| Account | Shares | Price | Value | % of acct | Cost/sh | Gain $ | Gain % | Target |
|---|---|---|---|---|---|---|---|---|
| HSA | 5 | $415.97 | $2,080 | 1.93% | $440.82 | $-124 | -5.6% | — |
| ROTH | 2 | $416.98 | $834 | 0.33% | $415.00 | $4 | +0.5% | — |
| Total | 7 | $2,914 | 0.06% | $-120 | -4.0% | — |
In short: EDA reaccelerates — the organic proof that was missing in Q2. Q3 revenue +42% Y/Y to $2.5B ($40M beat) with non-GAAP EPS of $3.91 ($0.24 beat). "The Ansys acquisition still drives much of the headline growth, but core EDA revenue grew 8.5%, with management now expecting double-digit organic growth in Q4." Design IP returned to growth, +11% Y/Y to $474M after falling 6% in Q2 — AI infrastructure is helping, with Synopsys winning more than 95% of PCIe 7 opportunities and its die-to-die IP business "on pace to double this year." The Ansys integration is moving into commercialization: the first Multiphysics Fusion products launched and the agentic AI platform now has 30+ active customer engagements, with meaningful revenue contribution expected in FY27. FY26 revenue guidance raised $50M to ~$9.715B. Bottom Line: "Q2 left investors waiting for stronger organic growth. Q3 delivered it, with EDA accelerating and Design IP back in growth mode. The September Investor Day now becomes the key test for how much Multiphysics Fusion and AI can lift FY27 growth."
Synopsys sells the software chip designers use to design chips. Nobody builds a modern processor by hand; they build it inside tools from Synopsys or its rival Cadence, which makes the business a toll booth on essentially every chip project in the world. It also licenses ready-made building blocks — "IP" — that customers drop into their own designs rather than engineering from scratch.
Revenue grew 42%, but that number is misleading and the newsletter says so immediately: most of it came from buying Ansys, a simulation-software company. When a company grows by acquisition, the honest question is how fast the part it already owned is growing. That figure is 8.5%, and it is the number that matters here, because last quarter the complaint was precisely that the underlying business had gone quiet. Management now expects the pre-acquisition business to grow at a double-digit rate next quarter.
The second recovery is in the building-blocks business, which had been shrinking 6% and grew 11% this quarter. AI hardware is the reason: Synopsys says it won more than 95% of the opportunities for PCIe 7 — the next-generation standard for moving data between chips inside a machine — and its "die-to-die" blocks, which let two chips in one package talk to each other, are on track to double. The Ansys purchase is also starting to produce joint products rather than just combined revenue. Guidance went up. The author flags the September investor day as the moment management has to quantify how much of this reaches next year's growth. Analysis, not a recommendation.
In short: Another mission-critical software name on her relative-value list — chip-design (EDA) software the semiconductor industry can't function without; out of favor versus the +85% SOXX, so a way to play the chip cycle through the cheaper software side.
Synopsys sells the design software (called EDA) that chip companies use to actually design their chips — the semiconductor industry literally can't make modern chips without it. That makes it a clever back-door way to play the chip boom: instead of buying the chip stocks that are already up 85%, you buy the essential software that's been left behind and is cheaper. It's the definition of the "mission-critical software" Link wants.
In short: The activist-on-the-board catalyst. Q2 rev +42% to $2.3B ($30M beat), non-GAAP EPS $3.35 ($0.19 beat) — but Design Automation +62% is mostly the Ansys integration doing the lift (Design IP −6% on China; organic below the 2022 boom), so shares −2%. Elliott (Jesse Cohn) joins the board June 1 (multi-billion stake, standstill); ~10% workforce cuts, $325M restructuring; Sept 30 investor day. The catalyst now is what Elliott pushes.
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