filings.toolsItem 1. Financial Statements
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Item 1. Financial Statements
SYNOPSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except par value amounts)
| January 31, 2026 | October 31, 2025 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,129,572 | $ | 2,888,030 | |||||||
| Short-term investments | 73,910 | 72,929 | |||||||||
| Total cash, cash equivalents and short-term investments | 2,203,482 | 2,960,959 | |||||||||
| Accounts receivable, net | 1,640,665 | 1,505,427 | |||||||||
| Inventories | 393,221 | 365,190 | |||||||||
| Prepaid and other current assets | 1,088,118 | 1,180,526 | |||||||||
| Current assets held for sale | 48,152 | — | |||||||||
| Total current assets | 5,373,638 | 6,012,102 | |||||||||
| Property and equipment, net | 676,693 | 696,693 | |||||||||
| Operating lease right-of-use assets, net | 713,594 | 702,008 | |||||||||
| Goodwill | 26,880,889 | 26,899,215 | |||||||||
| Intangible assets, net | 12,289,529 | 12,679,591 | |||||||||
| Deferred income taxes | 117,386 | 112,159 | |||||||||
| Other long-term assets | 1,186,199 | 1,122,693 | |||||||||
| Total assets | $ | 47,237,928 | $ | 48,224,461 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued liabilities | $ | 1,304,688 | $ | 1,326,211 | |||||||
| Operating lease liabilities | 133,098 | 128,205 | |||||||||
| Deferred revenue | 2,459,122 | 2,245,961 | |||||||||
| Short-term debt | 22,117 | 22,117 | |||||||||
| Current liabilities held for sale | 23,625 | — | |||||||||
| Total current liabilities | 3,942,650 | 3,722,494 | |||||||||
| Long-term operating lease liabilities | 691,249 | 680,698 | |||||||||
| Long-term deferred revenue | 420,887 | 382,557 | |||||||||
| Long-term debt | 10,022,093 | 13,462,398 | |||||||||
| Other long-term liabilities | 1,613,051 | 1,649,299 | |||||||||
| Total liabilities | 16,689,930 | 19,897,446 | |||||||||
| Stockholders’ equity: | |||||||||||
| Preferred stock, $0.01 par value: 2,000 shares authorized; none outstanding | — | — | |||||||||
| Common stock, $0.01 par value: 400,000 shares authorized; 191,449 and 185,994 shares outstanding, respectively | 1,915 | 1,860 | |||||||||
| Capital in excess of par value | 20,562,001 | 18,640,947 | |||||||||
| Retained earnings | 10,380,445 | 10,315,487 | |||||||||
| Treasury stock, at cost: 589 and 1,222 shares, respectively | (191,851) | (398,278) | |||||||||
| Accumulated other comprehensive income (loss) | (203,683) | (232,414) | |||||||||
| Total Synopsys stockholders’ equity | 30,548,827 | 28,327,602 | |||||||||
| Non-controlling interest | (829) | (587) | |||||||||
| Total stockholders’ equity | 30,547,998 | 28,327,015 | |||||||||
| Total liabilities and stockholders’ equity | $ | 47,237,928 | $ | 48,224,461 |
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 January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| Time-based products | $ | 951,541 | $ | 828,238 | |||||||||||||||||||
| Upfront products | 741,530 | 368,124 | |||||||||||||||||||||
| Total products revenue | 1,693,071 | 1,196,362 | |||||||||||||||||||||
| Maintenance and service | 715,727 | 258,953 | |||||||||||||||||||||
| Total revenue | 2,408,798 | 1,455,315 | |||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||
| Products | 242,402 | 168,842 | |||||||||||||||||||||
| Maintenance and service | 146,738 | 92,537 | |||||||||||||||||||||
| Amortization of acquired intangible assets | 248,242 | 8,596 | |||||||||||||||||||||
| Total cost of revenue | 637,382 | 269,975 | |||||||||||||||||||||
| Gross margin | 1,771,416 | 1,185,340 | |||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 714,988 | 553,216 | |||||||||||||||||||||
| Sales and marketing | 396,375 | 209,199 | |||||||||||||||||||||
| General and administrative | 182,732 | 167,086 | |||||||||||||||||||||
| Amortization of acquired intangible assets | 155,993 | 4,000 | |||||||||||||||||||||
| Restructuring charges | 118,282 | — | |||||||||||||||||||||
| Total operating expenses | 1,568,370 | 933,501 | |||||||||||||||||||||
| Operating income | 203,046 | 251,839 | |||||||||||||||||||||
| Interest expense | (162,715) | (11,139) | |||||||||||||||||||||
| Other income (expense), net | 38,722 | 50,417 | |||||||||||||||||||||
| Income before income taxes | 79,053 | 291,117 | |||||||||||||||||||||
| Provision (benefit) for income taxes | 14,337 | (6,294) | |||||||||||||||||||||
| Net income | 64,716 | 297,411 | |||||||||||||||||||||
| Less: Net income (loss) attributed to non-controlling interest and redeemable non-controlling interest | (242) | 1,728 | |||||||||||||||||||||
| Net income attributed to Synopsys | $ | 64,958 | $ | 295,683 | |||||||||||||||||||
| Net income per share attributed to Synopsys: | |||||||||||||||||||||||
| Basic | $ | 0.34 | $ | 1.91 | |||||||||||||||||||
| Diluted | $ | 0.34 | $ | 1.89 | |||||||||||||||||||
| Shares used in computing per share amounts: | |||||||||||||||||||||||
| Basic | 189,593 | 154,408 | |||||||||||||||||||||
| Diluted | 190,762 | 156,189 |
See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).
SYNOPSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Net income | $ | 64,716 | $ | 297,411 | |||||||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Change in foreign currency translation adjustment | 38,533 | (28,637) | |||||||||||||||||||||
| Change in unrealized gains (losses) on available-for-sale securities, net of tax of $0 for periods presented | 74 | (42) | |||||||||||||||||||||
| Cash flow hedges: | |||||||||||||||||||||||
| Deferred gains (losses), net of tax of $3,543 and $11,494, respectively | (11,536) | (36,448) | |||||||||||||||||||||
| Reclassification adjustment on deferred (gains) losses included in net income, net of tax of $(653) and $(1,403), respectively | 1,660 | 3,588 | |||||||||||||||||||||
| Other comprehensive income (loss), net of tax effects | 28,731 | (61,539) | |||||||||||||||||||||
| Comprehensive income | 93,447 | 235,872 | |||||||||||||||||||||
| Less: Net income (loss) attributed to non-controlling interest and redeemable non-controlling interest | (242) | 1,728 | |||||||||||||||||||||
| Comprehensive income attributed to Synopsys | $ | 93,689 | $ | 234,144 |
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 Value | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Synopsys Stockholders’ Equity | Non-controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at October 31, 2025 | 185,994 | $ | 1,860 | $ | 18,640,947 | $ | 10,315,487 | $ | (398,278) | $ | (232,414) | $ | 28,327,602 | $ | (587) | $ | 28,327,015 | ||||||||||||||||||||||||||||||||||||
| Net income | 64,958 | 64,958 | (242) | 64,716 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax effects | 28,731 | 28,731 | 28,731 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for private placement | 4,822 | 48 | 1,999,952 | 2,000,000 | 2,000,000 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for prior acquisition | 1 | 1 | 189 | 478 | 668 | 668 | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued, net of shares withheld for employee taxes | 632 | 6 | (337,811) | 205,949 | (131,856) | (131,856) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 258,724 | 258,724 | 258,724 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 31, 2026 | 191,449 | $ | 1,915 | $ | 20,562,001 | $ | 10,380,445 | $ | (191,851) | $ | (203,683) | $ | 30,548,827 | $ | (829) | $ | 30,547,998 | ||||||||||||||||||||||||||||||||||||
| Capital in Excess of Par Value | Retained Earnings | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total Synopsys Stockholders’ Equity | Non-controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at October 31, 2024 | 154,112 | $ | 1,541 | $ | 1,211,206 | $ | 8,984,105 | $ | (1,025,770) | $ | (180,380) | $ | 8,990,702 | $ | 2,504 | $ | 8,993,206 | ||||||||||||||||||||||||||||||||||||
| Net income | 295,683 | 295,683 | 2,566 | 298,249 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss), net of tax effects | (61,539) | (61,539) | (61,539) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued, net of shares withheld for employee taxes | 506 | 6 | (275,413) | 164,803 | (110,604) | (110,604) | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | 185,754 | 185,754 | 709 | 186,463 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Adjustments to redeemable non-controlling interest | (838) | (838) | (838) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Deconsolidation of non-controlling interest upon the sale of subsidiary | 5,634 | 5,634 | (5,670) | (36) | |||||||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 31, 2025 | 154,618 | $ | 1,547 | $ | 1,127,181 | $ | 9,278,950 | $ | (860,967) | $ | (241,919) | $ | 9,304,792 | $ | 109 | $ | 9,304,901 | ||||||||||||||||||||||||||||||||||||
See the accompanying Notes to Condensed Consolidated Financial Statements (unaudited).
SYNOPSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
| Three Months Ended January 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 64,716 | $ | 297,411 | |||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
| Amortization and depreciation | 450,688 | 47,934 | |||||||||
| Reduction of operating lease right-of-use assets | 36,442 | 25,473 | |||||||||
| Amortization of capitalized costs to obtain revenue contracts | 19,277 | 12,466 | |||||||||
| Stock-based compensation | 258,724 | 186,463 | |||||||||
| Allowance for credit losses | 8,206 | 9,919 | |||||||||
| Amortization of bridge financing costs | — | 10,468 | |||||||||
| Amortization of debt issuance costs | 12,558 | — | |||||||||
| Deferred income taxes | (51,776) | (139,075) | |||||||||
| Other | (218) | 186 | |||||||||
| Net changes in operating assets and liabilities, net of effects from acquisitions and dispositions: | |||||||||||
| Accounts receivable | (128,651) | 30,948 | |||||||||
| Inventories | (29,382) | (55,852) | |||||||||
| Prepaid and other current assets | 84,616 | (103,567) | |||||||||
| Other long-term assets | (81,413) | (43,494) | |||||||||
| Accounts payable and accrued liabilities | (37,286) | (313,651) | |||||||||
| Operating lease liabilities | (32,345) | (23,102) | |||||||||
| Income taxes | 17,561 | 86,992 | |||||||||
| Deferred revenue | 265,115 | (96,974) | |||||||||
| Net cash provided by (used in) operating activities | 856,832 | (67,455) | |||||||||
| Cash flows from investing activities: | |||||||||||
| Proceeds from maturities of short-term investments | 3,718 | 19,684 | |||||||||
| Proceeds from sales of short-term investments | — | 16,411 | |||||||||
| Purchases of short-term investments | (4,503) | (37,269) | |||||||||
| Purchases of strategic investments | (401) | (3,288) | |||||||||
| Purchases of property and equipment, net | (35,320) | (40,715) | |||||||||
| Proceeds from business divestiture, net of cash divested | — | 23,808 | |||||||||
| Other | — | (611) | |||||||||
| Net cash used in investing activities | (36,506) | (21,980) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Repayment of debt | (3,451,310) | (1,289) | |||||||||
| Issuances of common stock | 12,742 | 14,417 | |||||||||
| Payments for taxes related to net share settlement of equity awards | (144,597) | (124,966) | |||||||||
| Common stock issuance for private placement | 2,000,000 | — | |||||||||
| Redemption of redeemable non-controlling interest | — | (30,000) | |||||||||
| Net cash used in financing activities | (1,583,165) | (141,838) | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 3,432 | (9,676) | |||||||||
| Net change in cash, cash equivalents and restricted cash | (759,407) | (240,949) | |||||||||
| Cash, cash equivalents and restricted cash, beginning of year | 2,893,721 | 3,898,729 | |||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 2,134,314 | $ | 3,657,780 | |||||||
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 electronic design automation (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.
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 development risk and speed time to market. Our high quality, silicon-proven semiconductor IP includes logic libraries, embedded memories, wired interface IP, memory interface IP, security IP, and embedded processors. To accelerate IP integration and silicon bring-up, our IP Accelerated initiative provides architecture design expertise, customized IP subsystems, 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, 2025 as filed with the SEC on December 22, 2025 (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. Our fiscal year end is October 31 and our fiscal quarters end on January 31, April 30, and July 31 of each year.
Acquisition of Ansys. On July 17, 2025 (the 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. See Note 4. Business Combination and Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Consolidated Financial Statements in our Annual Report for additional information.
Significant Accounting Policies. There have been no material changes to our significant accounting policies included in our Annual Report.
Recent Accounting Pronouncements Not Yet Adopted
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 is effective for our annual reports beginning in fiscal 2026 with early adoption 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.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The ASU allows companies to apply a practical expedient when estimating credit losses on current accounts receivable and contract assets. The ASU will be effective for us beginning in fiscal 2027 and will be applied on a prospective basis. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for internal-use software costs and clarifies the criteria for capitalization. The ASU will be effective for us beginning in fiscal 2029, either on a prospective, retrospective, or a modified basis. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) Narrow-Scope Improvements. The ASU is intended to improve the navigability of the guidance in ASC 270, Interim Reporting, and clarify when it applies. Under the amendments, an entity is subject to ASC 270 if it provides interim financial statements and notes in accordance with GAAP. ASU 2025-11 also addresses the form and content of such financial statements, interim disclosures requirements, and establishes a principle under which an entity must disclose events since the end of the last annual reporting period that have a material impact on the entity. The ASU will be effective for us 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.
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. The ASU addresses suggestions received from stakeholders regarding the Accounting Standards Codification and makes other incremental improvements to U.S. GAAP. The update represents changes to the Codification that clarify, correct errors in or make other improvements to a variety of topics that are intended to make it easier to understand and apply. ASU 2025-12 is effective for fiscal years beginning after December 15, 2026 and interim periods within those fiscal years. Entities are required to apply the amendments to ASC 260 retrospectively. All other amendments may be applied prospectively or retrospectively. Early adoption is permitted. We are currently evaluating the impact of adopting this ASU on our consolidated financial statements and related disclosures.
Note 3. Acquisition of Ansys
On July 17, 2025, we completed the acquisition of Ansys (the Ansys Merger) for approximately $34.9 billion, consisting of cash of $17.6 billion (the Cash Consideration), 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.
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.
Transaction Costs
Transaction costs for acquisitions, primarily related to the Ansys Merger, were $10.5 million and $56.8 million during the three months ended January 31, 2026 and 2025, respectively. These costs mainly consisted of professional fees, administrative costs for closed and pending acquisitions, as well as the Bridge Commitment financing costs, and were expensed as incurred in our condensed consolidated statements of income.
Supplemental Pro Forma Information (Unaudited)
The following unaudited pro forma financial information presents combined results of operations for the period presented, as if Ansys had been acquired as of the beginning of fiscal year 2024.
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2025 | |||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Pro forma total revenue | $ | 2,217,683 | |||||||||||||||||||||
| Pro forma net income | $ | 56,366 |
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 4. Revenue
Disaggregated Revenue
The following table shows the percentage of revenue by product groups:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| EDA | 45.6 | % | 67.3 | % | |||||||||||||||||||
| Design IP | 16.9 | % | 29.9 | % | |||||||||||||||||||
| Ansys | 36.8 | % | — | % | |||||||||||||||||||
| Other | 0.7 | % | 2.8 | % | |||||||||||||||||||
| Total | 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) in our condensed consolidated balance sheets. For specific software, hardware, and IP agreements with payment plans, we record 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. Unbilled receivables are presented as accounts receivable, net, in the condensed consolidated balance sheets.
A contract asset is recorded when revenue is recognized before we have the unconditional right to invoice or retain 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 | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| (in thousands) | |||||||||||
| Contract assets, net | $ | 1,141,522 | $ | 1,222,029 | |||||||
| Unbilled receivables | $ | 43,124 | $ | 45,528 | |||||||
| Deferred revenue | $ | 2,880,009 | $ | 2,628,518 |
Long-term contract assets were $365.9 million and $336.4 million as of January 31, 2026 and October 31, 2025, respectively.
During the three months ended January 31, 2026, we recognized revenue of $1.1 billion that was included in the deferred revenue balance as of October 31, 2025, 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 $11.3 billion as of January 31, 2026, which includes $1.9 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 47% of the backlog as of January 31, 2026, 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 months ended January 31, 2026 and 2025, we recognized $33.8 million and $25.0 million 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 January 31, 2026 were $115.7 million, of which $27.7 million are included in prepaid and other current assets, and $88.0 million in other long-term assets in our condensed consolidated balance sheets. Amortization of these assets were $19.3 million and $12.5 million
during the three months ended January 31, 2026 and 2025, respectively, and are included in sales and marketing expense in our condensed consolidated statements of income.
Note 5. Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill during the three months ended January 31, 2026 are as follows:
| (in thousands) | |||||
| Balance at October 31, 2025 | $ | 26,899,215 | |||
| Adjustments | (39,616) | ||||
| Effect of foreign currency translation | 21,290 | ||||
| Balance at January 31, 2026 | $ | 26,880,889 |
Intangible Assets
Intangible assets as of January 31, 2026 consist of the following:
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Core/developed technology | $ | 7,236,330 | $ | 1,040,891 | $ | 6,195,439 | |||||||||||
| Customer relationships | 5,398,388 | 553,408 | 4,844,980 | ||||||||||||||
| Contract rights intangible | 596,819 | 275,391 | 321,428 | ||||||||||||||
| Trademarks and trade names | 962,325 | 34,643 | 927,682 | ||||||||||||||
| Total | $ | 14,193,862 | $ | 1,904,333 | $ | 12,289,529 |
Intangible assets as of October 31, 2025 consist of the following:
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Core/developed technology | $ | 7,309,753 | $ | 929,901 | $ | 6,379,852 | |||||||||||
| Customer relationships | 5,415,558 | 428,377 | 4,987,181 | ||||||||||||||
| Contract rights intangible | 614,358 | 239,808 | 374,550 | ||||||||||||||
| Trademarks and trade names | 962,925 | 24,917 | 938,008 | ||||||||||||||
| Total | $ | 14,302,594 | $ | 1,623,003 | $ | 12,679,591 |
Amortization expense related to intangible assets consists of the following:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Core/developed technology | $ | 193,523 | $ | 8,189 | |||||||||||||||||||
| Customer relationships | 145,667 | 3,996 | |||||||||||||||||||||
| Contract rights intangible | 54,719 | 407 | |||||||||||||||||||||
| Trademarks and trade names | 10,326 | 4 | |||||||||||||||||||||
| Total | $ | 404,235 | $ | 12,596 |
The following table presents the estimated future amortization of acquired intangible assets as of January 31, 2026:
| Fiscal year | (in thousands) | ||||
| Remainder of fiscal 2026 | $ | 1,211,259 | |||
| 2027 | 1,547,378 | ||||
| 2028 | 1,385,619 | ||||
| 2029 | 1,382,920 | ||||
| 2030 | 1,376,990 | ||||
| 2031 and thereafter | 5,385,363 | ||||
| Total | $ | 12,289,529 |
Note 6. Balance Sheet Components
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| (in thousands) | |||||||||||
| Accounts payable and accrued liabilities: | |||||||||||
| Payroll and related benefits | $ | 685,566 | $ | 822,575 | |||||||
| Interest payable | 170,480 | 49,826 | |||||||||
| Accounts payable | 113,263 | 164,766 | |||||||||
| Accrued income taxes | 111,560 | 94,664 | |||||||||
| Other accrued liabilities | 223,819 | 194,380 | |||||||||
| Total | $ | 1,304,688 | $ | 1,326,211 | |||||||
| Other long-term liabilities: | |||||||||||
| Deferred tax liability | $ | 954,115 | $ | 1,001,070 | |||||||
| Deferred compensation plan liabilities | 464,876 | 447,232 | |||||||||
| Other | 194,060 | 200,997 | |||||||||
| Total | $ | 1,613,051 | $ | 1,649,299 |
Assets Held For Sale
On January 14, 2026, we entered into a definitive agreement for the sale of our Processor IP Solutions (Processor IP) business to GlobalFoundries Inc. as part of our reallocation of resources to the highest growth opportunities in our Design IP segment.
The Processor IP business is part of the Design IP segment and we have determined that we met the criteria to classify the assets and liabilities of this business as held for sale. The divestiture does not represent a strategic shift in operations that would have a major effect on our business and is also not material to our business and therefore does not meet the criteria to be classified as discontinued operations.
The sale is expected to be completed in the second half of calendar year 2026, subject to the satisfaction of customary closing conditions, including the receipt of required regulatory approvals.
The following table presents the major classes of assets and liabilities classified as held for sale as of January 31, 2026:
| (in thousands) | |||||
| Assets: | |||||
| Prepaid and other assets | $ | 6,154 | |||
| Property and equipment, net | 2,082 | ||||
| Operating lease right-of-use assets, net | 1,870 | ||||
| Goodwill | 38,046 | ||||
| Total current assets held for sale | $ | 48,152 | |||
| Liabilities: | |||||
| Accounts payable and accrued liabilities | $ | 1,384 | |||
| Operating lease liabilities | 1,850 | ||||
| Deferred revenue | 20,391 | ||||
| Total current liabilities held for sale | $ | 23,625 |
Note 7. Financial Assets and Liabilities
Cash Equivalents and Short-term Investments
As of January 31, 2026, the balances of our cash equivalents and short-term investments are as follows:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses Less Than 12 Continuous Months | Gross Unrealized Losses 12 Continuous Months or Longer | Estimated Fair Value**(1)** | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||||||||
| Money market funds | $ | 40,825 | $ | — | $ | — | $ | — | $ | 40,825 | |||||||||||||||||||
| U.S. Treasury, agency & T-bills | 2,280 | — | — | — | 2,280 | ||||||||||||||||||||||||
| Total: | $ | 43,105 | $ | — | $ | — | $ | — | $ | 43,105 | |||||||||||||||||||
| Short-term investments: | |||||||||||||||||||||||||||||
| U.S. Treasury, agency & T-bills | $ | 5,014 | $ | 20 | $ | — | $ | — | $ | 5,034 | |||||||||||||||||||
| Municipal bonds | 22,903 | 79 | (2) | — | 22,980 | ||||||||||||||||||||||||
| Corporate debt securities | 45,538 | 179 | (1) | — | 45,716 | ||||||||||||||||||||||||
| Other | 180 | — | — | — | 180 | ||||||||||||||||||||||||
| Total: | $ | 73,635 | $ | 278 | $ | (3) | $ | — | $ | 73,910 | |||||||||||||||||||
*(1)*See Note 8. Fair Value Measurements for further discussion on fair values.
The contractual maturities of our available-for-sale debt securities as of January 31, 2026 are as follows:
| Amortized Cost | Fair Value | ||||||||||
| (in thousands) | |||||||||||
| 1 year or less | $ | 29,693 | $ | 29,784 | |||||||
| 1-5 years | 43,942 | 44,126 | |||||||||
| Total | $ | 73,635 | $ | 73,910 |
As of October 31, 2025, the balances of our cash equivalents and short-term investments are as follows:
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses Less Than 12 Continuous Months | Gross Unrealized Losses 12 Continuous Months or Longer | Estimated Fair Value**(1)** | |||||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||||||||
| Money market funds | $ | 52,978 | $ | — | $ | — | $ | — | $ | 52,978 | |||||||||||||||||||
| Total: | $ | 52,978 | $ | — | $ | — | $ | — | $ | 52,978 | |||||||||||||||||||
| Short-term investments: | |||||||||||||||||||||||||||||
| U.S. Treasury, agency & T-bills | $ | 6,661 | $ | 19 | $ | — | $ | — | $ | 6,680 | |||||||||||||||||||
| Municipal bonds | 22,004 | 61 | — | — | 22,065 | ||||||||||||||||||||||||
| Corporate debt securities | 43,878 | 139 | (18) | — | 43,999 | ||||||||||||||||||||||||
| Other | 185 | — | — | — | 185 | ||||||||||||||||||||||||
| Total: | $ | 72,728 | $ | 219 | $ | (18) | $ | — | $ | 72,929 | |||||||||||||||||||
*(1)*See Note 8. 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 deposits for 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 | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| (in thousands) | |||||||||||
| Cash and cash equivalents | $ | 2,129,572 | $ | 2,888,030 | |||||||
| Restricted cash included in prepaid and other current assets | 3,708 | 4,680 | |||||||||
| Restricted cash included in other long-term assets | 1,034 | 1,011 | |||||||||
| Cash, cash equivalents and restricted cash | $ | 2,134,314 | $ | 2,893,721 |
Non-marketable equity securities. Our portfolio of non-marketable equity securities consists of strategic investments in privately held companies. There were no impairments of non-marketable equity securities during the three months ended January 31, 2026 and 2025.
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 provided by (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 provided by (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) (OCI) 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 OCI 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 three months ended January 31, 2026 and 2025.
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 manage the variability in cash flows due to changes in benchmark interest rate rated to the Senior Notes (as defined in Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Condensed Consolidated Financial Statements). These derivatives were designated as cash flow hedges with unrealized gains and losses deferred in 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 January 31, 2026, the unamortized portion of the fair value of the 2025 Rate Lock Agreements was $115.3 million. We had no interest rate hedge contracts outstanding as of January 31, 2026.
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 January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Gains (losses) recorded in other income (expense), net | $ | (4,297) | $ | (4,421) |
The notional amounts in the table below for foreign currency derivative instruments provide one measure of the transaction volume outstanding:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| (in thousands) | |||||||||||
| Total gross notional amounts | $ | 1,734,610 | $ | 1,587,863 | |||||||
| Net fair value | $ | (16,088) | $ | (1,234) |
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 instruments | Fair values of derivative instruments not designated as hedging instruments | ||||||||||
| (in thousands) | |||||||||||
| Balance at January 31, 2026 | |||||||||||
| Other current assets | $ | 11,625 | $ | 163 | |||||||
| Accrued liabilities | $ | 27,754 | $ | 122 | |||||||
| Balance at October 31, 2025 | |||||||||||
| Other current assets | $ | 8,598 | $ | 265 | |||||||
| Accrued liabilities | $ | 9,504 | $ | 593 |
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 derivatives | Amount of gains (losses) recognized in OCI on derivatives (effective portion) | Location of gains (losses) reclassified from OCI | Amount of gains (losses) reclassified from OCI (effective portion) | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Three months ended January 31, 2026 | |||||||||||||||||||||||
| Foreign exchange contracts | Revenue | $ | 2,927 | Revenue | $ | 1,190 | |||||||||||||||||
| Foreign exchange contracts | Operating expenses | (14,463) | Operating expenses | (1,518) | |||||||||||||||||||
| Interest rate contracts | Interest expense | — | Interest expenses | (1,332) | |||||||||||||||||||
| Total | $ | (11,536) | $ | (1,660) | |||||||||||||||||||
| Three months ended January 31, 2025 | |||||||||||||||||||||||
| Foreign exchange contracts | Revenue | $ | 513 | Revenue | $ | (1,002) | |||||||||||||||||
| Foreign exchange contracts | Operating expenses | (16,891) | Operating expenses | (2,586) | |||||||||||||||||||
| Total | $ | (16,378) | $ | (3,588) | |||||||||||||||||||
Note 8. 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.
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 January 31, 2026:
| Fair Value Measurement Using | |||||||||||||||||||||||
| Description | Total | Quoted 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 | $ | 40,825 | $ | 40,825 | $ | — | $ | — | |||||||||||||||
| U.S. Treasury, agency & T-bills | 2,280 | — | 2,280 | — | |||||||||||||||||||
| Short-term investments: | |||||||||||||||||||||||
| U.S. Treasury, agency & T-bills | 5,034 | — | 5,034 | — | |||||||||||||||||||
| Municipal bonds | 22,980 | — | 22,980 | — | |||||||||||||||||||
| Corporate debt securities | 45,716 | — | 45,716 | — | |||||||||||||||||||
| Other | 180 | — | 180 | — | |||||||||||||||||||
| Prepaid and other current assets: | |||||||||||||||||||||||
| Foreign currency derivative contracts | 11,788 | — | 11,788 | — | |||||||||||||||||||
| Contingent consideration receivable | 22,202 | — | — | 22,202 | |||||||||||||||||||
| Other long-term assets: | |||||||||||||||||||||||
| Deferred compensation plan assets | 464,876 | 464,876 | — | — | |||||||||||||||||||
| Marketable equity securities | 865 | 865 | — | — | |||||||||||||||||||
| Total assets | $ | 616,746 | $ | 506,566 | $ | 87,978 | $ | 22,202 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Accounts payable and accrued liabilities: | |||||||||||||||||||||||
| Foreign currency derivative contracts | $ | 27,876 | $ | — | $ | 27,876 | $ | — | |||||||||||||||
| Other long-term liabilities: | |||||||||||||||||||||||
| Deferred compensation plan liabilities | 464,876 | 464,876 | — | — | |||||||||||||||||||
| Total liabilities | $ | 492,752 | $ | 464,876 | $ | 27,876 | $ | — |
Assets and liabilities measured at fair value on a recurring basis are summarized below as of October 31, 2025:
| Fair Value Measurement Using | |||||||||||||||||||||||
| Description | Total | Quoted 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 | $ | 52,978 | $ | 52,978 | $ | — | $ | — | |||||||||||||||
| Short-term investments: | |||||||||||||||||||||||
| U.S. Treasury, agency & T-bills | 6,680 | — | 6,680 | — | |||||||||||||||||||
| Municipal bonds | 22,065 | — | 22,065 | — | |||||||||||||||||||
| Corporate debt securities | 43,999 | — | 43,999 | — | |||||||||||||||||||
| Other | 185 | — | 185 | — | |||||||||||||||||||
| Prepaid and other current assets: | |||||||||||||||||||||||
| Foreign currency derivative contracts | 8,863 | — | 8,863 | — | |||||||||||||||||||
| Contingent consideration receivable | 22,202 | — | — | 22,202 | |||||||||||||||||||
| Other long-term assets: | |||||||||||||||||||||||
| Deferred compensation plan assets | 447,232 | 447,232 | — | — | |||||||||||||||||||
| Marketable equity securities | 785 | 785 | — | — | |||||||||||||||||||
| Total assets | $ | 604,989 | $ | 500,995 | $ | 81,792 | $ | 22,202 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Accounts payable and accrued liabilities: | |||||||||||||||||||||||
| Foreign currency derivative contracts | $ | 10,097 | $ | — | $ | 10,097 | $ | — | |||||||||||||||
| Other long-term liabilities: | |||||||||||||||||||||||
| Deferred compensation plan liabilities | 447,232 | 447,232 | — | — | |||||||||||||||||||
| Total liabilities | $ | 457,329 | $ | 447,232 | $ | 10,097 | $ | — |
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 9. Restructuring Charges
In the fourth quarter of fiscal 2025, we initiated a restructuring plan for involuntary employee terminations as part of a business reorganization (the 2026 Plan). Total charges under the 2026 Plan are expected to be in the range of $300.0 million and $350.0 million, and consist primarily of severance costs and other one-time termination benefits. The 2026 Plan is anticipated to be completed by the end of fiscal 2027, with majority of the workforce reduction in fiscal 2026.
During the first quarter of fiscal 2026, we recorded restructuring charges of $118.3 million, and made payments of $86.1 million under the 2026 Plan. As of January 31, 2026, the outstanding restructuring related liabilities were $32.2 million and recorded in accounts payable and accrued liabilities in the condensed consolidated balance sheets.
Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities
The following table summarizes our borrowings as of January 31, 2026:
| Effective Interest Rate | Amount (in thousands) | |||||||||||||
| Fixed-rate 4.550% Senior Notes due on April 1, 2027 | 4.840 | % | $ | 1,000,000 | ||||||||||
| Fixed-rate 4.650% Senior Notes due on April 1, 2028 | 4.850 | % | 1,000,000 | |||||||||||
| Fixed-rate 4.850% Senior Notes due on April 1, 2030 | 4.980 | % | 2,000,000 | |||||||||||
| Fixed-rate 5.000% Senior Notes due on April 1, 2032 | 5.150 | % | 1,500,000 | |||||||||||
| Fixed-rate 5.150% Senior Notes due on April 1, 2035 | 5.270 | % | 2,400,000 | |||||||||||
| Fixed-rate 5.700% Senior Notes due on April 1, 2055 | 5.800 | % | 2,100,000 | |||||||||||
| Total | 10,000,000 | |||||||||||||
| Unamortized discount and issuance costs | (78,336) | |||||||||||||
| Total Senior Notes | 9,921,664 | |||||||||||||
| Deferred payment on settlement of interest rate treasury lock | 110,585 | |||||||||||||
| Other borrowings | 11,961 | |||||||||||||
| Total | $ | 10,044,210 | ||||||||||||
| Reported as: | ||||||||||||||
| Short-term debt | $ | 22,117 | ||||||||||||
| Long-term debt | 10,022,093 | |||||||||||||
| Total | $ | 10,044,210 |
Senior Notes:
On March 17, 2025, we issued $10.0 billion in aggregate principal amount of senior, unsecured and unsubordinated long-term notes, which mature on various dates from April 1, 2027 to April 1, 2055 (collectively, 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 and pay related transaction fees and expenses.
The Indenture contains provisions for early redemption of the Senior Notes and also 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 $10.1 billion as of January 31, 2026. 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 January 31, 2026, 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 7. 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 the 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. On October 17, 2025, we made an early repayment of $850.0 million on the Tranche 1 Term Loan. During the first quarter of fiscal 2026, we paid off the remaining $3.5 billion, and the Term Loans were terminated upon repayment.
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 January 31, 2026, the Term Loans were fully paid off and terminated.
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 January 31, 2026, we were in compliance with the financial covenant as well as the other covenants.
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 (as defined in the Revolving Credit Agreement) plus an applicable margin based on our credit ratings ranging from 0.795% to 1.200% or (ii) the ABR (as defined in the Revolving Credit Agreement) 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 January 31, 2026 and October 31, 2025.
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 January 31, 2026, we had $12.0 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 January 31, 2026 are as follows:
| Principal Payments | |||||
| Fiscal year | (in thousands) | ||||
| Remainder of fiscal 2026 | $ | 23,446 | |||
| 2027 | 1,024,775 | ||||
| 2028 | 1,024,775 | ||||
| 2029 | 24,775 | ||||
| 2030 | 2,024,775 | ||||
| 2031 and thereafter | 6,000,000 | ||||
| Total | $ | 10,122,546 |
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 January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Operating lease expense (1) | $ | 37,206 | $ | 25,052 | |||||||||||||||||||
| Variable lease expense (2) | 10,517 | 6,760 | |||||||||||||||||||||
| Total lease expense | $ | 47,723 | $ | 31,812 |
(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:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 34,010 | $ | 24,925 | |||||||||||||||||||
| ROU assets obtained in exchange for operating lease liabilities | $ | 49,323 | $ | 8,848 |
Lease term and discount rate information related to our operating leases as of the end of the period presented are as follows:
| As of | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| Weighted-average remaining lease term (in years) | 6.70 | 6.88 | |||||||||
| Weighted-average discount rate | 3.34 | % | 3.40 | % |
The following table represents the maturities of our future lease payments due under operating leases as of January 31, 2026:
| Lease Payments | |||||
| Fiscal year | (in thousands) | ||||
| Remainder of fiscal 2026 | $ | 117,512 | |||
| 2027 | 160,939 | ||||
| 2028 | 148,556 | ||||
| 2029 | 139,066 | ||||
| 2030 | 109,836 | ||||
| 2031 and thereafter | 251,209 | ||||
| Total future minimum lease payments | 927,118 | ||||
| Less: Imputed interest | 102,771 | ||||
| Total lease liabilities | $ | 824,347 |
In addition, the sublease income from facilities leased by us, due to us as of January 31, 2026 are as follows:
| Lease Receipts | |||||||||||
| Fiscal year | (in thousands) | ||||||||||
| Remainder of fiscal 2026 | $ | 14,162 | |||||||||
| 2027 | 19,689 | ||||||||||
| 2028 | 20,280 | ||||||||||
| 2029 | 20,888 | ||||||||||
| 2030 | 17,867 | ||||||||||
| 2031 and thereafter | — | ||||||||||
| Total | $ | 92,886 |
Note 12. 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 | |||||||||||
| January 31, 2026 | October 31, 2025 | ||||||||||
| (in thousands) | |||||||||||
| Cumulative currency translation adjustments | $ | (98,924) | $ | (137,457) | |||||||
| Unrealized gains (losses) on derivative instruments, net of taxes | (105,034) | (95,158) | |||||||||
| Unrealized gains (losses) on available-for-sale securities, net of taxes | 275 | 201 | |||||||||
| Total | $ | (203,683) | $ | (232,414) |
The effect of amounts reclassified out of each component of accumulated other comprehensive income (loss) into net income is as follows:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Reclassifications: | |||||||||||||||||||||||
| Gains (losses) on cash flow hedges, net of taxes | |||||||||||||||||||||||
| Revenues | $ | 1,190 | $ | (1,002) | |||||||||||||||||||
| Operating expenses | (1,518) | (2,586) | |||||||||||||||||||||
| Interest expense | (1,332) | — | |||||||||||||||||||||
| Total | $ | (1,660) | $ | (3,588) |
Amounts reclassified during the three months ended January 31, 2026 and 2025 primarily consisted of gains (losses) from our cash flow hedging activities. See Note 7. Financial Assets and Liabilities of the Notes to Condensed Consolidated Financial Statements.
Note 13. 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 January 31, 2026, $194.3 million remained available for future repurchases under the Program. In February 2026, the Board approved a replenishment of the Program with authorization to purchase up to $2.0 billion.
The reissuance of treasury stock for employee stock-based compensation purposes are as follows:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Reissuance of treasury stock | 633 | 506 |
.
Note 14. Stock-Based Compensation
The compensation cost recognized in the condensed consolidated statements of income for our stock compensation arrangements is as follows:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Cost of products | $ | 19,973 | $ | 20,477 | |||||||||||||||||||
| Cost of maintenance and service | 13,140 | 8,991 | |||||||||||||||||||||
| Research and development expense | 123,215 | 102,696 | |||||||||||||||||||||
| Sales and marketing expense | 60,567 | 34,950 | |||||||||||||||||||||
| General and administrative expense | 41,829 | 19,349 | |||||||||||||||||||||
| Stock-based compensation expense before taxes | 258,724 | 186,463 | |||||||||||||||||||||
| Income tax benefit | (40,749) | (30,655) | |||||||||||||||||||||
| Stock-based compensation expense after taxes | $ | 217,975 | $ | 155,808 |
During the three months ended January 31, 2026 and 2025, 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:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Expected life (in years) | 2.87 | 2.79 | |||||||||||||||||||||
| Risk-free interest rate | 3.48% | 4.39% | |||||||||||||||||||||
| Volatility | 44.90% | 34.72% | |||||||||||||||||||||
| Weighted average grant date fair value per share | $537.83 | $464.17 |
As of January 31, 2026, we had $1.3 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 1.8 years. As of January 31, 2026, we had $53.3 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 January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Intrinsic value of awards exercised | $ | 10,362 | $ | 20,359 |
Note 15. Net Income Per Share
We compute basic net income 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 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 per share with the weighted average common shares used to calculate diluted net income per share:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands, except per share amounts) | |||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income attributed to Synopsys | $ | 64,958 | $ | 295,683 | |||||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average common shares for basic net income per share | 189,593 | 154,408 | |||||||||||||||||||||
| Dilutive effect of common share equivalents from equity-based compensation | 1,169 | 1,781 | |||||||||||||||||||||
| Weighted average common shares for diluted net income per share | 190,762 | 156,189 | |||||||||||||||||||||
| Net income per share attributed to Synopsys: | |||||||||||||||||||||||
| Basic | $ | 0.34 | $ | 1.91 | |||||||||||||||||||
| Diluted | $ | 0.34 | $ | 1.89 | |||||||||||||||||||
| Anti-dilutive employee stock-based awards excluded | 984 | 352 |
Private Placement
In December 2025, we entered into a securities purchase agreement with NVIDIA Corporation, pursuant to which we sold an aggregate of approximately 4.8 million shares of our common stock in a private placement at a price of $414.79 per share for net proceeds of $2.0 billion.
Note 16. 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, Ansys products, 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 logic libraries, embedded memories, wired interface IP, memory interface IP, security IP, and embedded processors.
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.
Information by reportable segment is as follows:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Total Segments: | |||||||||||||||||||||||
| Revenue | $ | 2,408,798 | $ | 1,455,315 | |||||||||||||||||||
| Cost of revenue and operating expenses | 1,395,146 | 924,098 | |||||||||||||||||||||
| Adjusted operating income | 1,013,652 | 531,217 | |||||||||||||||||||||
| Adjusted operating margin | 42 | % | 37 | % | |||||||||||||||||||
| Design Automation: | |||||||||||||||||||||||
| Revenue | $ | 2,001,818 | $ | 1,020,216 | |||||||||||||||||||
| Cost of revenue and operating expenses | 1,054,286 | 615,546 | |||||||||||||||||||||
| Adjusted operating income | 947,532 | 404,670 | |||||||||||||||||||||
| Adjusted operating margin | 47 | % | 40 | % | |||||||||||||||||||
| Design IP: | |||||||||||||||||||||||
| Revenue | $ | 406,980 | $ | 435,099 | |||||||||||||||||||
| Cost of revenue and operating expenses | 340,860 | 308,552 | |||||||||||||||||||||
| Adjusted operating income | 66,120 | 126,547 | |||||||||||||||||||||
| Adjusted operating margin | 16 | % | 29 | % |
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, restructuring charges, 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:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Total segment adjusted operating income | $ | 1,013,652 | $ | 531,217 | |||||||||||||||||||
| Reconciling items: | |||||||||||||||||||||||
| Amortization of acquired intangible assets | (404,235) | (12,596) | |||||||||||||||||||||
| Stock-based compensation expense | (258,724) | (186,463) | |||||||||||||||||||||
| Deferred compensation plan | (13,773) | (19,638) | |||||||||||||||||||||
| Restructuring charges | (118,282) | — | |||||||||||||||||||||
| Acquisition/divestiture related items | (15,592) | (60,681) | |||||||||||||||||||||
| Total operating income | $ | 203,046 | $ | 251,839 |
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 January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||
| United States | $ | 1,096,085 | $ | 610,710 | |||||||||||||||||||
| Europe | 467,033 | 153,671 | |||||||||||||||||||||
| China | 211,083 | 173,948 | |||||||||||||||||||||
| Korea | 246,616 | 250,385 | |||||||||||||||||||||
| Other | 387,981 | 266,601 | |||||||||||||||||||||
| Consolidated | $ | 2,408,798 | $ | 1,455,315 |
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 17. Other Income (Expense), Net
The following table presents the components of other income (expense), net:
| Three Months Ended January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Interest income | $ | 17,433 | $ | 35,721 | |||||||||||||||||||
| Gains on assets related to deferred compensation plan | 13,773 | 19,638 | |||||||||||||||||||||
| Foreign currency exchange gains (losses) | (5,828) | 63 | |||||||||||||||||||||
| Other, net | 13,344 | (5,005) | |||||||||||||||||||||
| Total | $ | 38,722 | $ | 50,417 |
Note 18. 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 January 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Income before income taxes | $ | 79,053 | $ | 291,117 | |||||||||||||||||||
| Provision (benefit) for income taxes | $ | 14,337 | $ | (6,294) | |||||||||||||||||||
| Effective tax rate | 18.1 | % | (2.2) | % |
Our effective tax rate increased in the three months ended January 31, 2026, as compared to the same period in fiscal 2025, primarily due to the reduced benefit from stock-based compensation and foreign-derived intangible income deduction. The capital loss on the sale of our ownership in OpenLight was included in the first quarter of 2025.
Our effective tax rate for the three months ended January 31, 2026, is lower than the statutory federal corporate tax rate of 21% primarily due to U.S. federal research tax credits, foreign-derived intangible income deduction, and U.S. foreign tax credits, partially offset by 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 $28.0 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 calendar tax years 2017 to 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 connection with 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 legislation includes corporate income tax changes, including the restoration of immediate expensing for domestic research and experimental expenditures effective beginning in our fiscal 2026, resulting in a decrease to our current cash tax liabilities. Immediate expensing of research and development expenditures also results in a corresponding increase to our effective tax rate due to decreasing the foreign-derived intangible income deduction. The most significant effects begin in our fiscal 2026, with certain provisions extending into fiscal 2027.
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 2026, 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.
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 Organisation for Economic Co-operation and Development (the OECD) has model rules for a global minimum tax framework, which is 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 2), which define global minimum tax rules and imposes a 15% minimum tax rate. Various countries have started to enact new laws related to Pillar 2, including certain new laws effective beginning in fiscal 2025. As of January 31, 2026, the impact of Pillar 2 is not material.
Note 19. 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. For more detail on currently pending legal proceedings, see Part II, Item 1, Legal Proceedings. 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 18. Income Taxes of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q.
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