What Would It Take For Synopsys Stock To Move Higher

Shares of Synopsys (SNPS) rose 30% over the past month, compared with a 2.5% gain for the S&P 500. This climb followed the company's Investor Day on September 30 alongside new deals with OpenAI and Amazon. The climb offers a sign that buyers may be betting on AI. One part of that bet involves Design IP, the business that licenses ready-made pieces of chips. That division shrank last fiscal year. So is Design IP growing again?

Synopsys's Design IP Returned To Growth In Fiscal Q3

This recovery is currently one quarter old. Design IP revenue rose about 11% from a year earlier in fiscal Q3 2026, following an 8.1% drop in fiscal 2025. Management said the segment grew on broad AI infrastructure demand, as AI pushes chip makers toward faster connections and more complex systems.

Synopsys's die-to-die products connect separate chips inside one package. Management said these products are on pace to double year over year. The company has won more than 100 chip designs with them so far.

Design IP Remains The Smaller Part Of Synopsys

Design IP made up 25% of fiscal 2025 revenue. Design Automation, the company's chip-design tools, made up the rest. During fiscal Q3 2026, Design IP brought in $474 million of Synopsys's $2.477 billion revenue. Faster growth in Design IP would add to Synopsys's overall growth. Still, most of its revenue comes from Design Automation.

During its fiscal Q3 call, management called mid-teens its long-term growth guide for IP for now. The higher growth opportunity lies with AI customers who want IP shaped to their own chips, management said. Synopsys is addressing that work by moving from licensing alone to licensing plus royalties, a model it calls Factory 2.

Even after the past month's rise, the shares sit 7.5% below their 52-week high. They returned 12.7% over twelve months, against 21% for the S&P 500.

What Could Stall Synopsys's Design IP Recovery?

One good quarter following a year of decline is not yet a trend for Design IP. Synopsys's growth has to come from Design Automation alone if Design IP slips back. The shares trade at 88 times earnings, against 22.5 for the S&P 500. That price appears to assume growth across the company.

Design IP has returned to growth on AI demand for now. Yet Synopsys has yet to show faster growth from charging AI customers royalties on custom IP. The number to watch in Synopsys's fiscal Q4 2026 report is Design IP's revenue growth from a year earlier.

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