assumptions may impact valuation of intangible assets, subsequent amortization of intangible assets as well as amounts recognized as goodwill. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include, but are not limited to:

•future expected cash flowsflows, fromwhich includes estimates of software license sales, subscriptions, support agreements,agreements and consulting contracts and acquired developed technologies and patents;

•estimated obsolescenceroyalty rates usedapplied into valuingacquired developed technology relatedplatforms and other intangible assets;

•the expected use of the acquired assets; and

•discount rates used to discount expected future cash flows to present value, which are typically derived from the implied rate of return on the transaction and a weighted-average cost of capital analysis andwith adjustedadjustments made to reflect inherent risks.risks of the individual assets being valued;

ForWith acquisitionsour completedacquisition inof fiscal 2024,Ansys, the fair value forof acquireddeveloped existingtechnologies technologyand trade names was determined by applying the relief from royalty method under the income approach. The relief from royalty method applies a royalty rate to projected income to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. The economic useful life for developed technology was determined based on historical technology obsolescence patterns and prospective technologytechnological developments. The estimated economic useful life of the trade names was determined based on the expected probability of continued use of the brand asset. We assumed royalty rates ranging from 35%35.0% to 40%.45.0% for existing technology, and 2.5% for trade names. The present value of operating cash flows from the existing technology and trade names was determined using discount ratesrate ranging fromof approximately 11% to 14%.10.0%.

Customer relationships represent the fair value of the existing relationships with the acquired company’s customers. Their fair value was determined using the multi-period excess earnings method under the income approach, which involves isolating the net earnings attributable to the asset being measured based on the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the asset over its remaining useful life. The economic useful life was determined based on historical customer turnover rates. Projected income from existing customer relationships considered customer retention rates (i.e. gross retention and net retention including upsell) ranging from 55%85.0% to 95%.105.0% for the direct sales channel and 70.0% to 90.0% for the indirect sales channel. The present value of operating cash flows from existing customers was determined using a discount ratesrate ranging fromof approximately 11% to 14%.10.0%.

Technology in these industries evolves rapidly and is characterized by frequent product introductions and improvements as well as changes in industry standards and customer requirements. The adoption of AI technologies has brought new demands and also challenges in terms of disruption to both our business models and existing technology offerings. For example, in response to recent market trends and the underperformance of our Design IP segment, we are in the process of reallocating resources in our IP business to certain higher growth opportunities. Our efforts in reallocating these resources and developing these new technology solutions may not succeed or generate expected returns, which may result in an adverse impact on our business and financial results. SemiconductorAdditionally, semiconductor device functionality requirements continually increase while feature widths decrease, which substantially increases the complexity, cost and risk of chip design and manufacturing. At the same time, our customers and potential customers continue to demand a lower total cost of design, which can lead to the consolidation of their purchases from one vendor or displacement of their purchases by internal development. In order to succeed in this environment, we must successfully meet our customers’ technology requirements and increase the value of our products, while also striving to reduce their overall costs and our own operating costs.

We have also divested and may in the future divest certain product lines or technologies that no longer fit our long-term strategies, including, for example, the pending divestiture of our Processor IP business.business in June 2026. Divestitures may adversely impact our business, operating results and financial condition if we are unable to achieve the anticipated benefits or cost savings from such divestitures, or if we are unable to offset impacts from the loss of revenue associated with the divested product lines or technologies. Additionally, if we sell or otherwise dispose of certain product lines or assets, we may be unable to do so on satisfactory terms within our anticipated timeframe or at all. Further, whether such divestitures are ultimately consummated or not, their pendency could have a number of negative effects on our current business, including disrupting our regular operations, diverting the attention of our workforce and management team and increasing undesired workforce turnover. It could also disrupt existing business relationships, make it harder to develop new business relationships, or otherwise negatively impact the way that we operate our business.

The techniques used to obtain unauthorized access to networks or to sabotage systems of companies such as ours change frequently, increasingly leverage technologies such as AI, and generally are not recognized until launched against a target. We may be unable to anticipate these emerging techniques, react in a timely manner, or implement adequate preventative measures, or we may not have sufficient logging available to fully investigate the incident. Our security measures vary in maturity across the business and may be and have been circumvented. For example, we have identified instances where employees have used non-approved applications for business purposes, some of which do not meet our security standards. In addition, we have discovered unauthorized third-party access to our and our customers' proprietary information in various incidents by cybercriminals suspected of being financially motivated and/or state-sponsored actors. We believe these incidents are contained, and where appropriateappropriate, we have informed affected customers, federal law enforcement, and applicable regulatory agencies.

We have incurred a substantial amount of debt in connection with the Ansys Merger, including the Senior Notes. Accordingly, as of AprilJuly 30,31, 2026, we had approximately $10.0 billion of total debt.

The agreements that govern our indebtedness contain various affirmative and negative covenants. Thethe indenture governing the Senior Notes alsoeach containscontain various affirmative and negative covenants. Such covenants, subject to certain significant exceptions, restrict our ability and the ability of certain of our subsidiaries to, among other things, engage in mergers, consolidations and acquisitions, grant liens, enter into certain sale and leaseback transactions and incur debt at subsidiaries. Our ability to comply with these provisions may be affected by events beyond our control. Failure to comply with these covenants could result in an event of default, which, if not cured or waived, could accelerate repayment obligations under all of our outstanding debt, which could have a material adverse effect on our business, operating results or financial condition.

In addition, certain of our directors and officers may be involved in ongoing securities or other lawsuits, including in the context of their roles with other public companies, and our directors or officers may in the future become involved in such litigation. Securities litigation, including the cost to defend against, and any potential adverse outcome resulting from any such proceeding, can be expensive, time-consuming, damage our reputation and divert our management’s and directors' attention from other business concerns, which could seriously harm our business. As noted above, in 2025 and 2026,2025, shareholder class action complaints were filed against Synopsys and certain of our current directors and officers and in 2025 and 2026, shareholder derivative actions were filed against certain of our current directors and officers. The complaints allege, among other matters, that certain material misstatements or omissions related to the performance of our Design IP segment were made in violation of federal securities laws. There is no guarantee that we will be successful in our efforts to defend against these complaints. Further information regarding certain of these matters is contained in Part II, Item 1, Legal Proceedings of this Quarterly Report.

This Quarterly Report on Form 10-Q (this Quarterly Report) includes forward-looking statements, which involve risks, uncertainties and other factors that could cause Synopsys, Inc.'s (Synopsys, we, our or us) actual results, time frames or achievements to differ materially from those expressed or implied in such forward-looking statements. Readers are urged to carefully review and consider the various disclosures regarding these risks and uncertainties made in this Quarterly Report, including those identified below in Part II, Item 1A, Risk Factors, and in other documents we file from time to time with the Securities and Exchange Commission (SEC). Forward-looking statements include any statements that are not statements of historical fact and include, but are not limited to, statements concerning our short-term and long-term financial targets, expectations and objectives; our businesses, business segments, strategies, partnerships, initiatives and opportunities, including, among other things, the reallocation of resources in our Design IP segment to higher growth opportunities and planned restructuring activities; industry growth and technological trends, such as artificial intelligence (AI), including our development and planned commercialization thereof; business and market outlook; the potential impact of the uncertain macroeconomic environment and global economic conditions on our financial results; the impact of current and future U.S. and foreign trade regulations, government actions and regulatory changes, such as export control restrictions and tariffs; the ANSYS, Inc. (Ansys) integration and its expected impact, including expected synergies and the timing thereof, our ability to create joint solutions as a combined company, and related accounting changes; planned and recently completed acquisitions or divestitures, including the expected completion of the sale of the Processor IP Solutions (Processor IP) business, and their anticipated timing and impact; our key customers, customer concentration, customer engagement, customer demand and market expansion; results and strategies related to our products, technology and services, including product development and our planned product releases and capabilities; the expected realization of our contracted but unsatisfied or partially unsatisfied performance obligations (backlog); planned stock repurchases; our expected tax rate; and the status, expected outcome or expected impact of litigation and/or regulatory investigations. Forward-looking statements may be identified by words including, but not limited to, “may,” “will,” “could,” “would,” “can,” “should,” “anticipate,” “expect,” “intend,” “believe,” “estimate,” “project,” “continue,” “forecast,” "likely," "potential," "seek," or the negatives of such terms and similar expressions. The information included herein represents our estimates and assumptions as of the date of this filing. Unless required by law, we undertake no obligation to update publicly any forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. All subsequent written or oral forward-looking statements attributable to Synopsys or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements.

For the secondthird quarter of fiscal 2026, our results reflect continued, strong execution and the resiliency of our business, including 42% revenue growth compared to the secondthird quarter of fiscal 2025, primarily due to broad-based strength across our businessbusiness, and Ansys' contribution of $652.4 million in revenue, partially offsetled by weaknesselectronic indesign ourautomation (EDA), Design IP segment.returning to year-over-year growth, and a strong quarter from Ansys. Results for the third quarter of fiscal 2026 reflected a full quarter of revenue from Ansys, compared to a partial quarter contribution in the prior year period following our acquisition of Ansys in July 2025.

Financial performance summary for the three months ended AprilJuly 30,31, 2026 compared to the same period of fiscal 2025:

•Revenues were $2.3$2.5 billion, an increase of $671.7$737.1 million or 42%, which includes revenuesan increase of $622.2 million in revenue from Ansys offor $652.4the million.full quarter in fiscal 2026 versus the partial quarter in fiscal 2025. The remaining growth came organically due to broad-based strength across our business, partially offset by weakness in our Design IP segment.business.

•Total cost of revenue and operating expenses was $4.4$2.1 billion, an increase of $1.9$544.8 billionmillion or 79%,35%, reflecting $788.3an increase of $330.0 million ofin amortization expense related to intangible assets acquired from the Ansys Merger,Merger (as defined below), as well as an increase of $594.7$174.3 million in employee-related costscosts, which includes an increase of $169.2 million from Ansys, primarily due to the headcountinclusion increasesof asAnsys' results for a resultfull ofperiod for the Ansysthree Merger.months ended July 31, 2026 versus a partial period for the same period in fiscal 2025.

On July 17, 2025 (the Acquisition Date), we completed our acquisition of ANSYS, Inc. (Ansys) pursuant to the terms of the previously announced Agreement and Plan of Merger, dated as of January 15, 2024 (the Merger Agreement) by and among Synopsys, Ansys and ALTA Acquisition Corp. (Merger Sub), a Delaware corporation and a wholly owned subsidiary of Synopsys (the Ansys Merger). See Note 4. Acquisition of Ansys of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for more information on the Ansys Merger.

WeGrowth expecttrends growthhave varied across most geographies induring fiscal 2026;2026, however,and we are expecting a challengingthe near-term environment, including in China, duecontinues to be affected by macroeconomic factors and Trade Restrictions (as defined below). See the discussion below under the heading "Impact of Global Trade Policy and the Current Geopolitical Environment" and in Part II, Item 1A, Risk Factors, "We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets" for further discussion of the impact of Trade Restrictions, including export control regulations and geopolitical events, on Synopsys.

Design Automation. This segment includes our advanced silicon design, verification products and services, and Ansys products, and system integration products and services. This segment also includes digital, custom and field programmable gate array (FPGA) integrated circuit (IC) design software, verification software and hardware products, and manufacturing software products. Designers use our electronic design automation (EDA) products to accelerate and automate the chip design process, reduce errors and enable more powerful and robust designs, with improved productivity for faster time to market. Engineers use our S&A solutions to virtually test and optimize designs across various physics domains, such as structural analysis, thermal analysis, and computational fluid dynamics (CFD).

Design IP. This segment includes our logic libraries, embedded memories, wired interface IP, memory interface IP, and security IP, and embedded processorsIP that serve companies primarily in the semiconductor and electronics industries. We are a leading provider of high-quality, silicon-proven IP solutions for system-on-chips (SoCs). This includes IP that has been optimized to address specific application requirements for the mobile, automotive, digital home, Internet of Things and AI/data center markets, enabling designers to quickly develop SoCs in these areas.

We believe the critical accounting policies that reflect more significant judgments and estimates used in the preparation of our consolidated financial statements regarding critical accounting estimates are Revenue Recognition and Business Combinations. There have been no material changes in our critical accounting estimates during the sixnine months ended AprilJuly 30,31, 2026 since our Annual Report for fiscal 2025.

•S&A solutions allow engineers to virtually test and optimize designs across various physics domains, such as structural analysis, thermal analysis, and CFD. S&A software solutions are offered as subscription solutions and also as perpetual licenses. Software subscription arrangements include bundles of time-based software licenses with support services, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. In such subscription arrangements, the updates to time-based software licenses are not considered integral to maintaining the utility of the software. We consider the license and support services as separate performance obligations. In these instances, we allocate the total consideration received for the revenue arrangement to the separate performance obligations based on the standalone selling prices of the time-based software license and support service. The time-based software license revenue is presented as upfront products revenue, recognized at a point of time upon the later of the delivery date or the beginning of the license period, and the revenue related to the support service is presented as maintenance and service revenue and is recognized over the term of the arrangement. Perpetual license arrangements typically include a perpetual license sold with support services, which includes a stand-ready obligation to provide technical support and software updates over the support term. We allocate the total consideration received for the bundled perpetual and support service arrangements based on the standalone selling prices of the perpetual license and support service. Revenue from perpetual licenses is presented as upfront product revenue and is recognized at a point in time upon the later of the delivery date or the beginning of the license period. Revenue from support service is classified as maintenance and service revenue and is recognized ratably over the term of the contract, as we satisfy the support service performance obligation. For our reseller business, we evaluate whether we are the principal or agent for reporting purposes. Beginning in the second quarter of fiscal 2026, we have enhanced our channel partner arrangements to improve oversight and pricing visibility. Specifically, we now have visibility into end-customer pricing, improved delivery control over key distributors, and are able to provide routine maintenance to the end customers. As a result, we report our revenue from reseller arrangements on a gross basis beginning in the second quarter of fiscal 2026.

•Design IP includes our logic libraries, embedded memories, wired interface IP, memory interface IP,IP and security IP, and embedded processors.IP. These arrangements generally have two performance obligations which consist of transferring of the licensed IP and providing related support, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. Revenue allocated to the IP licenses is recognized at a point in time upon the later of the delivery date or the beginning of the license period, and revenue allocated to support is recognized over the support term. Royalties are recognized as revenue in the quarter in which the applicable customer sells its products that incorporate our IP. Payments for IP contracts are generally received upon delivery of the IP. Revenue related to the customization of certain IP is recognized over time, generally using costs incurred or hours expended to measure progress.

Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) were $11.0$10.9 billion as of AprilJuly 30,31, 2026, which includes $1.8$1.9 billion in non-cancellable FSA commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date. We have elected to exclude future sales-based royalty payments from the remaining performance obligations. Approximately 49% of the backlog as of AprilJuly 30,31, 2026, excluding non-cancellable FSA, is expected to be recognized as revenue over the next 12 months, with the remainder to be recognized thereafter. The majority of the remaining backlog is expected to be recognized in the following three years.

The amount and composition of unsatisfied performance obligations will fluctuate period to period. We do not believe the amount of unsatisfied performance obligations is indicative of future sales or revenue, or that such obligations at the end of any given period correlates with actual sales performance of a particular geography or particular products and services. For more information regarding our revenue during the three and sixnine months ended AprilJuly 30,31, 2026, including our contract balances as of such date, see Note 5. Revenue of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report.

The increase in time-based products revenue for the three and sixnine months ended AprilJuly 30,31, 2026 compared to the same periods in fiscal 2025 was primarily attributable to Ansys' contributionincreases of $78.7$71.6 million and $157.1$228.7 millionmillion, inrespectively, time-basedfrom products revenue, respectively for the threeAnsys, and six months ended April 30, 2026, and an increase inhigher TSL license revenue from arrangements bookedentered into in prior periods.

The increase in upfront products revenue for the three and sixnine months ended AprilJuly 30,31, 2026 compared to the same periods in fiscal 2025 was primarily dueattributable to Ansys' contributionincreases of $149.3$161.4 million and $532.3$693.7 million, respectivelyrespectively, forfrom the three and six months ended April 30, 2026 in upfront products revenue,Ansys, partially offset by a decrease in license revenue due to timing of customer requirements for IP products and the Optical Solutions Group divestiture.

The increase in maintenance revenue for the three and sixnine months ended AprilJuly 30,31, 2026 compared to the same periods in fiscal 2025 was primarily dueattributable to increases of $367.0 million and $1.2 billion, respectively, from Ansys, and an increase in the volume of arrangements that include maintenance largely due to Ansys' contribution of $402.9 million and $807.3 million in maintenance revenue, respectively, for the three and six months ended April 30, 2026.maintenance.

The increase in professional service and other revenue for the three and sixnine months ended AprilJuly 30,31, 2026 compared to the same periods in fiscal 2025 was primarily dueattributable to Ansys' contribution of $21.5 million and $41.3 million in professional service and other revenue, respectively, for the three and six months ended April 30, 2026 and the timing of IP customization projects.projects, as well as increases of $22.2 million and $63.5 million, respectively, from Ansys.

Our cost of revenue is comprisedconsists of three categories: cost of products revenue, cost of maintenance and service revenue, and amortization of acquired intangible assets.

The increase in costs of products revenue and costs of maintenance and service revenue for the three months ended AprilJuly 30,31, 2026 compared to the same period in fiscal 2025 was primarily due to increases of $20.9 million in employee-related costs asfrom aAnsys result of headcount increases fromfor the Ansysfull Merger,quarter whichin contributedfiscal $25.92026 million,versus $16.1the partial quarter in fiscal 2025, $20.8 million in hardware-related costs including inventory provisions, $17.2 million in costs to fulfill IP consulting arrangements, and $10.2$7.2 million in IT and facility costs. The increase in amortization of acquired intangible assets for the three months ended AprilJuly 30,31, 2026 compared to the same period in fiscal 2025 was primarily due to an increase of $242.3$202.7 million in connection with the Ansys Merger.

The increase in costs of products revenue and costs of maintenance and service revenue for the sixnine months ended AprilJuly 30,31, 2026 compared to the same period in fiscal 2025 was primarily due to increases of $75.4 million in employee-related costs asfrom aAnsys result of headcount increases fromfor the Ansysfull Merger,period whichin contributedfiscal $54.62026 million,versus $31.0the partial period in fiscal 2025, $48.2 million in costs to fulfill IP consulting arrangements, $22.3 million in IT and facility costs and $22.3$43.1 million in hardware-related costs including inventory provisions.provisions, and $29.6 million in IT and facility costs. The increase in amortization of acquired intangible assets for the sixnine months ended AprilJuly 30,31, 2026 compared to the same period in fiscal 2025 was primarily due to an increase of $484.4$687.1 million in connection with the Ansys Merger.

The increase in research and development expenses for the three months ended AprilJuly 30,31, 2026 compared to the same period in fiscal 2025 was primarily due to increases of $116.2$91.5 million in employee-related costs due to headcountthe increasesinclusion fromof Ansys for the Ansysfull Merger,quarter $36.7in fiscal 2026 versus the partial quarter in fiscal 2025 and $27.8 million in IT and facility costs, andpartially offset by a decrease of $20.5 million in the change in the fair value of our executive deferred compensation plan assets,assets partially offset byand a decrease in employee-related costs due to headcount decreasesreductions as a result of the 2026 Plan (as defined in Restructuring Charges below).

The increase in research and development expenses for the sixnine months ended AprilJuly 30,31, 2026 compared to the same period in fiscal 2025 was primarily due to increases of $243.2$334.4 million in employee-related costs duefrom toAnsys headcount increases fromfor the Ansysfull Merger,period $74.3in fiscal 2026 versus the partial period in fiscal 2025 and $102.2 million in IT and facility costs and $15.8 million in the change in the fair value of our executive deferred compensation plan assets,costs, partially offset by a decrease in employee-related costs due to headcount decreasesreductions as a result of the 2026 Plan.

The increase in sales and marketing expenses for the three months ended AprilJuly 30,31, 2026 compared to the same period in fiscal 2025 was primarily due to increases of $123.8$92.6 million in employee-related costs duefrom toAnsys headcount increases fromfor the Ansysfull Merger,quarter $19.5in fiscal 2026 versus the partial quarter in fiscal 2025 and $9.6 million in IT and facility costs and $7.3 million in the change in the fair value of our executive deferred compensation plan assets, partially offset by a decrease in employee-related costs due to headcount decreases as a result of the 2026 Plan.costs.

The increase in sales and marketing expenses for the sixnine months ended AprilJuly 30,31, 2026 compared to the same period in fiscal 2025 was primarily due to increases of $267.6$357.6 million in employee-related costs duefrom toAnsys headcount increases fromfor the Ansysfull Merger,period $38.9in fiscal 2026 versus the partial period in fiscal 2025 and $49.5 million in IT and facility costs and $6.9 million in the change in the fair value of our executive deferred compensation plan assets,costs, offset in part by a decrease in employee-related costs due to headcount decreases as a result of the 2026 Plan.

The increase in amortization of acquired intangible assets for the three and sixnine months ended AprilJuly 30,31, 2026 compared to the same periods in fiscal 2025 was primarily due to increases in amortization expense related to intangible assets acquired from the Ansys Merger. See Note 6. Goodwill and Intangible Assets of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for a schedule of future amortization amounts.

In November 2025, we initiated a restructuring plan for involuntary employee terminations as part of a business reorganization (the 2026 Plan). Totalwith total charges under the 2026 Plan are expected to be in the range of $300.0 million toand $350.0 million. In August 2026, our Board of Directors (the Board) approved updated estimates of charges related to the 2026 Plan ranging from $425.0 million to $500.0 million, and consistconsisting primarily of severance costs and other one-time termination benefits.benefits, and other costs such as certain site closures as part of Synopsys' global site strategy. The 2026 Plan is anticipated to be completed by the end of fiscal 2027, with majority of the workforce reduction in fiscal 2026. We recorded restructuring charges of $115.9$2.2 million and $234.2$236.3 million for the three and sixnine months ended AprilJuly 30,31, 2026, respectively. See Note 10. Restructuring Charges of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for more information.

The increasedecrease in interest expense for the three months ended AprilJuly 30,31, 2026 as compared to the same period in fiscal 2025 was primarily due to interestthe onrepayment and termination of the SeniorTerm NotesLoan issuedAgreement induring the secondfirst quarter of fiscal 2025 in connection with the Ansys Merger.2026.

The increase in interest expense for the sixnine months ended AprilJuly 30,31, 2026 as compared to the same period in fiscal 2025 was primarily due to interest on the Senior Notes issued in the second quarter of fiscal 2025 and the borrowing under the Term Loan Agreement in the third quarter of fiscal 2025 in connection with the Ansys Merger. See Note 11. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for further detail on our debt obligations.

The decreaseincrease in other income (expense), net for the three and six months ended AprilJuly 30,31, 2026 as compared to the same periodsperiod in fiscal 2025 was primarily due to thea pre-tax gain recognizedof from$425.4 themillion on sale of anour officeProcessor buildingIP forSolutions the(Processor threeIP) andbusiness sixon monthsJune ended1, April2026, 30,partially 2025,offset by lower interest income as a result of lower average cash balances,balances partiallyand offseta by an increasedecrease in the change in fair value of our executive deferred compensation plan assets.

The increase in adjusted operating income for the three and sixnine months ended AprilJuly 30,31, 2026 compared to the same periods in fiscal 2025 was primarily due to an increase in revenue from arrangements booked in prior periods.periods, partially offset by a decrease in license revenue due to the Optical Solutions Group divestiture.

The decreaseincrease in adjusted operating income for the three and six months ended AprilJuly 30,31, 2026 compared to the same periodsperiod in fiscal 2025 was primarily due to loweran increase in the revenue asof weIP continueproducts todriven reallocateby resourcestiming toof thecustomer highest growth opportunities.demands.

Our effective tax rate increased in the three and six months ended AprilJuly 30,31, 2026,2026 as compared to the same periodsperiod in fiscal 2025, which was primarily due to the reducedrelease benefitof froma stock-basedfull compensationvaluation andallowance foreign-derivedagainst intangibleCalifornia incomeresearch deduction.credits The capital loss onduring the sale of our ownership in OpenLight was included in the firstthird quarter of fiscal 2025.

As of AprilJuly 30,31, 2026, we held $2.5$3.6 billion in cash, cash equivalents and short-term investments. We also held $4.3$4.5 million in restricted cash primarily associated with deposits for office leases and employee loan programs. Our cash equivalents consisted primarily of taxable money market mutual funds, time deposits and highly liquid investments with maturities of three months or less. Our short-term investments include U.S. government and municipal obligations,securities and investment-gradeother available-for-saleU.S. debtgovernment obligations, with an overall weighted-average credit rating of approximately AA.AA+.

As of AprilJuly 30,31, 2026, approximately $1.5$1.7 billion of our cash and cash equivalents were domiciled in various foreign jurisdictions. We have provided for foreign withholding taxes on the undistributed earnings of certain of our foreign subsidiaries to the extent such earnings are no longer considered to be indefinitely reinvested in the operations of those subsidiaries.

During the second quarter of fiscal 2025, we entered into a deferred payment agreement to defer the cash settlement of the 2025 Rate Lock Agreements over a period of 5.5 years. As of AprilJuly 30,31, 2026, we had $9.9 billion outstanding balance of the Senior Notes and $99.5 million outstanding balance under the deferred payment agreement related to the 2025 Rate Lock agreements. See Note 11. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities and Note 8. Financial Assets and Liabilities of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report for further discussion.

The following sections discuss changes in our condensed consolidated statements of cash flows and other commitments of our liquidity and capital resources during the sixnine months ended AprilJuly 30,31, 2026.

The increase in net cash provided by operating activities for the sixnine months ended AprilJuly 30,31, 2026 compared to the same period in fiscal 2025 was primarily due to contributions from Ansys, organic growth in our business (excluding Ansys), higher accounts receivable collections, and the non-recurring unrealized loss from settlement of the interest rate treasury lock of $121.6 million in the second quarter of fiscal 2025, partially offset by higher disbursements for operations, including vendor and tax payments, and lower net income of $560.9$257.5 million.

Net cash used in financing activities was $1.9 billion for the sixnine months ended AprilJuly 30,31, 2026 compared to net cash provided by financing activities of $10.0$14.2 billion for the same period in fiscal 2025. In the first half of fiscal 2026, theNet cash used in financing activities for the nine months ended July 31, 2026, consisted of the repayment of the remaining $3.5 billion of the Term Loans,Loans and purchases of treasury stock of $262.5$300.0 million and purchase of equity forward contract of $37.5 million in the second quarter of fiscal 2026,million, partially offset by net proceeds of $2.0 billion from the sale of our common stock pursuant to a securities purchase agreement with NVIDIA Corporation in the first quarter of fiscal 2026. InFor the firstnine halfmonths ofended fiscalJuly 31, 2025, the cash provided by financing activities was primarily driven by the non-recurring net cash proceeds of $10.0$14.3 billion from ourthe debtissuance issuance.of Senior Notes and the borrowing under the Term Loan Agreement in connection with the financing of the Ansys Merger.