On Wednesday, Synopsys said it increased its full-year revenue and earnings guidance, underscoring how the billions being invested in artificial intelligence are flowing into the software used to design chips.

The California-based company, whose tools are used in nearly every advanced chip under development, said the growing adoption of AI has pushed customers to build more complex chips on tighter timelines.

The significance extends beyond one earnings report. Synopsys sits in a critical part of the AI supply chain: before chips from companies such as Nvidia or AMD, or a hyperscaler’s proprietary chip program, reach a fabrication plant, they typically pass through electronic design automation software from Synopsys or a rival such as Cadence, in a market concentrated among three main players — the two U.S. firms alongside Siemens EDA. As a result, a stronger outlook from Synopsys can offer a signal on spending by companies building the next generation of AI infrastructure.

AI demand lifts the forecast

In its third-quarter results, Synopsys said it now expects fiscal 2026 revenue of between $9.69 billion and $9.74 billion, up from a previous range whose top end had been $9.71 billion. The company also raised its adjusted earnings forecast to $15.04 to $15.10 per share, from a prior range of $14.72 to $14.80 per share. The outlook covers a fiscal year that closes at the end of October, with fourth-quarter and full-year results typically reported in December, the next scheduled checkpoint on whether AI-driven design demand holds.

Both figures exceed Wall Street expectations. Analysts surveyed by LSEG and cited by Reuters had projected fiscal 2026 revenue of $9.68 billion and adjusted profit of $14.76 per share.

Third-quarter results also came in ahead of estimates. Revenue rose to $2.477 billion for the three months ended July 31, compared with $1.740 billion in the same period a year earlier. The comparison also spans Synopsys’ roughly $35 billion acquisition of simulation-software maker Ansys, completed in July 2025, which added Ansys’ simulation and analysis products to the company’s revenue base. Adjusted earnings were $3.91 per share, ahead of the $3.67 per share analysts expected.

Chief Financial Officer Shelagh Glaser said the company’s performance reflects AI-related investment. “The growth is really underpinned by the strong design environment we’re seeing, and the main thing driving it is AI,” she told Reuters. Even so, Synopsys shares fell about 2% in after-hours trading.

Broader semiconductor spending remains strong

Synopsys’ updated guidance fits into a wider increase in semiconductor investment. On August 24, Gartner forecast that worldwide semiconductor revenue will reach $1.6 trillion in 2026, up 92% from $809 billion in 2025. The firm also said AI data centers will account for 53% of the market by 2030, up from 36.5% this year.

“The semiconductor industry is entering a fundamentally new phase of growth,” Gartner director analyst Ben Lee said, pointing to substantial spending on AI infrastructure.

The trend is also being reflected in design software. The ESD Alliance, a SEMI coalition, reported that electronic system design revenues reached $5.75 billion in the first quarter of 2026, up 12.7%, with semiconductor IP and computer-aided design contributing materially.

Cadence signaled similar momentum in July, when it raised its 2026 growth forecast to 19% and reported a record backlog of $8.1 billion. Cadence CEO Anirudh Devgan said, “Cadence is leading the agentic AI transformation in semiconductor design,” calling it a “massive TAM expansion opportunity.”

The design-software market has also had to absorb policy swings: in mid-2025, U.S. export rules briefly required licenses for EDA sales to China before the restriction was rescinded within weeks, a reminder that trade policy remains a variable for the sector.

More in-house chips are adding demand for design tools

Another factor supporting Synopsys is the rise in companies designing their own chips. Cloud companies including Amazon and Alphabet are expanding their in-house silicon programs, Reuters reported, broadening a market that was once dominated by a handful of merchant chipmakers. Even these custom accelerators still need design tools, verification software and licensable chip components.

Synopsys said its design IP business reflected that demand, returning to year-over-year growth in the third quarter, with another increase expected in the current quarter.

“Customers are building more and more complex chips and in shorter time frames. And we offer the tools for them to simplify that complexity,” Glaser said.

The company is also automating more of the design process. At the DAC conference in July, Synopsys introduced autonomous “agentic” EDA workflows developed with Microsoft and used by AMD. Early evaluations showed debug cycle times declining by 25% to 40%.

Synopsys CEO Sassine Ghazi said the pressure on chip designers is intensifying: “AI is driving unprecedented complexity” in the silicon needed to power the next generation of AI systems.