10-K – 2025-12-22 – snps-20251031.htm

includes penalties and settlements, of which there were none. During the same time period, while some of our suppliers have experienced security breaches, none of these breaches have had a material impact on Synopsys.
In our risk factors, we describe whether and how risks from identified cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. See our risk factor disclosures in Part I, Item 1A of this Annual Report.
Cybersecurity Governance
Information technology and data security, particularly cybersecurity, is a top area of focus for our Board of Directors (the Board), which considers these areas as essential for the success of our company and the broader technology industry in which we operate.
Our Board is actively involved in overseeing cybersecurity risk management. At least once a year, senior management, including our Chief Information Security Officer (CISO) , presents to the Board on Synopsys' cybersecurity performance and risk profile. Further, senior management and our CISO present semiannually to our Corporate Governance and Nominating Committee (CGN Committee) on Synopsys' cybersecurity risk oversight activities and cybersecurity preparedness efforts. The CGN Committee, a majority of whom are individuals with a strong background in cybersecurity and related matters, meets with members of senior management to review our information technology and data security policies and practices, and to assess current and potential threats, cybersecurity incidents and related risks.
Our CISO reports directly to our executive management team and advises Synopsys on cybersecurity risks and assesses the effectiveness of information technology and data security processes. The materials presented to our Board and CGN Committee include updates on our data security posture, results of third-party assessments, progress towards pre-determined risk-mitigation related goals, our incident response plan, and certain cybersecurity threat risks or incidents and developments, as well as the steps management has taken to respond to such risks. Members of the Board and the CGN Committee are also encouraged to regularly engage in ad hoc conversations with management on cybersecurity-related news events and to discuss any updates to our cybersecurity risk management and strategy programs. Material cybersecurity threat risks may also be considered during separate Board meeting discussions.
Our cybersecurity risk management and strategy processes, which are discussed in greater detail above, are led by our CISO. Our CISO has over 30 years of prior work experience in various roles involving managing information security, developing cybersecurity strategy and implementing effective information and cybersecurity programs. Our CISO holds a Bachelor’s of Science in Information Technology and a Master of Business Administration, and is also a Certified Information Systems Security Professional. He oversees our cybersecurity program and chairs a cross-functional committee that spans information security, IT, product security, physical security, and legal.
Our CISO and other members of senior management are informed about and monitor the prevention, mitigation, detection, and remediation of cybersecurity incidents through their management of, and participation in, the cybersecurity risk management and strategy processes described above, including the operation of our incident response plan . If a cybersecurity incident is determined to be a material cybersecurity incident, our incident response plan and cybersecurity disclosure controls and procedures define the process to disclose such material cybersecurity incident.

 Item 2.      Properties

Our principal o ffices are currently located in Sunnyvale, California. We currently lease approximately 1.7 million square feet of space in 45 offices throughout the United States, of which we sublet 340,000 square feet to third parties. We own approximately 176,000 square feet across four sites in the United States. These offices are used primarily for sales and support, marketing, and administrative activities as well as research and development for our business segments.

We currently lease approximately 4 million square feet of space in 35 countries other than the United States, and own buildings in Wuhan, China and Hsinchu, Taiwan as well as office space in Xiamen, China, Pune, India, and Yongin-si, South Korea . These offices are likewise used primarily for sales and support, service, and research and development activities for our business segments.

30

Table of Contents

As our needs change, from time to time, we may relocate, expand, and/or otherwise increase or decrease the size of our operations, offices or personnel. We believe that our existing facilities, including both owned and leased properties, are in good condition and suitable for our current needs and that suitable additional or substitute space will be available on commercially reasonable terms as needed to accommodate any expansion of our operations.

 Item 3.      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. On October 31, 2025, a shareholder class action complaint was filed in the United States District Court for the Northern District of California captioned Kim v. Synopsys, Inc., et al. (Case No. 25-cv-09410) against us and certain of our officers (the Kim Action). The complaint brings claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and alleges that certain material misstatements or omissions related to the performance of our Design IP segment were made in violation of federal securities laws. In addition, on November 25, 2025, a shareholder class action complaint was filed in the United States District Court for the Northern District of California captioned New England Teamsters Pension Fund v. Synopsys, Inc., et al . (Case No. 25-cv-10201) against us and certain of our directors and officers. The complaint raises similar allegations to the Kim Action but also brings claims under Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 on behalf of stockholders who received our stock in exchange for their shares of common stock of Ansys, Inc. as part of our acquisition of that company. The plaintiffs in both actions are seeking unspecified monetary damages and an award of costs and expenses, including reasonable attorneys’ fees and expert fees. We believe these claims are without merit, and we intend to defend the matters vigorously. However, 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. Regardless of outcome, litigation can have an adverse impact on Synopsys because of the defense costs, diversion of management resources and other factors. As we are unable to determine at this time whether any loss ultimately will occur or to estimate the range of such loss, no amount of loss has been accrued by us in our financial statements as of and for the fiscal year-ended October 31, 2025
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 are not aware of any other legal proceedings that would materially impact our business, operating results, or financial condition.

 Item 4.      Mine Safety Disclosures

Not applicable.

31

Table of Contents

PART II

 Item 5.      Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock trades on the Nasdaq Global Select Market under the symbol “SNPS.” As of December 15, 2025, we had 331 stockholders of record.
Performance Graph
The following graph compares the five-year total return to stockholders of our common stock relative to the cumulative total returns of the S&P 500 Index, the S&P Information Technology Index and the Nasdaq Composite Index. The graph assumes that $100 was invested in Synopsys common stock on October 30, 2020 (the last trading day before the beginning of our fifth preceding fiscal year) and in each of the indexes on October 31, 2020 (the closest month end) and that all dividends were reinvested. No cash dividends were declared on our common stock during such time. The comparisons in the table are not intended to forecast or be indicative of possible future performance of our common stock.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

*$100 invested on October 30, 2020 in stock or October 31, 2020 index, including reinvestment of dividends. Indexes calculated on a month-end basis. Fiscal year ending October 31.

32

Table of Contents

The information presented above in the stock performance graph shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, except to the extent that we subsequently specifically request that such information be treated as soliciting material or specifically incorporate it by reference into a filing under the Securities Act or Exchange Act.
Dividends
We have not paid cash dividends on our common stock.
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 October 31, 2025, $194.3 million remained available for future repurchases under the Program. However, in connection with the Ansys Merger, we have suspended the Program until we reduce our expected debt levels.
The table below sets forth information regarding our repurchases of our common stock during the three months ended October 31, 2025:

Period Total
number
of shares
purchased
Average
price paid
per share
Total
number of
shares
purchased
as part of
publicly
announced
programs Maximum dollar
value of shares
that may yet be
purchased
under the
programs
Month #1
August 1, 2025 through August 31, 2025 —  $ —  —  $ 194,276,393 
Month #2
September 1, 2025 through September 30, 2025 —  $ —  —  $ 194,276,393 
Month #3
October 1, 2025 through October 31, 2025 —  $ —  —  $ 194,276,393 
Total —  —  $ 194,276,393 

 Item 6.    [Reserved]

33

Table of Contents

 Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview
The following overview is qualified in its entirety by the more complete discussion contained in this Item 7, the risk factors set forth in Part I, Item 1A of this Form 10-K, and our consolidated financial statements and the notes thereto set forth in Item 8 of this Form 10-K. Please also see the cautionary language at the beginning of Part I of this Annual Report regarding forward-looking statements.
Unless otherwise noted, this Management’s Discussion and Analysis of Financial Condition and Results of Operations does not include the operations of our former Software Integrity business. See Note 3. Discontinued Operations of the Notes to Consolidated Financial Statements in this Annual Report for additional information about the sale of our former Software Integrity business (the Software Integrity Divestiture).
Fiscal 2025 Financial Performance Summary
For fiscal 2025, our results reflect continued, strong execution and the resiliency of our business, including 15% revenue growth compared to fiscal 2024, primarily due to revenue growth across a majority of product groups and geographies and the closing of the Ansys Merger, which contributed $756.6 million in revenue, which was offset by weakness in our business in China, which saw revenue decrease 22% compared to fiscal 2024, excluding Ansys. We saw strength in our Design Automation segment, including strong demand for our hardware products. This was offset by weakness in our Design IP segment, due to several headwinds, including China export control restrictions, such as the Q3 2025 BIS Restrictions (as defined below), which disrupted customer design starts in China, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results. We have begun taking actions to sharpen our execution and reallocate resources to the highest growth opportunities in our Design IP segment, but expect to see muted growth in fiscal 2026.

The following table sets forth some of our key consolidated financial information for each of our last three fiscal years:

  Year Ended October 31,
  2025 2024 2023
  (in millions, except per share amounts)

Revenue
$ 7,054.2  $ 6,127.4  $ 5,318.0 
Cost of revenue
$ 1,623.5  $ 1,245.3  $ 1,030.9 
Operating expenses
$ 4,515.7  $ 3,526.4  $ 3,013.9 
Operating income
$ 914.9  $ 1,355.7  $ 1,273.2 
Net income from continuing operations attributed to Synopsys $ 1,336.1  $ 1,441.7  $ 1,227.0 
Net income (loss) from discontinued operations attributed to Synopsys $ (3.9) $ 821.7  $ 2.8 
Diluted net income (loss) per share attributed to Synopsys:
Continuing operations $ 8.07  $ 9.25  $ 7.91 
Discontinued operations $ (0.03) $ 5.26  $ 0.01 

Fiscal 2025 compared to fiscal 2024 financial performance summary
• Revenues were $7.1 billion, an increase of $926.8 million or 15%, which includes revenues from Ansys of $756.6 million. The remaining growth came organically across a majority of products and geographies and was partially offset by the impact of the extra week in the first quarter of fiscal 2024 of approximately $63.2 million, and by weakness in our business in China, which saw revenue decrease 22% compared to fiscal 2024, excluding Ansys, and in our Design IP segment due to several headwinds, including China export control restrictions, such as the Q3 2025 BIS Restrictions, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results.
• Total cost of revenue and operating expenses was $6.1 billion, an increase of $1.4 billion or 29%, primarily due to an increase of $664.5 million in employee-related costs from headcount increases as a result of the Ansys Merger of $432.1 million and the balance from organic growth, as well as $457.8 million of amortization expense related to intangible assets acquired from the Ansys Merger.

34

Table of Contents

Fiscal 2024 compared to fiscal 2023 financial performance summary
• Revenues were $6.1 billion, an increase of $809.4 million or 15%, primarily due to revenue growth across all products and geographies.
• Total cost of revenue and operating expenses was $4.8 billion, an increase of $726.9 million or 18%, primarily due to an increase of $325.8 million in employee-related costs resulting from headcount increases through organic growth and acquisitions.
• Operating income was $1.4 billion, an increase of $82.5 million or 6%.
• Net income from discontinued operations was $821.7 million, an increase of $818.9 million, primarily due to the gain on Software Integrity Divestiture.
Business Summary
Synopsys delivers industry-leading silicon design, simulation and analysis (S&A) and IP solutions 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. For more information about our business segments and product groups, see Part I, Item 1, Business in our Annual Report.
We have consistently grown our revenue since 2005, despite periods of global economic uncertainty. We achieved these results because of our solid execution, leading technologies and strong customer relationships, and because we generally recognize our revenue for software licenses over the arrangement period, which typically approximates two to three years. See Note 2. Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report for a discussion on our revenue recognition policy . The revenue we recognize in a particular period generally results from selling efforts in prior periods rather than the current period. As a result, decreases as well as increases in customer spending do not immediately affect our revenue in a significant way.
Our growth strategy is focused on expanding our total addressable market by maximizing the capabilities of R&D teams across industries spanning semiconductor, high-tech, industrial, aerospace, and more with engineering solutions from silicon to systems. Our priorities are to maintain and expand our technology leadership, drive sustainable growth and efficiently scale to accelerate our strategy. Our revenue growth from period to period is expected to vary based on the mix of our time-based and upfront products. Our upfront products have grown at a faster rate than our time-based products in recent periods, which has resulted in, and may in the future result in, increased fluctuation in our business, operating results and overall financial position on a quarterly basis. Such fluctuation may be more pronounced depending on demand from our larger customers. See Part I, Item 1A, Risk Factors, "Our operating results may fluctuate in the future, which may adversely affect our stock price" of this Annual Report for further discussion on potential fluctuations in our operating results. Based on our leading technologies, customer relationships, business model, diligent expense management and acquisition strategy, we believe that we will continue to execute our strategies successfully.
Acquisition of Ansys
On July 17, 2025 (the Acquisition Date), we completed our acquisition of ANSYS, Inc. (Ansys) pursuant to the terms of the previously announced Agreement and Plan of Merger, dated as of January 15, 2024 (the Merger Agreement) by and among Synopsys, Ansys and ALTA Acquisition Corp. (Merger Sub), a Delaware corporation and a wholly owned subsidiary of Synopsys (the Ansys Merger). See Note 4. Business Combinations of the Notes to Consolidated Financial Statements for more information on the Ansys Merger.
For more on risks related to the Ansys Merger, see Part I, Item 1A, Risk Factors , “ Risks Related to the Ansys Merger " of this Annual Report.
Impact of the Current Macroeconomic Environment
The current macroeconomic environment, including the effects of, among other things, changes in U.S. and global trade policy, including the tariffs enacted in 2025 by the U.S. and other governments, sustained global inflationary pressures and elevated interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, and fluctuations in foreign exchange rates, have resulted in increased volatility in global markets. While we have seen continued strength in the artificial intelligence and high-performance computing sectors, certain industries such as industrial, automotive and consumer electronics have recovered more slowly from recent macroeconomic uncertainty. The current uncertain macroeconomic environment has led some of our
35

Table of Contents

customers to postpone their decision-making, delay their drawdowns under non-cancellable commitments, decrease their spending and/or delay their payments to us.
We expect growth across our geographies in fiscal 2026; however, we are expecting a challenging near-term environment, including in China, due to macroeconomic factors and Trade Restrictions (as defined below). See the discussion below under the heading "Impact of Global Trade Policy and the Current Geopolitical Environment" and in Part I, Item 1A, Risk Factors , " We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets " of this Annual Report for further discussion of the impact of Trade Restrictions, including export control regulations and geopolitical events on Synopsys.
While our time-based model provides stability to our business, operating results and overall financial position, the broader implications of these macroeconomic or geopolitical events, particularly in the long term, remain uncertain. Further, the negative impact of these events or disruptions may be deferred due to our business model. See Part I, Item 1A, Risk Factors , “ Uncertainty in the macroeconomic environment, and its potential impact on the semiconductor and electronics industries, may negatively affect our business, operating results and financial condition ” and " Our operating results may fluctuate in the future, which may adversely affect our stock price " of this Annual Report for further discussion of the impact of global economic uncertainty on our business, operations and financial condition and potential fluctuations in our operating results, respectively.
See Part I, Item 1A, Risk Factors of this Annual Report for further discussion of the impact of global economic and geopolitical uncertainty on our business, operations and financial condition.
Impact of Global Trade Policy and the Current Geopolitical Environment
We are actively monitoring changes to global trade policy, such as changes to U.S. Export Regulations (as defined below) and developments related to the tariffs enacted by the U.S. government. In fiscal 2025, the U.S. government imposed a number of new and higher U.S. tariffs on imports from countries around the world. Certain countries have responded to the U.S. tariffs by imposing or threatening retaliatory tariffs. There may be additional changes to tariffs or new tariffs and other aspects of global trade policy in fiscal 2026 in the U.S. and other countries due to global trade negotiations and other factors. These changes in global trade policy have not had a material impact on our business, operating results or financial condition to date.
The Bureau of Industry and Security of the U.S. Department of Commerce (BIS) has continued to publish changes to U.S. export control regulations (the U.S. Export Regulations), including, among other things, the inclusion of certain Chinese technology companies on the Entity List, restrictions on the export of electronic computer-aided design (ECAD) software specially designed for the development of certain ICs, as well as controls on ECAD software for advanced semiconductor packaging involving multiple chips or chiplets, and certain other restrictions on China’s access to certain semiconductor and advanced computing technology. U.S.-China relations remain fluid, in particular with respect to trade policy and export restrictions relating to dual-use technologies. For example, on May 29, 2025, Synopsys received a so-called “is-informed” letter from the BIS imposing a license requirement for the export, reexport, or in-country transfer of EDA software and technology classified under export control classification numbers (ECCNs) 3D991 and 3E991 when a party to the transaction is located in China or is a Chinese “military end user,” wherever located (such restrictions, the Q3 2025 BIS Restrictions). The Q3 2025 BIS Restrictions were subsequently rescinded on July 2, 2025. China export control restrictions, including the Q3 2025 BIS Restrictions, have negatively impacted our business in China, including in our Design IP segment, and may continue to impact design starts or other aspects of our business in China in the future. The evolving nature of U.S. Export Regulations, including the potential for new and expanded license requirements of this or similar nature, creates uncertainty regarding the current and future impacts on our business. We anticipate additional changes to the U.S. Export Regulations or other U.S. or non-U.S. export, sanctions, or similar trade requirements (collectively, the Trade Restrictions) in the future, but we cannot forecast the scope or timing of such changes, nor the impact on our business. We will continue to monitor such developments, including potential additional Trade Restrictions, new or expanded license requirements, and other regulatory or policy changes by the U.S. and foreign governments.
For more on risks related to government export and import restrictions such as the U.S. government’s Entity List and other U.S. Export Regulations, see Part I, Item 1A, Risk Factors , “ We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets .”
We are also monitoring other geopolitical pressures around the world, including, among others, changes in China-Taiwan and U.S.-China relations, the conflicts in Ukraine and the Middle East and other regional or global military
36

Table of Contents

conflicts. Any significant disruption caused by these or other geopolitical pressures or conflicts could materially affect our employees, business, operating results, financial condition or customers in those regions of the world. For example, Synopsys has employees, operations, customers and strategic partners in the Middle East. While we are actively monitoring the conflicts in the Middle East, at this time they have not had a material impact on our business, operating results or financial condition to date.
Business Segments
Design Automation. This segment includes our advanced silicon design, verification products and services, and Ansys products, and system integration products and services. This segment also includes digital, custom and field programmable gate array (FPGA) integrated circuit (IC) design software, verification software and hardware products, and manufacturing software products. Designers use our EDA products to accelerate and automate the chip design process, reduce errors and enable more powerful and robust designs, with improved productivity for faster time to market. Engineers use our S&A solutions to virtually test and optimize designs across various physics domains, such as structural analysis, thermal analysis, and computational fluid dynamics (CFD).
Design IP. This segment includes our interface, foundation, security, and embedded processor IP, IP subsystems, and IP implementation services that serve companies primarily in the semiconductor and electronics industries. We are a leading provider of high-quality, silicon-proven IP solutions for system-on-chips (SoCs). This includes IP that has been optimized to address specific application requirements for the mobile, automotive, digital home, Internet of Things and AI/data center markets, enabling designers to quickly develop SoCs in these areas.
Fiscal Year End
We have changed our fiscal year end from the Saturday nearest to October 31 and consisting of 52 or 53 fiscal weeks to a fiscal year end of October 31 each year. The fiscal year change became effective with our fiscal 2025, which began on November 3, 2024. Our fiscal quarters end on January 31, April 30, July 31 and October 31 of each year.
Historically, our fiscal years have been 52- or 53-week periods ending on the Saturday nearest to October 31. Fiscal 2024 was a 53-week year ended on November 2, 2024. Fiscal 2023 was a 52-week year ended on October 28, 2023. The extra week in the first quarter of fiscal 2024 resulted in approximately $63.2 million of additional revenue, and approximately $52.5 million of additional expenses, including approximately $10.6 million in stock-based compensation costs from continuing operations.
For presentation purposes, this Annual Report refers to the closest calendar month end.

Critical Accounting Estimates
A critical accounting estimate is defined as one that has a material impact on our financial condition and results of operations and requires us to make difficult, complex or subjective judgments, often as a result of the need to make estimates about matters that are inherently uncertain. Where applicable, we base these estimates and assumptions on historical experience and evaluate them on an ongoing basis to ensure that they remain reasonable under current conditions. Actual results could differ from those estimates. We believe that the following critical accounting policies reflect more significant judgments and estimates used in the preparation of our consolidated financial statements regarding critical accounting estimates. See Note 2. Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report for further information on our significant accounting policies.
37

Table of Contents

Revenue Recognition
Our contracts with customers often include promises to transfer multiple products and services to a customer. Arrangements with customers can involve multiple products and various license rights. Customers can negotiate for a broad portfolio of solutions, and favorable terms along with future purchase options to manage their overall costs. Analysis of the terms and conditions in these contracts and their effect on revenue recognition may require significant judgment.
We have concluded that our EDA software licenses in Technology Subscription License (TSL) contracts and software licenses in Ansys semiconductor products are not distinct from our obligation to provide unspecified software updates to the licensed software throughout the license term, because those promises represent inputs to a single, combined performance obligation. Where unspecified additional software product rights are part of the contract with the customer, those rights are accounted for as part of the single performance obligation that includes the licenses, updates, and technical support, because such rights are provided during the same period of time and have the same time-based pattern of transfer to the customer.
Software subscription arrangements for S&A solutions include bundles of time-based software licenses with support services, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. We have concluded that the updates to time-based software licenses are not considered integral to maintaining the utility of the software and hence consider the license and support services as separate performance obligations. We also license S&A software on a perpetual basis with support services, which includes a stand-ready obligation to provide technical support and software updates over the support term. We allocate the total consideration received for the bundled perpetual and support service arrangements based on the standalone selling prices of the perpetual license and support service.
For our IP licensing arrangements, we have concluded that the licenses and support services are distinct from each other, and therefore treated as separate performance obligations. Revenues from IP licenses are recognized at a point in time upon transfer of control of the IP license, and support services are recognized over the support period as a stand ready obligation to the customer.
We are required to estimate total consideration expected to be received from contracts with customers. In some circumstances, the consideration expected to be received is variable based on the specific terms of the contract or based on our expectations of the term of the contract. Generally, we have not experienced significant returns or refunds to customers. These estimates require significant judgment and the change in these estimates could have an effect on our results of operations during the periods involved.
Business Combinations
We allocate the purchase price of acquired companies to the tangible assets acquired, liabilities assumed and intangible assets acquired based upon their estimated fair values on the acquisition date with the exception of contract assets and contract liabilities (deferred revenue) which are recognized and measured on the acquisition date in accordance with our "Revenue Recognition" policy in Note 2. Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report , as if we had originated the contracts. The excess of the purchase price over the fair values of these net tangible and intangible assets acquired is recorded as goodwill.
Accounting for business combinations requires management to make significant estimates and assumptions for the valuation of goodwill and intangible assets. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions and information obtained from management of the acquired companies and are inherently uncertain. Changes in our estimates and assumptions may impact valuation of intangible assets, subsequent amortization of intangible assets as well as amounts recognized as goodwill. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include, but are not limited to:
• future expected cash flows, which includes estimates of software license sales, subscriptions, support agreements and consulting contracts;
• projected expenses, which include cost of revenue, research and development and selling, general and administrative expenses (including estimated expenses required to generate the revenues attributable to different intangible assets);
38

Table of Contents

• historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;
• royalty rates applied to acquired developed technology platforms and other intangible assets;
• expected obsolescence rates and estimated useful lives of technology-related intangible assets;
• expected use of the acquired assets; and
• discount rates used to discount expected future cash flows to present value, which are typically derived from the implied rate of return on the transaction and a weighted-average cost of capital analysis with adjustments made to reflect inherent risks of the individual assets being valued;
The fair value of the definite-lived intangibles was determined using variations of the income approach.
With our acquisition of Ansys, the fair value of developed technologies and trade names was determined by applying the relief from royalty method under the income approach. The relief from royalty method applies a royalty rate to projected income to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. The economic useful life for developed technology was determined based on historical technology obsolescence patterns and prospective technological developments. The estimated economic useful life of the trade names was determined based on the expected probability of continued use of the brand asset. We assumed royalty rates ranging from 35.0% to 45.0% for existing technology, and 2.5% for trade names. The present value of operating cash flows from the existing technology and trade names was determined using discount rate of approximately 10.0%.
Customer relationships represent the fair value of the existing relationships with the acquired company’s customers. Their fair value was determined using the multi-period excess earnings method under the income approach, which involves isolating the net earnings attributable to the asset being measured based on the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the asset over its remaining useful life. The economic useful life was determined based on historical customer turnover rates. Projected income from existing customer relationships considered customer retention rates (i.e. gross retention and net retention including upsell) ranging from 85.0% to 105.0% for the direct sales channel and 70.0% to 90.0% for the indirect sales channel. The present value of operating cash flows from existing customers was determined using a discount rate of approximately 10.0%.
Contract rights intangible (i.e. order backlog) represents contracted but unsatisfied or partially unsatisfied performance obligations, primarily related to the dollar value of purchase arrangements with customers, effective as of a given point in time, that are based on mutually agreed terms. The fair value was determined by using the multi-period excess earnings method under the income approach. The economic useful life is based on the time to achieve 90.0% of cumulative undiscounted cash flows. The present value of operating cash flows from order backlog was determined using a discount rate of approximately 5.9%.
We believe that our preliminary estimates and assumptions related to the fair value of acquired intangible assets are reasonable, but significant judgment is involved. As a result, during the measurement period, which will not exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of the purchase price of our acquisitions, whichever comes first, any subsequent adjustments are recorded to our Consolidated Statements of Income or Condensed Consolidated Statement of Income.

Results of Operations
Revenue
Our revenues are generated from two business segments: the Design Automation segment and the Design IP segment. See Note 19. Segment Disclosure of the Notes to Consolidated Financial Statements in this Annual Report for more information about our reportable segments and revenue by geographic regions.
Further disaggregation of the revenues into various products and services within these two segments is summarized as follows:
Design Automation Segment
• EDA solutions include digital, custom and FPGA IC design software, verification software and hardware products, Ansys semiconductor products, system integration products and services, and obligations to
39

Table of Contents

provide unspecified updates and support services. EDA products and services are typically sold through Technology Subscription License (TSL) arrangements that grant customers the right to access and use all of the licensed products at the outset of an arrangement; software updates are generally made available throughout the entire term of the arrangement. The duration of our TSL contracts is generally two to three years, though it may vary for specific arrangements. We have concluded that the software licenses in TSL contracts are not distinct from the obligation to provide unspecified software updates to the licensed software throughout the license term, because the multiple software licenses and support represent inputs to a single, combined offering, and timely, relevant software updates are integral to maintaining the utility of the software licenses. We recognize revenue for the combined performance obligation under TSL contracts ratably over the term of the license.
• In the case of arrangements involving the sale of hardware products, we generally have two performance obligations. The first performance obligation is to transfer the hardware product, which includes software integral to the functionality of the hardware product. The second performance obligation is to provide maintenance on the hardware and its embedded software, which includes rights to technical support, hardware repairs and software updates that are all provided over the same term and have the same time-based pattern of transfer to the customer. The portion of the transaction price allocated to the hardware product is generally recognized as revenue at the time of shipment because the customer obtains control of the product at that point in time. We have concluded that control generally transfers at that point in time because the customer has the ability to direct the use of the asset and an obligation to pay for the hardware. The portion of the transaction price allocated to the maintenance obligation is recognized as revenue ratably over the maintenance term.
• S&A solutions allow engineers to virtually test and optimize designs across various physics domains, such as structural analysis, thermal analysis, and CFD. S&A software solutions are offered as subscription solutions and also as perpetual licenses. Software subscription arrangements include bundles of time-based software licenses with support services, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. In such subscription arrangements, the updates to time-based software licenses are not considered integral to maintaining the utility of the software. We consider the license and support services as separate performance obligations. In these instances, we allocate the total consideration received for the revenue arrangement to the separate performance obligations based on the standalone selling prices of the time-based software license and support service. The time-based software license revenue is presented as upfront products revenue, recognized at a point of time upon the later of the delivery date or the beginning of the license period, and the revenue related to the support service is presented as maintenance and service revenue and is recognized over the term of the arrangement. Perpetual license arrangements typically include a perpetual license sold with support services, which includes a stand-ready obligation to provide technical support and software updates over the support term. We allocate the total consideration received for the bundled perpetual and support service arrangements based on the standalone selling prices of the perpetual license and support service. Revenue from perpetual licenses is presented as upfront product revenue and is recognized at a point in time upon the later of the delivery date or the beginning of the license period. Revenue from support service is classified as maintenance and service revenue and is recognized ratably over the term of the contract, as we satisfy the support service performance obligation.
• Revenue from professional service contracts is recognized over time, generally using costs incurred or hours expended to measure progress. We have a history of reasonably estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes.
Design IP Segment
• Design IP includes our interface, foundation, security, and embedded processor IP, IP subsystems, and IP implementation services. These arrangements generally have two performance obligations which consist of transferring of the licensed IP and providing related support, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. Revenue allocated to the IP licenses is recognized at a point in time upon the later of the delivery date or the beginning of the license period, and revenue allocated to support is recognized over the support term. Royalties are recognized as revenue in the quarter in which the
40

Table of Contents

applicable customer sells its products that incorporate our IP. Payments for IP contracts are generally received upon delivery of the IP. Revenue related to the customization of certain IP is recognized over time, generally using costs incurred or hours expended to measure progress.
Our customer arrangements can involve multiple products and various license rights, and our customers negotiate with us over many aspects of these arrangements. For example, they generally request a broader portfolio of solutions, support and services and seek more favorable terms such as expanded license usage, future purchase rights and other unique rights at an overall lower total cost. No single factor typically drives our customers’ buying decisions, and we compete on all fronts to serve customers in highly competitive markets. Customers generally negotiate the total value of the arrangement rather than just unit pricing or volumes.
Total Revenue

Year Ended October 31, $ Change     % Change     $ Change % Change
2025 2024 2023 2025 vs. 2024 2024 vs. 2023
(dollars in millions)
Design Automation $ 5,302.4  $ 4,221.1  $ 3,775.3  $ 1,081.3  26  % $ 445.8  12  %
Design IP 1,751.8  1,906.3  1,542.7  (154.5) (8) % 363.6  24  %

Total $ 7,054.2  $ 6,127.4  $ 5,318.0  $ 926.8  15  % $ 809.4  15  %

Our revenues are subject to fluctuations, primarily due to customer requirements including customer demand, timing requirements and the value of contract renewals. For example, we experience fluctuations in our revenues due to factors such as the timing of IP product sales, Flexible Spending Account (FSA) drawdowns, royalties, and hardware products sales. As revenues from sales of IP products, hardware products and S&A product licenses are recognized upfront, customer demand and timing requirements for such IP products, hardware products and S&A product licenses could result in increased variability of our total revenues.
Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) were approximately $11.4 billion as of October 31, 2025, which includes $2.0 billion in non-cancellable 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 45% of the backlog as of October 31, 2025, excluding non-cancellable FSA, is expected to be recognized as revenue over the next 12 months, with the remainder recognized thereafter. The majority of the remaining backlog is expected to be recognized in the following three years . The backlog was approximately $8.1 billion as of October 31, 2024, which included $1.2 billion in non-cancellable FSA commitments from customers.
The amount and composition of unsatisfied performance obligations will fluctuate period to period. We do not believe the amount of unsatisfied performance obligations is indicative of future sales or revenue, or that such obligations at the end of any given period correlates with actual sales performance of a particular geography or particular products and services. F or more information regarding our revenue during the year ended October 31, 2025, including our contract balances as of such date, see Note 5. Revenue of the Notes to Consolidated Financial Statements in this Annual Report.
The increase in total revenue for fiscal 2025 compared to fiscal 2024 was primarily due to the closing of the Ansys Merger, which contributed $756.6 million in revenue in fiscal 2025, revenue growth of our business across a majority of product groups and geographies. This was offset by weakness in our Design IP segment due to several headwinds, including China export control restrictions, such as the Q3 2025 BIS Restrictions, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results. The increase for fiscal 2025 was also partially offset by the impact of the extra week in fiscal 2024 of approximately $63.2 million.
The increase in total revenues for fiscal 2024 compared to fiscal 2023 was primarily due to the continued organic growth of our business in all product groups and geographies.
For a discussion of revenue by geographic areas, see Note 19. Segment Disclosure of the Notes to Consolidated Financial Statements in this Annual Report .
41

Table of Contents

Time-Based Products Revenue

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023
  (dollars in millions)
Time-based products revenue $ 3,489.6  $ 3,224.3  $ 3,016.3  $ 265.3  8  % $ 208.0  7  %
Percentage of total revenue 49  % 53  % 57  %

The increase in time-based products revenue for fiscal 2025 compared to fiscal 2024 was primarily attributable to the closing of the Ansys Merger, which contributed $86.5 million in revenue in fiscal 2025, and an increase in TSL license revenue from arrangements booked in prior periods. The increase for fiscal 2025 compared to fiscal 2024 was partially offset by the impact of the extra week in fiscal 2024. The increase in time-based products revenue for fiscal 2024 compared to fiscal 2023 was primarily attributable to an increase in TSL license revenue from arrangements booked in prior periods. The increase for fiscal 2024 compared to fiscal 2023 also included the impact of the extra week in fiscal 2024.
Upfront Products Revenue

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023
  (dollars in millions)
Upfront products revenue $ 2,010.6  $ 1,802.2  $ 1,400.1  $ 208.4  12  % $ 402.1  29  %
Percentage of total revenue 29  % 29  % 26  %

Changes in upfront products revenue are generally attributable to normal fluctuations in the extent and timing of customer requirements, which can drive the amount of upfront orders and revenue in any particular period.
The increase in upfront products revenue for fiscal 2025 compared to fiscal 2024 was primarily due to an increase in the sale of hardware products driven by higher demand from customers and the closing of the Ansys Merger, which contributed $198.7 million in upfront products revenue in fiscal 2025. The increase for fiscal 2024 compared to fiscal 2023 was primarily due to an increase in the sale of IP and hardware products driven by higher demand from customers.
Upfront products revenue as a percentage of total revenue will likely fluctuate based on the timing of IP, hardware and S&A product sales. Such fluctuations will continue to be impacted by the timing of shipments and FSA drawdowns due to customer requirements.
Maintenance and Service Revenue

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023
  (dollars in millions)
Maintenance revenue $ 954.2  $ 429.4  $ 358.1  $ 524.8  122  % $ 71.3  20  %
Professional service and other revenue 599.8  671.5  543.5  (71.7) (11) % 128.0  24  %
Total $ 1,554.0  $ 1,100.9  $ 901.6  $ 453.1  41  % $ 199.3  22  %
Percentage of total revenue 22  % 18  % 17  %

The increase in maintenance revenue for fiscal 2025 compared to fiscal 2024 was primarily due to an increase in the volume of arrangements that include maintenance largely due to the closing of the Ansys Merger, which contributed $449.0 million in maintenance revenue in fiscal 2025. The increase for fiscal 2024 compared to fiscal 2023 was primarily due to an increase in the volume of arrangements that include maintenance.
The decrease in professional service and other revenue for fiscal 2025 compared to fiscal 2024 and the increase for fiscal 2024 compared to fiscal 2023 were primarily due to the timing of IP customization projects.
42

Table of Contents

Cost of Revenue

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023
  (dollars in millions)
Cost of products revenue $ 867.2  $ 770.2  $ 697.7  $ 97.0  13  % $ 72.5  10  %
Cost of maintenance and service revenue 444.5  367.1  287.9  77.4  21  % 79.2  28  %
Amortization of acquired intangible assets
311.8  108.0  45.3  203.8  189  % 62.7  138  %
Total $ 1,623.5  $ 1,245.3  $ 1,030.9  $ 378.2  30  % $ 214.4  21  %
Percentage of total revenue 23  % 20  % 19  %

Our cost of revenue comprises of three categories: cost of products revenue, cost of maintenance and service revenue, and amortization of acquired intangible assets.
Cost of products revenue. Cost of products revenue includes costs related to products sold and software licensed, hardware-related costs including inventory provisions, allocated operating costs related to product support and distribution, royalties paid to third-party vendors, and the amortization of capitalized software development costs.
Cost of maintenance and service revenue. Cost of maintenance and service revenue includes costs to deliver our maintenance services, such as hotline and on-site support, production services and documentation of maintenance updates.
Amortization of acquired intangible assets. Amortization of acquired intangible assets, included in cost of revenue, consists of the amortization and impairment charges of core/developed technology and certain contract rights intangible assets related to acquisitions.
The increase in costs of products revenue and costs of maintenance and service revenue for fiscal 2025 compared to fiscal 2024 was primarily due to increases in employee-related costs as a result of headcount increases from organic growth, which contributed $59.0 million, and the Ansys Merger, which contributed $32.8 million; $60.4 million in hardware-related costs including inventory provisions, and $3.3 million in IT and facility costs, partially offset by a decrease of $2.5 million in costs to fulfill IP consulting arrangements. The increase in amortization of acquired intangible assets for fiscal 2025 compared to fiscal 2024 was primarily due to an increase of $257.3 million in amortization of acquired technology-related and contract rights intangible assets mainly in connection with the Ansys Merger, partially offset by an impairment charge of $53.5 million of certain core / developed technology intangible assets in fiscal 2024.
The increase in cost of revenue for fiscal 2024 compared to fiscal 2023 was primarily due to increases of $62.7 million in amortization of acquired technology-related intangible assets, which included an impairment charge of $53.5 million due to a decline in estimated fair value resulting from the reductions in the expected future cash flows associated with certain core/developed technology intangible assets as further discussed in Note 6. Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements in this Annual Report, $53.5 million in costs to fulfill IP consulting arrangements, $47.4 million in employee-related costs as a result of headcount increases from hiring, $43.4 million in hardware-related costs including inventory provisions, $3.4 million in the change in the fair value of our executive deferred compensation plan assets, and $3.2 million in maintenance and depreciation expenses. These increases were partially offset by a decrease of $2.1 million in IT and facility costs.
43

Table of Contents

Operating Expenses
Research and Development

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023
  (dollars in millions)
Research and development expenses
$ 2,479.3  $ 2,082.4  $ 1,849.9  $ 396.9  19  % $ 232.5  13  %
Percentage of total revenue 35  % 34  % 35  %

The increase in research and development expenses for fiscal 2025 compared to fiscal 2024 was primarily due to increases of $319.7 million in employee-related costs as a result of headcount increases from organic growth of $172.9 million as we continue to expand and enhance our product portfolio and $146.8 million from the Ansys Merger, $57.1 million in IT and facility costs, and $39.1 million in consultant and contractor costs, partially offset by a decrease of $6.6 million in the change in the fair value of our executive deferred compensation plan assets.
The increase in research and development expenses for fiscal 2024 compared to fiscal 2023 was primarily due to higher employee-related costs of $148.2 million as a result of headcount increases as we continue to expand and enhance our product portfolio, increases of $36.5 million in the change in the fair value of our executive deferred compensation plan assets, $20.6 million in IT and facility costs, $6.7 million in depreciation expenses, and $2.4 million in consultant and contractor costs.
Sales and Marketing

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023
  (dollars in millions)
Sales and marketing expenses
$ 1,074.2  $ 859.3  $ 724.9  $ 214.9  25  % $ 134.4  19  %
Percentage of total revenue 15  % 14  % 14  %

The increase in sales and marketing expenses for fiscal 2025 compared to fiscal 2024 was primarily due to increases of $183.5 million in employee-related costs due to headcount increases from the Ansys Merger, which contributed $156.3 million, and organic growth, which contributed $27.2 million; $22.8 million in IT and facility costs, $13.1 million in travel and marketing costs due to an increased number of in-person meetings and events, $3.3 million in depreciation and maintenance expense, partially offset by a decrease of $10.6 million in the change in the fair value of our executive deferred compensation plan assets.
The increase in sales and marketing expenses for fiscal 2024 compared to fiscal 2023 was primarily due to increases of $90.9 million in employee-related costs due to headcount increases, $19.6 million in the change in the fair value of our executive deferred compensation plan assets, and $7.0 million in travel and marketing costs due to an increased number of in-person meetings and events.
General and Administrative

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023
  (dollars in millions)
General and administrative expenses
$ 769.6  $ 568.5  $ 376.7  $ 201.1  35  % $ 191.8  51  %
Percentage of total revenue 11  % 9  % 7  %

The increase in general and administrative expenses for fiscal 2025 compared to fiscal 2024 was primarily due to increases of $94.8 million in legal, consulting and other professional fees mainly in connection with the Ansys
44

Table of Contents

Merger, $69.5 million in employee-related costs primarily related to the Ansys Merger, $7.4 million in depreciation and maintenance expense and $3.5 million in IT and facility costs.
The increase in general and administrative expenses for fiscal 2024 compared to fiscal 2023 was primarily due to increases of $135.2 million in legal, consulting and other professional fees mainly in connection with the Ansys Merger, $39.3 million in personnel-related costs due to headcount increases from hiring, $24.2 million in maintenance and depreciation expenses, and $5.7 million in the change in the fair value of our executive deferred compensation plan assets.
Change in Fair Value of Deferred Compensation
The income or loss arising from the change in the fair value of our non-qualified deferred compensation plan obligation is recorded in cost of sales and each functional operating expense, with the offsetting change in the fair value of the related assets recorded in other income (expense), net. There is no impact on our net income from the fair value changes in our deferred compensation plan obligation and related assets.
Amortization of Acquired Intangible Assets
Amortization of acquired intangible assets, included in operating expenses, consists of the amortization of trademarks, trade names and customer relationships intangible assets related to acquisitions.

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023
  (dollars in millions)
Amortization of acquired intangible assets
$ 192.5  $ 16.2  $ 9.3  $ 176.3  1,088  % $ 6.9  74  %
Percentage of total revenue 3  % —  % —  %

The increase in amortization of acquired intangible assets for fiscal 2025 compared to fiscal 2024 was primarily due to amortization expense related to intangible assets acquired from the Ansys Merger . See Note 6. Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements in this Annual Report for a schedule of future amortization amounts.
The increase in amortization of acquired intangible assets for fiscal 2024 compared to fiscal 2023 was primarily due to amortization expense related to intangible assets acquired during fiscal 2024, partially offset by certain intangible assets becoming fully amortized during fiscal 2024.
45

Table of Contents

Restructuring Charges
In the first quarter of fiscal 2023, we initiated a restructuring plan for involuntary employee terminations as part of a business reorganization (the 2023 Plan). The 2023 Plan was substantially completed in the third quarter of fiscal 2023, and total charges under the 2023 Plan consisting primarily of severance costs and facility exit costs were $77.0 million, of which $23.9 million were related to discontinued operations.
The following is a summary of our restructuring liabilities:
Fiscal Year Balance at Beginning of Period Costs Incurred Cash Payments Balance at End of Period
(dollars in millions)
2025 $ 4.6  $ —  $ (0.8) $ 3.8 
2024 $ 8.2  $ —  $ (3.6) $ 4.6 
2023 $ —  $ 53.1  $ (44.9) $ 8.2 

In November 2025, we initiated a restructuring plan for involuntary employee terminations as part of a business reorganization (the 2026 Plan) upon approval by the Board of Directors. The 2026 Plan will allow us to invest in key growth opportunities and drive business efficiencies following the completion of the Ansys Merger. Total charges under the 2026 Plan are expected to be in the range of $300.0 million and $350.0 million, and will consist primarily of severance costs, other one-time termination benefits and facility exit costs. The 2026 Plan is anticipated to be completed by the end of fiscal 2027, with majority of the workforce reduction in fiscal 2026.
See Note 20. Restructuring Charges of the Notes to Consolidated Financial Statements in this Annual Report for additional information .

Interest Expense

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023
  (dollars in millions)
Interest expense $ (446.7) $ (36.8) $ (2.7) $ (409.9) 1114  % $ (34.1) 1263  %
Percentage of total revenue (6) % (1) % —  %

The increase in interest expense for fiscal 2025 as compared to fiscal 2024 was primarily due to interest on the Senior Notes and the borrowings under the Term Loan Agreement in fiscal 2025 in connection with the Ansys Merger.
The increase in interest expense for fiscal 2024 as compared to fiscal 2023 was primarily due to the amortization of bridge financing costs in fiscal 2024. See Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Consolidated Financial Statements in this Annual Report for further detail on our debt obligations.
46

Table of Contents

Other Income (Expense), Net

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023
  (dollars in millions)
Interest income $ 277.7  $ 67.0  $ 36.7  $ 210.7  314  % $ 30.3  83  %
Gain on divestitures
548.9  —  —  548.9  100  % —  —  %

Gains on assets related to deferred compensation plan
65.5  85.4  20.2  (19.9) (23) % 65.2  323  %
Gain on sale of building 51.4  1.9  —  49.5  2,605  % 1.9  100  %
Gain (loss) on sale of strategic investments (3.6) 55.1  —  (58.7) (107) % 55.1  100  %
Foreign currency exchange gains (losses) 1.8  6.3  (1.5) (4.5) (71) % 7.8  (520) %
Other, net (16.8) (20.7) (20.5) 3.9  (19) % (0.2) 1  %
Total $ 924.9  $ 195.0  $ 34.9  $ 729.9  374  % $ 160.1  459  %

The increase in other income (expense) for fiscal 2025 as compared to fiscal 2024 was primarily due to the gain recognized from the sale of Optical Solutions Group business in connection with the Ansys Merger, higher interest income as a result of higher average cash balances and higher gain recognized from the sale of a building, partially offset by the impact of gain recognized from the sale of strategic investments in fiscal 2024 and a decrease in the change in fair value of our executive deferred compensation plan assets.
The increase in other income (expense) for fiscal 2024 as compared to fiscal 2023 was primarily due to the increase in the change in fair value of our executive deferred compensation plan assets, the impact of gain recognized from the sale of strategic investments and higher interest income as a result of higher average cash balances .

Segment Operating Results
We do not allocate certain operating expenses managed at a consolidated level to our reportable segments. These unallocated expenses consist primarily of amortization of acquired intangible assets, stock-based compensation expense, changes in the fair value of deferred compensation plan, restructuring charges, and acquisition/divestiture related items. See Note 19. Segment Disclosure of the Notes to Consolidated Financial Statements in this Annual Report for more information.
Design Automation Segment

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023

  (dollars in millions)
Adjusted operating income $ 2,213.5  $ 1,631.9  $ 1,413.9  $ 581.6  36  % $ 218.0  15  %
Adjusted operating margin 42  % 39  % 37  % 3  % 8  % 2  % 5  %

The increase in adjusted operating income for fiscal 2025 compared to fiscal 2024 and for fiscal 2024 compared to fiscal 2023 was primarily due to an increase in revenue from arrangements booked in prior periods.
47

Table of Contents

Design IP Segment

  Year Ended October 31, $ Change % Change $ Change % Change
  2025 2024 2023 2025 vs. 2024 2024 vs. 2023

  (dollars in millions)
Adjusted operating income $ 419.3  $ 730.2  $ 514.1  $ (310.9) (43) % $ 216.1  42  %
Adjusted operating margin 24  % 38  % 33  % (14) % (37) % 5  % 15  %

The decrease in adjusted operating income for fiscal 2025 compared to fiscal 2024 was primarily due to lower revenue from the impact of China export control restrictions, including the Q3 2025 BIS Restrictions, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results, as well as an increase in employee-related costs due to headcount increases.
The increase in adjusted operating income for fiscal 2024 compared to fiscal 2023 was primarily due to an increase in the revenue of IP products driven by timing of customer demands.

Income Taxes
Our effective tax rate for fiscal 2025 is 4.0%, which included $64.8 million of U.S. federal research tax credit benefit, $106.9 million of foreign derived intangible income (FDII) deduction benefit, and $148.0 million of tax benefit for the reduction in valuation allowance, of which $111.0 million relates to the full valuation allowance release against state research credits.
Our effective tax rate for fiscal 2024 was 6.6%, which included $70.1 million of U.S. federal research tax credit benefit, $104.8 million of FDII deduction benefit, and $43.4 million of net excess tax benefit from stock-based compensation.
See Note 17. Income Taxes of the Notes to Consolidated Financial Statements in this Annual Report for further discussion of the provision for income taxes .

Liquidity and Capital Resources
Our principal sources of liquidity are funds generated from our business operations and funds that may be drawn down under our revolving credit and term loan facilities.
As of October 31, 2025 , we held $3.0 billion in cash, cash equivalents and short-term investments. We also held $5.7 million in restricted cash primarily associated with deposits for office leases and employee loan programs. Our cash equivalents consisted primarily of taxable money market mutual funds, time deposits and highly liquid investments with maturities of three months or less. Our short-term investments include U.S. government and municipal obligations and investment-grade available-for-sale debt with an overall weighted-average credit rating of approximately AA.
As of October 31, 2025, approximately $1.4 billion of our cash and cash equivalents were domiciled in various foreign jurisdictions. We have provided for foreign withholding taxes on the undistributed earnings of certain of our foreign subsidiaries to the extent such earnings are no longer considered to be indefinitely reinvested in the operations of those subsidiaries.
Our debt and liquidity needs increased as a result of completing the Ansys Merger. We funded the Cash Consideration in the Ansys Merger from the issuance of the Senior Notes and the borrowings under the Term Loan Agreement. See Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Consolidated Financial Statements in this Annual Report for further discussion.
During the second quarter of fiscal 2025, we entered into a deferred payment agreement to defer the cash settlement of the 2025 Rate Lock Agreements over a period of 5.5 years. As of October 31, 2025 , we had $110.6 million outstanding balance under the deferred payment agreement related to the 2025 Rate Lock agreements. See Note 8. Financial Assets and Liabilities of the Notes to Consolidated Financial Statements in this Annual Report for further discussion.
Based on past performance and current expectations, we believe that our existing cash, cash equivalents and short-term investments and sources of liquidity, as well as the debt financing, will be sufficient to satisfy our cash requirements, including repayment of outstanding debt, over the next twelve-month period and beyond. Our future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales
48

Table of Contents

and marketing activities, the timing and extent of our spending to support our research and development efforts, and our investments in or acquisitions of businesses, applications or technologies.
Cash Flows
Our consolidated statements of cash flows include cash flows related to the Software Integrity business. Significant non-cash items and capital expenditures of discontinued operations related to our Software Integrity business are presented separately in Note 3. Discontinued Operations of the Notes to Consolidated Financial Statements in this Annual Report . For a discussion of fiscal 2024 changes compared to fiscal 2023, see the discussion in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report for the fiscal year ended October 31, 2024, filed on December 19, 2024.

  Year Ended October 31,
  2025 2024 $ Change
  (dollars in millions)
Cash provided by operating activities $ 1,518.6  $ 1,407.0  $ 111.6 
Cash provided by (used in) investing activities
$ (15,881.3) $ 1,223.0  $ (17,104.3)
Cash provided by (used in) financing activities
$ 13,355.8  $ (181.3) $ 13,537.1 

Cash Provided by Operating Activities
We expect cash from our operating activities to fluctuate as a result of a number of factors, including the timing of billings and collections, operating results, and the timing and amount of tax and other liability payments. Cash provided by operations is dependent primarily upon the payment terms of our license agreements. We generally receive cash from upfront arrangements much sooner than from time-based products revenue, in which the license fee is typically paid either quarterly or annually over the term of the license.
The increase in cash provided by operating activities for fiscal 2025 compared to fiscal 2024 was primarily due to higher accounts receivable collections, partially offset by lower net income of $902.7 million, the unrealized loss from settlement of the interest rate treasury lock of $121.6 million in fiscal 2025 and higher disbursements for operations, including vendor and tax payments .
Cash Provided by (Used in) Investing Activities
Net cash used in investing activities was $15.9 billion for fiscal 2025 compared to net cash provided by investing activities of $1.2 billion for fiscal 2024. The increase in cash used in investing activities was primarily driven by higher cash paid for acquisitions, net of cash acquired, of $16.5 billion mainly for the Ansys Merger and lower proceeds of $700.0 million from business divestitures, net of cash divested, partially offset by higher net proceeds of $92.4 million from the sales, purchases and maturities of investments, and higher proceeds of $57.9 million from the sale of a building in fiscal 2025.
Cash Provided by (Used) in Financing Activities
Net cash provided by financing activities was $13.4 billion for fiscal 2025 compared to net cash used in financing activities of $181.3 million for fiscal 2024. The cash provided by financing activities for fiscal 2025 was primarily driven by proceeds of $14.3 billion from the issuance of Senior Notes and the borrowing under the Term Loan Agreement, partially offset by the repayment of $850.0 million of the Term Loan. The cash used in financing activities for fiscal 2024 was primarily driven by taxes paid for net share settlements of $337.5 million and the payment of bridge financing costs of $72.3 million, partially offset by the issuance of common stock of $232.2 million.
Bridge Commitment Letter, Term Loan, Revolving Credit Facilities and Senior Notes
49

Table of Contents

On January 15, 2024, we entered into the Bridge Commitment Letter with certain financial institutions that committed to provide, subject to the satisfaction of customary closing conditions, the bridge commitment (the Bridge Commitment) for the purpose of financing a portion of the aggregate Cash Consideration in the Ansys Merger and paying related fees and expenses in connection with the Ansys Merger and the other transactions contemplated by the Merger Agreement.
On October 3, 2024, we reduced the Bridge Commitment by $1.1 billion to $10.6 billion following the closing of the Software Integrity Divestiture. On March 17, 2025, we further reduced the Bridge Commitment by $9.9 billion following the issuance of the Senior Notes. On the Acquisition Date, we terminated the approximately $690.0 million in remaining Bridge Commitment, reducing total Bridge Commitment to $0.
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. The outstanding balance under the Term Loan Agreement as of October 31, 2025 was $3.5 billion.
Under the Term Loan Agreement, borrowings will 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 October 31, 2025, we were in compliance with the financial covenant.
In March 2025, we issued $10.0 billion in aggregate principal amount of senior notes (the Senior Notes). Our total proceeds were approximately $9.9 billion, net of original issuance discount of $17.0 million and total issuance costs of $70.2 million. 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.
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).
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 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. There was no outstanding balance under the Revolving Credit Agreement as of October 31, 2025.
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.
50

Table of Contents

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 October 31, 2025, we were in compliance with the financial covenant.
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 October 31, 2025, we had $13.1 million outstanding balance under the agreement.
See Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Consolidated Financial Statements in this Annual Report for further discussion.
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 October 31, 2025 , $194.3 million remained available for future stock repurchases under the Program. In connection with the Ansys Merger, we have suspended our stock repurchase program until we reduce our expected debt levels.
The IR Act was enacted in the United States on August 16, 2022. The IR Act imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year. As of October 31, 2025, this has not had any impact on our consolidated financial statements.

Material Cash Requirements
Our material cash requirements include the following contractual and other obligations.
Leases
We have operating lease arrangements for office space, data center, equipment and other corporate assets. As of October 31, 2025 , we had lease payment obligations, net of immaterial sublease income, of $812.4 million, with $132.8 million payable within 12 months.
Purchase Obligations
Purchase obligations represent an estimate of all open purchase orders and contractual obligations in the ordinary course of business for which we have not received the goods or services. As of October 31, 2025 , we had $1.2 billion of purchase obligations, with $832.2 million payable within 12 months. Although open purchase orders are considered enforceable and legally binding, the terms may allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.
Debt Obligations
Refer to "Bridge Commitment Letter, Term Loan, Revolving Credit Facilities and Senior Notes” under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report for more information.
Long Term Accrued Income Taxes
As of October 31, 2025 , we had $93.8 million of long-term accrued income taxes which represent uncertain tax benefits. Currently, a reasonably reliable estimate of timing of payments related to uncertain tax benefits in individual years beyond fiscal 2025 cannot be made due to uncertainties in timing of the commencement and settlement of potential tax audits.

 Item 7A.      Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, primarily due to changes in interest rates, foreign currency exchange rates, and non-marketable equity security price. None of market risk sensitive instruments are held for speculative trading purposes.
Interest Rate Risk . The primary objective of our investment activities is to preserve the invested principal while maximizing yields without significantly increasing risk exposure. To achieve this objective, we maintain our portfolio of investments in a mix of tax-exempt and taxable instruments that meet high credit quality standards, as specified
51

Table of Contents

in our investment policy. Our policy also limits the amount of credit exposure to any one issue, issuer and type of instrument.
Our exposure to market risk for changes in interest rates relates to our cash, cash equivalents, short-term investments, and outstanding debt. As of October 31, 2025, all of our cash, cash equivalents, and debt were at short-term variable or fixed interest rates.
As of October 31, 2025, we had short term fixed income investment portfolio of $72.9 million. These securities, as with all fixed income instruments, are subject to interest rate risk and will decline in value if market interest rates increase. As of October 31, 2025, we had $10.0 billion in principal amount of fixed rate senior notes outstanding with the fair value of $10.1 billion. As of October 31, 2025, we also had $3.5 billion of outstanding term loans, which are subject to floating interest rates. The carrying value of the term loans approximates their fair value as the underlying interest rates are tied to SOFR or ABR. While par value generally approximates fair value on variable instruments, rising interest rates over time would increase both our interest income and our interest expense. However, it would not impact the interest expense on our fixed rate senior notes outstanding.
Our cash equivalents, short-term investments and debt by fiscal year of expected maturity and average interest rates as of October 31, 2025 are as follows:
  Maturing in Year Ending

  2026 2027 2028 2029 2030 and thereafter Total Fair Value
  (in millions)

Cash & Cash equivalents $ 2,797.2  $ —  $ —  $ —  $ —  $ 2,797.2  $ 2,797.2 
Approx. average interest rate 2.89  %
Short-term investments $ 27.0  $ 29.3  $ 16.6  $ —  $ —  $ 72.9  $ 72.9 
Approx. average coupon rate 2.76  % 3.82  % 3.66  %

Debt (variable rate):

Credit Facility in China $ 2.6  $ 2.6  $ 2.6  $ 2.6  $ 2.6  $ 13.1  $ 13.1 
Average interest rate
LPR +
.74% of such rate
Senior Notes $ —  $ 1,000.0  $ 1,000.0  $ —  $ 8,000.0  $ 10,000.0  $ 10,143.0 
Average interest rate
4.84  % 4.85  % 5.31  % 5.22  %
Term Loan $ —  $ 600.0  $ 2,850.0  $ —  $ —  $ 3,450.0  $ 3,450.0 
Average interest rate 5.39  % 5.48  % 5.46  %
Deferred payment on settlement of interest rate treasury lock $ 22.1  $ 22.1  $ 22.1  $ 22.1  $ 22.1  $ 110.6  $ 110.6 
Interest rate 3.45  %

Foreign Currency Risk. We operate internationally and are exposed to potentially adverse movements in currency exchange rates. The functional currency of the majority of our active foreign subsidiaries is the foreign subsidiary’s local currency. A weakening U.S. dollar relative to other currencies increases expenses of our foreign subsidiaries when they are translated into U.S. dollars in our consolidated statements of income. Likewise, a strengthening of the U.S. dollar relative to other currencies, including the renminbi or Yen, reduces revenue of our foreign subsidiaries upon translation and consolidation. Increased international sales in the future may result in greater foreign currency denominated sales, increasing our foreign currency risk. Our operating expenses incurred outside the United States and denominated in foreign currencies are increasing and are subject to fluctuations due to changes in foreign currency exchange rates. If we are not able to successfully hedge against the risks associated with foreign currency fluctuations, our financial condition and operating results could be adversely affected.
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
52

Table of Contents

denominated in foreign currencies. The foreign currency contracts are carried at fair value and denominated in various currencies as listed in the tables below. The duration of forward contracts usually ranges from 1 month to 30 months. See Note 2. Summary of Significant Accounting Policies and Basis of Presentation and Note 8. Financial Assets and Liabilities of the Notes to Consolidated Financial Statements in this Annual Report for a description of our accounting for foreign currency forward contracts .
The success of our hedging activities depends upon the accuracy of our estimates of various balances and transactions denominated in non-functional currencies. Exchange rates are subject to significant and rapid fluctuations due to a number of factors, including interest rate changes and political and economic uncertainty. Therefore, we cannot predict the prospective impact of exchange rate fluctuations. To the extent our estimates are correct, gains and losses on our foreign currency contracts will be offset by corresponding losses and gains on the underlying transactions. For example, if the Euro were to depreciate by 10% compared to the U.S. dollar prior to the settlement of the Euro forward contracts listed in the table below as of October 31, 2025, the fair value of the contracts would decrease by approximately $3.4 million, and we would be required to pay approximately $3.4 million to the counterparty upon contract maturity. At the same time, the U.S. dollar value of our Euro-based expenses would decline, resulting in positive cash flow of approximately $3.4 million that would offset the loss and negative cash flow on the maturing forward contracts.
If estimates of our balances and transactions prove inaccurate, we will not be completely hedged, and we will record gains or losses, depending upon the nature and extent of such inaccuracy. Although we engage in foreign currency hedging activity, we may be unable to hedge all of our foreign currency risk, which could have a negative impact on our results of operations.
We enter into foreign exchange forward contracts with financial institutions and have not experienced nonperformance by counterparties. Further, we anticipate performance by all counterparties to such agreements.
Information about the gross notional values of our foreign currency contracts as of October 31, 2025 is as follows:

Gross Notional
Amount in
U.S. Dollars Average
Contract
Rate
  (in thousands)  
Forward Contract Values:
Indian rupee $ 637,068  88.896 
Japanese yen 375,436  147.960 
Chinese renminbi 187,276  7.056 
Canadian dollar 151,455  1.382 
Taiwanese dollar 103,539  30.481 
Euro 34,241  1.116 
Korean won 9,959  1,430.200 
British pound sterling 4,484  1.322 
Israel shekel 2,923  3.248 
Singapore dollar 1,685  1.291 

$ 1,508,066 

Equity Price Risk. Our non-marketable equity securities investments totaled $45.0 million and $15.7 million as of October 31, 2025 and 2024, respectively. Our strategic investments include privately-held companies that are considered to be in the start-up or development stages and have a higher inherent risk. Specifically, the technologies or products these companies have under development are typically in the early stages and may never materialize, which could result in a loss of a substantial part of our initial investment in these companies. These investments could be impaired if the carrying value exceeds the fair value and is not expected to recover. The evaluation of these investments is based on information provided by these companies, which is not subject to the same disclosure regulations as U.S. publicly traded companies and as such, the basis for these evaluations is subject to the timing and accuracy of the data provided.
53

Table of Contents

 Item 8.      Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Synopsys, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Synopsys, Inc. and subsidiaries (the Company) as of October 31, 2025 and November 2, 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended October 31, 2025, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of October 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 31, 2025 and November 2, 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended October 31, 2025, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2025 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company acquired ANSYS, Inc. during fiscal 2025, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of October 31, 2025, total assets and total revenue of ANSYS, Inc. which represented approximately 21% of the Company’s total consolidated assets and 11% of total consolidated revenue included in the consolidated financial statements of the Company as of and for the year ended October 31, 2025. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of ANSYS, Inc.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
54

Table of Contents

Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of the Company's analysis of terms and conditions in software and intellectual property license contracts with customers
As discussed in Notes 2 and 5 to the consolidated financial statements, the Company generates revenue from the sale of products that include software and intellectual property (IP) licenses, hardware products, maintenance and services. The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. Arrangements with customers can involve hundreds of products and various license rights, and customers negotiate with the Company over many aspects of these arrangements. The Company’s customers often request a broader portfolio of solutions, support and services and seek more favorable terms such as expanded license usage, future purchase rights and other unique rights at an overall lower total cost. The Company recognized total revenue of $7,054.2 million for the fiscal year ended October 31, 2025, which included revenue related to software and IP licenses.
We identified the evaluation of the Company’s analysis of terms and conditions in software and IP license contracts with customers and their effect on revenue recognition as a critical audit matter. Complex auditor judgment was required to assess the Company’s judgments made in applying revenue recognition requirements to certain terms and conditions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s revenue recognition process, including the Company’s analysis of terms and conditions in software and IP license contracts with customers and their effect on revenue recognition. We tested certain significant software and IP license customer contracts by inspecting the underlying customer agreements and evaluating the Company’s assessment of the contractual terms and conditions in accordance with revenue recognition requirements. For a selection of software and IP license contracts with customers entered during the year, we inquired of personnel outside of the accounting function to corroborate our understanding of certain terms and conditions.
Evaluation of the acquisition-date fair value of certain intangible assets acquired in a business combination
As described in Note 4 to the consolidated financial statements, the Company completed the acquisition of Ansys for aggregate purchase consideration of approximately $34.9 billion on July 17, 2025. The Company accounted for the acquisition using the acquisition method of accounting that requires allocation of the fair value of the purchase consideration to assets acquired (including identified intangible assets) and liabilities assumed
55

Table of Contents

at their estimated fair value on the acquisition date. The fair values of certain acquired intangible assets were determined using the relief-from-royalty method and the multi-period excess earnings method. The Company recorded estimated intangible assets attributable to the transaction of $13.0 billion, which included core/developed technologies, customer relationships, and trademarks and trade names with acquisition-date fair values of $6,500,000 thousand, $5,100,000 thousand, and $950,000 thousand, respectively.
We identified the evaluation of the acquisition-date fair value of the core/developed technologies, customer relationships, and trademarks and trade names intangible assets as a critical audit matter. Subjective and complex auditor judgment was required to evaluate certain key assumptions used in the measurement of acquisition-date fair values, including the determination of royalty rates, projected revenue and discount rate. Changes to those key assumptions could have had a significant effect on the determination of the fair value of the intangible assets. In addition, specialized skills and knowledge were needed to evaluate such assumptions.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s acquisition process. This included controls over the development and selection of the key assumptions used in the valuation of the acquired intangible assets. We performed sensitivity analyses over the key assumptions to assess the impact of changes in those assumptions on the Company’s determination of the acquisition-date fair values. We evaluated the reasonableness of projected revenue by comparing the information underlying this assumption to industry benchmarks, recent market data or historical results of the acquired business. In addition, we involved valuation professionals with specialized skills and knowledge who assisted in:
• evaluating the Company’s royalty rates by comparing such royalty rates to publicly available data for comparable companies
• evaluating the Company’s discount rate by comparing the Company’s inputs to the discount rate to publicly available data for comparable entities and assessing the resulting discount rate.

/s/ KPMG LLP

We have served as the Company’s auditor since 1992.

Santa Clara, California
December 19, 2025
56

Table of Contents

SYNOPSYS, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amounts)

  October 31,
  2025 2024
ASSETS
Current assets:
Cash and cash equivalents $ 2,888,030   $ 3,896,532  
Short-term investments 72,929   153,869  
      Total cash, cash equivalents and short-term investments 2,960,959   4,050,401  
Accounts receivable, net 1,505,427   934,470  
Inventories 365,190   361,849  

Prepaid and other current assets 1,180,526   1,122,946  

Total current assets 6,012,102   6,469,666  
Property and equipment, net 696,693   563,006  
Operating lease right-of-use assets, net 702,008   565,917  
Goodwill 26,899,215   3,448,850  
Intangible assets, net 12,679,591   195,164  

Deferred income taxes 112,159   1,247,258  
Other long-term assets 1,122,693   583,700  

Total assets $ 48,224,461   $ 13,073,561  
LIABILITIES, REDEEMABLE NON-CONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,326,211   $ 1,163,592  
Operating lease liabilities 128,205   94,791  

Deferred revenue 2,245,961   1,391,737  
Short-term debt 22,117   —  

Total current liabilities 3,722,494   2,650,120  
Long-term operating lease liabilities 680,698   574,065  

Long-term deferred revenue 382,557   340,831  
Long-term debt 13,462,398   15,601  
Other long-term liabilities 1,649,299   469,738  

Total liabilities 19,897,446   4,050,355  
Redeemable non-controlling interest —   30,000  
Stockholders’ equity:
Preferred stock, $ 0.01 par value: 2,000 shares authorized; none outstanding
—   —  
Common stock, $ 0.01 par value: 400,000 shares authorized; 185,994 and 154,112 shares outstanding, respectively
1,860   1,541  
Capital in excess of par value 18,640,947   1,211,206  
Retained earnings 10,315,487   8,984,105  
Treasury stock, at cost: 1,222 and 3,148 shares, respectively
( 398,278 ) ( 1,025,770 )
Accumulated other comprehensive income (loss) ( 232,414 ) ( 180,380 )
Total Synopsys stockholders’ equity 28,327,602   8,990,702  
Non-controlling interest ( 587 ) 2,504  
Total stockholders’ equity 28,327,015   8,993,206  
Total liabilities, redeemable non-controlling interest and stockholders’ equity $ 48,224,461   $ 13,073,561  

See the accompanying Notes to Consolidated Financial Statements .
57

Table of Contents

SYNOPSYS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)

  Year Ended October 31,
  2025 2024 2023
Revenue:
Time-based products $ 3,489,609   $ 3,224,299   $ 3,016,256  
Upfront products 2,010,602   1,802,222   1,400,125  
    Total products revenue 5,500,211   5,026,521   4,416,381  
Maintenance and service 1,553,967   1,100,915   901,633  
Total revenue 7,054,178   6,127,436   5,318,014  
Cost of revenue:
Products 867,165   770,238   697,686  
Maintenance and service 444,526   367,055   287,876  
Amortization of acquired intangible assets
311,858   107,996   45,281  
Total cost of revenue 1,623,549   1,245,289   1,030,843  
Gross margin 5,430,629   4,882,147   4,287,171  
Operating expenses:
Research and development 2,479,338   2,082,360   1,849,935  
Sales and marketing 1,074,191   859,342   724,934  
General and administrative 769,648   568,496   376,677  
Amortization of acquired intangible assets
192,525   16,238   9,295  
Restructuring charges —   —   53,091  
Total operating expenses 4,515,702   3,526,436   3,013,932  
Operating income 914,927   1,355,711   1,273,239  
Interest expense ( 446,729 ) ( 36,829 ) ( 2,703 )
Other income (expense), net 924,944   194,976   34,934  
Income before income taxes 1,393,142   1,513,858   1,305,470  
Provision for income taxes
55,991   99,718   90,188  
Net income from continuing operations 1,337,151   1,414,140   1,215,282  
Income (loss) from discontinued operations, net of income taxes ( 3,900 ) 821,670   2,843  
Net income 1,333,251   2,235,810   1,218,125  
Less: Net income (loss) attributed to non-controlling interest and redeemable non-controlling interest 1,031   ( 27,570 ) ( 11,763 )
Net income attributed to Synopsys $ 1,332,220   $ 2,263,380   $ 1,229,888  

Net income (loss) attributed to Synopsys:
Continuing operations $ 1,336,120   $ 1,441,710   $ 1,227,045  
Discontinued operations ( 3,900 ) 821,670   2,843  
Net income $ 1,332,220   $ 2,263,380   $ 1,229,888  

Net income (loss) per share attributed to Synopsys - basic:
Continuing operations $ 8.15   $ 9.41   $ 8.06  
Discontinued operations ( 0.02 ) 5.37   0.02  
Basic net income per share $ 8.13   $ 14.78   $ 8.08  

Net income (loss) per share attributed to Synopsys - diluted:
Continuing operations $ 8.07   $ 9.25   $ 7.91  
Discontinued operations ( 0.03 ) 5.26   0.01  
Diluted net income per share $ 8.04   $ 14.51   $ 7.92  

Shares used in computing per share amounts:
Basic 163,947   153,138   152,146  
Diluted 165,656   155,944   155,195  

58

Table of Contents

See the accompanying Notes to Consolidated Financial Statements .
59

Table of Contents

SYNOPSYS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

  Year Ended October 31,
  2025 2024 2023
Net income $ 1,333,251   $ 2,235,810   $ 1,218,125  
Other comprehensive income (loss):
Change in foreign currency translation adjustment 24,497   8,150   ( 13,912 )
Change in unrealized gains (losses) on available-for-sale securities, net of tax of $ 0 for periods presented
( 173 ) 1,460   1,513  
Cash flow hedges:
Deferred gains (losses), net of tax of $ 21,418 , $( 3,052 ), and $( 8,940 ) for fiscal years 2025, 2024 and 2023, respectively
( 80,074 ) 9,625   24,986  
Reclassification adjustment on deferred (gains) losses included in net income, net of tax of $( 1,339 ), $( 446 ), and $( 10,053 ) for fiscal years 2025, 2024 and 2023, respectively
3,716   ( 3,201 ) 25,276  
Other comprehensive income (loss), net of tax effects ( 52,034 ) 16,034   37,863  
Comprehensive income 1,281,217   2,251,844   1,255,988  
Less: Net income (loss) attributed to non-controlling interest and redeemable non-controlling interest 1,031   ( 27,570 ) ( 11,763 )
Comprehensive income attributed to Synopsys $ 1,280,186   $ 2,279,414   $ 1,267,751  

See the accompanying Notes to Consolidated Financial Statements.

60

Table of Contents

SYNOPSYS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)

  Capital in
Excess of
Par
Value Retained
Earnings Treasury
Stock Accumulated
Other
Comprehensive
Income (Loss) Total 
Synopsys
Stockholders’
Equity Non-controlling
Interest Stockholders'
Equity
Common Stock
  Shares Amount
Balance at October 31, 2022 152,375   $ 1,524   $ 1,487,126   $ 5,534,307   $ ( 1,272,955 ) $ ( 234,277 ) $ 5,515,725   $ 4,801   $ 5,520,526  
Net income 1,229,888   1,229,888   ( 1,761 ) 1,228,127  
Other comprehensive income (loss), net of tax effects 37,863   37,863   37,863  
Purchases of treasury stock ( 2,992 ) ( 30 ) 30   ( 1,160,724 ) ( 1,160,724 ) ( 1,160,724 )
Equity forward contract, net ( 45,000 ) ( 45,000 ) ( 45,000 )
Common stock issued, net of shares withheld for employee taxes 2,670   27   ( 725,211 ) ( 19,108 ) 758,029   13,737   13,737  
Stock-based compensation 558,078   558,078   5,214   563,292  
Adjustments to redeemable non-controlling interest ( 3,388 ) ( 3,388 ) ( 3,388 )
Recognition of non-controlling interest upon issuance of subsidiary stock 1,129   1,129   ( 2,304 ) ( 1,175 )
Balance at October 31, 2023 152,053   $ 1,521   $ 1,276,152   $ 6,741,699   $ ( 1,675,650 ) $ ( 196,414 ) $ 6,147,308   $ 5,950   $ 6,153,258  
Net income 2,263,380   2,263,380   ( 5,552 ) 2,257,828  

Other comprehensive income (loss), net of tax effects 16,034   16,034   16,034  
Purchases of treasury stock ( 74 ) ( 1 ) 1   ( 45,000 ) ( 45,000 ) ( 45,000 )
Equity forward contract, net 45,000   45,000   45,000  
Common stock issued, net of shares withheld for employee taxes 2,133   21   ( 799,210 ) 694,880   ( 104,309 ) ( 104,309 )
Stock-based compensation 687,765   687,765   4,551   692,316  
Adjustments to redeemable non-controlling interest ( 20,974 ) ( 20,974 ) ( 20,974 )
Recognition of non-controlling interest upon issuance of subsidiary stock 1,498   1,498   ( 2,445 ) ( 947 )
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 1,332,220   1,332,220   1,870   1,334,090  
Other comprehensive income (loss), net of tax effects ( 52,034 ) ( 52,034 ) ( 52,034 )

Common stock issued upon the acquisition of Ansys 29,955   300   17,105,238   17,105,538   17,105,538  
Assumption of equity awards in connection with the acquisition of Ansys 130,963   130,963   130,963  
Common stock issued, net of shares withheld for employee taxes 1,927   19   ( 704,679 ) 627,492   ( 77,168 ) ( 77,168 )
Stock-based compensation 892,585   892,585   709   893,294  

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 October 31, 2025 185,994   $ 1,860   $ 18,640,947   $ 10,315,487   $ ( 398,278 ) $ ( 232,414 ) $ 28,327,602   $ ( 587 ) $ 28,327,015  

See the accompanying Notes to Consolidated Financial Statements .
61

Table of Contents

SYNOPSYS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

  Year Ended October 31,
  2025 2024 2023
Cash flows from operating activities:
Net income $ 1,333,251   $ 2,235,810   $ 1,218,125  
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and depreciation 660,430   295,065   247,120  

Reduction of operating lease right-of-use assets 117,273   97,273   97,705  
Amortization of capitalized costs to obtain revenue contracts 53,237   73,587   82,190  
Stock-based compensation 893,294   692,316   563,292  
Allowance for credit losses 50,891   19,724   19,932  
(Gain) loss on sale of strategic investments
3,635   ( 55,077 ) —  
Gain on sale of building ( 51,385 ) ( 1,906 ) —  
Gain on divestitures, net of transaction costs ( 508,044 ) ( 868,830 ) —  
Amortization of bridge financing costs 41,996   33,677   —  
Amortization of debt issuance costs 13,847   —   —  

Deferred income taxes ( 470,693 ) ( 407,649 ) ( 211,045 )
Other
( 888 ) 611   13,295  
Net changes in operating assets and liabilities, net of effects from acquisitions and dispositions:

Accounts receivable ( 174,140 ) ( 103,460 ) ( 178,432 )
Inventories ( 22,517 ) ( 51,449 ) ( 123,752 )
Prepaid and other current assets 66,918   ( 410,432 ) ( 106,396 )
Other long-term assets ( 481,376 ) ( 168,255 ) ( 100,618 )
Accounts payable and accrued liabilities ( 13,487 ) 187,564   170,496  
Operating lease liabilities ( 113,603 ) ( 96,966 ) ( 73,281 )
Income taxes 6,351   ( 73,215 ) 198,078  
Deferred revenue 235,261   8,641   ( 113,435 )
Unrealized loss on settlement of interest rate treasury lock ( 121,643 ) —   —  
Net cash provided by operating activities 1,518,608   1,407,029   1,703,274  
Cash flows from investing activities:
Proceeds from maturities of short-term investments 58,016   126,703   127,128  
Proceeds from sales of short-term investments 157,204   12,258   3,307  
Purchases of short-term investments ( 65,708 ) ( 136,821 ) ( 131,079 )
Proceeds from sales of strategic investments
3,566   55,696   8,492  
Purchases of strategic investments
( 4,100 ) ( 1,293 ) ( 435 )

Purchases of property and equipment, net
( 169,454 ) ( 139,500 ) ( 189,618 )
Proceeds from sale of building 74,279   16,339   —  
Acquisitions, net of cash acquired ( 16,681,257 ) ( 156,947 ) ( 297,692 )
Proceeds from business divestitures, net of cash divested
746,550   1,446,578   —  
Capitalization of software development costs —   —   ( 2,204 )
Other ( 365 ) —   —  
Net cash provided by (used in) investing activities
( 15,881,269 ) 1,223,013   ( 482,101 )
Cash flows from financing activities:
Proceeds from debt, net of issuance costs 14,329,340   —   —  
Repayment of debt ( 863,637 ) ( 2,607 ) ( 2,603 )
Payment of bridge financing and term loan costs —   ( 72,265 ) —  
Issuances of common stock 228,418   232,212   252,986  
Payments for taxes related to net share settlement of equity awards ( 305,501 ) ( 337,541 ) ( 241,408 )
Purchase of equity forward contract —   —   ( 45,000 )
Purchases of treasury stock —   —   ( 1,160,724 )
Redemption of redeemable non-controlling interest
( 30,000 ) —   —  
Other ( 2,863 ) ( 1,096 ) ( 122 )
       Net cash provided by (used in) financing activities 13,355,757   ( 181,297 ) ( 1,196,871 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash 1,896   8,797   ( 2,979 )

62

Table of Contents

Net change in cash, cash equivalents and restricted cash
( 1,005,008 ) 2,457,542   21,323  
Cash, cash equivalents and restricted cash, beginning of year, including cash from discontinued operations 3,898,729   1,441,187   1,419,864  
Cash, cash equivalents and restricted cash, end of year, including cash from discontinued operations 2,893,721   3,898,729   1,441,187  
Less: Cash, cash equivalents and restricted cash from discontinued operations —   —   4,947  
Cash, cash equivalents and restricted cash from continuing operations $ 2,893,721   $ 3,898,729   $ 1,436,240  

Supplemental disclosure of cash flow information:
Cash paid for income taxes during the year: $ 512,705   $ 680,064   $ 97,956  
Interest payments during the year: $ 353,773   $ 814   $ 996  
Non-cash activities:
Issuance of common stock for the acquisition of Ansys $ 17,105,538   $ —   $ —  
Fair value of replacement equity awards in connection with the acquisition of Ansys
$ 130,963   $ —   $ —  
Purchase of property and equipment included in accounts payable $ 24,314   $ 32,014   $ 21,672  
Conversion of notes receivable to non-marketable equity securities $ —   $ —   $ 2,000  
Contingent consideration receivable in connection with divestiture
$ —   $ 22,202   $ —  

See the accompanying Notes to Consolidated Financial Statements.
63

Table of Contents
SYNOPSYS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.
Following the completion of the Ansys Merger (as defined below), we are the global leader in engineering S&A software. Our Ansys® solutions portfolio is widely used by engineers, designers, researchers and students across a broad spectrum of industries and academia, including high-tech, aerospace and defense, automotive, energy, industrial equipment, materials and chemicals, consumer products, healthcare and construction. These products enable customers to analyze designs on-premises and/or via the cloud, providing a common platform for fast, efficient and cost-conscious product development, from design concept to final-stage testing, validation and deployment. These products and services are part of our Design Automation segment.
We also offer a broad and comprehensive portfolio of semiconductor IP solutions, which are pre-designed circuits that engineers use as components of larger chip designs to reduce 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
Basis of Presentation and Principles of Consolidation. Historically, our fiscal years have been 52- or 53-week periods ending on the Saturday nearest to October 31. Fiscal 2024 was a 53-week year ended on November 2, 2024, and fiscal 2023 was a 52-week year ended on October 28, 2023.
We have changed our fiscal year end from the Saturday nearest to October 31 and consisting of 52 or 53 fiscal weeks to a fiscal year end of October 31 each year. The fiscal year change became effective with our fiscal 2025, which began on November 3, 2024. Our fiscal quarters end on January 31, April 30, July 31 and October 31 of each year.
Our results of operations for the fiscal 2025, fiscal 2024 and fiscal 2023 included 363 days, 371 days, and 364 days respectively. For presentation purposes, the consolidated financial statements and accompanying notes refer to the closest calendar month end.
The 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.
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 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.
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 .
64

Table of Contents

We accounted for the acquisition of Ansys by applying the acquisition method of accounting for business combinations. The consolidated financial statements include the financial results of Ansys prospectively from the Acquisition Date. See Note 4. Business Combinations and Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Consolidated Financial Statements in this Annual Report.
Cash Equivalents and Short-term Investments . We consider all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents, as well as time deposits which can be withdrawn at any time without penalty to be cash equivalents. Our investments in debt securities with remaining maturities greater than three months at the date of purchase are designated as available-for-sale securities as we may convert these investments into cash at any time to fund general operations, and included in short-term investments in the consolidated balance sheets. Our debt securities generally have an effective maturity term of less than three years and are carried at fair value, with unrealized gains and losses included in the consolidated balance sheets as a component of accumulated other comprehensive income (loss). For available-for-sale debt securities in an unrealized loss position, we evaluate whether a current expected credit loss exists based on available information relevant to the credit rating of the security, current economic conditions and reasonable and supportable forecasts. The allowance for credit loss is recorded in other income (expense), net, in the consolidated statements of income, not to exceed the amount of the unrealized loss. Any excess unrealized loss other than the credit loss is recognized in accumulated other comprehensive income or loss in the stockholders' equity section of the consolidated balance sheets. The cost of securities sold is based on the specific identification method and realized gains and losses are included in other income (expense), net. See Note 8. Financial Assets and Liabilities of the Notes to Consolidated Financial Statements in this Annual Report.
Investments in Equity Securities. We hold equity securities in privately held companies for the promotion of business and strategic objectives. We account for these investments using either the measurement alternative approach when the fair value of the investment is not readily determinable and we do not have the ability to exercise significant influence, or the equity method of accounting when it is determined that we have the ability to exercise significant influence. Investments accounted for using the measurement alternative approach are initially recorded at cost and adjusted for changes in fair value from observable transactions. For investments accounted for using the equity method of accounting, we record our proportionate share of the investee’s income or loss to other income (expense), net, in our consolidated statements of income. These investments are subject to a periodic impairment review, and are included in other long-term assets in the consolidated balance sheets.
Accounts Receivable, Net. The balances consist of billed accounts receivable and current portion of unbilled accounts receivable. Trade accounts receivables are recorded at the invoiced amount and do not bear interest.
Allowance for Credit Losses. We maintain an allowance for credit losses for expected uncollectible accounts receivable and contract assets, which is recorded as an offset to accounts receivable or contract assets and provisions for credit losses are recorded in general and administrative expense in the consolidated statements of income. The allowance for current expected credit losses is based on a review of customer accounts and considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The allowance for credit losses is reviewed on a quarterly basis to assess the adequacy of the allowance. The following table presents the changes in the allowance for credit losses:

Fiscal Year Balance at
Beginning
of Period Provisions Write-offs/Adjustments Balance at
End of
Period
  (in thousands)
2025 $ 64,043   $ 50,891   $ ( 9,097 ) $ 105,837  
2024 $ 50,366   $ 19,286   $ ( 5,609 ) $ 64,043  
2023 $ 38,586   $ 18,345   $ ( 6,565 ) $ 50,366  

Inventories. Inventories are computed at standard costs which approximate actual costs, on a first-in, first-out basis and valued at the lower of cost or net realizable value. Inventories primarily include components and finished goods for complex emulation and prototyping hardware systems. The valuation process includes a review of the forecasts based upon future demand and market conditions. Inventory provisions are recorded when gross inventory may be in excess of anticipated demand or considered obsolete. Inventory provisions are impacted by market and economic conditions, technology changes, new product introductions and changes in strategic direction, and require estimates that may include uncertain elements.
65

Table of Contents

Fair Values of Financial Instruments. Our cash equivalents, short-term investments, marketable securities and foreign currency contracts are carried at fair value. The fair value of our accounts receivable and accounts payable approximates the carrying amount due to their short duration. Non-marketable equity securities are accounted for using either the measurement alternative or equity method of accounting. We perform periodic impairment analysis on these non-marketable equity securities. The carrying amount of the short-term and long-term debt approximates the estimated fair value. See Note 9. Fair Value Measurements of the Notes to Consolidated Financial Statements in this Annual Report.
Foreign Currency Contracts. We operate internationally and are exposed to potentially adverse movements in currency exchange 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. The assets or liabilities associated with the forward contracts are recorded at fair value in other current assets or accrued liabilities in the 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. See Note 8. Financial Assets and Liabilities of the Notes to Consolidated Financial Statements in this Annual Report.
Concentration of Credit Risk. Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash equivalents, short-term investments, foreign currency contracts, and trade accounts receivable. We maintain cash equivalents primarily in highly rated taxable and tax-exempt money market funds located in the U.S. and in various overseas locations. Our short-term investments include a variety of financial instruments, such as corporate debt and municipal securities, U.S. Treasury and Government agency securities. By policy, we limit the amount of credit exposure with any one issue, issuer and type of instrument.
We sell our products worldwide primarily to customers in the global electronics market. We perform on-going credit evaluations of our customers’ financial condition and do not require collateral. We establish reserves for potential credit losses and such losses have been within management’s expectations.
Income Taxes. We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
We account for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. An uncertain tax position is considered effectively settled on completion of an examination by a taxing authority if certain other conditions are satisfied.
Property and Equipment. Property and equipment is recorded at cost less accumulated depreciation. Assets, excluding land, are depreciated using the straight-line method over their estimated useful lives. Depreciation expenses were $ 171.9 million, $ 162.9 million and $ 141.4 million in fiscal 2025, 2024 and 2023, respectively. Repair and maintenance costs are expensed as incurred and such costs were $ 104.7 million, $ 89.4 million and $ 74.4 million in fiscal 2025, 2024 and 2023, respectively.
66

Table of Contents

The useful lives of depreciable assets are as follows:
  Useful Life in Years
Computer and other equipment 3 - 8

Buildings 30
Furniture and fixtures 5
Leasehold improvements Shorter of the lease term or the estimated useful life

Leases . We determine if an arrangement is a lease at inception of the contract, which is the date on which the terms of the contract are agreed to, and the agreement creates enforceable rights and obligations. A contract is or contains a lease when we have the right to control the use of an identified asset for a period of time. The commencement date of the lease is the date that the lessor makes an underlying asset available for use by the lessee. On the commencement date, leases are evaluated for classification and assets and liabilities are recognized based on the present value of lease payments over the lease term.
The lease term used to calculate the lease liability includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The right of use (ROU) asset is initially measured as the amount of lease liability, adjusted for any initial lease costs, prepaid lease payments and any lease incentives. Variable lease payments, consisting primarily of reimbursement of costs incurred by lessors for common area maintenance, real estate taxes and insurance, are not included in the lease liability and are recognized as they are incurred.
As most of our leases do not provide an implicit rate, we use the incremental borrowing rate at lease commencement to measure ROU assets and lease liabilities. We use a benchmark senior unsecured yield curve for debt instruments over the similar term, and consider specific credit quality, market conditions, tenor of lease arrangements, and quality of collateral to determine the incremental borrowing rate.
Operating lease expense is generally recognized on a straight-line basis over the lease term. We have elected the practical expedient to account for the lease and non-lease components as a single lease component for the majority of our asset classes. For leases with an initial term of one year or less, we have elected not to record the ROU asset or liability.
Business Combinations. We allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their acquisition-date fair values with the exception of contract assets and contract liabilities (deferred revenue) which are recognized and measured on the acquisition date in accordance with our “Revenue Recognition” policy, as if we had originated the contracts. The excess of the purchase consideration over the fair value of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. We include the results of operations of the businesses that are acquired from the acquisition date.
Goodwill. Goodwill represents the excess of the aggregate purchase price over the fair value of the net tangible and identifiable intangible assets acquired by us. All goodwill acquired in a business combination is assigned to one or more reporting units as of acquisition date. We have two reportable segments, and reporting units are determined to be the same as reportable segments. The carrying amount of goodwill at each reporting unit is tested for impairment annually on the first day of the fourth fiscal quarter, or more frequently if facts and circumstances warrant a review. We perform either a qualitative or quantitative assessment for goodwill impairment test. When a quantitative goodwill impairment assessment is performed, we use an income approach based on discounted cash flow analysis, a market approach based on market multiples, or a combination of both. If the fair value of a reporting unit is less than its carrying value, a goodwill impairment loss is recorded for the difference.
Intangible Assets. Intangible assets consist of acquired technology, certain contract rights, customer relationships, trademarks and trade names, and capitalized software. These intangible assets are acquired through business combinations, direct purchases, or internally developed capitalized software. Intangible assets are amortized on a straight-line basis over their estimated useful lives which range from one to twenty-three years .
We review the carrying values of long-lived assets including intangible assets whenever events or changes in circumstances indicate that the carrying value may not be fully recoverable. Recoverability of long-lived assets is
67

Table of Contents

measured by comparing the carrying value of such asset group to the future undiscounted cash flows that asset group is expected to generate. If the undiscounted future cash flow is less than the carrying amount of the asset group, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the asset group.
Redeemable Non-controlling Interest. Non-controlling interest that is not solely redeemable within our control is reported as temporary equity in our consolidated balance sheets. The carrying value of the redeemable non-controlling interest equals the redemption value at the end of each reporting period, after giving effect to the change from the net income (loss) attributable to the redeemable non-controlling interest. We remeasure the redemption value of the non-controlling interest on a quarterly basis and changes in the estimated redemption value are recognized through retained earnings and may also impact the net income or loss attributable to common stockholders of Synopsys if the redemption value falls below a stated threshold. See Note 4. Business Combinations of the Notes to Consolidated Financial Statements in this Annual Report for more information regarding the redeemable non-controlling interests.
Revenue Recognition. We recognize revenue for the transfer of services or products to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those services or products. The principle is achieved through the following five-step approach:
• Identification of the contract, or contracts, with the customer
• Identification of the performance obligation in the contract
• Determination of the transaction price 
• Allocation of the transaction price to the performance obligations in the contract 
• Recognition of revenue when, or as, we satisfy a performance obligation 
Nature of Products and Services
We generate revenue from the licensing of our EDA software, IP products and S&A software solutions, as well as sale of hardware products, and maintenance and services. The various types are set forth below.
Electronic Design Automation
Software license revenue consists of fees associated with the licensing of our software and Ansys semiconductor products primarily through Technology Subscription License (TSL) contracts. TSLs are time-based licenses for a finite term and generally provide the customer with limited rights to receive, or to exchange certain quantities of licensed software for, unspecified future technology. The majority of our arrangements are TSLs due to the nature of our business and customer requirements. In addition to the licenses, the arrangements also include: post-contract customer support, which includes providing frequent updates and upgrades to maintain the utility of the software due to rapid changes in technology; other intertwined services such as multiple copies of the tools; assisting our customers in applying our technology in the customers' development environment; and rights to remix licenses for other licenses. Payments are generally received in equal or near equal installments over the term of the arrangement. We have concluded that our software licenses in TSL contracts are not distinct from our obligation to provide unspecified software updates to the licensed software throughout the license term. Such updates represent inputs to a single, combined performance obligation, commencing upon the later of the arrangement effective date or transfer of control to the software license. Remix rights are not an additional promised good or service in the contract, and where unspecified additional software product rights are part of the contract with the customer, such rights are accounted for as part of the single performance obligation that includes the licenses, updates, and technical support because such rights are provided for the same period of time and have the same pattern of transfer to the customer over the duration of the subscription term. 
Design IP Products
We generally license IP under nonexclusive license agreements that provide usage rights for specific applications. Additionally, for certain IP license agreements, royalties are collected as customers sell their own products that incorporate our IP. These arrangements generally have two distinct performance obligations that consist of transferring the licensed IP and the post contract support service. Support services consist of a stand-ready
68

Table of Contents

obligation to provide technical support and software updates over the support term. Revenue allocated to the IP license is recognized at a point in time upon the later of the delivery date or the beginning of the license period, and revenue allocated to support services is recognized ratably over the support term. Royalties are recognized as revenue is earned, generally when the customer sells its products that incorporate our IP. 
Simulation and Analysis
S&A solutions allow engineers to virtually test and optimize designs across various physics domains, such as structural analysis, thermal analysis, and computational fluid dynamics (CFD). S&A software solutions are offered as subscription solutions and also as perpetual licenses. Software subscription arrangements include bundles of time-based software licenses with support services, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. In such subscription arrangements, the updates to time-based software licenses are not considered integral to maintaining the utility of the software. We consider the license and support services as separate performance obligations. In these instances, we allocate the total consideration received for the revenue arrangement to the separate performance obligations based on the standalone selling prices of the time-based software license and support service. The time-based software license revenue is presented as upfront products revenue, recognized at a point of time upon the later of the delivery date or the beginning of the license period, and the revenue related to the support service is presented as maintenance and service revenue and is recognized over the term of the arrangement. Perpetual license arrangements typically include a perpetual license sold with support services, which includes a stand-ready obligation to provide technical support and software updates over the support term. We allocate the total consideration received for the bundled perpetual and support service arrangements based on the standalone selling prices of the perpetual license and support service. Revenue from perpetual licenses is presented as upfront product revenue and is recognized at a point in time upon the later of the delivery date or the beginning of the license period. Revenue from support service is classified as maintenance and service revenue and is recognized ratably over the term of the contract, as we satisfy the support service performance obligation.
Hardware
We generally have two performance obligations in arrangements involving the sale of hardware products. The first performance obligation is to transfer the hardware product, which includes embedded software integral to the functionality of the hardware product. The second performance obligation is to provide maintenance on the hardware and our embedded software, including rights to technical support, hardware repairs and software updates that are all provided over the same term and have the same time-based pattern of transfer to the customer. The portion of the transaction price allocated to the hardware product is recognized as revenue at a point in time when control of the hardware is transferred to the customer. We have concluded that control generally transfers upon shipment because the customer has the ability to direct the use of the asset and an obligation to pay for the hardware. The portion of the transaction price allocated to maintenance is recognized as revenue that is ratable over the maintenance term.
Professional Services
Our arrangements often include service elements other than maintenance and support services. These services include training, design assistance, and consulting. These services are generally performed on a time and materials basis, and are recognized over time, as the customer simultaneously receives and consumes the benefit provided. Certain arrangements also include the customization or modification of licensed IP. Revenue from these contracts is recognized over time as the services are performed, when the development is specific to the customer’s needs and we have enforceable rights to payment for performance completed. Inputs such as costs incurred and hours expended are used in order to measure progress of performance. We have a history of accurately estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances, specification and testing requirement changes, and changes in customer delivery priorities. Payments for services are generally due upon milestones in the contract or upon consumption of the hourly resources.
Flexible Spending Accounts
Our customers frequently enter into non-cancelable Flexible Spending Account arrangements (FSA) whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of our products or services. These arrangements do not meet the definition of a revenue contract until the customer
69

Table of Contents

executes a separate order (pulldown request) to identify the required products and services that they are purchasing. The combination of the FSA arrangement and the subsequent order creates enforceable rights and obligations, thus meeting the definition of a revenue contract. Each separate order under the agreement is treated as an individual contract and accounted for based on the respective performance obligations included within the pulldown requests.
Significant Judgments
Our contracts with customers often include promises to transfer multiple products and services to a customer. Customers can negotiate for a broad portfolio of solutions, and favorable terms along with future purchase options to manage their overall costs. Analysis of the terms and conditions in these contracts and their effect on revenue recognition may require significant judgment. We have concluded that (1) our EDA software licenses in TSL contracts and software licenses in certain Ansys' semiconductor industry subscription products are not distinct from our obligation to provide unspecified software updates to the licensed software throughout the license term, because those promises represent inputs to a single, combined performance obligation, and (2) where unspecified additional software product rights are part of the contract with the customer, such rights are accounted for as part of the single performance obligation that includes the licenses, updates, and technical support, because such rights are provided for the same period of time and have the same time-based pattern of transfer to the customer. In reaching this conclusion, we considered the nature of the obligation to customers, which is to provide an ongoing right to use the most up to date and relevant software. As EDA customers operate in a rapidly changing and competitive environment, satisfying the obligation requires providing critical updates to the existing software products, including ongoing iterative interaction with customers to make the software relevant to customers’ ability to meet the time to go to market with advanced products.
Software subscription arrangements for S&A solutions include bundles of time-based software licenses with support services, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. We have concluded that the updates to time-based software licenses are not considered integral to maintaining the utility of the software and hence the license and support services as separate performance obligations. We also license S&A software on a perpetual basis with support services, which includes a stand-ready obligation to provide technical support and software updates over the support term. We allocate the total consideration received for the bundled perpetual and support service arrangements based on the standalone selling prices of the perpetual license and support service.
Our contracts with customers can involve hundreds of products and various license rights. Customers often negotiate a broad portfolio of solutions, and favorable terms along with future purchase options to manage their overall costs. Determining whether the purchase options are considered distinct performance obligations that should be accounted for separately as material rights versus combined together may require significant judgment.
Judgment is also required to determine the standalone selling price (SSP) for each distinct performance obligation. For non-software performance obligations (IP, Hardware, and services), SSP is established based on observable prices of products and services sold separately. SSP for license (and related updates and support) in a contract with multiple performance obligations is determined by applying a residual approach whereby all other non-software performance obligations within a contract are first allocated a portion of the transaction price based upon their respective SSP, using observable prices, with any residual amount of the transaction price allocated to the license because we do not sell the license separately, and the pricing is highly variable. For S&A product subscription sales, we use all information reasonably available to us to determine the estimated SSP of time-based software license and support services.
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 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. 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. A deferred revenue is recorded when revenue is recognized subsequent to invoicing.
70

Table of Contents

Warranties and Indemnities
Warranties. We generally warrant our products to be free from defects in media and to substantially conform to material specifications for a period of 90  days for our software products and for up to six months for our hardware products.
Indemnities. In addition to such warranties, in certain cases, we provide our customers with limited indemnification with respect to claims that their use of our software products infringes on patents, copyrights, trademarks or trade secrets. We are unable to estimate the potential impact of these commitments on the future results of operations.
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 restricted stock units (RSUs) and awards during the period using the treasury stock method. See Note 16. Net Income (Loss) Per Share of the Notes to Consolidated Financial Statements in this Annual Report .
Foreign Currency Translation. The functional currency of the majority of our active foreign subsidiaries is the foreign subsidiary’s local currency. Assets and liabilities that are not denominated in the functional currency are remeasured into the functional currency with any related gains or losses recorded in earnings. We translate assets and liabilities of our non-U.S. dollar functional currency foreign operations into the U.S. dollar reporting currency at exchange rates in effect at the balance sheet date. We translate income and expense items of such foreign operations into the U.S. dollar reporting currency at average exchange rates for the period. Accumulated translation adjustments are reported in stockholders’ equity, as a component of accumulated other comprehensive income (loss).
Recently Adopted Accounting Pronouncements
In June 2022, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which applies to all equity securities measured at fair value that are subject to contractual sale restrictions. This change prohibits entities from taking into account contractual restrictions on the sale of equity securities when estimating fair value and introduces required disclosures for such transactions. We adopted the standard as of the beginning of fiscal 2025 on a prospective basis and the adoption did not have a material impact on our consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (CODM) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The ASU is effective for our annual reports beginning in fiscal 2025 and interim period reports beginning in fiscal 2026. We adopted the standard during fiscal 2025, on a retrospective basis, and the adoption provided more granular disclosure of significant operating expenses within our segment disclosure. See Note 19. Segment Disclosure of the Notes to Consolidated Financial Statements in this Annual Report for further details.
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 will be effective for us beginning in fiscal 2026 and will be applied on a prospective ba sis. Early adoption is permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income-Expense Disaggregation (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires the disclosure of additional information related to certain costs and expenses, including amounts of inventory purchases, employee compensation, and depreciation and amortization included in each income statement line item. The ASU also requires disclosure of the total amount of selling expenses and our definition of selling expenses. The ASU will be effective for our annual reports beginning in fiscal 2028, and interim period reports
71

Table of Contents

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.

Note 3. Discontinued Operations
On September 30, 2024, we completed the sale of our former Software Integrity business (the Software Integrity Divestiture) to entities controlled by funds affiliated with Clearlake Capital Group, L.P. and Francisco Partners (together, the Sponsors). The aggregate consideration for the sale was $ 1.65  billion, comprised of (i) cash of $ 1.48  billion received upon closing; (ii) $ 121.5  million reflecting the present value of $ 125.0  million in deferred consideration receivable in equal installments over five fiscal quarters beginning on January 17, 2025, subject to acceleration at our option prior to the closing of the Ansys Merger; (iii) $ 22.2  million reflecting the fair value of contingent consideration of up to $ 475.0  million receivable upon the Sponsors achieving a specified rate of return in the event of one or more potential liquidity transactions; and (iv) additional consideration receivable of $ 27.1  million as a result of net working capital adjustments. As a result of the Software Integrity Divestiture, we derecognized net assets of $ 720.5  million and incurred transaction costs of $ 61.7  million, resulting in a pre-tax gain of $ 868.8  million in fiscal 2024.
In the second quarter of fiscal 2025, we finalized the working capital adjustments and received $ 20.0  million from the Sponsors. The remainder receivable balance of $ 7.1  million was recorded as a reduction to the previously recorded gain from the Software Integrity Divestiture. We recorded a total pre-tax gain, net of transaction costs, of $ 860.5  million from the Software Integrity Divestiture.
We have received the entire deferred consideration installment payments of $ 125.0  million in fiscal 2025. There was no material change to the fair value of the contingent consideration receivable as of October 31, 2025.
72

Table of Contents

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

Year Ended October 31,
2025 2024 2023
(in thousands)
Revenue
$ —   $ 468,720   $ 524,605  
Cost of revenue
—   153,081   191,350  
Operating expenses
—   265,029   337,235  
Other income (expense), net
—   2,003   292  
Income (loss) from discontinued operations
—   52,613   ( 3,688 )
Gain (loss) on Software Integrity Divestiture ( 8,299 ) 868,830   —  
Income (loss) from discontinued operations before income taxes
( 8,299 ) 921,443   ( 3,688 )
Income tax provision (benefit)
( 4,399 ) 99,773   ( 6,531 )
Income (loss) from discontinued operations, net of income taxes
$ ( 3,900 ) $ 821,670   $ 2,843  

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

Year Ended October 31,
2025 2024 2023
( in thousands)
Amortization and depreciation
$ —   $ 16,317   $ 51,971  
Reduction of operating lease right-of-use assets
$ —   $ 2,162   $ 5,120  
Amortization of capitalized costs to obtain revenue contracts
$ —   $ 25,051   $ 30,071  
Stock-based compensation
$ —   $ 34,381   $ 50,198  
Deferred income taxes
$ ( 6,933 ) $ ( 31,679 ) $ ( 3,136 )
Purchases of property and equipment
$ —   $ 1,487   $ 3,232  

Note 4. Business Combinations
Fiscal 2025
On July 17, 2025, we completed our acquisition of Ansys pursuant to the terms of the previously announced Agreement and Plan of Merger, dated as of January 15, 2024 (the Merger Agreement) by and among Synopsys, Ansys and ALTA Acquisition Corp. (Merger Sub), a Delaware corporation and a wholly owned subsidiary of Synopsys. Pursuant to the Merger Agreement, Merger Sub merged with and into Ansys (the Ansys Merger), with Ansys surviving the Ansys Merger as a wholly owned subsidiary of Synopsys. At the effective time of the Ansys Merger (the Effective Time), each share of common stock, par value $ 0.01 per share, of Ansys (Ansys Common Stock) issued and outstanding immediately prior to the Effective Time (subject to certain exceptions) was converted into the right to receive (i) 0.3399 (the Exchange Ratio) of a share of common stock, par value $ 0.01 per share, of Synopsys (Synopsys Common Stock) (in the aggregate, the Stock Consideration) and (ii) $ 199.91 in cash, without interest (the Per Share Cash Amount, and in the aggregate, the Cash Consideration) (the Stock Consideration and the Cash Consideration, collectively, the Merger Consideration). In addition, we assumed certain outstanding Ansys options and other outstanding unvested Ansys equity awards held by continuing Ansys employees.
The aggregate purchase consideration was approximately $ 34.9  billion, consisting of cash of $ 17.6  billion, S ynopsys 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
73

Table of Contents

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 Consolidated Financial Statements in this Annual Report.
The aggregate purchase consideration was preliminarily allocated as follows:

(in thousands)
Cash for outstanding Ansys Common Stock (1)
$ 17,613,185  
Fair value of Synopsys Common Stock issued for outstanding Ansys Common Stock (2)
17,105,538  
Fair value of assumed Ansys equity awards attributable to pre-combination services (3)
130,963  
Settlement of pre-existing relationships 8,794  
Total purchase consideration 34,858,480  
Less: cash acquired ( 931,740 )
Total purchase consideration, net of cash acquired $ 33,926,740  
Allocations
Total current assets $ 898,127  
Property and equipment 106,209  
Goodwill 23,442,889  
Intangible assets 12,990,000  
Other long-term assets 253,815  
Deferred revenue ( 637,076 )
Other current liabilities ( 303,526 )
Long-term deferred revenue ( 34,070 )
Long-term deferred tax liabilities ( 2,624,094 )
Other long-term liabilities ( 165,534 )
$ 33,926,740  

(1) Represents the total cash paid to settle 88.1  million outstanding shares of Ansys Common Stock as of the Acquisition Date at $ 199.91 per share and for the settlement of fractional shares.
(2) Represents the fair value of 30.0  million shares of Synopsys Common Stock issued to settle 88.1  million outstanding shares of Ansys Common Stock. Synopsys issued 0.3399 of a share of Synopsys Common Stock for each Ansys share. The fair value of Synopsys Common Stock was $ 571.20 per share as of the Acquisition Date.
(3) Represents the fair value of assumed Ansys options and RSUs attributed to pre-combination services. See Note 15. Employee Benefit Plans for additional information.
We allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on their preliminary estimated fair values, which were determined using generally accepted valuation techniques based on estimates and assumptions made by management at the time of acquisition. These estimates and assumptions are believed to be reasonable, but they are inherently uncertain and may be subject to material change as additional information becomes available during the respective measurement period, which will not exceed 12 months from applicable acquisition date. The primary areas that are preliminary relate to the fair values of goodwill, intangible assets, certain tangible assets and liabilities, and income taxes.
Goodwill is primarily attributed to the assembled workforce and anticipated synergies and economies of scale expected from the integration of the Ansys business. The synergies include certain cost savings, operating efficiencies and other strategic benefits projected to be achieved as a result of the Ansys Merger. The goodwill was assigned to the Design Automation reporting unit and the amount recognized was not deductible for tax purposes.
74

Table of Contents

The operating results of Ansys have been included in our consolidated financial statements for the fiscal year ended October 31, 2025 from the Acquisition Date.
Intangible Assets
The estimated fair value and weighted average useful life of the Ansys intangible assets were as follows:

Fair value
Useful Lives

(in thousands)
(in years)

Core/developed technologies (1)
$ 6,500,000   6 - 9

Customer relationships (2)
5,100,000   9
Contract rights intangible (3)
440,000   2
Trademarks and trade names (4)
950,000   23
Total identified intangible assets
$ 12,990,000  

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

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

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

(4)Trademarks and trade names refers to Ansys brand assets. The preliminary fair value was determined by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue attributable to Ansys brand assets. The economic useful life was determined based on the expected usage period of the brand assets and the anticipated cash flows over the forecast period.
We believe the amounts of purchased intangible assets recorded above represent the fair values of and approximate the amounts a market participant would pay for these intangible assets as of the date of the Ansys Merger.
The Optical Solutions Group and PowerArtist RTL Divestitures
Following the determination that it was a necessary step towards obtaining governmental approval of and successfully closing the Ansys Merger, on September 3, 2024, we signed a definitive agreement for the sale of our Optical Solutions Group (OSG) to Keysight Technologies, Inc. (such sale, the Optical Solutions Divestiture). Ansys has similarly entered into a definitive agreement with Keysight Technologies, Inc. for the sale of its PowerArtist RTL business (such sale, together with the Optical Solutions Divestiture, the Regulatory Divestitures).
The Regulatory Divestitures did not represent a strategic shift in operations that would have a major effect on Synopsys' business and are also not material to our financial results, and therefore, are not presented as discontinued operations. The assets and liabilities of OSG and PowerArtist were classified as assets held for sale as of the Acquisition Date. OSG and PowerArtist were included in our Design Automation segment.
On October 17, 2025, we completed the Regulatory Divestitures for cash consideration of $ 604.0 million. As the result of the Regulatory Divestitures, we disposed $ 55.1  million of net assets including goodwill of $ 19.5  million, and recognized a pre-tax gain on sale of $ 548.9  million, which was included in other income (expense), net in the
75

Table of Contents

consolidated statements of income. In addition, we incurred $ 32.6  million divestiture-related expenses, resulting in a net pre-tax gain on sale of $ 516.3  million.
Supplemental Pro Forma Information (Unaudited)
The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, as if Ansys had been acquired as of the beginning of fiscal year 2024.

Year Ended October 31,
2025 2024
(in thousands)
Pro forma total revenue
$ 8,920,890   $ 8,450,296  
Pro forma net income (loss)
$ 743,822   $ 651,499  

The unaudited pro forma financial information reflects significant non-recurring adjustments, including transaction costs of $ 298.4  million, stock-based compensation costs of $ 71.5  million, and severance costs of $ 8.2  million. This information is provided for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2024, or of the results of our future operations of the combined business.
Fiscal 2024
During fiscal 2024, we completed several acquisitions for an aggregate purchase consideration of $ 159.3  million, net of cash acquired. We do not consider these acquisitions to be material, individually or in the aggregate, to our consolidated financial statements. The total purchase consideration was allocated as follows: $ 78.9  million to identifiable intangible assets, $ 96.1  million to goodwill, and $ 15.7  million to net tangible liabilities. The goodwill recognized from these acquisitions, of which $ 61.8  million was attributable to the Design Automation reporting unit, and $ 34.3 million was attributable to the Design IP reporting unit, was not deductible for income tax purposes.
Fiscal 2023
During fiscal 2023, we completed several acquisitions for an aggregate purchase consideration of $ 295.4  million, net of cash acquired. We do not consider these acquisitions to be material, individually or in the aggregate, to our consolidated financial statements. The t otal purchase consideration was allocated as follows: $ 95.8  million to identifiable intangible assets, $ 229.4  million to goodwill, and $ 29.8  million to net tangible liabilities. The goodwill recognized from these acquisitions was assigned to the Design Automation reporting unit, of which $ 5.7  million was deductible for income tax purposes.
Redeemable Non-controlling Interest
During the second quarter of fiscal 2022, we acquired a 75 % equity interest in OpenLight Photonics, Inc. (OpenLight) for cash consideration of $ 90.0  million. The remaining 25 % equity interest in OpenLight was held by Juniper Networks, Inc. (the Minority Investor) from their contribution of IP and certain tangible assets.
The agreement with the Minority Investor contained redemption features whereby the interest held by the Minority Investor was redeemable either (1) at the option of the Minority Investor on or after the third anniversary of the acquisition or sooner in certain circumstances or (2) at our option beginning on the third anniversary of the acquisition. This option was exercisable at the greater of fair value at the time of redemption or $ 30.0  million. The fair value of the option was initially valued at $ 10.1  million, resulting in a total consideration of $ 100.1  million.
As of the end of fiscal 2024, upon issuance of new OpenLight stock, our ownership interest in OpenLight was reduced to 71 % and the Minority Investor was reduced to 24 % . On December 23, 2024, we exercised the call option to purchase the remaining ownership interest held by the Minority Investor at a redemption price of $ 30.0  million, bringing our ownership interest in OpenLight to 95 %.
Subsequently on December 30, 2024, we divested our entire ownership interest in OpenLight. We had previously recorded an impairment charge of $ 53.5  million related to acquired intangible assets in OpenLight in fiscal 2024. See Note 6. Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements in this Annual Report for more information. The goodwill related to the OpenLight acquisition was assigned to our Design Automation
76

Table of Contents

reporting unit. The resulting loss on the OpenLight divestiture, included in other income (expense), net in the consolidated statements of income, was not material to our results of operation.
During fiscal 2025, 2024 and 2023 , OpenLight incurred a net loss of $ 3.5  million, $ 91.7  million and $ 40.9  million , respectively, of which $ 0.8  million, $ 22.0  million and $ 10.0  million , respectively, was attributable to redeemable non-controlling interest. The carrying value of the redeemable non-controlling interest was recorded at its estimated fair value of $ 30.0 million as of October 31, 2024 in the consolidated balance sheets. We have excluded the financial results of OpenLight from our consolidated financial statements from the date of sale.
Transaction Costs
Transaction costs for acquisitions, primarily related to the Ansys Merger , were $ 267.1  million, $ 161.8  million and $ 13.8  million during fiscal 2025, 2024 and 2023, respectively. These costs mainly consisted of professional fees and administrative costs for closed and pending acquisitions, as well as the Bridge Commitment financing costs, and were expensed as incurred in our consolidated statements of income.

Note 5. Revenue
Disaggregated Revenue
The following table shows the percentage of revenue by product groups:

Year Ended October 31,

2025 2024 2023
EDA 62.0   % 66.4   % 69.2   %
Design IP 24.8   % 31.1   % 29.0   %
Ansys
10.7   % —   % —   %
Other 2.5   % 2.5   % 1.8   %
Total 100.0   % 100.0   % 100.0   %

For additional information on our product groups and the revenue attributable to them by product type, refer to Part I, Item 1, Business in this Annual Report.
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 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.
A contract asset is recorded when revenue is recognized before we have the unconditional right to invoice or retains performance risk concerning that performance obligation. These contract assets transition to receivables when the rights become unconditional, generally upon the completion of a milestone. The contract assets listed below are included in prepaid and other current assets and other long-term assets in our consolidated balance sheets.
77

Table of Contents

Contract balances are as follows:
As of October 31,
2025 2024
  (in thousands)
Contract assets, net $ 1,222,029   $ 757,075  
Unbilled receivables $ 45,528   $ 44,166  
Deferred revenue $ 2,628,518   $ 1,732,568  

Long-term contract assets were $ 336.4 million as of October 31, 2025.
During fiscal 2025, we recognized revenue of $ 1.5 billion that was included in the deferred revenue balance as of October 31, 2024, including previously unfulfilled contracts that have expired and are no longer subject to an implied promise to provide future services. During fiscal 2024, we recognized revenue of $ 1.5 billion, that was included in the deferred revenue balance as of October 31, 2023, 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 $ 11.4 billion as of October 31, 2025, which includes $ 2.0 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 45 % of the backlog as of October 31, 2025, excluding non-cancellable FSA, is expected to be recognized as revenue over the next 12 months, with the remainder to be recognized thereafter. The majority of the remaining backlog is expected to be recognized in the following three years . The backlog was approximately $ 8.1  billion as of October 31, 2024, which included $ 1.2  billion in non-cancellable FSA commitments from customers.
During fiscal 2025 and 2024, we recognized $ 125.3 million and $ 104.4 million, respectively, from performance obligations satisfied from sales-based royalties earned during the periods.
Costs of Obtaining a Contract with Customer
The incremental costs of obtaining a contract with a customer, which consist primarily of direct sales commission earned upon execution of the contract, were capitalized in compliance with authoritative guidance, and amortized over the estimated period of which the benefit is expected to be received. As direct sales commission paid for renewals are commensurate with the amounts paid for initial contracts, the deferred incremental costs will be recognized over the contract term.
Capitalized commission costs, net of accumulated amortization, as of October 31, 2025 were $ 92.5 million, of which $ 13.4 million were included in prepaid and other current assets, and $ 79.1 million in other long-term assets in our consolidated balance sheets. Capitalized commission costs, net of accumulated amortization, as of October 31, 2024 were $ 72.8 million, included in other long-term assets in our consolidated balance sheets. Amortization of these assets were $ 53.2 million, $ 48.5 million and $ 52.1 million during fiscal 2025, 2024 and 2023, respectively, and are included in sales and marketing expense in our consolidated statements of income.