Synepsis

​Synopsys (NASDAQ: SNPS) stock experienced a significant drop yesterday, with shares plummeting by over 35%. This sharp decline was triggered by a disappointing third-quarter earnings report and a lowered full-year financial outlook.

​Here's a breakdown of what happened:

• ​Missed Earnings and Revenue: Synopsys reported quarterly earnings and revenue that were below analysts' expectations.

• ​Weak Guidance: The company provided a weak forecast for the current quarter and reduced its full-year earnings outlook.

• ​IP Business Underperformance: A major factor in the negative results was a slump in the company's "design intellectual property" (IP) business. The CEO attributed this to challenges in a "challenging geo-political backdrop," which analysts and news sources have linked to U.S. export control restrictions affecting business in China.

• ​Analyst Downgrades: Following the earnings report, several financial analysts downgraded their ratings and lowered their price targets for Synopsys stock.

• ​Workforce Reduction: In response to the challenges, Synopsys announced a plan to reduce its workforce by 10% by the end of fiscal year 2026.

​The combination of these factors led to a major sell-off, causing the stock to fall to a new five-month low and wiping out its gains for the year.