HSBC Global Investment Research downgraded Synopsys Inc (NASDAQ: SNPS) to a Hold rating from Buy on Friday, pointing to constrained near-term upside and mounting challenges as the chip design software company enters fiscal 2026.
The research team also cut its price objective to $455 from $545. That revised target, HSBC said, reflects limited upside from current market levels given analysts view the coming year as a transition period for Synopsys.
HSBC highlighted that growth in the companys Design IP business is likely to be subdued in fiscal 2026 as Synopsys reallocates resources toward opportunities in artificial intelligence. Although management maintains a mid-teens long-term growth target, the pivot toward higher-value AI and high-performance computing markets could weigh on near-term results.
The bank further emphasized risks surrounding the Electronic Design Automation business, which accounted for more than 60% of Synopsys revenue in 2025. HSBC cited geopolitical uncertainty and export restrictions affecting China, as well as ongoing challenges tied to Intels foundry roadmap, as factors that could pressure EDA performance.
While HSBC acknowledged that Synopsys is well positioned to benefit from long-term demand for AI semiconductors, analysts expect that fiscal 2026 growth will be driven largely by the companys acquisition of Ansys, with that deal potentially contributing roughly 30% of revenue next year. The research team noted that visibility beyond fiscal 2026 remains limited, supporting a more cautious stance on the shares.
For fiscal 2026, HSBC now forecasts adjusted earnings per share of $14.22 and applies a 32x forward price-to-earnings multiple to derive its revised target price. The bank warned that geopolitical risks, customer uncertainty and the ongoing transition in Design IP could continue to act as headwinds until clearer demand visibility emerges.
Key points
- HSBC downgraded Synopsys to Hold from Buy and lowered its price target to $455 from $545.
- Design IP growth is expected to be muted in fiscal 2026 as resources shift toward AI and high-performance computing opportunities.
- EDA, which was over 60% of 2025 revenue, faces geopolitical and foundry-related risks that could pressure near-term results.
Risks and uncertainties
- Geopolitical uncertainty and export restrictions affecting China may negatively impact the EDA business and broader semiconductor-software markets.
- Ongoing challenges tied to Intels foundry roadmap could weigh on demand and execution within key product lines.
- Limited visibility beyond fiscal 2026 creates uncertainty around revenue and earnings trajectories until clearer demand signals emerge.