US electronic design automation (EDA) giant Synopsys faced ongoing challenges from US export restrictions to China and difficulties with key foundry customers. As of July 31, 2025, the company's revenue and profit for the third quarter of fiscal year 2025 fell short of market expectations, prompting an announcement of a 10% workforce reduction.
Revenue falls short despite year-over-year growth
According to the latest financial report, Synopsys posted third-quarter fiscal 2025 revenue of US$1.74 billion, representing a 14% year-over-year increase but below the market consensus of US$1.77 billion.
By segment, the design automation division accounted for 75.4% of total revenue, growing 23% year-over-year to US$1.31 billion, including US$78 million contributed by engineering simulation software provider Ansys. The design IP division made up 24.6%, with revenue declining 8% year-over-year to US$428 million.
Synopsys CEO Sassine Ghazi explained that overall revenue growth was primarily driven by EDA tools, with strong performance in European and North American markets.
IP business slowdown drags down profitability
However, the design IP business showed a significant slowdown, dragging down overall profitability. Ghazi identified three main reasons behind the IP business setback.
First, although the US Department of Commerce's Bureau of Industry and Security (BIS) imposed export restrictions on China for only six weeks, it caused customers to hesitate on long-term investments, impacting collaboration plans.
Second, a major foundry customer encountered challenges that significantly affected Synopsys' results. The company recently invested substantial resources to develop IP for this customer, hoping for returns in the second half of 2025, but market and customer factors prevented timely realization.
Third, internal resource allocation and strategic decisions did not yield expected outcomes. To meet customer demands, Synopsys allocated resources toward edge AI-related IP, causing delays in progress on legacy IP projects.
Strategic restructuring ahead
Ghazi noted that issues related to the Chinese market and foundry projects could persist into fiscal year 2026. Synopsys plans to reallocate resources to strengthen other areas and will reduce its workforce by approximately 10%.
Additionally, responding to a shift in delivery models from single IPs to subsystems and chiplets, the company has merged its IP and system solutions engineering teams to better address customized requirements.
Article edited by Jerry Chen
