Item 1. Financial Statements

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Item 1. Financial Statements

SYNOPSYS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except par value amounts)

July 31, 2025October 31, 2024
ASSETS
Current assets:
Cash and cash equivalents$2,526,475$3,896,532
Short-term investments67,235153,869
Total cash, cash equivalents and short-term investments2,593,7104,050,401
Accounts receivable, net1,392,373934,470
Inventories382,056361,849
Prepaid and other current assets1,153,1721,122,946
Current assets held for sale74,317—
Total current assets5,595,6286,469,666
Property and equipment, net699,688563,006
Operating lease right-of-use assets, net693,368565,917
Goodwill26,945,7233,448,850
Intangible assets, net13,079,912195,164
Deferred income taxes97,0611,247,258
Other long-term assets1,118,876583,700
Total assets$48,230,256$13,073,561
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities$1,283,204$1,163,592
Operating lease liabilities127,45294,791
Deferred revenue1,991,4291,391,737
Short-term debt22,117—
Current liabilities held for sale20,005—
Total current liabilities3,444,2072,650,120
Long-term operating lease liabilities672,729574,065
Long-term deferred revenue383,405340,831
Long-term debt14,318,01615,601
Other long-term liabilities1,797,713469,738
Total liabilities20,616,0704,050,355
Redeemable non-controlling interest—30,000
Stockholders’ equity:
Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding——
Common stock, $0.01 par value: 400,000 shares authorized; 185,460 and 154,112 shares outstanding, respectively1,8551,541
Capital in excess of par value18,549,8711,211,206
Retained earnings9,866,7918,984,105
Treasury stock, at cost: 1,756 and 3,148 shares, respectively(572,091)(1,025,770)
Accumulated other comprehensive income (loss)(231,895)(180,380)
Total Synopsys stockholders’ equity27,614,5318,990,702
Non-controlling interest(345)2,504
Total stockholders’ equity27,614,1868,993,206
Total liabilities, redeemable non-controlling interest and stockholders’ equity$48,230,256$13,073,561

See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

SYNOPSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, in thousands, except per share amounts)

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
Revenue:
Time-based products$892,364$803,147$2,548,928$2,389,924
Upfront products516,404442,5281,395,2041,281,283
Total products revenue1,408,7681,245,6753,944,1323,671,207
Maintenance and service330,969280,074855,186820,243
Total revenue1,739,7371,525,7494,799,3184,491,450
Cost of revenue:
Products230,895179,536615,953553,753
Maintenance and service103,30196,630290,309275,348
Amortization of acquired intangible assets46,36814,51062,62441,165
Total cost of revenue380,564290,676968,886870,266
Gross margin1,359,1731,235,0733,830,4323,621,184
Operating expenses:
Research and development625,301508,8721,732,4961,527,542
Sales and marketing259,480211,491683,700640,117
General and administrative280,550150,437584,133396,464
Amortization of acquired intangible assets28,5734,06236,56912,152
Total operating expenses1,193,904874,8623,036,8982,576,275
Operating income165,269360,211793,5341,044,909
Interest expense(146,502)(11,742)(251,977)(20,547)
Other income (expense), net170,54343,526335,061166,617
Income before income taxes189,310391,995876,6181,190,979
Provision (benefit) for income taxes(52,967)(30,712)(12,080)37,634
Net income from continuing operations242,277422,707888,6981,153,345
Income (loss) from discontinued operations, net of income taxes—(17,813)(3,900)(13,155)
Net income242,277404,894884,7981,140,190
Less: Net income (loss) attributed to non-controlling interest and redeemable non-controlling interest(232)(3,161)1,274(9,084)
Net income attributed to Synopsys$242,509$408,055$883,524$1,149,274
Net income (loss) attributed to Synopsys:
Continuing operations$242,509$425,868$887,424$1,162,429
Discontinued operations—(17,813)(3,900)(13,155)
Net income$242,509$408,055$883,524$1,149,274
Net income (loss) per share attributed to Synopsys - basic:
Continuing operations$1.51$2.78$5.67$7.60
Discontinued operations$—$(0.12)$(0.03)$(0.08)
Basic net income per share$1.51$2.66$5.64$7.52
Net income (loss) per share attributed to Synopsys - diluted:
Continuing operations$1.50$2.73$5.61$7.46
Discontinued operations$—$(0.12)$(0.02)$(0.09)
Diluted net income per share$1.50$2.61$5.59$7.37
Shares used in computing per share amounts:
Basic160,174153,417156,536152,885
Diluted161,682156,131158,176155,863

See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

SYNOPSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited, in thousands)

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
Net income$242,277$404,894$884,798$1,140,190
Other comprehensive income (loss):
Change in foreign currency translation adjustment2,7474,91318,8744,526
Change in unrealized gains (losses) on available-for-sale securities, net of tax of $0 for periods presented(387)885(378)1,764
Cash flow hedges:
Deferred gains (losses), net of tax benefit (loss) of $(1,666) and $20,336 for the three and nine months ended July 31, 2025, respectively and of $(1,989) and $(1,970) for each of the same periods in fiscal 2024, respectively5,5984,181(76,558)7,656
Reclassification adjustment on deferred (gains) losses included in net income, net of tax of $(18) and $(2,204) for the three and nine months ended July 31, 2025, respectively, and of $348 and $(2,083), for each of the same periods in fiscal 2024, respectively283(2,078)6,5472,356
Other comprehensive income (loss), net of tax effects8,2417,901(51,515)16,302
Comprehensive income250,518412,795833,2831,156,492
Less: Net income (loss) attributed to non-controlling interest and redeemable non-controlling interest(232)(3,161)1,274(9,084)
Comprehensive income attributed to Synopsys$250,750$415,956$832,009$1,165,576

See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

SYNOPSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands)

Capital in Excess of Par ValueRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total Synopsys Stockholders’ EquityNon-controlling InterestTotal Stockholders’ Equity
Common Stock
SharesAmount
Balance at April 30, 2025155,146$1,552$1,219,021$9,624,282$(689,001)$(240,136)$9,915,718$(113)$9,915,605
Net income242,509242,509(232)242,277
Other comprehensive income (loss), net of tax effects8,2418,2418,241
Common stock issued upon the acquisition of Ansys29,95530017,105,23817,105,53817,105,538
Assumption of equity awards in connection with the acquisition of Ansys130,963130,963130,963
Common stock issued, net of shares withheld for employee taxes3593(173,074)116,910(56,161)(56,161)
Stock-based compensation267,723267,723267,723
Balance at July 31, 2025185,460$1,855$18,549,871$9,866,791$(572,091)$(231,895)$27,614,531$(345)$27,614,186
Balance at October 31, 2024154,112$1,541$1,211,206$8,984,105$(1,025,770)$(180,380)$8,990,702$2,504$8,993,206
Net income883,524883,5242,112885,636
Other comprehensive income (loss), net of tax effects(51,515)(51,515)(51,515)
Common stock issued upon the acquisition of Ansys29,95530017,105,23817,105,53817,105,538
Assumption of equity awards in connection with the acquisition of Ansys130,963130,963130,963
Common stock issued, net of shares withheld for employee taxes1,39314(558,370)453,679(104,677)(104,677)
Stock-based compensation655,200655,200709655,909
Adjustments to redeemable non-controlling interest(838)(838)(838)
Deconsolidation of non-controlling interest upon the sale of subsidiary5,6345,634(5,670)(36)
Balance at July 31, 2025185,460$1,855$18,549,871$9,866,791$(572,091)$(231,895)$27,614,531$(345)$27,614,186
Capital in Excess of Par ValueRetained EarningsTreasury StockAccumulated Other Comprehensive Income (Loss)Total Synopsys Stockholders’ EquityNon-controlling InterestTotal Stockholders’ Equity
Common Stock
SharesAmount
Balance at April 30, 2024153,204$1,532$1,182,829$7,478,366$(1,321,554)$(188,013)$7,153,160$4,638$7,157,798
Net income408,055408,055(783)407,272
Other comprehensive income (loss), net of tax effects7,9017,9017,901
Common stock issued, net of shares withheld for employee taxes4094(170,884)133,119(37,761)(37,761)
Stock-based compensation180,418180,4181,121181,539
Adjustments to redeemable non-controlling interest(2,377)(2,377)(2,377)
Balance at July 31, 2024153,613$1,536$1,192,363$7,884,044$(1,188,435)$(180,112)$7,709,396$4,976$7,714,372
Balance at October 31, 2023152,053$1,521$1,276,152$6,741,699$(1,675,650)$(196,414)$6,147,308$5,950$6,153,258
Net income1,149,2741,149,274(2,154)1,147,120
Other comprehensive income (loss), net of tax effects16,30216,30216,302
Purchases of treasury stock(74)(1)1(45,000)(45,000)(45,000)
Equity forward contract, net45,00045,00045,000
Common stock issued, net of shares withheld for employee taxes1,63416(666,689)532,215(134,458)(134,458)
Stock-based compensation536,401536,4013,625540,026
Adjustments for redeemable non-controlling interest(6,929)(6,929)(6,929)
Recognition of non-controlling interest upon issuance of subsidiary stock1,4981,498(2,445)(947)
Balance at July 31, 2024153,613$1,536$1,192,363$7,884,044$(1,188,435)$(180,112)$7,709,396$4,976$7,714,372

See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

SYNOPSYS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Nine Months Ended July 31,
20252024
Cash flows from operating activities:
Net income$884,798$1,140,190
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation211,307180,149
Reduction of operating lease right-of-use assets80,78972,196
Amortization of capitalized costs to obtain revenue contracts38,92057,071
Stock-based compensation655,909540,026
Allowance for credit losses23,55914,696
(Gain) loss on sale of strategic investments3,635(55,077)
Gain on sale of building(51,385)—
Loss on divestitures, net of transaction costs8,299—
Amortization of bridge financing costs41,99618,435
Amortization of debt issuance costs6,790—
Deferred income taxes(326,610)(276,840)
Other(737)(3,730)
Net changes in operating assets and liabilities, net of effects from acquisitions and dispositions:
Accounts receivable(27,989)59,159
Inventories(34,068)(71,303)
Prepaid and other current assets120,348(350,652)
Other long-term assets(427,793)(137,159)
Accounts payable and accrued liabilities31,38417,532
Operating lease liabilities(78,360)(72,254)
Income taxes(140,347)(241,952)
Deferred revenue(19,932)(46,276)
Unrealized loss on settlement of interest rate treasury lock(121,643)—
Net cash provided by operating activities878,870844,211
Cash flows from investing activities:
Proceeds from maturities of short-term investments53,63098,265
Proceeds from sales of short-term investments148,809200
Purchases of short-term investments(47,558)(97,181)
Proceeds from sales of strategic investments3,47055,696
Purchases of strategic investments(4,086)(1,240)
Purchases of property and equipment, net(134,908)(118,772)
Proceeds from sale of building74,279—
Acquisitions, net of cash acquired(16,681,257)(156,947)
Proceeds from business divestiture, net of cash divested142,546—
Other(611)—
Net cash used in investing activities(16,445,686)(219,979)
Cash flows from financing activities:
Proceeds from debt, net of issuance costs14,329,340—
Repayment of debt(2,579)(2,607)
Payment of bridge financing and term loan costs—(72,265)
Issuances of common stock138,101143,148
Payments for taxes related to net share settlement of equity awards(242,791)(278,571)
Redemption of redeemable non-controlling interest(30,000)—
Other(463)(1,096)
Net cash provided by (used in) financing activities14,191,608(211,391)
Effect of exchange rate changes on cash, cash equivalents and restricted cash8,6495,458
Net change in cash, cash equivalents and restricted cash(1,366,559)418,299
Cash, cash equivalents and restricted cash, beginning of year, including cash from discontinued operations3,898,7291,441,187
Cash, cash equivalents and restricted cash, end of period, including cash from discontinued operations2,532,1701,859,486
Less: Cash, cash equivalents and restricted cash from discontinued operations—17,441
Cash, cash equivalents and restricted cash from continuing operations$2,532,170$1,842,045

See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).

SYNOPSYS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Description of Business

Synopsys, Inc. (Synopsys, we, our or us) is the leader in engineering solutions from silicon to systems, enabling customers to rapidly innovate AI-powered products. We deliver trusted and comprehensive solutions spanning silicon design, silicon intellectual property (IP), simulation and analysis (S&A) as well as design services. We partner closely with our customers across a wide range of industries to maximize their R&D capability and productivity, powering innovation today that ignites the ingenuity of tomorrow.

We are a global leader in supplying the mission-critical EDA software that engineers use to design and test integrated circuits (ICs), also known as chips or silicon, and we are pioneering artificial intelligence (AI) driven chip design across the full-stack EDA suite to improve efficiency and accelerate the design, verification testing and manufacturing of advanced digital and analog chips. We provide software and hardware used to validate the electronic systems that incorporate chips and the software that runs on them, including cloud-based digital design flow to boost chip-design development productivity. We also provide technical services and support to help our customers develop advanced chips and electronic systems.

Following the completion of the Ansys Merger (as defined below), we are the global leader in engineering S&A software. Our Ansys® solutions portfolio is widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including high-tech, aerospace and defense, automotive, energy, industrial equipment, materials and chemicals, consumer products, healthcare and construction. These products enable customers to analyze designs on-premises and/or via the cloud, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing, validation and deployment. These products and services are part of our Design Automation segment.

We also offer a broad and comprehensive portfolio of semiconductor IP solutions, which are pre-designed circuits that engineers use as components of larger chip designs to reduce integration risk and speed time to market. Our high quality, silicon-proven semiconductor IP includes logic libraries, embedded memories, analog IP, wired and wireless interface IP, security IP, embedded processors and subsystems. To accelerate IP integration and silicon bring-up, our IP Accelerated initiative provides architecture design expertise, hardening, and signal and power integrity analysis. These products and services are part of our Design IP segment.

Note 2. Summary of Significant Accounting Policies and Basis of Presentation

We have prepared the accompanying condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Pursuant to these rules and regulations, we have condensed or omitted certain information and footnote disclosures we normally include in our annual consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). The condensed consolidated financial statements are unaudited but, in management’s opinion, we have made all adjustments (consisting only of normal, recurring adjustments, except as otherwise indicated) necessary for a fair presentation of our quarterly results. Our interim period operating results do not necessarily indicate the results that may be expected for any other interim period or for the full fiscal year. These financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024 as filed with the SEC on December 19, 2024 (our Annual Report).

Use of Estimates. To prepare financial statements in conformity with U.S. GAAP, management must make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates and could have a material impact on our operating results and financial position.

Principles of Consolidation. The condensed consolidated financial statements include our accounts and the accounts of our wholly and majority-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Fiscal Year and Fiscal Quarter End. Historically, our fiscal year had been 52- or 53-week periods ending on the Saturday nearest to October 31. Fiscal 2024 was a 53-week year ending on November 2, 2024.

We have changed our fiscal year end from the Saturday nearest to October 31 and consisting of 52 or 53 fiscal weeks to a fiscal year end of October 31 each year. The fiscal year change became effective with our fiscal 2025, which began on November 3, 2024. Our fiscal quarters will end on January 31, April 30, July 31 and October 31 of each year.

The third quarter of fiscal 2025 and 2024 ended on July 31, 2025 and August 3, 2024, respectively. Our results of operations for the first nine months of fiscal 2025 and fiscal 2024 included 271 days and 280 days, respectively. For presentation purposes, the condensed consolidated financial statements and accompanying notes refer to the closest calendar month end.

Acquisition of Ansys. On July 17, 2025 (the Closing Date or Acquisition Date), we completed the acquisition of ANSYS, Inc. (Ansys), a provider of broad engineering simulation and analysis software and services for $199.91 in cash and 0.3399 of a share of our common stock in exchange for each ordinary share of Ansys for a total consideration of $34.9 billion.

We accounted for the acquisition of Ansys by applying the acquisition method of accounting for business combinations. The unaudited condensed consolidated financial statements in this Quarterly Report include the financial results of Ansys prospectively from the Acquisition Date. See Note 4. Acquisition of Ansys and Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Condensed Consolidated Financial Statements for additional information.

Significant Accounting Policies. We updated our accounting policy for Revenue Recognition in the third quarter of fiscal 2025. There have been no other material changes to our significant accounting policies included in our Annual Report.

Revenue Recognition. S&A software solutions are offered as subscription solutions and also as perpetual licenses. Software subscription arrangements include bundles of time-based software licenses with support services, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. In such subscription arrangements, the updates to time-based software licenses are not considered integral to maintaining the utility of the software. We consider the license and support services as separate performance obligations. In these instances, we allocate the total consideration received for the revenue arrangement to the separate performance obligations based on the standalone selling prices of the time-based software license and support service. The time-based software license revenue is presented as upfront products revenue, recognized at a point of time upon the later of the delivery date or the beginning of the license period, and the revenue related to the support service is presented as maintenance and service revenue and is recognized over the term of the arrangement. Perpetual license arrangements typically include a perpetual license sold with support services, which includes a stand-ready obligation to provide technical support and software updates over the support term. We allocate the total consideration received for the bundled perpetual and support service arrangements based on the standalone selling prices of the perpetual license and support service. Revenue from perpetual licenses is presented as upfront product revenue and is recognized at a point in time upon the later of the delivery date or the beginning of the license period. Revenue from support service is classified as maintenance and service revenue and is recognized ratably over the term of the contract, as we satisfy the support service performance obligation.

Recently Adopted Accounting Pronouncements

In June 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which applies to all equity securities measured at fair value that are subject to contractual sale restrictions. This change prohibits entities from taking into account contractual restrictions on the sale of equity securities when estimating fair value and introduces required disclosures for such transactions. We adopted the standard as of the beginning of fiscal 2025 on a prospective basis and the adoption did not have a material impact on our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (CODM) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU is effective for our annual reports beginning in fiscal 2025, and interim period reports beginning in fiscal 2026. We are currently

evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures. We will adopt this ASU for our annual report for the fiscal year ending October 31, 2025.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances the transparency and decision usefulness of income tax disclosures primarily through changes to the rate reconciliation and income taxes paid information. The ASU will be effective for us beginning in fiscal 2026 and will be applied on a prospective basis. Early adoption is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income-Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires the disclosure of additional information related to certain costs and expenses, including amounts of inventory purchases, employee compensation, and depreciation and amortization included in each income statement line item. The ASU also requires disclosure of the total amount of selling expenses and our definition of selling expenses. The ASU will be effective for our annual reports beginning in fiscal 2028, and interim period reports beginning in fiscal 2029 either on a prospective or retrospective basis. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.

Note 3. Discontinued Operations

On September 30, 2024, we completed the sale of our former Software Integrity business (the Software Integrity Divestiture) to entities controlled by funds affiliated with Clearlake Capital Group, L.P. and Francisco Partners (together, the Sponsors). The aggregate consideration for the sale was $1.65 billion, comprised of: (i) cash of $1.48 billion received upon closing; (ii) $121.5 million reflecting the present value of $125.0 million in deferred consideration receivable in equal installments over five fiscal quarters beginning on January 17, 2025, subject to acceleration at our option prior to the closing of the Ansys Merger; (iii) $22.2 million reflecting the fair value of contingent consideration of up to $475.0 million receivable upon the Sponsors achieving a specified rate of return in the event of one or more potential liquidity transactions; and (iv) additional consideration receivable of $27.1 million as a result of net working capital adjustments. As a result of the Software Integrity Divestiture, we derecognized net assets of $720.5 million and incurred transaction costs of $61.7 million, resulting in a pre-tax gain of $868.8 million in fiscal 2024.

In the second quarter of fiscal 2025, we finalized the working capital adjustments and received $20.0 million from the Sponsors. The remainder receivable balance of $7.1 million was recorded as a reduction to the previously recorded gain from the Software Integrity Divestiture. We recorded a total pre-tax gain, net of transaction costs, of $860.5 million from the Software Integrity Divestiture.

We have received the entire deferred consideration installment payments of $125.0 million as of July 31, 2025. There was no material change to the fair value of the contingent consideration receivable at the quarter end.

The financial results of the Software Integrity business were presented as income from discontinued operations, net of income taxes in our condensed consolidated statements of income. The following table presents the major components of financial results of our Software Integrity business for the periods presented:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Revenue$—$127,917$—$392,579
Cost of revenue—40,279—136,010
Operating expenses—91,854—262,745
Other income (expense), net—605—1,601
Income (loss) from discontinued operations—(3,611)—(4,575)
Loss on Software Integrity Divestiture——(8,299)—
Income (loss) from discontinued operations before income taxes—(3,611)(8,299)(4,575)
Income tax provision (benefit)—14,202(4,399)8,580
Income (loss) from discontinued operations, net of income taxes$—$(17,813)$(3,900)$(13,155)

The following table presents significant non-cash items and capital expenditures of discontinued operations for the period presented:

Nine Months Ended July 31,
20252024
(in thousands)
Amortization and depreciation$—$16,317
Reduction of operating lease right-of-use assets$—$2,162
Amortization of capitalized costs to obtain revenue contracts$—$20,808
Stock-based compensation$—$47,476
Deferred income taxes$(6,933)$18,939
Purchases of property and equipment$—$972

Note 4. Acquisition of Ansys

On July 17, 2025, we completed our acquisition of Ansys pursuant to the terms of the previously announced Agreement and Plan of Merger, dated as of January 15, 2024 (the Merger Agreement) by and among Synopsys, Ansys and ALTA Acquisition Corp. (Merger Sub), a Delaware corporation and a wholly owned subsidiary of Synopsys. Pursuant to the Merger Agreement, Merger Sub merged with and into Ansys (the Ansys Merger), with Ansys surviving the Ansys Merger as a wholly owned subsidiary of Synopsys. At the effective time of the Ansys Merger (the Effective Time), each share of common stock, par value $0.01 per share, of Ansys (Ansys Common Stock) issued and outstanding immediately prior to the Effective Time (subject to certain exceptions) was converted into the right to receive (i) 0.3399 (the Exchange Ratio) of a share of common stock, par value $0.01 per share, of Synopsys (Synopsys Common Stock) (in the aggregate, the Stock Consideration) and (ii) $199.91 in cash, without interest (the Per Share Cash Amount, and in the aggregate, the Cash Consideration) (the Stock Consideration and the Cash Consideration, collectively, the Merger Consideration). In addition, we assumed certain outstanding Ansys options and other outstanding unvested Ansys equity awards held by continuing Ansys employees.

The aggregate purchase consideration was approximately $34.9 billion, consisting of cash of $17.6 billion, Synopsys Common Stock with a fair value of $17.1 billion, and the balance related to the assumption of certain outstanding Ansys equity awards and the settlement of pre-existing relationships. We acquired Ansys to combine Synopsys’ semiconductor electronic design automation expertise with Ansys’ S&A capabilities to address the growing demand for integrated design and simulation tools across various industries.

We funded the Cash Consideration in the Ansys Merger through a combination of cash on hand, the net proceeds from the issuance of the Senior Notes, and the borrowings under the Term Loan Agreement, each as defined and discussed in Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Condensed Consolidated Financial Statements.

The aggregate purchase consideration was preliminarily allocated as follows:

(in thousands)
Cash for outstanding Ansys Common Stock(1)$17,613,185
Fair value of Synopsys Common Stock issued for outstanding Ansys Common Stock(2)17,105,538
Fair value of assumed Ansys equity awards attributable to pre-combination services(3)130,963
Settlement of pre-existing relationships8,794
Total purchase consideration34,858,480
Less: cash acquired(931,740)
Total purchase consideration, net of cash acquired$33,926,740
Allocations
Total current assets902,639
Property and equipment105,193
Goodwill23,493,632
Intangible assets12,990,000
Other long-term assets256,210
Deferred revenue(637,076)
Other current liabilities(310,082)
Long-term deferred revenue(34,070)
Long-term deferred tax liabilities(2,677,401)
Other long-term liabilities(162,305)
$33,926,740

(1) Represents the total cash paid to settle 88.1 million outstanding shares of Ansys Common Stock as of the Acquisition Date at $199.91 per share and a small portion for the settlement of fractional shares.

(2) Represents the fair value of 30.0 million shares of Synopsys Common Stock issued to settle 88.1 million outstanding shares of Ansys Common Stock. Synopsys issued 0.3399 of a share of Synopsys Common Stock for each Ansys share. The fair value of Synopsys Common Stock was $571.20 per share as of the Acquisition Date.

(3) Represents the fair value of assumed Ansys options and RSUs attributed to pre-combination services. See Note 15. Stock-Based Compensation for additional information.

We allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on their preliminary estimated fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management at the time of acquisition. These estimates and assumptions are believed to be reasonable, but they are inherently uncertain and may be subject to material change as additional information becomes available during the respective measurement period, which will not exceed 12 months from applicable acquisition date. The primary areas that are preliminary relate to the fair values of goodwill, intangible assets, certain tangible assets and liabilities, and income taxes.

Goodwill is primarily attributed to the assembled workforce and anticipated synergies and economies of scale expected from the integration of the Ansys business. The synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the Ansys Merger. The goodwill was assigned to the Design Automation reporting unit and the amount recognized was not deductible for tax purposes.

The operating results of Ansys have been included in our condensed consolidated financial statements for the three and nine months ended July 31, 2025 from the Acquisition Date, and were not material to our financial results for either of these periods.

Transaction Costs

Transaction costs for acquisitions, primarily related to the Ansys Merger, were $114.9 million and $236.7 million during the three and nine months ended July 31, 2025, respectively. Transaction costs for acquisitions, including the Ansys Merger, were $53.0 million and $110.2 million during the three and nine months ended July 31, 2024, respectively. These costs mainly consisted of professional fees and administrative costs for closed and pending acquisitions and were expensed as incurred in our condensed consolidated statements of income.

Intangible Assets

The estimated fair value and weighted average useful life of the Ansys intangible assets were as follows:

Fair valueUseful Lives
(in thousands)(in years)
Core/developed technologies(1)$6,500,0006 - 9
Customer relationships(2)5,100,0009
Contract rights intangible(3)440,0002
Trademarks and trade names(4)950,00023
Total identified intangible assets$12,990,000

(1) Core/developed technology was identified from the products of Ansys and its preliminary fair value was determined using the relief-from-royalty method under the income approach. The relief-from-royalty method applies a royalty rate to projected income to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. The discount rate was determined at the time of measurement based on an analysis of the implied internal rate of return of the transaction, weighted-average cost of capital, and weighted-average return on assets. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash-flows over the forecast period.

(2) Customer relationships represent the preliminary fair value of future projected revenue that will be derived from sales of products to existing Ansys customers. The fair value was determined using the multi-period excess earnings method under the income approach, which involves isolating the net earnings attributable to the asset being measured based on present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. The economic useful life was determined based on historical customer turnover rates and the useful life of developed technology.

(3) Contract rights intangible which represents contracted but unsatisfied or partially unsatisfied performance obligations, primarily relates to the dollar value of purchase arrangements with customers. The preliminary fair value was determined using the multi-period excess earnings method under the income approach. The economic useful life is based on the time to fulfill the outstanding order backlog obligation.

(4)Trademarks and trade names refers to Ansys brand assets. The preliminary fair value was determined by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue attributable to Ansys brand assets. The economic useful life was determined based on the expected usage period of the brand assets and the anticipated cash flows over the forecast period.

We believe the amounts of purchased intangible assets recorded above represent the fair values of and approximate the amounts a market participant would pay for these intangible assets as of the date of the Ansys Merger.

The Optical Solutions Group and PowerArtist RTL Divestiture

Following the determination that it was a necessary step towards obtaining governmental approval of and successfully closing the Ansys Merger, on September 3, 2024, we signed a definitive agreement for the sale of our Optical Solutions Group (OSG) to Keysight Technologies, Inc. (such sale, the Optical Solutions Divestiture). Ansys has similarly entered into a definitive agreement with Keysight Technologies, Inc. for the sale of its PowerArtist RTL business (such sale, together with the Optical Solutions Divestiture, the Regulatory Divestitures). The Regulatory Divestitures are subject to customary closing conditions, including approval by regulatory authorities. The assets and liabilities of OSG and PowerArtist have been classified as assets held for sale in the condensed consolidated balance sheets as of the Acquisition Date. OSG and PowerArtist are included in our Design Automation segment.

The following table presents the major classes of assets and liabilities classified as held for sale as of July 31, 2025.

(in thousands)
Assets:
Accounts receivable, net$18,507
Inventories281
Prepaid and other current assets6,282
Property and equipment, net576
Operating lease right-of-use assets, net1,978
Goodwill31,523
Intangible assets, net15,170
Total current assets held for sale$74,317
Liabilities:
Accounts payable and accrued liabilities$882
Operating lease liabilities2,103
Deferred revenue17,020
Total current liabilities held for sale$20,005

The Regulatory Divestitures did not represent a strategic shift in operations that would have a major effect on the Company's business and are also not material to our financial results, therefore, are not presented as discontinued operations. The measurement of assets held for sale to fair value less costs to sell resulted in a gain which will not be recognized until realized on the date of sale.

Supplemental Pro Forma Information (Unaudited)

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, as if Ansys had been acquired as of the beginning of fiscal year 2024.

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Pro forma total revenue$2,290,354$2,105,893$6,666,029$6,385,630
Pro forma net income (loss)$214,539$107,135$294,183$(127,250)

The unaudited pro forma financial information reflects significant non-recurring adjustments, including transaction costs of $298.4 million, stock-based compensation costs of $71.5 million, and severance costs of $8.2 million. This information is provided for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2024, or of the results of our future operations of the combined business.

Note 5. Revenue

Disaggregated Revenue

The following table shows the percentage of revenue by product groups:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
EDA68.6%66.9%67.6%66.8%
Design IP24.6%30.4%28.0%30.9%
Simulation and Analysis4.5%—%1.6%—%
Other2.3%2.7%2.8%2.3%
Total100.0%100.0%100.0%100.0%

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing customers, resulting in receivables, contract assets, or contract liabilities (deferred revenue) on Synopsys's condensed consolidated balance sheets. For specific software, hardware, and IP agreements with payment plans, Synopsys records an unbilled receivable associated with revenue recognized upon transfer of control, as it holds an unconditional right to invoice and receive payment in the future for those transferred products or services.

A contract asset is recorded when revenue is recognized before Synopsys has the unconditional right to invoice or retains performance risk concerning that performance obligation. These contract assets transition to receivables when the rights become unconditional, generally upon the completion of a milestone. The contract assets listed below are included in prepaid and other current assets and other long-term assets in the condensed consolidated balance sheets.

Contract balances are as follows:

As of
July 31, 2025October 31, 2024
(in thousands)
Contract assets, net$1,177,744$757,075
Unbilled receivables$44,936$44,166
Deferred revenue$2,374,834$1,732,568

During the three and nine months ended July 31, 2025, we recognized revenue of $245.0 million and $1.4 billion, respectively, that was included in the deferred revenue balance as of October 31, 2024, including previously unfulfilled contracts that have expired and are no longer subject to an implied promise to provide future services.

Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) were approximately $10.1 billion as of July 31, 2025, which includes $1.3 billion in non-cancellable Flexible Spending Account (FSA) commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date. We have elected to exclude future sales-based royalty payments from the remaining performance obligations. Approximately 46% of the backlog as of July 31, 2025, excluding non-cancellable FSA, is expected to be recognized as revenue over the next 12 months, with the remainder to be recognized thereafter. The majority of the remaining backlog is expected to be recognized in the following three years.

During the three and nine months ended July 31, 2025, we recognized $44.5 million and $95.2 million, respectively, from performance obligations satisfied from sales-based royalties earned during the periods. During the three and nine months ended July 31, 2024, we recognized $21.1 million and $73.9 million, respectively, from performance obligations satisfied from sales-based royalties earned during the periods.

Costs of Obtaining a Contract with Customer

Capitalized commission costs, net of accumulated amortization, as of July 31, 2025 were $67.9 million, of which $1.4 million are included in prepaid and other current assets, and $66.5 million in other long-term assets in our condensed consolidated balance sheets. Amortization of these assets was $13.5 million and $38.9 million during the three and nine months ended July 31, 2025, respectively, and are included in sales and marketing expense in our condensed consolidated statements of income. Amortization of these assets was $12.6 million and $36.3 million

during the three and nine months ended July 31, 2024, respectively, and are included in sales and marketing expense in our condensed consolidated statements of income.

Note 6. Goodwill and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill during the nine months ended July 31, 2025 are as follows:

(in thousands)
Balance at October 31, 2024$3,448,850
Additions23,493,632
Adjustments(19,470)
Effect of foreign currency translation22,711
Balance at July 31, 2025$26,945,723

The change in goodwill during the nine months ended July 31, 2025 resulted primarily from $23.5 billion related to the Ansys Merger. For additional information, refer to Note 4. Acquisition of Ansys.

Intangible Assets

Intangible assets as of July 31, 2025 consist of the following:

Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
(in thousands)
Core/developed technology$7,271,070$699,991$6,571,079
Customer relationships5,399,231269,1005,130,131
Contract rights intangible613,263182,895430,368
Trademarks and trade names961,32512,991948,334
Total$14,244,889$1,164,977$13,079,912

Intangible assets as of October 31, 2024 consist of the following:

Gross Carrying AmountAccumulated Amortization and ImpairmentNet Carrying Amount
(in thousands)
Core/developed technology$904,347$777,518$126,829
Customer relationships314,140247,02567,115
Contract rights intangible176,382175,1701,212
Trademarks and trade names12,92512,9178
Total$1,407,794$1,212,630$195,164

Amortization expense related to intangible assets consists of the following:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Core/developed technology$37,357$13,447$52,883$38,373
Customer relationships26,9074,05834,89511,467
Contract rights intangible9,0111,0639,7413,465
Trademarks and trade names1,66641,67412
Total$74,941$18,572$99,193$53,317

The following table presents the estimated future amortization of acquired intangible assets as of July 31, 2025:

Fiscal year(in thousands)
Remainder of fiscal 2025$405,134
20261,613,162
20271,544,552
20281,383,210
20291,380,773
2030 and thereafter6,753,081
Total$13,079,912

Note 7. Balance Sheet Components

As of
July 31, 2025October 31, 2024
(in thousands)
Other long-term assets:
Deferred compensation plan assets$426,862$386,757
Contract assets, net355,802—
Capitalized commission, net66,57272,801
Other269,640124,142
Total$1,118,876$583,700
Accounts payable and accrued liabilities:
Payroll and related benefits$733,539$624,823
Accrued income taxes17,063147,115
Other accrued liabilities198,554184,321
Interest payable201,103—
Accounts payable132,945207,333
Total$1,283,204$1,163,592
Other long-term liabilities:
Deferred tax liability$1,188,824$36,557
Deferred compensation plan liabilities426,862386,757
Other182,02746,424
Total$1,797,713$469,738

Note 8. Financial Assets and Liabilities

Cash Equivalents and Short-term Investments

As of July 31, 2025, the balances of our cash equivalents and short-term investments are as follows:

Amortized CostGross Unrealized GainsGross Unrealized Losses Less Than 12 Continuous MonthsGross Unrealized Losses 12 Continuous Months or LongerEstimated Fair Value**(1)**
(in thousands)
Cash equivalents:
Money market funds$267,586$—$—$—$267,586
Total:$267,586$—$—$—$267,586
Short-term investments:
U.S. Treasury, agency & T-bills$5,020$1$(3)$—$5,018
Municipal bonds17,1265(4)—17,127
Corporate debt securities44,90517(20)—44,902
Other188$—$——188
Total:$67,239$23$(27)$—$67,235

*(1)*See Note 9. Fair Value Measurements for further discussion on fair values.

The contractual maturities of our available-for-sale debt securities as of July 31, 2025 are as follows:

Amortized CostFair Value
(in thousands)
1 year or less$20,278$20,292
1-5 years46,96146,943
Total$67,239$67,235

As of October 31, 2024, the balances of our cash equivalents and short-term investments are as follows:

Amortized CostGross Unrealized GainsGross Unrealized Losses Less Than 12 Continuous MonthsGross Unrealized Losses 12 Continuous Months or LongerEstimated Fair Value**(1)**
(in thousands)
Cash equivalents:
Money market funds$869,972$—$—$—$869,972
U.S. Treasury, agency & T-bills7,9841——7,985
Total:$877,956$1$—$—$877,957
Short-term investments:
U.S. Treasury, agency & T-bills$19,411$44$(6)$—$19,449
Corporate debt securities105,024349(115)(2)105,256
Asset-backed securities29,061130(7)(20)29,164
Total:$153,496$523$(128)$(22)$153,869

*(1)*See Note 9. Fair Value Measurements for further discussion on fair values.

Restricted cash. We include amounts generally described as restricted cash in cash and cash equivalents when reconciling beginning-of-period and end-of-period total amounts shown in the condensed consolidated statements of cash flows. Restricted cash is primarily associated with office leases and employee loan programs.

The following table provides a reconciliation of cash, cash equivalents and restricted cash included in the condensed consolidated balance sheets and the condensed consolidated statements of cash flows:

As of
July 31, 2025October 31, 2024
(in thousands)
Cash and cash equivalents$2,526,475$3,896,532
Restricted cash included in prepaid and other current assets4,7171,529
Restricted cash included in other long-term assets978668
Cash, cash equivalents and restricted cash$2,532,170$3,898,729

Non-marketable equity securities. Our portfolio of non-marketable equity securities consists of strategic investments in privately held companies. During the first quarter of fiscal 2024, we completed the sale of certain strategic investments in privately-held companies. The gain recognized from the sales was $55.1 million and included in other income (expense), net, in our condensed consolidated statements of income. There were no material impairments of non-marketable equity securities during the three and nine months ended July 31, 2025 and 2024.

Derivatives

We recognize derivative instruments as either assets or liabilities in the condensed consolidated balance sheets at fair value and provide qualitative and quantitative disclosures about such derivatives. We operate internationally and are exposed to potentially adverse movements in foreign currency exchange and interest rates. We enter into hedges in the form of foreign currency forward contracts to reduce our exposure to foreign currency rate changes on non-functional currency denominated forecasted transactions and balance sheet positions including: (1) certain assets and liabilities, (2) shipments forecasted to occur within approximately one month, (3) future billings and revenue on previously shipped orders, and (4) certain future intercompany invoices denominated in foreign currencies.

The majority of the forward contracts are short-term with maturity of up to 30 months at inception. We do not use foreign currency forward contracts for speculative or trading purposes. We enter into foreign exchange forward contracts with high credit quality financial institutions that are rated "A" or above and to date have not experienced nonperformance by counterparties. In addition, we mitigate credit risk in derivative transactions by permitting net settlement of transactions with the same counterparty and anticipate continued performance by all counterparties to such agreements.

The assets or liabilities associated with the forward contracts are recorded at fair value in other current assets or accrued liabilities in the condensed consolidated balance sheets. The accounting for gains and losses resulting from changes in fair value depends on the use of the foreign currency forward contract and whether it is designated and qualifies for hedge accounting. The cash flow impact upon settlement of the derivative contracts is included in net cash used in operating activities in the condensed consolidated statements of cash flows.

Additionally, in order to manage interest rate exposure related to anticipated debt transactions, in the first quarter of fiscal 2025, we entered into treasury rate lock agreements to hedge against unfavorable interest rate changes. The accounting for gains and losses resulting from changes in fair value depends on whether these are designated and qualify for hedge accounting. The assets or liabilities associated with these derivatives are recorded at fair value in other current assets or accrued liabilities in the condensed consolidated balance sheets. The cash flow impact upon settlement of these derivative contracts is included in net cash used in operating activities in the condensed consolidated statements of cash flows.

Cash Flow Hedging Activities

Certain foreign exchange forward contracts are designated and qualify as cash flow hedges. These contracts have durations of up to 30 months or less. Certain forward contracts are rolled over periodically to capture the full length of exposure to our foreign currency risk, which can be up to three years. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on the hedged transactions. The related gains or losses resulting from changes in fair value of these hedges is initially reported, net of tax, as a component of other comprehensive income (loss) in stockholders’ equity and reclassified into revenue or operating expenses, as appropriate, at the time the hedged transactions affect earnings. We expect a majority of the hedge balance in other comprehensive income (loss) to be reclassified to the statements of income after the next 12 months.

We did not record any gains or losses related to discontinuation of foreign exchange forward contracts cash flow hedges during the nine months ended July 31, 2025 and 2024.

During the first quarter of fiscal 2025, we entered into 6-month interest rate hedge contracts (the 2025 Rate Lock Agreements) with notional value of $2.0 billion to lock the benchmark interest rate prior to expected debt issuances with 10-year and 30-year terms. The objective of the 2025 Rate Lock Agreements was to hedge the risk associated with the variability in interest rates due to the changes in the benchmark rate leading up to the closing of the intended financing on the notional amount being hedged. To receive hedge accounting treatment, the hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on the hedged transactions. These derivatives are designated as cash flow hedges with unrealized gains and losses deferred in other comprehensive income (loss) (OCI). The 2025 Rate Lock Agreements terminated and settled in the second quarter of fiscal 2025, and we recorded the fair value of $121.6 million as a loss within OCI. The unrealized loss of $121.6 million is being amortized to interest expense over the life of the related debt. We expect $7.0 million of the unrealized loss to be amortized to interest expense over the next 12 months. As of July 31, 2025, the unamortized portion of the fair value of the 2025 Rate Lock Agreements was $118.7 million. We had no interest rate hedge contracts outstanding as of July 31, 2025.

During the second quarter of fiscal 2025, we entered into a deferred payment agreement with the counterparty bank to defer the cash settlement of 2025 Rate Lock Agreements over a period of 5.5 years with installments due semi-annually. The implied interest rate is 3.45%. This liability is recognized in our condensed consolidated balance sheets as short-term debt for the portion due within the next 12 months and as long-term debt for the remaining portion. There were no debt covenants applicable to the deferred payment agreement.

Non-designated Hedging Activities

Our foreign exchange forward contracts that are used to hedge non-functional currency denominated balance sheet assets and liabilities are not designated as hedging instruments. Accordingly, any gains or losses from changes in the fair value of the forward contracts are recorded in other income (expense), net. The gains and losses on these forward contracts generally offset the gains and losses associated with the underlying assets and liabilities, which are also recorded in other income (expense), net. The duration of the forward contracts for hedging our balance sheet exposure is approximately one month.

We also have certain foreign exchange forward contracts for hedging certain international revenues and expenses that are not designated as hedging instruments. Accordingly, any gains or losses from changes in the fair value of these forward contracts are recorded in other income (expense), net. The gains and losses on these forward contracts generally offset the gains and losses associated with the foreign currency in operating income. The duration of these forward contracts is usually less than one year. The overall goal of our hedging program is to minimize the impact of currency fluctuations on the net income over the fiscal year.

The effects of the non-designated foreign currency derivative instruments in the condensed consolidated statements of income are summarized as follows:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Gains (losses) recorded in other income (expense), net$(5,298)$955$1,467$(110)

The notional amounts in the table below for foreign currency derivative instruments provide one measure of the transaction volume outstanding:

As of
July 31, 2025October 31, 2024
(in thousands)
Total gross notional amounts$1,223,925$1,686,341
Net fair value$4,371$1,819

Our exposure to the market gains or losses will vary over time as a function of currency exchange rates. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.

The following table represents the condensed consolidated balance sheets location and amount of foreign currency derivative instrument fair values segregated between designated and non-designated hedge instruments:

Fair values of derivative instruments designated as hedging instrumentsFair values of derivative instruments not designated as hedging instruments
(in thousands)
Balance at July 31, 2025
Other current assets$10,422$679
Accrued liabilities$4,166$2,564
Balance at October 31, 2024
Other current assets$8,839$12
Accrued liabilities$6,918$114

The following table represents the location of the amount of gains and losses on derivative instrument fair values for designated hedge instruments, net of tax in the condensed consolidated statements of income:

Location of gains (losses) recognized in OCI on derivativesAmount of gains (losses) recognized in OCI on derivatives (effective portion)Location of gains (losses) reclassified from OCIAmount of gains (losses) reclassified from OCI (effective portion)
(in thousands)
Three months ended July 31, 2025
Foreign exchange contractsRevenue$4,751Revenue$1,056
Foreign exchange contractsOperating expenses847Operating expenses(8)
Interest rate contractsInterest expense—Interest expenses(1,331)
Total$5,598$(283)
Three months ended July 31, 2024
Foreign exchange contractsRevenue$4,501Revenue$2,689
Foreign exchange contractsOperating expenses(320)Operating expenses(611)
Total$4,181$2,078
Nine months ended July 31, 2025
Foreign exchange contractsRevenue$17,953Revenue$1,336
Foreign exchange contractsOperating expenses(1,295)Operating expenses(5,664)
Interest rate contractsInterest expense(93,216)Interest expenses(2,219)
Total$(76,558)$(6,547)
Nine months ended July 31, 2024
Foreign exchange contractsRevenue$1,936Revenue$(1,593)
Foreign exchange contractsOperating expenses5,720Operating expenses(763)
Total$7,656$(2,356)

Note 9. Fair Value Measurements

ASC 820-10, Fair Value Measurements and Disclosures, defines fair value, establishes guidelines and enhances disclosure requirements for fair value measurements. The accounting guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The accounting guidance also establishes a fair value hierarchy based on the independence of the source and objective evidence of the inputs used. There are three fair value hierarchies based upon the level of inputs that are significant to fair value measurement:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical instruments in active markets;

Level 2—Observable inputs other than quoted prices for identical instruments in active markets, quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in inactive markets, and model-driven valuations in which all significant inputs and significant value drivers are observable in active markets; and

Level 3—Unobservable inputs derived from fair valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

On a recurring basis, we measure the fair value of certain assets and liabilities, which include cash equivalents, short-term investments, marketable securities, non-qualified deferred compensation plan assets, contingent consideration receivable, and foreign currency derivative contracts.

Our cash equivalents, short-term investments and marketable securities are classified within Level 1 or Level 2 because they are valued using quoted market prices in an active market or alternative independent pricing sources and models utilizing market observable inputs.

Our non-qualified deferred compensation plan assets consist of money market and mutual funds invested in domestic and international marketable securities that are directly observable in active markets and are therefore classified within Level 1.

Our foreign currency derivative contracts are classified within Level 2 because these contracts are not actively traded, and the valuation inputs are based on quoted prices and market observable data of similar instruments.

Our borrowings under our Credit and Term Loan facilities are classified within Level 2 because these borrowings are not actively traded and have a variable interest rate structure based upon market rates currently available to us for debt with similar terms and maturities. See Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Condensed Consolidated Financial Statements for more information on these borrowings.

Our contingent consideration receivable, which was recorded in connection with the Software Integrity Divestiture, was classified within Level 3 because it was estimated using significant inputs that were not observable in the market. See Note 3. Discontinued Operations of the Notes to Condensed Consolidated Financial Statements for additional information.

Assets/Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below as of July 31, 2025:

Fair Value Measurement Using
DescriptionTotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
(in thousands)
Assets
Cash equivalents:
Money market funds$267,586$267,586$—$—
Short-term investments:
U.S. Treasury, agency & T-bills5,018—5,018—
Municipal bonds17,127—17,127—
Corporate debt securities44,902—44,902—
Other188—188—
Prepaid and other current assets:
Foreign currency derivative contracts11,101—11,101—
Contingent consideration receivable22,202——22,202
Other long-term assets:
Deferred compensation plan assets426,862426,862——
Marketable equity securities969969——
Total assets$795,955$695,417$78,336$22,202
Liabilities
Accounts payable and accrued liabilities:
Foreign currency derivative contracts$6,730$—$6,730$—
Other long-term liabilities:
Deferred compensation plan liabilities426,862426,862——
Total liabilities$433,592$426,862$6,730$—

Assets and liabilities measured at fair value on a recurring basis are summarized below as of October 31, 2024:

Fair Value Measurement Using
DescriptionTotalQuoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)
(in thousands)
Assets
Cash equivalents:
Money market funds$869,972$869,972$—$—
U.S. Treasury, agency & T-bills7,985—7,985—
Short-term investments:
U.S. Treasury, agency & T-bills19,449—19,449—
Corporate debt securities105,256—105,256—
Asset-backed securities29,164—29,164—
Prepaid and other current assets:
Foreign currency derivative contracts8,851—8,851—
Contingent consideration receivable22,202——22,202
Other long-term assets:
Deferred compensation plan assets386,757386,757——
Total assets$1,449,636$1,256,729$170,705$22,202
Liabilities
Accounts payable and accrued liabilities:
Foreign currency derivative contracts$7,032$—$7,032$—
Other long-term liabilities:
Deferred compensation plan liabilities386,757386,757——
Total liabilities$393,789$386,757$7,032$—

Assets/Liabilities Measured at Fair Value on a Non-Recurring Basis

Non-Marketable Equity Securities

Non-marketable equity securities are classified within Level 3 as they are valued using a combination of observable transaction price and unobservable inputs or data in an inactive market due to the absence of market price and inherent lack of liquidity.

Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities

The following table summarizes our borrowings as of July 31, 2025:

Effective Interest RateAmount (in thousands)
Fixed-rate 4.550% Senior Notes due on April 1, 20274.840%$1,000,000
Fixed-rate 4.650% Senior Notes due on April 1, 20284.850%1,000,000
Fixed-rate 4.850% Senior Notes due on April 1, 20304.980%2,000,000
Fixed-rate 5.000% Senior Notes due on April 1, 20325.150%1,500,000
Fixed-rate 5.150% Senior Notes due on April 1, 20355.270%2,400,000
Fixed-rate 5.700% Senior Notes due on April 1, 20555.800%2,100,000
Term Loan due on July 17, 20275.670%1,450,000
Term Loan due on July 17, 20285.770%2,850,000
Total14,300,000
Unamortized discount and issuance costs(94,474)
Total Senior Notes and Term Loan14,205,526
Deferred payment on settlement of interest rate treasury lock121,643
Other borrowings12,964
Total$14,340,133
Reported as:
Short-term debt$22,117
Long-term debt14,318,016
Total$14,340,133

Senior Notes:

On March 17, 2025, we issued $10.0 billion in aggregate principal amount of senior, unsecured and unsubordinated long-term notes, including $1.0 billion aggregate principal amount of 4.550% Senior Notes due April 1, 2027 (the 2027 Senior Notes), $1.0 billion aggregate principal amount of 4.650% Senior Notes due April 1, 2028 (the 2028 Senior Notes), $2.0 billion aggregate principal amount of 4.850% Senior Notes due April 1, 2030,(the 2030 Senior Notes), $1.5 billion aggregate principal amount of 5.000% Senior Notes due April 1, 2032 (the 2032 Senior Notes), $2.4 billion aggregate principal amount of 5.150% Senior Notes due April 1, 2035 (the 2035 Senior Notes) and $2.1 billion aggregate principal amount of 5.700% Senior Notes due April 1, 2055 (the 2055 Senior Notes and together with the 2027 Senior Notes, 2028 Senior Notes, 2030 Senior Notes, 2032 Senior Notes and 2035 Senior Notes, the Senior Notes). Our total proceeds were approximately $9.9 billion, net of original issuance discount of $17.0 million and total issuance costs of $70.2 million. Interest on the Senior Notes is payable semi-annually on April 1 and October 1 of each year, beginning on October 1, 2025. The discount and issuance costs on our Senior Notes are amortized to interest expense over the terms of the respective notes using the effective interest method. The effective rates for the Senior Notes include the interest on the notes, the accretion of the discount and the amortization of issuance costs.

The Senior Notes were issued under an indenture, dated as of March 17, 2025 (the Base Indenture), as supplemented by the first supplemental indenture, dated as of March 17, 2025 (the Supplemental Indenture and, together with the Base Indenture, the Indenture), each between Synopsys and U.S. Bank Trust Company, National Association, as trustee.

The net proceeds of the Senior Notes were used to fund a portion of the Cash Consideration in the Ansys Merger, pay related transaction fees and expenses, as well as repay Ansys’ outstanding indebtedness.

At any time and from time to time prior to their respective par call dates (as defined in the Indenture and applicable series of Senior Notes or, in the case of the 2027 Senior Notes, prior to the maturity date), Synopsys may redeem the applicable series of the Senior Notes at its option, in whole or in part, at any time and from time to time, at the “make-whole” redemption price (calculated as set forth in the Indenture and applicable series of Senior Notes), plus, in each case, accrued and unpaid interest, if any, on the Senior Notes being redeemed to, but excluding, the redemption date. In addition, on or after the applicable par call date, Synopsys may redeem the 2028 Senior Notes, 2030 Senior Notes, 2032 Senior Notes, 2035 Senior Notes or 2055 Senior Notes at its option, in whole or in part, at any time and from time to time, at a redemption price equal to 100% of the principal amount of the Senior Notes being redeemed plus accrued and unpaid interest, if any, thereon to, but excluding, the applicable redemption date.

The Indenture contains covenants limiting Synopsys’ ability to create certain liens and enter into certain sale and leaseback transactions. These covenants are subject to important limitations and exceptions as set forth in the Indenture.

Based on the trading prices of the Senior Notes, the fair value of our Senior Notes was $10.0 billion as of July 31, 2025. While the Senior Notes are recorded at cost, the fair value of long-term debt was determined based on observable market prices in less active markets and categorized as Level 2 for purposes of the fair value measurement hierarchy.

As of July 31, 2025, we were in compliance with all of our covenants under the Indenture.

During the first quarter of fiscal 2025, we entered into 6-month interest rate hedge contracts with an aggregate notional amount of $2.0 billion to manage the variability in cash flows due to changes in benchmark interest rates related to the Senior Notes. These interest rate hedge contracts were terminated and settled during the second quarter of fiscal 2025, and we entered into a deferred payment agreement with the counterparty bank to defer the cash settlement. See Note 8. Financial Assets and Liabilities of the Notes to Condensed Consolidated Financial Statements for more information on these cash flow hedging activities.

Bridge Commitment:

On January 15, 2024, we entered into the Bridge Commitment Letter with certain financial institutions that committed to provide, subject to the satisfaction of customary closing conditions, the bridge commitment (the Bridge Commitment) for the purpose of financing a portion of the aggregate Cash Consideration in the Ansys Merger and paying related fees and expenses in connection with the Ansys Merger and the other transactions contemplated by the Merger Agreement.

On October 3, 2024, we reduced the Bridge Commitment by $1.1 billion to $10.6 billion following the closing of the Software Integrity Divestiture. On March 17, 2025, we further reduced the Bridge Commitment by $9.9 billion following the issuance of the Senior Notes. On the Acquisition Date, we terminated the approximately $690.0 million in remaining Bridge Commitment, reducing total Bridge Commitment to $0.

Term Loan:

On February 13, 2024, we entered into a term loan facility credit agreement (the Term Loan Agreement) in connection with the financing of the Ansys Merger. On July 17, 2025, we borrowed the full $4.3 billion available under the Term Loan Agreement to fund a portion of the Cash Consideration in the Ansys Merger and to pay transaction fees, premiums and expenses related to the Ansys Merger.

The Term Loan Agreement provides for two tranches of senior unsecured term loans: a $1.45 billion tranche (Tranche 1) that matures on July 17, 2027 and a $2.85 billion tranche (Tranche 2) that matures on July 17, 2028. The outstanding balance under the Term Loan Agreement as of July 31, 2025 was $4.3 billion.

Under the Term Loan Agreement, borrowings bear interest on the principal amount outstanding at a floating rate based on, at Synopsys’ election, (i) the Adjusted Term SOFR Rate (as defined in the Term Loan Agreement) plus an applicable margin based on the credit ratings of Synopsys ranging from 0.875% to 1.375% (in the case of Tranche 1) or 1.000% to 1.500% (in the case of Tranche 2) or (ii) the ABR (as defined in the Term Loan Agreement) plus an applicable margin based on the credit ratings of Synopsys ranging from 0.000% to 0.375% (in the case of Tranche 1) or 0.000% to 0.500% (in the case of Tranche 2).

The Term Loan Agreement contains a financial covenant requiring that Synopsys maintain a maximum consolidated leverage ratio, as well as certain other non-financial covenants. As of July 31, 2025, we were in compliance with the financial covenant.

Revolving Credit Facilities:

On February 13, 2024, we entered into a Sixth Amendment Agreement (the Sixth Amendment), which amended and restated our previous revolving credit agreement, dated as of December 14, 2022 (as amended and restated, the Revolving Credit Agreement).

The Revolving Credit Agreement provides an unsecured $850.0 million committed multicurrency revolving credit facility and an unsecured uncommitted incremental revolving loan facility of up to $150.0 million. The maturity date of the revolving credit facility is December 14, 2027, which may be extended at our option.

Under the Sixth Amendment, certain amendments became effective on February 13, 2024 and certain additional amendments became effective on the Acquisition Date. The Sixth Amendment amended the financial covenant to allow netting of the cash proceeds of certain debt incurred to finance the Ansys Merger as well as certain other modifications set forth therein. The Sixth Amendment, among other things, also amended: (i) the applicable margin used to determine the interest that accrues on loans and the facility fee payable under the revolving credit facility to be based on our credit ratings, (ii) the financial covenant thresholds under the financial covenant in the Revolving Credit Agreement requiring us to maintain a maximum consolidated leverage ratio and (iii) certain conditions to borrowing, other non-financial covenants and events of default.

The Revolving Credit Agreement contains a financial covenant requiring us to maintain a maximum consolidated leverage ratio, as well as other non-financial covenants. As of July 31, 2025, we were in compliance with the financial covenant.

Interest under the Revolving Credit Agreement accrues on dollar-denominated loans at a floating rate based on, at Synopsys’ election, (i) the Adjusted Term SOFR Rate plus an applicable margin based on our credit ratings ranging from 0.795% to 1.200% or (ii) the ABR plus an applicable margin based on our credit ratings ranging from 0.000% to 0.200%. In addition to the interest on any outstanding loans, Synopsys is also required to pay a facility fee on the entire portion of the revolving credit facility ranging from 0.080% to 0.175% based on the credit ratings of Synopsys on the daily amount of the revolving commitment.

There was no outstanding balance under the Revolving Credit Agreement as of July 31, 2025 and October 31, 2024.

Other Borrowings:

In July 2018, we entered into a 12-year 220.0 million Renminbi (approximately $33.0 million) credit agreement with a lender in China to support our facilities expansion. Borrowings bear interest at a floating rate based on the 5-year Loan Prime Rate plus 0.74%. As of July 31, 2025, we had $13.0 million outstanding balance under the agreement.

The carrying amount of the short-term and long-term debt approximates the estimated fair value.

The future principal payments of debt as of July 31, 2025 are as follows:

Principal Payments
Fiscal year(in thousands)
Remainder of fiscal 2025$11,058
202624,710
20272,474,710
20283,874,710
202924,710
2030 and thereafter8,024,709
Total$14,434,607

Note 11. Leases

We have operating lease arrangements for office space, data center, equipment and other corporate assets. These leases have various expiration dates through December 31, 2042, some of which include options to extend the leases for up to 15 years. We consider the lease renewal options in determining the lease term and include associated potential option payments in lease payments when it is reasonably certain that the renewal options will be exercised.

The components of our lease expense during the period presented are as follows:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Operating lease expense (1)$29,398$23,800$80,513$67,848
Variable lease expense (2)8,6865,18222,24316,761
Total lease expense$38,084$28,982$102,756$84,609

(1) Operating lease expense includes immaterial amounts of short-term leases, net of sublease income.

(2) Variable lease expense includes payments to lessors that are not fixed or determinable at lease commencement date. These payments primarily consist of maintenance, property taxes, insurance and variable indexed based payments.

Supplemental cash flow information during the period presented is as follows:

Nine Months Ended July 31,
20252024
(in thousands)
Cash paid for amounts included in the measurement of operating lease liabilities(1)$79,819$74,715
ROU assets obtained in exchange for operating lease liabilities(2)$110,069$64,790

(1) Cash paid for amounts included in the measurement of operating lease liabilities included cash from discontinued operations of $4.3 million during the nine months ended July 31, 2024.

(2) ROU assets obtained in exchange for operating lease liabilities included ROU assets from discontinued operations of $0.7 million during the nine months ended July 31, 2024.

Lease term and discount rate information related to our operating leases as of the end of the period presented are as follows:

As of
July 31, 2025October 31, 2024
Weighted-average remaining lease term (in years)6.817.59
Weighted-average discount rate3.33%2.86%

The following table represents the maturities of our future lease payments due under operating leases as of July 31, 2025:

Lease Payments
Fiscal year(in thousands)
Remainder of fiscal 2025$34,397
2026152,997
2027149,967
2028136,922
2029127,192
2030 and thereafter294,037
Total future minimum lease payments895,512
Less: Imputed interest95,331
Total lease liabilities$800,181

In addition, the sublease income from facilities leased by us, due to us as of July 31, 2025 are as follows:

Lease Receipts
Fiscal year(in thousands)
Remainder of fiscal 2025$4,604
202618,767
202719,689
202820,280
202920,888
2030 and thereafter17,867
Total$102,095

Note 12. Redeemable Non-controlling Interest

During the second quarter of fiscal 2022, we acquired a 75% equity interest in OpenLight Photonics, Inc. (OpenLight) for cash consideration of $90.0 million. The remaining 25% equity interest in OpenLight was held by Juniper Networks, Inc. (the Minority Investor) from their contribution of IP and certain tangible assets.

The agreement with the Minority Investor contained redemption features whereby the interest held by the Minority Investor was redeemable either (1) at the option of the Minority Investor on or after the third anniversary of the acquisition or sooner in certain circumstances or (2) at our option beginning on the third anniversary of the acquisition. This option was exercisable at the greater of fair value at the time of redemption or $30.0 million. The fair value of the option was initially valued at $10.1 million, resulting in a total consideration of $100.1 million.

As of the end of fiscal 2024, upon issuance of new OpenLight stock, our ownership interest in OpenLight was reduced to 71% and Juniper's was reduced to 24%. On December 23, 2024, we exercised the call option to purchase the remaining ownership interest held by Juniper at a redemption price of $30.0 million, bringing our ownership interest in OpenLight to 95%.

Subsequently on December 30, 2024, we divested our entire ownership interest in OpenLight. We had previously recorded an impairment charge of $53.5 million related to acquired intangible assets in OpenLight in fiscal 2024. See Note 6. Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements in our Annual Report for more information. The goodwill related to the OpenLight acquisition was assigned to our Design Automation reporting unit. The resulting loss on the OpenLight divestiture, included in other income (expense), net in the condensed consolidated statements of income, was not material to our results of operation.

During the first quarter of fiscal 2025, prior to the exercise of the call option, OpenLight incurred a net loss of $3.5 million, of which $0.8 million was attributable to redeemable non-controlling interest. We have excluded the financial results of OpenLight from our condensed consolidated financial statements from the date of sale.

Note 13. Accumulated Other Comprehensive Income (Loss)

The components of accumulated other comprehensive income (loss), on an after-tax basis where applicable, are as follows:

As of
July 31, 2025October 31, 2024
(in thousands)
Cumulative currency translation adjustments$(143,080)$(161,954)
Unrealized gains (losses) on derivative instruments, net of taxes(88,811)(18,800)
Unrealized gains (losses) on available-for-sale securities, net of taxes(4)374
Total$(231,895)$(180,380)

The effect of amounts reclassified out of each component of accumulated other comprehensive income (loss) into net income is as follows:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Reclassifications:
Gains (losses) on cash flow hedges, net of taxes
Revenues$1,056$2,689$1,336$(1,593)
Operating expenses(8)(611)(5,664)(763)
Interest expense(1,331)—(2,219)—
Total$(283)$2,078$(6,547)$(2,356)

Amounts reclassified during the nine months ended July 31, 2025 and 2024 primarily consisted of gains (losses) from our cash flow hedging activities. See Note 8. Financial Assets and Liabilities of the Notes to Condensed Consolidated Financial Statements.

Note 14. Stock Repurchase Program

In fiscal 2022, our Board of Directors approved a stock repurchase program (the Program) with authorization to purchase up to $1.5 billion of our common stock. As of July 31, 2025, $194.3 million remained available for future repurchases under the Program. However, in connection with the Ansys Merger, we have suspended the Program until we reduce our debt levels.

Stock repurchase activities as well as the reissuance of treasury stock for employee stock-based compensation purposes are as follows:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024**(1)**
(in thousands)
Total shares repurchased———74
Total cost of the repurchased shares$—$—$—$45,000
Reissuance of treasury stock3594091,3931,634

(1) Included the 73,903 shares and $45.0 million equity forward contract from the August 2023 Accelerated Share Repurchase settled in November 2023.

Note 15. Stock-Based Compensation

As of the Acquisition Date, we assumed outstanding equity incentive awards under the following Ansys equity incentive plans: (i) the Fourth Amended and Restated Ansys, Inc. 1996 Stock Option and Grant Plan, (ii) the Fifth Amended and Restated Ansys, Inc. 1996 Stock Option and Grant Plan, and (iii) the Ansys, Inc. 2021 Equity and Incentive Compensation Plan (each, an Assumed Equity Plan, and collectively the Assumed Equity Plans). The awards under the Assumed Equity Plans, previously issued in the form of stock options and RSUs, were generally settled as follows:

(1) Each award of Ansys restricted stock units (RSUs) held by non-employee directors and specified employees that were outstanding immediately prior to the Acquisition Date (the specified RSUs), including any RSUs deferred as part of Ansys' director deferred compensation program, was canceled and terminated and converted into the right to receive the Merger Consideration as of the Acquisition Date.

(2) Each award of Ansys stock options and RSUs (other than specified RSUs) that was outstanding and unvested immediately prior to the Acquisition Date was assumed by us (each, an Assumed Option and Assumed RSU, and collectively, the Assumed Equity Awards) and converted to stock options exercisable and RSUs settleable in the number of shares of our common stock equal to the product of (i) the number of Ansys shares underlying such Assumed Equity Awards as of immediately prior to the Acquisition Date multiplied by (ii) the conversion ratio defined in the Merger Agreement. Any Ansys performance-based RSUs that were assumed by us will only be

subject to time-based vesting. The number of Ansys shares underlying the performance-based RSUs for which the performance period was not complete as of the Acquisition Date was based on the target level of performance, and the number of Ansys shares underlying the performance-based RSUs for which the performance period was complete as of the Acquisition Date was based on the actual level of performance. The Assumed Equity Awards generally retain all of the rights, terms and conditions of the respective plans under which they were originally granted, including the same service-based vesting schedule, applicable thereto.

As of the Acquisition Date, the estimated fair value of the Assumed Equity Awards was $639.7 million, of which $131.0 million was recognized as goodwill and the balance of $508.7 million will be recognized as stock-based compensation expense over the remainder term of the Assumed Equity Awards. The fair value of the Assumed Equity Awards for services rendered through the Acquisition Date was recognized as a component of the purchase consideration, with the remaining fair value related to the post-combination services to be recorded as stock-based compensation over the remaining vesting period. A total of 1.1 million shares of our common stock underlying the Assumed Equity Awards that will be recognized as stock-based compensation expense have an estimated weighted average fair value at the Acquisition Date of $453.83 per share.

During the three months ended July 31, 2025, stock-based compensation expense included $67.2 million related to the Assumed Equity Awards in connection with the Ansys Merger. As of July 31, 2025, we had $432.5 million of total unrecognized stock-based compensation expense relating to RSUs underlying the outstanding Assumed Equity Awards, which is expected to be recognized over a weighted-average period of 1.74 years.

The compensation cost recognized in the condensed consolidated statements of income for our stock compensation arrangements is as follows:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Cost of products$22,943$14,645$66,470$44,824
Cost of maintenance and service10,2229,67728,71528,126
Research and development expense113,86189,279326,274269,087
Sales and marketing expense45,56430,251117,21491,811
General and administrative expense75,13320,502117,23658,702
Stock-based compensation expense from continuing operations before taxes267,723164,354655,909492,550
Stock-based compensation expense from discontinued operations before taxes—17,185—47,476
Total stock-based compensation expense before taxes267,723181,539655,909540,026
Income tax benefit(38,686)(29,972)(94,779)(89,158)
Stock-based compensation expense after taxes$229,037$151,567$561,130$450,868

During the three and nine months ended July 31, 2025 and 2024, we recognized stock-based compensation expense relating to RSUs granted to senior executives with certain market, performance and service conditions (market-based RSUs). The grant date fair value of the market-based RSUs and the assumptions used in the Monte Carlo simulation model to determine the grant date fair value during the periods are as follows:

Nine Months Ended July 31,
20252024
Expected life (in years)2.67 - 2.792.89
Risk-free interest rate3.90% - 4.39%4.41%
Volatility33.40% - 34.72%34.03%
Grant date fair value$409.94 - $464.17$600.29

As of July 31, 2025, we had $1.7 billion of total unrecognized stock-based compensation expense relating to options, RSUs and restricted stock awards, which is expected to be recognized over a weighted-average period of 2.0 years. As of July 31, 2025, we had $109.2 million of unrecognized stock-based compensation expense relating

to our Employee Stock Purchase Plan, which is expected to be recognized over a period of approximately 2.0 years.

The intrinsic values of equity awards exercised during the periods are as follows:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Intrinsic value of awards exercised$31,834$90,973$86,671$166,993

Note 16. Net Income (Loss) Per Share

We compute basic net income (loss) per share by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the dilution from potential common shares outstanding such as stock options and unvested RSUs and awards during the period using the treasury stock method.

The table below reconciles the weighted average common shares used to calculate basic net income (loss) per share with the weighted average common shares used to calculate diluted net income (loss) per share:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands, except per share amounts)
Numerator:
Net income from continuing operations attributed to Synopsys$242,509$425,868$887,424$1,162,429
Net income (loss) from discontinued operations attributed to Synopsys—(17,813)(3,900)(13,155)
Net income attributed to Synopsys$242,509$408,055$883,524$1,149,274
Denominator:
Weighted average common shares for basic net income per share160,174153,417156,536152,885
Dilutive effect of common share equivalents from equity-based compensation1,5082,7141,6402,978
Weighted average common shares for diluted net income per share161,682156,131158,176155,863
Net income (loss) per share attributed to Synopsys - basic:
Continuing operations$1.51$2.78$5.67$7.60
Discontinued operations$—$(0.12)$(0.03)$(0.08)
Basic net income per share$1.51$2.66$5.64$7.52
Net income (loss) per share attributed to Synopsys - diluted:
Continuing operations$1.50$2.73$5.61$7.46
Discontinued operations$—$(0.12)$(0.02)$(0.09)
Diluted net income per share$1.50$2.61$5.59$7.37
Anti-dilutive employee stock-based awards excluded479211430203

Note 17. Segment Disclosure

Segment reporting is based upon the “management approach,” i.e., how management organizes our operating segments for which separate financial information is (1) available and (2) evaluated regularly by the CODM in deciding how to allocate resources and in assessing performance. Our CODM is our CEO.

We have two reportable segments: (1) Design Automation, which includes our advanced silicon design, verification products and services, S&A solutions, system integration products and services, digital, custom and field programmable gate array (FPGA) IC design software, verification software and hardware products, manufacturing software products and other; and (2) Design IP, which includes our interface, foundation, security, and embedded processor IP, IP subsystems, and IP implementation services.

We completed our assessment of our organizational structure after the Ansys Merger and concluded that Ansys will be included within our Design Automation segment based on how our CODM will evaluate the financial results in making operational decisions, allocating resources and assessing performance.

The financial information provided to and used by the CODM to assist in making operational decisions, allocating resources, and assessing performance includes consolidated financial information as well as revenue, adjusted operating income, and adjusted operating margin information for the Design Automation and Design IP segments, accompanied by disaggregated information relating to revenue by geographic region.

The Software Integrity business constituted its own reportable segment under Topic 280. In accordance with applicable accounting guidance, the results of the Software Integrity business were presented as discontinued operations in the condensed consolidated statements of income and, as such, have been excluded from both continuing operations and segment results for all periods presented. See Note 3. Discontinued Operations of the Notes to Condensed Consolidated Financial Statements.

Information by reportable segment is as follows:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Total Segments:
Revenue$1,739,737$1,525,749$4,799,318$4,491,450
Adjusted operating income669,778610,5891,810,2651,758,823
Adjusted operating margin38%40%38%39%
Design Automation:
Revenue$1,312,166$1,062,666$3,454,617$3,102,938
Adjusted operating income583,755440,8641,447,1811,218,574
Adjusted operating margin44%41%42%39%
Design IP:
Revenue$427,571$463,083$1,344,701$1,388,512
Adjusted operating income86,023169,725363,084540,249
Adjusted operating margin20%37%27%39%

Certain operating expenses are not allocated to the segments and are managed at a consolidated level. The unallocated expenses managed at a consolidated level, including amortization of acquired intangible assets, stock-based compensation, changes in the fair value of deferred compensation plan, and acquisition/divestiture related items, are presented in the table below to provide a reconciliation of the total adjusted operating income from segments to our consolidated operating income from continuing operations:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Total segment adjusted operating income$669,778$610,589$1,810,265$1,758,823
Reconciling items:
Amortization of acquired intangible assets(74,941)(18,572)(99,193)(53,317)
Stock-based compensation expense(267,723)(164,354)(655,909)(492,550)
Deferred compensation plan(43,417)(25,780)(42,949)(76,276)
Acquisition/divestiture related items(118,428)(41,672)(218,680)(91,771)
Total operating income$165,269$360,211$793,534$1,044,909

The CODM does not use total assets by segment to evaluate segment performance or allocate resources. As a result, total assets by segment are not disclosed.

In allocating revenue to particular geographic areas, the CODM considers where individual “seats” or licenses to our products are located. Revenue is defined as revenue from external customers. Revenue related to operations in the United States and other geographic areas are:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Revenue:
United States$816,194$660,479$2,076,203$2,015,066
Europe178,595144,631527,109429,377
China247,288266,699578,742729,583
Korea202,117194,817710,097569,538
Other295,543259,123907,167747,886
Consolidated$1,739,737$1,525,749$4,799,318$4,491,450

Geographic revenue data for multi-regional, multi-product transactions reflect internal allocations and are therefore subject to certain assumptions and to our allocation methodology.

Note 18. Other Income (Expense), Net

The following table presents the components of other income (expense), net:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Interest income$131,417$15,717$257,027$40,508
Gains (losses) on assets related to deferred compensation plan43,41725,78042,94976,276
Foreign currency exchange gains (losses)1,2213291,1063,438
Gain (loss) on sale of strategic investments(1,200)—(3,635)55,077
Gain on sale of building——51,385—
Other, net(4,312)1,700(13,771)(8,682)
Total$170,543$43,526$335,061$166,617

Assets Held for Sale

During the second quarter of fiscal 2025, we completed the sale of an office building for cash consideration of $74.3 million, net of selling costs. We recognized a pre-tax gain on sale of $51.4 million, which was included in other income (expense), net in the condensed consolidated statements of income.

Note 19. Income Taxes

Effective Tax Rate

We estimate our annual effective tax rate at the end of each fiscal quarter. The effective tax rate reflects our estimations of annual pre-tax income, the geographic mix of pre-tax income, interpretations of applicable tax laws and the potential outcomes of audits.

The following table presents the provision for income taxes and the effective tax rates:

Three Months Ended July 31,Nine Months Ended July 31,
2025202420252024
(in thousands)
Income before income taxes$189,310$391,995$876,618$1,190,979
Provision (benefit) for income taxes$(52,967)$(30,712)$(12,080)$37,634
Effective tax rate(28.0)%(7.8)%(1.4)%3.2%

Our effective tax rate decreased in the three months ended July 31, 2025, as compared to the same period in fiscal 2024, primarily due to the tax benefits from a full valuation allowance release against California research credits.

Our effective tax rate for the nine months ended July 31, 2025, is lower than the statutory federal corporate tax rate of 21% primarily due to the capital loss on the sale of our ownership in OpenLight in the first quarter of 2025, tax benefits from the release of a full valuation allowance against California research credits, U.S. federal research tax credits, foreign-derived intangible income deduction, excess tax benefits from stock-based compensation and U.S. foreign tax credits, partially offset by state taxes, capitalized transaction costs and the effect of non-deductible stock-based compensation.

The timing of the resolution of income tax examinations, and the amounts and timing of various tax payments that are part of the settlement process, are highly uncertain. Variations in such amounts and/or timing could cause large fluctuations in the balance sheet classification of current and non-current assets and liabilities. During the next 12 months, it is reasonably possible that certain audits and ongoing tax litigation will be resolved, or that the statute of limitations on certain state and foreign income and withholding taxes will expire, or both. Given the uncertainty as to ultimate settlement terms, the timing of payment and the impact of such settlements on other uncertain tax

positions, we estimate a potential decrease in underlying unrecognized tax benefits to be between $0 and $9.0 million.

Non-U.S. Examinations

One of our Korean subsidiaries, Ansys Korea, is currently involved in various stages of Tax Tribunal and Korea's High Court appeals regarding Korea's National Tax Service assessments of withholding taxes against Ansys Korea for 2017-2023. In connection with this matter, we have recorded the net impact of the unrecognized tax benefit and offsetting foreign tax credit.

We are under examinations by tax authorities in certain jurisdictions. No material assessments have been proposed in these examinations.

Legislative Developments

On July 4, 2025, President Donald J. Trump signed H.R. 1, the One Big Beautiful Bill Act (OBBB) into law. The OBBB includes many changes to corporate income tax law and will go into effect in fiscal 2026 and fiscal 2027 for Synopsys. We are currently evaluating the impacts of OBBB.

Effective in fiscal 2024, we are subject to the new 15% corporate alternative minimum tax (CAMT) enacted as part of the Inflation Reduction Act of 2022 (IR Act). We do not expect to be subject to CAMT in fiscal 2025, due to our regular tax liability exceeding CAMT. The details of the computation will be subject to final regulations issued by the U.S. Department of the Treasury. We will monitor regulatory developments and will continue to evaluate the impact, if any, of the CAMT.

The IR Act generally imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. In general, the total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year. There has been no impact to our consolidated financial statements for this.

On June 27, 2024, California enacted SB-167, which suspends the use of California net operating loss and limits the use of California research tax credits to $5 million for our fiscal 2025-2027. On June 29, 2024, California enacted SB-175, which provides a refund mechanism effective beginning in our fiscal 2025 for the incremental tax that was paid as a result of SB-167.

The Organization for Economic Co-operation and Development (OECD) has a two-pillar solution to address tax challenges arising from digitalization of the economy. This two-pillar solution includes the Pillar Two Model Rules (Pillar Two) which define global minimum tax rules and imposes a 15% minimum tax rate. Various countries have started to enact new laws related to Pillar Two, including certain new laws effective beginning in fiscal 2025. As of July 31, 2025, the impact of Pillar 2 is not material.

Note 20. Contingencies

Legal Proceedings

We are subject to routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate outcome of any litigation is often uncertain and unfavorable outcomes could have a negative impact on our results of operations and financial condition. We regularly review the status of each significant matter and assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount is estimable, we accrue a liability for the estimated loss. Legal proceedings are inherently uncertain and as circumstances change, it is possible that the amount of any accrued liability may increase, decrease or be eliminated.

We have determined that no disclosure of estimated loss is required for a claim against us because: (1) there is not a reasonable possibility that a loss exceeding amounts already recognized (if any) may be incurred with respect to such claim; (2) a reasonably possible loss or range of loss cannot be estimated; or (3) such estimate is immaterial.

Tax Matters

We undergo examination from time to time by U.S. and foreign authorities for non-income based taxes, such as sales, use and value-added taxes, and are currently under examination by tax authorities in certain jurisdictions. If the potential loss from such examinations is considered probable and the amount or the range of loss could be estimated, we would accrue a liability for the estimated expense.

In addition to the foregoing, we are, from time to time, party to various other claims and legal proceedings in the ordinary course of our business, including with tax and other governmental authorities. For a description of certain of these other matters, see Note 19. Income Taxes of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.

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