Goldman Sachs maintains a "Buy" rating on Synopsys (SNPS.US) with a 12-month target price of $700, representing significant upside potential from current levels. This optimistic outlook is based on the company's robust core business growth and strategic acquisition synergies.
Financial projections show Synopsys is expected to achieve total revenue of $7.299 billion in fiscal 2025, representing 16.5% year-over-year growth, with non-GAAP earnings per share reaching $13.70. More notably, following the completion of the Ansys acquisition in 2024, the company's fiscal 2026 revenue is projected to surge to $10.422 billion, marking a 42.8% year-over-year increase, with EPS rising to $16.90.
Goldman Sachs particularly highlights the sequential quarterly revenue growth trajectory, with fiscal 2025 third quarter expected to reach $1.748 billion and fourth quarter projected to exceed $2.492 billion, primarily benefiting from Ansys' full quarterly contribution and steady performance of the core EDA (Electronic Design Automation) business.
Despite recent market concerns regarding China's temporary EDA export control restrictions, Goldman Sachs believes the impact will be limited. The research notes that strong quarterly results from peer companies like Cadence demonstrate resilient underlying EDA demand, effectively offsetting short-term policy volatility.
The analyst team recommends investors focus on three key dimensions: first, the penetration progress of core EDA software in custom chip design; second, the scale and implementation speed of synergies from Ansys integration; and third, the pace of demand recovery in the Chinese market following the lifting of restrictions.
Notably, Synopsys continues to strengthen its technological moats in the EDA market. Goldman Sachs expects the company to reveal more customer expansion cases and design project breakthroughs in upcoming earnings calls, particularly progress in applications for artificial intelligence chips and high-performance computing.
Based on a valuation model using 40x normalized price-to-earnings ratio, Goldman Sachs believes current share prices have not fully reflected the company's long-term growth potential, maintaining the $700 target price unchanged.