[News] Synopsys Reportedly to Cut 10% Staff by FY26; China, Foundry Woes Expected Through 4Q

Despite the U.S. easing export restrictions to China for chip design software in early July, EDA heavyweight Synopsys is feeling the strain. The company reported third-quarter earnings below expectations, attributing the shortfall to a slowdown in its Design IP segment and difficulties faced by a major foundry client, according to Reuters and Bloomberg.

Notably, Synopsys CEO Sassine Ghazi said that these two factors were the key drivers of the company’s Q3 revenue miss and could continue to pressure results in Q4, as per Investing.com.

The company, which counts NVIDIA, Intel, and Qualcomm among its partners, provides software and hardware used to design advanced processors, Reuters notes.

As per Reuters, citing the company’s press release, Synopsys posted third-quarter revenue of $1.74 billion for the period ending July 31, falling short of analysts’ forecast of $1.77 billion. On an adjusted basis, the company reported earnings of $3.39 per share, also below the projected $3.74 per share, the report adds.

Looking ahead, Synopsys expects revenue in the current quarter to range between $2.23 billion and $2.26 billion.

Foundry Setback Raises Questions for Synopsys

According to Reuters, Synopsys had invested heavily in developing IP for a major foundry customer, expecting returns in the second half of 2025. However, the customer reportedly withdrew due to market and client-related factors.

Synopsys CEO Sassine Ghazi further explained said the impact hinges on how the foundry client uses the technology the company has already developed and the potential to sell that IP afterward, as per Investing.com.

While Synopsys has not named the customer, Intel—still working to revive its foundry business—has indicated plans to use 18A primarily for internal purposes and is weighing whether to continue advanced node production beyond 14A.

China Risks

As Reuters points out, the U.S. lifted export restrictions on chip design software to China in early July, after they were imposed in late May. But Synopsys said the six-week limit belied the lasting impact, as customers remained cautious about multi-year commitments—questioning project funding, chip completion, and tape-out—extending the effects well beyond the official restriction period, according to Investing.com.

According to its 10-Q filing, China represented 14.2% of Synopsys’ sales in the July quarter, making it the company’s second-largest market after the U.S., which accounted for 46.9%. Its design IP sales, on the other hand, declined 11.3% quarter-over-quarter to $427.6 million.

As noted by Investing.com, Synopsys warned that the China-related impact and the foundry client’s challenges extend beyond Q3. Thus, the company reportedly expects a transitional, muted year for IP in FY2026 while continuing to de-risk its forecast. It plans to provide more details in December but remains confident in its other business segments, the report adds, citing CEO Sassine Ghazi.

10% Work Reduction to Come

Another major announcement from Synopsys’ earnings call was a planned workforce reduction. According to Investing.com, while the company integrates Ansys this quarter, it will also cut 10% of its staff through FY2026 to improve scale and efficiency.

The reductions were planned well before the acquisition, following a strategic review of management layers, processes, systems, and the impact of AI tools deployed over the past two years, Investing.com noted.

Read more

• [News] China Reportedly Stalls $35B Synopsys-Ansys Merger amid Tightened U.S. EDA Curbs
• [News] Synopsys Reportedly Resumes Limited Sales in China, but Key EDA Tools Remain Suspended

(Photo credit: Synopsys’ X)