Bank of America upgraded Synopsys Inc (NASDAQ:SNPS, XETRA:SYP) to “Neutral” on Monday, saying the chip-design software maker’s upcoming earnings call will be critical for rebuilding investor confidence after a weak patch in its intellectual property business and uncertainty tied to its Ansys acquisition.
The brokerage raised its rating from “Underperform” but trimmed its price objective to $500 from $525, reflecting a 4% cut to its fiscal 2026 and 2027 earnings estimates.
Bank of America said the December 10 earnings call, where Synopsys is expected to provide fiscal 2026 guidance, could be a “clearing event” following unexplained softness in China and Intel IP sales and higher-than-expected near-term integration costs tied to the Ansys deal.
The firm maintained largely unchanged revenue forecasts but reduced earnings expectations on uncertainty around achieving Ansys-related cost synergies. The bank is now anticipating FY26 sales of $9.6 billion and adjusted EPS of $14.02, close to consensus.
Despite the earnings cuts, analysts said sentiment has improved thanks to Nvidia’s proposed $2 billion equity investment, which adds to a deeper engineering and marketing collaboration aimed at expanding the use of GPU-accelerated electronic design automation. They also pointed to potential tailwinds from Intel’s progress on its 18A and 14A foundry nodes and an unusually wide valuation gap between Synopsys and rival Cadence.
However, risks remain, including the pace of Ansys integration and Synopsys’ exposure to China amid tightening export controls. The bank noted that a sharp IP revenue miss in the third quarter stemmed from a lack of external foundry customers at Intel, weakness in China after June EDA restrictions, and a shift toward custom IP while the Ansys deal awaited approval.
With peer Cadence reporting strong China hardware and broader IP growth, Bank of America said “the ball is in Synopsys’ court” to deliver a credible and beatable FY26 guide and outline the path to $400 million in revenue synergies and $400 million in Ansys cost savings.
“With Nvidia aggressively deploying free cash flow in the artificial intelligence ecosystem, we see Nvidia's investment as more tactical than exclusive or strategic,” the bank wrote.
“Nvidia has also been partnered with Cadence on its M2000 Millennium supercomputer for the past year, so electronic design automation and computer-aided engineering acceleration is not a new concept per se, while alignment with one vendor could be seen as an incremental hurdle in other merchant or application-specific integrated-circuit accelerator dealings.”