EDA Software

Alright, let me walk you through how I'm reading the next two quarters. The first key assumption is that revenue continues to plateau in the low-to-mid $2.2–2.5B band. Q3 is shaping up roughly flat to slightly down versus Q2, consistent with the historical seasonality where Q3 is the softest of the four quarters — many EDA and IP contracts time their renewals to fiscal year-end. Then Q4 picks up sharply as enterprise customers close out annual licenses and design IP ramps alongside advanced-node tape-outs. The second assumption is full-year Ansys integration contribution. Synopsys closed that deal in mid-2025, so 2026 is the first full year of combined revenue — which is partly why revenue jumped from the sub-$1.8B we saw in Q3 2025 to the $2.3B+ range now. I'm not modeling any big upside surprise beyond that, just a stable run rate. On margins, gross margin holds around 72.5%, blending design IP royalties (lower margin) with EDA software (higher margin). Operating income stays pressured because we're still absorbing Ansys-related operating costs. The biggest driver behind weak net income — which is what would jump out to any analyst — is the gap between operating income and net income: roughly $100M+ per quarter. That's amortization of acquired intangibles plus interest expense on the debt taken for the Ansys deal, and a normalizing tax rate after that Q4 2025 benefit flushed through. The top risk I'd flag is integration execution. If Ansys synergies slip, both operating margin and amortization drag compound. Add in ongoing China export-control uncertainty and the cyclicality of advanced-node design starts, and I'd rather under-promise than over-promise here.