A major chip design software company experienced a significant stock decline Wednesday evening after delivering a revenue outlook that disappointed Wall Street investors.
Synopsys saw its stock price drop more than 5% during after-hours trading following the release of its financial forecast, which cited ongoing challenges from Chinese trade restrictions and broader economic headwinds.
The California-based technology firm has encountered difficulties in the Chinese market, where trade limitations have blocked clients from launching new semiconductor design initiatives. Additionally, the company has seen weaker demand from a key foundry partner.
Industry experts point to another factor impacting the business: the semiconductor industry’s pivot toward artificial intelligence chips is reducing manufacturing of traditional consumer electronics like mobile phones and personal computers. This shift has particularly affected Synopsys’ intellectual property division, which provides ready-made circuit blueprints to manufacturers.
The IP segment’s revenue dropped by more than 6% during the first quarter, falling from $435.1 million in the previous year to $407 million this period.
Chief Financial Officer Shelagh Glaser addressed the China situation during the company’s earnings conference call, stating: “Excluding Ansys, China revenue declined slightly year‑over‑year, consistent with our outlook.” She noted that the Ansys acquisition contributed roughly $886 million to first-quarter earnings.
Looking ahead to the second quarter, Synopsys projects revenue between $2.23 billion and $2.28 billion, which falls below the $2.24 billion consensus forecast from financial analysts surveyed by LSEG.
However, the company’s earnings per share projection of $3.11 to $3.17 on an adjusted basis slightly exceeded analyst expectations of $3.09.
The first quarter showed mixed results, with total revenue reaching $2.41 billion, surpassing the anticipated $2.39 billion. Adjusted earnings of $3.77 per share also beat the consensus estimate of $3.56.
Synopsys is currently managing substantial debt obligations stemming from its massive $35 billion purchase of engineering simulation software company Ansys, a deal that was completed in July 2025.
To address financial pressures, the company announced a corporate restructuring initiative in November, which includes eliminating approximately 10% of its workforce while reallocating resources to more promising business opportunities.
