Synopsys Inc (NASDAQ:SNPS, XETRA:SYP) has been upgraded by Bank of America to ‘Buy’ from ‘Neutral,’ with the firm pointing to better-than-expected fiscal 2026 earnings guidance and reduced risk tied to China and Intel.
The firm also raised its price objective on the chip design firm to $560 from $500, above current levels of about $478.
Synopsys’ fiscal 2026 EPS forecast came in ahead of expectations despite a higher tax rate, which the analysts said supports a more constructive outlook for the year ahead.
The company guided to fiscal 2026 revenue of $9.6 billion, including $2.9 billion from Ansys. While that implies roughly 8% year-over-year growth for the core Synopsys business, Bank of America highlighted the stronger earnings trajectory and improving visibility.
The analysts raised their EPS estimates to $14.27 for fiscal 2026 and $17 for fiscal 2027.
They see Synopsys offering “attractive lower-beta AI-levered” exposure heading into 2026, supported by recurring revenue tied to chip design and R&D spending.
Bank of America also pointed to several possible catalysts that could add further upside. They believe Synopsys could benefit if Intel secures additional foundry customers, if joint products with Ansys gain traction, or if China rebounds after a 22% year-over-year decline in fiscal 2024.
However, the firm noted ongoing risks, including uncertainty surrounding the recovery of Synopsys’ IP segment, seasonal revenue swings at Ansys, and the sizeable integration work remaining following Synopsys’ $35 billion acquisition of the engineering software company. Integration costs could be higher in the near term as the company works toward targeted cost and revenue synergies.
Bank of America added that its top pick in the electronic design automation sector remains Cadence, citing stronger margins, share-gain potential, and a less leveraged balance sheet.