Synopsys Inc (NASDAQ:SNPS) stock fell 4.14% (As on February 26, 11:23:56 AM UTC-4, Source: Google Finance) though the company reported first-quarter results that exceeded Wall Street expectations. The company achieved more than 40 PCIe design wins in the quarter with HPC and automotive customers, achieved an industry-first demonstration of PCIe 8.0, and established first-to-market position with the 224 gig SerDes on advanced nodes and leading foundries with 10 lifetime wins. Backlog ended at $11.3 billion. Geographically, China grew approximately 21% year-over-year due to the inclusion of Ansys. Excluding Ansys, China revenue declined slightly year-over-year. Free cash flow was approximately $822 million in Q1. SNPS ended the quarter with cash and short-term investments of $2.2 billion. Total debt at the end of Q1 was $10 billion. The company has repaid the entirety of the $4.3 billion term loans, consistent with the commitment last quarter.

SNPS in the first quarter of FY26 has reported the adjusted earnings per share of $3.77, beating the analysts’ estimates for the adjusted earnings per share of $3.57, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 65.6 percent to $2.41 billion in the first quarter of FY26, beating the analysts’ estimates for revenue by 0.75%. The Design Automation segment, a major revenue driver, achieved $2 billion in revenue with a 47.3% operating margin. The Ansys acquisition contributed $886 million, approximately 37% of total revenue, highlighting its strategic importance. The company saw continued strength in hardware, with major competitive wins at both new and existing customers, including a marquee emulation win versus the incumbent at a leading AI HPC customer.

The company provided second-quarter guidance with adjusted EPS of $3.11 to $3.17, with a midpoint of $3.14 that exceeds the analyst consensus of $3.08. Revenue guidance of $2.225 billion to $2.275 billion has a midpoint of $2.25 billion, slightly above the $2.243 billion consensus. For fiscal year 2026, Synopsys expects adjusted EPS of $14.38 to $14.46, with the midpoint of $14.42 higher than the analyst estimate of $14.38. Full-year revenue guidance of $9.56 billion to $9.66 billion has a midpoint of $9.61 billion, below the consensus of $9.634 billion. The company expects cash flow from operations of approximately $2.2 billion and CapEx of approximately $300 million, resulting in free cash flow of approximately $1.9 billion.

Additionally, the company’s board of directors approved a replenishment of the existing stock repurchase program with authorization to purchase up to $2.0 billion of Synopsys common stock. The company expects fiscal 2026 operating cash flow of approximately $2.2 billion and free cash flow of around $1.9 billion.