By Adam Levine and Anita Hamilton

An earnings beat and strong guidance weren't enough to impress Synopsys investors, who sent shares of the chip-design software and hardware firm down Thursday by nearly 9% to around $480 a share.

That made Synopsys the worst-performing company in the S&P 500 as of noon Eastern time. It also wiped out most of its gains in 2026. It's currently up just 2% for the year versus 12% before it reported earnings.

The tech firm beat analyst expectations on key metrics when it reported its financials for its fiscal second quarter ended in April after the market closed on Wednesday. Adjusted earnings per share came in at $3.35, above analyst estimates of $3.15 per share. Revenue, meanwhile, hit $2.28 billion. Wall Street analysts were expecting $2.25 billion.

Synopsys also raised its full-year revenue guidance to a midpoint of $9.67 billion, up from previous guidance of $9.61 billion.

But none of that seemed to help the stock. The announcement of a cooperation agreement with activist investor Elliott Investment Management also failed to lift shares. It also includes the appointment of Elliott's Jesse Cohn to the Synopsys board.

BNP Paribas analysts said in a note Thursday morning that shares may have fallen due to Synopsys' core earnings before depreciation and amortization, which decelerated from 12% on a year over year basis in the first quarter to 8% in the second quarter.

"We think the market wants to see meaningful organic acceleration but that is likely 1-2 quarters away," they added.

The company has continued to make the case that its chip-design software and hardware are essential to the progress of artificial intelligence. But the near-term focus is on the integration of a big acquisition from last year.

Because of its $35 billion acquisition of physics-simulation-software maker Ansys last year, comparisons to the previous year don't hold much weight. Ansys had about half a billion dollars in sales in its final quarter as an independent company.

Like competitor Cadence Design Systems, Synopsys makes software that automates the very complex process of designing chips, and it also makes hardware that tests the designs before they get shipped to the manufacturer. AI chip leader Nvidia is a customer and a shareholder, with a 2.5% stake in Synopsys.

But the spread of chip design for the AI era hasn't yet been a big boon to Synopsys, with organic sales still not growing as quickly as they did during its previous boom period, in 2022.

The Ansys integration is the topic of the day. There was a logical connection in the horizontal merger, and the two companies had overlapping customers. In March, Synopsys announced the first fruit of the merger, called Multiphysics Fusion. It expands the simulation in Synopsys' chip design software to include electrical, thermal, electromagnetic, and mechanical effects, shortening the chip design pipeline for the increasingly complex architectures coming from AI chip makers.

Along with the merger came the inevitable layoffs, eliminating about 10% of the combined workforce of the two companies and costing about $325 million in total restructuring charges. Synopsys had about 28,000 postmerger employees, according to FactSet.

Write to Adam Levine at adam.levine@barrons.com and Anita Hamilton at anita.hamilton@barrons.com

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May 28, 2026 12:57 ET (16:57 GMT)

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