● SYNOPSYS INC · FY 2025

Management Discussion

Synopsys management demonstrates notable transparency by admitting internal failures, including a 43% year-over-year decline in Design IP segment operating income. While the company's strategic pivot into simulation and analysis via the Ansys acquisition is clear, the leadership team faces a critical 12-24 month execution test. This challenge is compounded by a heavily leveraged balance sheet and remediation plans that lack specific detail regarding resource reallocation and deleveraging timelines.

SNPS L1 Synthesis

● SYMBOLOGY.ONLINE l1 SYNTHESIS

Synopsys Inc Management Discussion Analysis

Leadership Assessment: Synopsys Inc. Management Team

Based on FY2025 10-K MD&A Analysis

1. TRANSPARENCY AND HONESTY IN DISCUSSING CHALLENGES

Strengths

Management demonstrates notable candor in acknowledging failures, which is relatively uncommon in MD&A disclosures:

They explicitly admit that "certain roadmap and resource decisions that did not yield their intended results" contributed to Design IP segment weakness — a direct acknowledgment of internal strategic missteps rather than attributing all problems to external factors.
The Design IP segment's performance deterioration is quantified clearly: adjusted operating income fell 43% year-over-year (from $730.2M to $419.3M), with operating margin collapsing from 38% to 24% — and management does not obscure these figures.
China revenue decline of 22% (excluding Ansys) is disclosed prominently and specifically, rather than buried in footnotes.
Management proactively discloses the 2026 Plan restructuring ($300-350M in expected charges), signaling acknowledgment that organizational changes are necessary following execution failures.

Weaknesses

The phrase "certain roadmap and resource decisions that did not yield their intended results" is vague. Management does not specify which decisions failed, who was accountable, or what the root cause analysis revealed. This limits investors' ability to assess whether corrective actions are appropriately targeted.
The admission of "weaker than expected demand from a major foundry customer" lacks detail on whether this represents a structural relationship deterioration or a temporary demand cycle — a distinction material to investors.
Operating income declined from $1.36B to $0.91B (a 33% drop) while revenue grew 15%, yet the overview leads with "continued, strong execution" — a characterization that appears inconsistent with the profitability data and risks undermining credibility.

2. STRATEGIC THINKING AND FORWARD PLANNING

Strengths

The Ansys acquisition reflects a coherent long-term strategy to expand the total addressable market from silicon design into simulation and analysis (S&A), extending Synopsys's reach across semiconductor, industrial, aerospace, and automotive sectors. The strategic logic of moving "from silicon to systems" is clearly articulated.
Management demonstrates portfolio discipline through the divestiture of the Software Integrity business, which generated proceeds that partially offset Ansys acquisition costs, and the sale of Ansys's Optical Solutions Group — suggesting active portfolio management rather than passive accumulation.
The time-based revenue model (49% of revenue) is explicitly positioned as a strategic stabilizer, providing revenue visibility through multi-year TSL contracts (typically 2-3 years). The $11.4B backlog (up from $8.1B in FY2024) with 45% expected to convert within 12 months provides concrete evidence of forward revenue visibility.
The identification of AI and high-performance computing as growth vectors, while acknowledging slower recovery in industrial, automotive, and consumer electronics, reflects differentiated sector-level thinking.

Weaknesses

The Design IP strategy appears reactive rather than proactive. Management acknowledges they are "beginning to take actions" to reallocate resources after the damage has occurred, rather than having anticipated the China export control risks or foundry customer concentration risk.
The forward guidance of "muted growth in fiscal 2026" for Design IP is disclosed, but the specific remediation strategy is vague — "sharpen execution and reallocate resources to highest growth opportunities" lacks the specificity that would allow assessment of strategic credibility.
The debt burden taken on for the Ansys acquisition ($13.5B in new financing, including $10B in Senior Notes and $4.3B Term Loan) significantly constrains strategic flexibility. The suspension of the stock repurchase program is acknowledged, but management does not articulate a clear deleveraging timeline or target leverage ratio, which represents a gap in forward financial planning transparency.
Management acknowledges it "cannot forecast the scope or timing" of future Trade Restrictions — while honest, this also reveals a lack of scenario planning or contingency strategy for a risk that has already materially impacted the business.

3. EXECUTION CAPABILITIES BASED ON PAST PERFORMANCE

Strengths

Consistent revenue growth since 2005 is cited, and the three-year data supports this: $5.3B (FY2023) → $6.1B (FY2024) → $7.1B (FY2025), representing compound growth.
The Design Automation segment demonstrates strong execution: revenue grew 26% to $5.3B, adjusted operating margin expanded from 39% to 42%, and adjusted operating income grew 36% to $2.2B. Hardware product demand was specifically cited as a strength driver.
The Ansys integration closed on July 17, 2025, contributing $756.6M in revenue in approximately 3.5 months — suggesting reasonable near-term integration execution, though the full integration test remains ahead.
Operating cash flow grew modestly from $1.41B to $1.52B despite significant integration costs, demonstrating underlying business resilience.
The 2023 restructuring plan was initiated and substantially completed within two quarters, suggesting management can execute organizational changes efficiently when required.

Weaknesses

The Design IP segment failure is a significant execution concern. A 43% decline in adjusted operating income, combined with the admission of internal roadmap and resource allocation failures, suggests a breakdown in product strategy execution within a segment that represented 31% of FY2024 revenue.
Cost growth outpaced revenue growth: total costs increased 29% against 15% revenue growth, causing operating income to fall from $1.36B to $0.91B — a 33% decline. While much of this is attributable to Ansys-related amortization ($457.8M) and integration costs, the magnitude raises questions about cost discipline during the integration.
G&A expenses grew 35% as a percentage of revenue (from 9% to 11%), driven by $94.8M in legal and consulting fees related to the Ansys Merger. While partially expected, the scale suggests integration costs were higher than optimal.
The interest expense surge from $36.8M to $446.7M (a 1,114% increase) reflects the cost of the acquisition financing strategy and will be a persistent drag on net income going forward.
Net income from continuing operations declined from $1.44B to $1.34B despite 15% revenue growth — a metric that sophisticated investors will note as evidence of execution pressure.

4. RISK AWARENESS AND MITIGATION STRATEGIES

Strengths

Management demonstrates granular awareness of geopolitical risks, specifically detailing the Q3 2025 BIS Restrictions (received May 29, 2025, rescinded July 2, 2025), their impact on customer design starts in China, and the broader uncertainty around evolving U.S. Export Regulations. This level of specificity is commendable.
The time-based revenue model is explicitly identified as a risk mitigation tool against macroeconomic volatility, with the acknowledgment that negative impacts may be "deferred" — showing awareness of both the benefit and the limitation of this model.
Multiple risk cross-references to Part I, Item 1A throughout the MD&A suggest a structured approach to risk disclosure, with management actively directing readers to more detailed risk factor discussions rather than minimizing risks within the MD&A narrative.
The deferred payment agreement for the 2025 Rate Lock Agreements (deferring $110.6M over 5.5 years) demonstrates tactical financial risk management in managing interest rate exposure.
Management acknowledges customer concentration risk implicitly through the disclosure of "weaker than expected demand from a major foundry customer" — though the mitigation strategy for this concentration is not articulated.

Weaknesses

Despite acknowledging China export control risks, the mitigation strategy is largely passive — "actively monitoring" developments rather than describing concrete hedging strategies, customer diversification plans, or alternative market development initiatives.
The $13.5B debt financing for the Ansys acquisition creates substantial financial risk. While management states liquidity is sufficient for the next 12 months, the long-term deleveraging path is not clearly defined. With $3.5B in Term Loans (maturing 2027-2028) and $10B in Senior Notes, the refinancing risk in a potentially higher-rate environment is not adequately addressed.
The China revenue concentration (which declined 22% excluding Ansys) appears to have been underweighted as a risk prior to the export control escalations. The reactive nature of the response — acknowledging disruption after it occurred — suggests risk monitoring did not translate into proactive mitigation.
The Design IP segment's customer concentration (a single major foundry customer contributing to material revenue shortfall) represents a risk that appears to have lacked adequate mitigation through customer diversification.
Management acknowledges macroeconomic uncertainty across industrial, automotive, and consumer electronics but provides limited specific mitigation strategies beyond the general resilience of the time-based model.

OVERALL ASSESSMENT SUMMARY

Dimension	Rating	Key Evidence
Transparency & Honesty	Above Average	Admits internal roadmap failures; quantifies China decline specifically; discloses restructuring proactively
Strategic Thinking	Average	Ansys acquisition is strategically coherent; Design IP remediation is vague; debt strategy limits flexibility
Execution Capability	Mixed	Design Automation excels; Design IP represents a significant execution failure; cost discipline under pressure
Risk Awareness & Mitigation	Below Average	Strong identification of risks; mitigation strategies are largely reactive and insufficiently specific

Overall: Synopsys management demonstrates above-average transparency relative to typical MD&A disclosures, which is a meaningful positive signal. However, the combination of a significant Design IP execution failure, reactive risk management in China, and a heavily leveraged balance sheet following the Ansys acquisition suggests the leadership team faces a critical 12-24 month execution test. The FY2026 restructuring plan ($300-350M) indicates management recognizes the need for organizational recalibration, but the vagueness of the Design IP recovery strategy and the absence of a clear deleveraging roadmap are the most significant gaps in the current management narrative.

● SYNOPSYS INC · FY 2025

Management Discussion

Table of Contents

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

The following overview is qualified in its entirety by the more complete discussion contained in this Item 7, the risk factors set forth in Part I, Item 1A of this Form 10-K, and our consolidated financial statements and the notes thereto set forth in Item 8 of this Form 10-K. Please also see the cautionary language at the beginning of Part I of this Annual Report regarding forward-looking statements.

Unless otherwise noted, this Management's Discussion and Analysis of Financial Condition and Results of Operations does not include the operations of our former Software Integrity business. See Note 3. Discontinued Operations of the Notes to Consolidated Financial Statements in this Annual Report for additional information about the sale of our former Software Integrity business (the Software Integrity Divestiture).

Fiscal 2025 Financial Performance Summary

For fiscal 2025, our results reflect continued, strong execution and the resiliency of our business, including 15% revenue growth compared to fiscal 2024, primarily due to revenue growth across a majority of product groups and geographies and the closing of the Ansys Merger, which contributed $756.6 million in revenue, which was offset by weakness in our business in China, which saw revenue decrease 22% compared to fiscal 2024, excluding Ansys. We saw strength in our Design Automation segment, including strong demand for our hardware products. This was offset by weakness in our Design IP segment, due to several headwinds, including China export control restrictions, such as the Q3 2025 BIS Restrictions (as defined below), which disrupted customer design starts in China, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results. We have begun taking actions to sharpen our execution and reallocate resources to the highest growth opportunities in our Design IP segment, but expect to see muted growth in fiscal 2026.

The following table sets forth some of our key consolidated financial information for each of our last three fiscal years:

Year Ended October 31,

202520242023

(in millions, except per share amounts)

Revenue

$7,054.2 $6,127.4 $5,318.0

Cost of revenue

$1,623.5 $1,245.3 $1,030.9

Operating expenses

$4,515.7 $3,526.4 $3,013.9

Operating income

$914.9 $1,355.7 $1,273.2

Net income from continuing operations attributed to Synopsys$1,336.1 $1,441.7 $1,227.0

Net income (loss) from discontinued operations attributed to Synopsys$(3.9)$821.7 $2.8

Diluted net income (loss) per share attributed to Synopsys:

Continuing operations$8.07 $9.25 $7.91

Discontinued operations$(0.03)$5.26 $0.01

Fiscal 2025 compared to fiscal 2024 financial performance summary

•Revenues were $7.1 billion, an increase of $926.8 million or 15%, which includes revenues from Ansys of $756.6 million. The remaining growth came organically across a majority of products and geographies and was partially offset by the impact of the extra week in the first quarter of fiscal 2024 of approximately $63.2 million, and by weakness in our business in China, which saw revenue decrease 22% compared to fiscal 2024, excluding Ansys, and in our Design IP segment due to several headwinds, including China export control restrictions, such as the Q3 2025 BIS Restrictions, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results.

•Total cost of revenue and operating expenses was $6.1 billion, an increase of $1.4 billion or 29%, primarily due to an increase of $664.5 million in employee-related costs from headcount increases as a result of the Ansys Merger of $432.1 million and the balance from organic growth, as well as $457.8 million of amortization expense related to intangible assets acquired from the Ansys Merger.

Fiscal 2024 compared to fiscal 2023 financial performance summary

•Revenues were $6.1 billion, an increase of $809.4 million or 15%, primarily due to revenue growth across all products and geographies.

•Total cost of revenue and operating expenses was $4.8 billion, an increase of $726.9 million or 18%, primarily due to an increase of $325.8 million in employee-related costs resulting from headcount increases through organic growth and acquisitions.

•Operating income was $1.4 billion, an increase of $82.5 million or 6%.

•Net income from discontinued operations was $821.7 million, an increase of $818.9 million, primarily due to the gain on Software Integrity Divestiture.

Business Summary

Synopsys delivers industry-leading silicon design, simulation and analysis (S&A) and IP solutions as well as design services. We partner closely with our customers across a wide range of industries to maximize their R&D capability and productivity, powering innovation today that ignites the ingenuity of tomorrow. For more information about our business segments and product groups, see Part I, Item 1, Business in our Annual Report.

We have consistently grown our revenue since 2005, despite periods of global economic uncertainty. We achieved these results because of our solid execution, leading technologies and strong customer relationships, and because we generally recognize our revenue for software licenses over the arrangement period, which typically approximates two to three years. See Note 2. Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report for a discussion on our revenue recognition policy. The revenue we recognize in a particular period generally results from selling efforts in prior periods rather than the current period. As a result, decreases as well as increases in customer spending do not immediately affect our revenue in a significant way.

Our growth strategy is focused on expanding our total addressable market by maximizing the capabilities of R&D teams across industries spanning semiconductor, high-tech, industrial, aerospace, and more with engineering solutions from silicon to systems. Our priorities are to maintain and expand our technology leadership, drive sustainable growth and efficiently scale to accelerate our strategy. Our revenue growth from period to period is expected to vary based on the mix of our time-based and upfront products. Our upfront products have grown at a faster rate than our time-based products in recent periods, which has resulted in, and may in the future result in, increased fluctuation in our business, operating results and overall financial position on a quarterly basis. Such fluctuation may be more pronounced depending on demand from our larger customers. See Part I, Item 1A, Risk Factors, "Our operating results may fluctuate in the future, which may adversely affect our stock price" of this Annual Report for further discussion on potential fluctuations in our operating results. Based on our leading technologies, customer relationships, business model, diligent expense management and acquisition strategy, we believe that we will continue to execute our strategies successfully.

Acquisition of Ansys

On July 17, 2025 (the Acquisition Date), we completed our acquisition of ANSYS, Inc. (Ansys) pursuant to the terms of the previously announced Agreement and Plan of Merger, dated as of January 15, 2024 (the Merger Agreement) by and among Synopsys, Ansys and ALTA Acquisition Corp. (Merger Sub), a Delaware corporation and a wholly owned subsidiary of Synopsys (the Ansys Merger). See Note 4. Business Combinations of the Notes to Consolidated Financial Statements for more information on the Ansys Merger.

For more on risks related to the Ansys Merger, see Part I, Item 1A, Risk Factors, "Risks Related to the Ansys Merger" of this Annual Report.

Impact of the Current Macroeconomic Environment

The current macroeconomic environment, including the effects of, among other things, changes in U.S. and global trade policy, including the tariffs enacted in 2025 by the U.S. and other governments, sustained global inflationary pressures and elevated interest rates, potential economic slowdowns or recessions, supply chain disruptions, geopolitical pressures, and fluctuations in foreign exchange rates, have resulted in increased volatility in global markets. While we have seen continued strength in the artificial intelligence and high-performance computing sectors, certain industries such as industrial, automotive and consumer electronics have recovered more slowly from recent macroeconomic uncertainty. The current uncertain macroeconomic environment has led some of our

customers to postpone their decision-making, delay their drawdowns under non-cancellable commitments, decrease their spending and/or delay their payments to us.

We expect growth across our geographies in fiscal 2026; however, we are expecting a challenging near-term environment, including in China, due to macroeconomic factors and Trade Restrictions (as defined below). See the discussion below under the heading "Impact of Global Trade Policy and the Current Geopolitical Environment" and in Part I, Item 1A, Risk Factors, "We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets" of this Annual Report for further discussion of the impact of Trade Restrictions, including export control regulations and geopolitical events on Synopsys.

While our time-based model provides stability to our business, operating results and overall financial position, the broader implications of these macroeconomic or geopolitical events, particularly in the long term, remain uncertain. Further, the negative impact of these events or disruptions may be deferred due to our business model. See Part I, Item 1A, Risk Factors, "Uncertainty in the macroeconomic environment, and its potential impact on the semiconductor and electronics industries, may negatively affect our business, operating results and financial condition" and "Our operating results may fluctuate in the future, which may adversely affect our stock price" of this Annual Report for further discussion of the impact of global economic uncertainty on our business, operations and financial condition and potential fluctuations in our operating results, respectively.

See Part I, Item 1A, Risk Factors of this Annual Report for further discussion of the impact of global economic and geopolitical uncertainty on our business, operations and financial condition.

Impact of Global Trade Policy and the Current Geopolitical Environment

We are actively monitoring changes to global trade policy, such as changes to U.S. Export Regulations (as defined below) and developments related to the tariffs enacted by the U.S. government. In fiscal 2025, the U.S. government imposed a number of new and higher U.S. tariffs on imports from countries around the world. Certain countries have responded to the U.S. tariffs by imposing or threatening retaliatory tariffs. There may be additional changes to tariffs or new tariffs and other aspects of global trade policy in fiscal 2026 in the U.S. and other countries due to global trade negotiations and other factors. These changes in global trade policy have not had a material impact on our business, operating results or financial condition to date.

The Bureau of Industry and Security of the U.S. Department of Commerce (BIS) has continued to publish changes to U.S. export control regulations (the U.S. Export Regulations), including, among other things, the inclusion of certain Chinese technology companies on the Entity List, restrictions on the export of electronic computer-aided design (ECAD) software specially designed for the development of certain ICs, as well as controls on ECAD software for advanced semiconductor packaging involving multiple chips or chiplets, and certain other restrictions on China's access to certain semiconductor and advanced computing technology. U.S.-China relations remain fluid, in particular with respect to trade policy and export restrictions relating to dual-use technologies. For example, on May 29, 2025, Synopsys received a so-called "is-informed" letter from the BIS imposing a license requirement for the export, reexport, or in-country transfer of EDA software and technology classified under export control classification numbers (ECCNs) 3D991 and 3E991 when a party to the transaction is located in China or is a Chinese "military end user," wherever located (such restrictions, the Q3 2025 BIS Restrictions). The Q3 2025 BIS Restrictions were subsequently rescinded on July 2, 2025. China export control restrictions, including the Q3 2025 BIS Restrictions, have negatively impacted our business in China, including in our Design IP segment, and may continue to impact design starts or other aspects of our business in China in the future. The evolving nature of U.S. Export Regulations, including the potential for new and expanded license requirements of this or similar nature, creates uncertainty regarding the current and future impacts on our business. We anticipate additional changes to the U.S. Export Regulations or other U.S. or non-U.S. export, sanctions, or similar trade requirements (collectively, the Trade Restrictions) in the future, but we cannot forecast the scope or timing of such changes, nor the impact on our business. We will continue to monitor such developments, including potential additional Trade Restrictions, new or expanded license requirements, and other regulatory or policy changes by the U.S. and foreign governments.

For more on risks related to government export and import restrictions such as the U.S. government's Entity List and other U.S. Export Regulations, see Part I, Item 1A, Risk Factors, "We are subject to governmental export and import requirements that could subject us to liability and restrict our ability to sell our products and services, which could impair our ability to compete in international markets."

We are also monitoring other geopolitical pressures around the world, including, among others, changes in China-Taiwan and U.S.-China relations, the conflicts in Ukraine and the Middle East and other regional or global military

conflicts. Any significant disruption caused by these or other geopolitical pressures or conflicts could materially affect our employees, business, operating results, financial condition or customers in those regions of the world. For example, Synopsys has employees, operations, customers and strategic partners in the Middle East. While we are actively monitoring the conflicts in the Middle East, at this time they have not had a material impact on our business, operating results or financial condition to date.

Business Segments

Design Automation. This segment includes our advanced silicon design, verification products and services, and Ansys products, and system integration products and services. This segment also includes digital, custom and field programmable gate array (FPGA) integrated circuit (IC) design software, verification software and hardware products, and manufacturing software products. Designers use our EDA products to accelerate and automate the chip design process, reduce errors and enable more powerful and robust designs, with improved productivity for faster time to market. Engineers use our S&A solutions to virtually test and optimize designs across various physics domains, such as structural analysis, thermal analysis, and computational fluid dynamics (CFD).

Design IP. This segment includes our interface, foundation, security, and embedded processor IP, IP subsystems, and IP implementation services that serve companies primarily in the semiconductor and electronics industries. We are a leading provider of high-quality, silicon-proven IP solutions for system-on-chips (SoCs). This includes IP that has been optimized to address specific application requirements for the mobile, automotive, digital home, Internet of Things and AI/data center markets, enabling designers to quickly develop SoCs in these areas.

Fiscal Year End

We have changed our fiscal year end from the Saturday nearest to October 31 and consisting of 52 or 53 fiscal weeks to a fiscal year end of October 31 each year. The fiscal year change became effective with our fiscal 2025, which began on November 3, 2024. Our fiscal quarters end on January 31, April 30, July 31 and October 31 of each year.

Historically, our fiscal years have been 52- or 53-week periods ending on the Saturday nearest to October 31. Fiscal 2024 was a 53-week year ended on November 2, 2024. Fiscal 2023 was a 52-week year ended on October 28, 2023. The extra week in the first quarter of fiscal 2024 resulted in approximately $63.2 million of additional revenue, and approximately $52.5 million of additional expenses, including approximately $10.6 million in stock-based compensation costs from continuing operations.

For presentation purposes, this Annual Report refers to the closest calendar month end.

Critical Accounting Estimates

A critical accounting estimate is defined as one that has a material impact on our financial condition and results of operations and requires us to make difficult, complex or subjective judgments, often as a result of the need to make estimates about matters that are inherently uncertain. Where applicable, we base these estimates and assumptions on historical experience and evaluate them on an ongoing basis to ensure that they remain reasonable under current conditions. Actual results could differ from those estimates. We believe that the following critical accounting policies reflect more significant judgments and estimates used in the preparation of our consolidated financial statements regarding critical accounting estimates. See Note 2. Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report for further information on our significant accounting policies.

Revenue Recognition

Our contracts with customers often include promises to transfer multiple products and services to a customer. Arrangements with customers can involve multiple products and various license rights. Customers can negotiate for a broad portfolio of solutions, and favorable terms along with future purchase options to manage their overall costs. Analysis of the terms and conditions in these contracts and their effect on revenue recognition may require significant judgment.

We have concluded that our EDA software licenses in Technology Subscription License (TSL) contracts and software licenses in Ansys semiconductor products are not distinct from our obligation to provide unspecified software updates to the licensed software throughout the license term, because those promises represent inputs to a single, combined performance obligation. Where unspecified additional software product rights are part of the contract with the customer, those rights are accounted for as part of the single performance obligation that includes the licenses, updates, and technical support, because such rights are provided during the same period of time and have the same time-based pattern of transfer to the customer.

Software subscription arrangements for S&A solutions include bundles of time-based software licenses with support services, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. We have concluded that the updates to time-based software licenses are not considered integral to maintaining the utility of the software and hence consider the license and support services as separate performance obligations. We also license S&A software on a perpetual basis with support services, which includes a stand-ready obligation to provide technical support and software updates over the support term. We allocate the total consideration received for the bundled perpetual and support service arrangements based on the standalone selling prices of the perpetual license and support service.

For our IP licensing arrangements, we have concluded that the licenses and support services are distinct from each other, and therefore treated as separate performance obligations. Revenues from IP licenses are recognized at a point in time upon transfer of control of the IP license, and support services are recognized over the support period as a stand ready obligation to the customer.

We are required to estimate total consideration expected to be received from contracts with customers. In some circumstances, the consideration expected to be received is variable based on the specific terms of the contract or based on our expectations of the term of the contract. Generally, we have not experienced significant returns or refunds to customers. These estimates require significant judgment and the change in these estimates could have an effect on our results of operations during the periods involved.

Business Combinations

We allocate the purchase price of acquired companies to the tangible assets acquired, liabilities assumed and intangible assets acquired based upon their estimated fair values on the acquisition date with the exception of contract assets and contract liabilities (deferred revenue) which are recognized and measured on the acquisition date in accordance with our "Revenue Recognition" policy in Note 2. Summary of Significant Accounting Policies and Basis of Presentation of the Notes to Consolidated Financial Statements in this Annual Report, as if we had originated the contracts. The excess of the purchase price over the fair values of these net tangible and intangible assets acquired is recorded as goodwill.

Accounting for business combinations requires management to make significant estimates and assumptions for the valuation of goodwill and intangible assets. Although we believe the assumptions and estimates we have made are reasonable, they are based in part on historical experience, market conditions and information obtained from management of the acquired companies and are inherently uncertain. Changes in our estimates and assumptions may impact valuation of intangible assets, subsequent amortization of intangible assets as well as amounts recognized as goodwill. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include, but are not limited to:

•future expected cash flows, which includes estimates of software license sales, subscriptions, support agreements and consulting contracts;

•projected expenses, which include cost of revenue, research and development and selling, general and administrative expenses (including estimated expenses required to generate the revenues attributable to different intangible assets);

•historical and expected customer attrition rates and anticipated growth in revenue from acquired customers;

•royalty rates applied to acquired developed technology platforms and other intangible assets;

•expected obsolescence rates and estimated useful lives of technology-related intangible assets;

• expected use of the acquired assets; and

•discount rates used to discount expected future cash flows to present value, which are typically derived from the implied rate of return on the transaction and a weighted-average cost of capital analysis with adjustments made to reflect inherent risks of the individual assets being valued;

The fair value of the definite-lived intangibles was determined using variations of the income approach.

With our acquisition of Ansys, the fair value of developed technologies and trade names was determined by applying the relief from royalty method under the income approach. The relief from royalty method applies a royalty rate to projected income to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. The economic useful life for developed technology was determined based on historical technology obsolescence patterns and prospective technological developments. The estimated economic useful life of the trade names was determined based on the expected probability of continued use of the brand asset. We assumed royalty rates ranging from 35.0% to 45.0% for existing technology, and 2.5% for trade names. The present value of operating cash flows from the existing technology and trade names was determined using discount rate of approximately 10.0%.

Customer relationships represent the fair value of the existing relationships with the acquired company's customers. Their fair value was determined using the multi-period excess earnings method under the income approach, which involves isolating the net earnings attributable to the asset being measured based on the present value of the incremental after-tax cash flows (excess earnings) attributable solely to the asset over its remaining useful life. The economic useful life was determined based on historical customer turnover rates. Projected income from existing customer relationships considered customer retention rates (i.e. gross retention and net retention including upsell) ranging from 85.0% to 105.0% for the direct sales channel and 70.0% to 90.0% for the indirect sales channel. The present value of operating cash flows from existing customers was determined using a discount rate of approximately 10.0%.

Contract rights intangible (i.e. order backlog) represents contracted but unsatisfied or partially unsatisfied performance obligations, primarily related to the dollar value of purchase arrangements with customers, effective as of a given point in time, that are based on mutually agreed terms. The fair value was determined by using the multi-period excess earnings method under the income approach. The economic useful life is based on the time to achieve 90.0% of cumulative undiscounted cash flows. The present value of operating cash flows from order backlog was determined using a discount rate of approximately 5.9%.

We believe that our preliminary estimates and assumptions related to the fair value of acquired intangible assets are reasonable, but significant judgment is involved. As a result, during the measurement period, which will not exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the fair value of the purchase price of our acquisitions, whichever comes first, any subsequent adjustments are recorded to our Consolidated Statements of Income or Condensed Consolidated Statement of Income.

Results of Operations

Revenue

Our revenues are generated from two business segments: the Design Automation segment and the Design IP segment. See Note 19. Segment Disclosure of the Notes to Consolidated Financial Statements in this Annual Report for more information about our reportable segments and revenue by geographic regions.

Further disaggregation of the revenues into various products and services within these two segments is summarized as follows:

Design Automation Segment

•EDA solutions include digital, custom and FPGA IC design software, verification software and hardware products, Ansys semiconductor products, system integration products and services, and obligations to

provide unspecified updates and support services. EDA products and services are typically sold through Technology Subscription License (TSL) arrangements that grant customers the right to access and use all of the licensed products at the outset of an arrangement; software updates are generally made available throughout the entire term of the arrangement. The duration of our TSL contracts is generally two to three years, though it may vary for specific arrangements. We have concluded that the software licenses in TSL contracts are not distinct from the obligation to provide unspecified software updates to the licensed software throughout the license term, because the multiple software licenses and support represent inputs to a single, combined offering, and timely, relevant software updates are integral to maintaining the utility of the software licenses. We recognize revenue for the combined performance obligation under TSL contracts ratably over the term of the license.

•In the case of arrangements involving the sale of hardware products, we generally have two performance obligations. The first performance obligation is to transfer the hardware product, which includes software integral to the functionality of the hardware product. The second performance obligation is to provide maintenance on the hardware and its embedded software, which includes rights to technical support, hardware repairs and software updates that are all provided over the same term and have the same time-based pattern of transfer to the customer. The portion of the transaction price allocated to the hardware product is generally recognized as revenue at the time of shipment because the customer obtains control of the product at that point in time. We have concluded that control generally transfers at that point in time because the customer has the ability to direct the use of the asset and an obligation to pay for the hardware. The portion of the transaction price allocated to the maintenance obligation is recognized as revenue ratably over the maintenance term.

•S&A solutions allow engineers to virtually test and optimize designs across various physics domains, such as structural analysis, thermal analysis, and CFD. S&A software solutions are offered as subscription solutions and also as perpetual licenses. Software subscription arrangements include bundles of time-based software licenses with support services, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. In such subscription arrangements, the updates to time-based software licenses are not considered integral to maintaining the utility of the software. We consider the license and support services as separate performance obligations. In these instances, we allocate the total consideration received for the revenue arrangement to the separate performance obligations based on the standalone selling prices of the time-based software license and support service. The time-based software license revenue is presented as upfront products revenue, recognized at a point of time upon the later of the delivery date or the beginning of the license period, and the revenue related to the support service is presented as maintenance and service revenue and is recognized over the term of the arrangement. Perpetual license arrangements typically include a perpetual license sold with support services, which includes a stand-ready obligation to provide technical support and software updates over the support term. We allocate the total consideration received for the bundled perpetual and support service arrangements based on the standalone selling prices of the perpetual license and support service. Revenue from perpetual licenses is presented as upfront product revenue and is recognized at a point in time upon the later of the delivery date or the beginning of the license period. Revenue from support service is classified as maintenance and service revenue and is recognized ratably over the term of the contract, as we satisfy the support service performance obligation.

•Revenue from professional service contracts is recognized over time, generally using costs incurred or hours expended to measure progress. We have a history of reasonably estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes.

Design IP Segment

•Design IP includes our interface, foundation, security, and embedded processor IP, IP subsystems, and IP implementation services. These arrangements generally have two performance obligations which consist of transferring of the licensed IP and providing related support, which includes rights to technical support and software updates that are provided over the support term and are transferred to the customer over time. Revenue allocated to the IP licenses is recognized at a point in time upon the later of the delivery date or the beginning of the license period, and revenue allocated to support is recognized over the support term. Royalties are recognized as revenue in the quarter in which the

applicable customer sells its products that incorporate our IP. Payments for IP contracts are generally received upon delivery of the IP. Revenue related to the customization of certain IP is recognized over time, generally using costs incurred or hours expended to measure progress.

Our customer arrangements can involve multiple products and various license rights, and our customers negotiate with us over many aspects of these arrangements. For example, they generally request a broader portfolio of solutions, support and services and seek more favorable terms such as expanded license usage, future purchase rights and other unique rights at an overall lower total cost. No single factor typically drives our customers' buying decisions, and we compete on all fronts to serve customers in highly competitive markets. Customers generally negotiate the total value of the arrangement rather than just unit pricing or volumes.

Total Revenue

Year Ended October 31,$ Change % Change $ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Design Automation$5,302.4 $4,221.1 $3,775.3 $1,081.3 26 %$445.8 12 %

Design IP1,751.8 1,906.3 1,542.7 (154.5)(8)%363.6 24 %

Total$7,054.2 $6,127.4 $5,318.0 $926.8 15 %$809.4 15 %

Our revenues are subject to fluctuations, primarily due to customer requirements including customer demand, timing requirements and the value of contract renewals. For example, we experience fluctuations in our revenues due to factors such as the timing of IP product sales, Flexible Spending Account (FSA) drawdowns, royalties, and hardware products sales. As revenues from sales of IP products, hardware products and S&A product licenses are recognized upfront, customer demand and timing requirements for such IP products, hardware products and S&A product licenses could result in increased variability of our total revenues.

Contracted but unsatisfied or partially unsatisfied performance obligations (backlog) were approximately $11.4 billion as of October 31, 2025, which includes $2.0 billion in non-cancellable FSA commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date. We have elected to exclude future sales-based royalty payments from the remaining performance obligations. Approximately 45% of the backlog as of October 31, 2025, excluding non-cancellable FSA, is expected to be recognized as revenue over the next 12 months, with the remainder recognized thereafter. The majority of the remaining backlog is expected to be recognized in the following three years. The backlog was approximately $8.1 billion as of October 31, 2024, which included $1.2 billion in non-cancellable FSA commitments from customers.

The amount and composition of unsatisfied performance obligations will fluctuate period to period. We do not believe the amount of unsatisfied performance obligations is indicative of future sales or revenue, or that such obligations at the end of any given period correlates with actual sales performance of a particular geography or particular products and services. For more information regarding our revenue during the year ended October 31, 2025, including our contract balances as of such date, see Note 5. Revenue of the Notes to Consolidated Financial Statements in this Annual Report.

The increase in total revenue for fiscal 2025 compared to fiscal 2024 was primarily due to the closing of the Ansys Merger, which contributed $756.6 million in revenue in fiscal 2025, revenue growth of our business across a majority of product groups and geographies. This was offset by weakness in our Design IP segment due to several headwinds, including China export control restrictions, such as the Q3 2025 BIS Restrictions, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results. The increase for fiscal 2025 was also partially offset by the impact of the extra week in fiscal 2024 of approximately $63.2 million.

The increase in total revenues for fiscal 2024 compared to fiscal 2023 was primarily due to the continued organic growth of our business in all product groups and geographies.

For a discussion of revenue by geographic areas, see Note 19. Segment Disclosure of the Notes to Consolidated Financial Statements in this Annual Report.

Time-Based Products Revenue

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Time-based products revenue$3,489.6 $3,224.3 $3,016.3 $265.3 8 %$208.0 7 %

Percentage of total revenue49 %53 %57 %

The increase in time-based products revenue for fiscal 2025 compared to fiscal 2024 was primarily attributable to the closing of the Ansys Merger, which contributed $86.5 million in revenue in fiscal 2025, and an increase in TSL license revenue from arrangements booked in prior periods. The increase for fiscal 2025 compared to fiscal 2024 was partially offset by the impact of the extra week in fiscal 2024. The increase in time-based products revenue for fiscal 2024 compared to fiscal 2023 was primarily attributable to an increase in TSL license revenue from arrangements booked in prior periods. The increase for fiscal 2024 compared to fiscal 2023 also included the impact of the extra week in fiscal 2024.

Upfront Products Revenue

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Upfront products revenue$2,010.6 $1,802.2 $1,400.1 $208.4 12 %$402.1 29 %

Percentage of total revenue29 %29 %26 %

Changes in upfront products revenue are generally attributable to normal fluctuations in the extent and timing of customer requirements, which can drive the amount of upfront orders and revenue in any particular period.

The increase in upfront products revenue for fiscal 2025 compared to fiscal 2024 was primarily due to an increase in the sale of hardware products driven by higher demand from customers and the closing of the Ansys Merger, which contributed $198.7 million in upfront products revenue in fiscal 2025. The increase for fiscal 2024 compared to fiscal 2023 was primarily due to an increase in the sale of IP and hardware products driven by higher demand from customers.

Upfront products revenue as a percentage of total revenue will likely fluctuate based on the timing of IP, hardware and S&A product sales. Such fluctuations will continue to be impacted by the timing of shipments and FSA drawdowns due to customer requirements.

Maintenance and Service Revenue

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Maintenance revenue$954.2 $429.4 $358.1 $524.8 122 %$71.3 20 %

Professional service and other revenue599.8 671.5 543.5 (71.7)(11)%128.0 24 %

Total$1,554.0 $1,100.9 $901.6 $453.1 41 %$199.3 22 %

Percentage of total revenue22 %18 %17 %

The increase in maintenance revenue for fiscal 2025 compared to fiscal 2024 was primarily due to an increase in the volume of arrangements that include maintenance largely due to the closing of the Ansys Merger, which contributed $449.0 million in maintenance revenue in fiscal 2025. The increase for fiscal 2024 compared to fiscal 2023 was primarily due to an increase in the volume of arrangements that include maintenance.

The decrease in professional service and other revenue for fiscal 2025 compared to fiscal 2024 and the increase for fiscal 2024 compared to fiscal 2023 were primarily due to the timing of IP customization projects.

Cost of Revenue

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Cost of products revenue$867.2 $770.2 $697.7 $97.0 13 %$72.5 10 %

Cost of maintenance and service revenue444.5 367.1 287.9 77.4 21 %79.2 28 %

Amortization of acquired intangible assets

311.8 108.0 45.3 203.8 189 %62.7 138 %

Total$1,623.5 $1,245.3 $1,030.9 $378.2 30 %$214.4 21 %

Percentage of total revenue23 %20 %19 %

Our cost of revenue comprises of three categories: cost of products revenue, cost of maintenance and service revenue, and amortization of acquired intangible assets.

Cost of products revenue. Cost of products revenue includes costs related to products sold and software licensed, hardware-related costs including inventory provisions, allocated operating costs related to product support and distribution, royalties paid to third-party vendors, and the amortization of capitalized software development costs.

Cost of maintenance and service revenue. Cost of maintenance and service revenue includes costs to deliver our maintenance services, such as hotline and on-site support, production services and documentation of maintenance updates.

Amortization of acquired intangible assets. Amortization of acquired intangible assets, included in cost of revenue, consists of the amortization and impairment charges of core/developed technology and certain contract rights intangible assets related to acquisitions.

The increase in costs of products revenue and costs of maintenance and service revenue for fiscal 2025 compared to fiscal 2024 was primarily due to increases in employee-related costs as a result of headcount increases from organic growth, which contributed $59.0 million, and the Ansys Merger, which contributed $32.8 million; $60.4 million in hardware-related costs including inventory provisions, and $3.3 million in IT and facility costs, partially offset by a decrease of $2.5 million in costs to fulfill IP consulting arrangements. The increase in amortization of acquired intangible assets for fiscal 2025 compared to fiscal 2024 was primarily due to an increase of $257.3 million in amortization of acquired technology-related and contract rights intangible assets mainly in connection with the Ansys Merger, partially offset by an impairment charge of $53.5 million of certain core / developed technology intangible assets in fiscal 2024.

The increase in cost of revenue for fiscal 2024 compared to fiscal 2023 was primarily due to increases of $62.7 million in amortization of acquired technology-related intangible assets, which included an impairment charge of $53.5 million due to a decline in estimated fair value resulting from the reductions in the expected future cash flows associated with certain core/developed technology intangible assets as further discussed in Note 6. Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements in this Annual Report, $53.5 million in costs to fulfill IP consulting arrangements, $47.4 million in employee-related costs as a result of headcount increases from hiring, $43.4 million in hardware-related costs including inventory provisions, $3.4 million in the change in the fair value of our executive deferred compensation plan assets, and $3.2 million in maintenance and depreciation expenses. These increases were partially offset by a decrease of $2.1 million in IT and facility costs.

Operating Expenses

Research and Development

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Research and development expenses

$2,479.3 $2,082.4 $1,849.9 $396.9 19 %$232.5 13 %

Percentage of total revenue35 %34 %35 %

The increase in research and development expenses for fiscal 2025 compared to fiscal 2024 was primarily due to increases of $319.7 million in employee-related costs as a result of headcount increases from organic growth of $172.9 million as we continue to expand and enhance our product portfolio and $146.8 million from the Ansys Merger, $57.1 million in IT and facility costs, and $39.1 million in consultant and contractor costs, partially offset by a decrease of $6.6 million in the change in the fair value of our executive deferred compensation plan assets.

The increase in research and development expenses for fiscal 2024 compared to fiscal 2023 was primarily due to higher employee-related costs of $148.2 million as a result of headcount increases as we continue to expand and enhance our product portfolio, increases of $36.5 million in the change in the fair value of our executive deferred compensation plan assets, $20.6 million in IT and facility costs, $6.7 million in depreciation expenses, and $2.4 million in consultant and contractor costs.

Sales and Marketing

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Sales and marketing expenses

$1,074.2 $859.3 $724.9 $214.9 25 %$134.4 19 %

Percentage of total revenue15 %14 %14 %

The increase in sales and marketing expenses for fiscal 2025 compared to fiscal 2024 was primarily due to increases of $183.5 million in employee-related costs due to headcount increases from the Ansys Merger, which contributed $156.3 million, and organic growth, which contributed $27.2 million; $22.8 million in IT and facility costs, $13.1 million in travel and marketing costs due to an increased number of in-person meetings and events, $3.3 million in depreciation and maintenance expense, partially offset by a decrease of $10.6 million in the change in the fair value of our executive deferred compensation plan assets.

The increase in sales and marketing expenses for fiscal 2024 compared to fiscal 2023 was primarily due to increases of $90.9 million in employee-related costs due to headcount increases, $19.6 million in the change in the fair value of our executive deferred compensation plan assets, and $7.0 million in travel and marketing costs due to an increased number of in-person meetings and events.

General and Administrative

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

General and administrative expenses

$769.6 $568.5 $376.7 $201.1 35 %$191.8 51 %

Percentage of total revenue11 %9 %7 %

The increase in general and administrative expenses for fiscal 2025 compared to fiscal 2024 was primarily due to increases of $94.8 million in legal, consulting and other professional fees mainly in connection with the Ansys

Merger, $69.5 million in employee-related costs primarily related to the Ansys Merger, $7.4 million in depreciation and maintenance expense and $3.5 million in IT and facility costs.

The increase in general and administrative expenses for fiscal 2024 compared to fiscal 2023 was primarily due to increases of $135.2 million in legal, consulting and other professional fees mainly in connection with the Ansys Merger, $39.3 million in personnel-related costs due to headcount increases from hiring, $24.2 million in maintenance and depreciation expenses, and $5.7 million in the change in the fair value of our executive deferred compensation plan assets.

Change in Fair Value of Deferred Compensation

The income or loss arising from the change in the fair value of our non-qualified deferred compensation plan obligation is recorded in cost of sales and each functional operating expense, with the offsetting change in the fair value of the related assets recorded in other income (expense), net. There is no impact on our net income from the fair value changes in our deferred compensation plan obligation and related assets.

Amortization of Acquired Intangible Assets

Amortization of acquired intangible assets, included in operating expenses, consists of the amortization of trademarks, trade names and customer relationships intangible assets related to acquisitions.

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Amortization of acquired intangible assets

$192.5 $16.2 $9.3 $176.3 1,088 %$6.9 74 %

Percentage of total revenue3 %- %- %

The increase in amortization of acquired intangible assets for fiscal 2025 compared to fiscal 2024 was primarily due to amortization expense related to intangible assets acquired from the Ansys Merger. See Note 6. Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements in this Annual Report for a schedule of future amortization amounts.

The increase in amortization of acquired intangible assets for fiscal 2024 compared to fiscal 2023 was primarily due to amortization expense related to intangible assets acquired during fiscal 2024, partially offset by certain intangible assets becoming fully amortized during fiscal 2024.

Restructuring Charges

In the first quarter of fiscal 2023, we initiated a restructuring plan for involuntary employee terminations as part of a business reorganization (the 2023 Plan). The 2023 Plan was substantially completed in the third quarter of fiscal 2023, and total charges under the 2023 Plan consisting primarily of severance costs and facility exit costs were $77.0 million, of which $23.9 million were related to discontinued operations.

The following is a summary of our restructuring liabilities:

Fiscal YearBalance at Beginning of PeriodCosts IncurredCash PaymentsBalance at End of Period

(dollars in millions)

2025$4.6 $- $(0.8)$3.8

2024$8.2 $- $(3.6)$4.6

2023$- $53.1 $(44.9)$8.2

In November 2025, we initiated a restructuring plan for involuntary employee terminations as part of a business reorganization (the 2026 Plan) upon approval by the Board of Directors. The 2026 Plan will allow us to invest in key growth opportunities and drive business efficiencies following the completion of the Ansys Merger. Total charges under the 2026 Plan are expected to be in the range of $300.0 million and $350.0 million, and will consist primarily of severance costs, other one-time termination benefits and facility exit costs. The 2026 Plan is anticipated to be completed by the end of fiscal 2027, with majority of the workforce reduction in fiscal 2026.

See Note 20. Restructuring Charges of the Notes to Consolidated Financial Statements in this Annual Report for additional information.

Interest Expense

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Interest expense$(446.7)$(36.8)$(2.7)$(409.9)1114 %$(34.1)1263 %

Percentage of total revenue(6)%(1)%- %

The increase in interest expense for fiscal 2025 as compared to fiscal 2024 was primarily due to interest on the Senior Notes and the borrowings under the Term Loan Agreement in fiscal 2025 in connection with the Ansys Merger.

The increase in interest expense for fiscal 2024 as compared to fiscal 2023 was primarily due to the amortization of bridge financing costs in fiscal 2024. See Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Consolidated Financial Statements in this Annual Report for further detail on our debt obligations.

Other Income (Expense), Net

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Interest income$277.7 $67.0 $36.7 $210.7 314 %$30.3 83 %

Gain on divestitures

548.9 - - 548.9 100 %- - %

Gains on assets related to deferred compensation plan

65.5 85.4 20.2 (19.9)(23)%65.2 323 %

Gain on sale of building51.4 1.9 - 49.5 2,605 %1.9 100 %

Gain (loss) on sale of strategic investments(3.6)55.1 - (58.7)(107)%55.1 100 %

Foreign currency exchange gains (losses)1.8 6.3 (1.5)(4.5)(71)%7.8 (520)%

Other, net(16.8)(20.7)(20.5)3.9 (19)%(0.2)1 %

Total$924.9 $195.0 $34.9 $729.9 374 %$160.1 459 %

The increase in other income (expense) for fiscal 2025 as compared to fiscal 2024 was primarily due to the gain recognized from the sale of Optical Solutions Group business in connection with the Ansys Merger, higher interest income as a result of higher average cash balances and higher gain recognized from the sale of a building, partially offset by the impact of gain recognized from the sale of strategic investments in fiscal 2024 and a decrease in the change in fair value of our executive deferred compensation plan assets.

The increase in other income (expense) for fiscal 2024 as compared to fiscal 2023 was primarily due to the increase in the change in fair value of our executive deferred compensation plan assets, the impact of gain recognized from the sale of strategic investments and higher interest income as a result of higher average cash balances.

Segment Operating Results

We do not allocate certain operating expenses managed at a consolidated level to our reportable segments. These unallocated expenses consist primarily of amortization of acquired intangible assets, stock-based compensation expense, changes in the fair value of deferred compensation plan, restructuring charges, and acquisition/divestiture related items. See Note 19. Segment Disclosure of the Notes to Consolidated Financial Statements in this Annual Report for more information.

Design Automation Segment

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Adjusted operating income$2,213.5 $1,631.9 $1,413.9 $581.6 36 %$218.0 15 %

Adjusted operating margin42 %39 %37 %3 %8 %2 %5 %

The increase in adjusted operating income for fiscal 2025 compared to fiscal 2024 and for fiscal 2024 compared to fiscal 2023 was primarily due to an increase in revenue from arrangements booked in prior periods.

Design IP Segment

Year Ended October 31,$ Change% Change$ Change% Change

2025202420232025 vs. 20242024 vs. 2023

(dollars in millions)

Adjusted operating income $419.3 $730.2 $514.1 $(310.9)(43)%$216.1 42 %

Adjusted operating margin24 %38 %33 %(14)%(37)%5 %15 %

The decrease in adjusted operating income for fiscal 2025 compared to fiscal 2024 was primarily due to lower revenue from the impact of China export control restrictions, including the Q3 2025 BIS Restrictions, weaker than expected demand from a major foundry customer, and certain roadmap and resource decisions that did not yield their intended results, as well as an increase in employee-related costs due to headcount increases.

The increase in adjusted operating income for fiscal 2024 compared to fiscal 2023 was primarily due to an increase in the revenue of IP products driven by timing of customer demands.

Income Taxes

Our effective tax rate for fiscal 2025 is 4.0%, which included $64.8 million of U.S. federal research tax credit benefit, $106.9 million of foreign derived intangible income (FDII) deduction benefit, and $148.0 million of tax benefit for the reduction in valuation allowance, of which $111.0 million relates to the full valuation allowance release against state research credits.

Our effective tax rate for fiscal 2024 was 6.6%, which included $70.1 million of U.S. federal research tax credit benefit, $104.8 million of FDII deduction benefit, and $43.4 million of net excess tax benefit from stock-based compensation.

See Note 17. Income Taxes of the Notes to Consolidated Financial Statements in this Annual Report for further discussion of the provision for income taxes.

Liquidity and Capital Resources

Our principal sources of liquidity are funds generated from our business operations and funds that may be drawn down under our revolving credit and term loan facilities.

As of October 31, 2025, we held $3.0 billion in cash, cash equivalents and short-term investments. We also held $5.7 million in restricted cash primarily associated with deposits for office leases and employee loan programs. Our cash equivalents consisted primarily of taxable money market mutual funds, time deposits and highly liquid investments with maturities of three months or less. Our short-term investments include U.S. government and municipal obligations and investment-grade available-for-sale debt with an overall weighted-average credit rating of approximately AA.

As of October 31, 2025, approximately $1.4 billion of our cash and cash equivalents were domiciled in various foreign jurisdictions. We have provided for foreign withholding taxes on the undistributed earnings of certain of our foreign subsidiaries to the extent such earnings are no longer considered to be indefinitely reinvested in the operations of those subsidiaries.

Our debt and liquidity needs increased as a result of completing the Ansys Merger. We funded the Cash Consideration in the Ansys Merger from the issuance of the Senior Notes and the borrowings under the Term Loan Agreement. See Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Consolidated Financial Statements in this Annual Report for further discussion.

During the second quarter of fiscal 2025, we entered into a deferred payment agreement to defer the cash settlement of the 2025 Rate Lock Agreements over a period of 5.5 years. As of October 31, 2025, we had $110.6 million outstanding balance under the deferred payment agreement related to the 2025 Rate Lock agreements. See Note 8. Financial Assets and Liabilities of the Notes to Consolidated Financial Statements in this Annual Report for further discussion.

Based on past performance and current expectations, we believe that our existing cash, cash equivalents and short-term investments and sources of liquidity, as well as the debt financing, will be sufficient to satisfy our cash requirements, including repayment of outstanding debt, over the next twelve-month period and beyond. Our future cash requirements will depend on many factors, including our rate of revenue growth, the expansion of our sales

and marketing activities, the timing and extent of our spending to support our research and development efforts, and our investments in or acquisitions of businesses, applications or technologies.

Cash Flows

Our consolidated statements of cash flows include cash flows related to the Software Integrity business. Significant non-cash items and capital expenditures of discontinued operations related to our Software Integrity business are presented separately in Note 3. Discontinued Operations of the Notes to Consolidated Financial Statements in this Annual Report. For a discussion of fiscal 2024 changes compared to fiscal 2023, see the discussion in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report for the fiscal year ended October 31, 2024, filed on December 19, 2024.

Year Ended October 31,

20252024$ Change

(dollars in millions)

Cash provided by operating activities$1,518.6 $1,407.0 $111.6

Cash provided by (used in) investing activities

$(15,881.3)$1,223.0 $(17,104.3)

Cash provided by (used in) financing activities

$13,355.8 $(181.3)$13,537.1

Cash Provided by Operating Activities

We expect cash from our operating activities to fluctuate as a result of a number of factors, including the timing of billings and collections, operating results, and the timing and amount of tax and other liability payments. Cash provided by operations is dependent primarily upon the payment terms of our license agreements. We generally receive cash from upfront arrangements much sooner than from time-based products revenue, in which the license fee is typically paid either quarterly or annually over the term of the license.

The increase in cash provided by operating activities for fiscal 2025 compared to fiscal 2024 was primarily due to higher accounts receivable collections, partially offset by lower net income of $902.7 million, the unrealized loss from settlement of the interest rate treasury lock of $121.6 million in fiscal 2025 and higher disbursements for operations, including vendor and tax payments.

Cash Provided by (Used in) Investing Activities

Net cash used in investing activities was $15.9 billion for fiscal 2025 compared to net cash provided by investing activities of $1.2 billion for fiscal 2024. The increase in cash used in investing activities was primarily driven by higher cash paid for acquisitions, net of cash acquired, of $16.5 billion mainly for the Ansys Merger and lower proceeds of $700.0 million from business divestitures, net of cash divested, partially offset by higher net proceeds of $92.4 million from the sales, purchases and maturities of investments, and higher proceeds of $57.9 million from the sale of a building in fiscal 2025.

Cash Provided by (Used) in Financing Activities

Net cash provided by financing activities was $13.4 billion for fiscal 2025 compared to net cash used in financing activities of $181.3 million for fiscal 2024. The cash provided by financing activities for fiscal 2025 was primarily driven by proceeds of $14.3 billion from the issuance of Senior Notes and the borrowing under the Term Loan Agreement, partially offset by the repayment of $850.0 million of the Term Loan. The cash used in financing activities for fiscal 2024 was primarily driven by taxes paid for net share settlements of $337.5 million and the payment of bridge financing costs of $72.3 million, partially offset by the issuance of common stock of $232.2 million.

Bridge Commitment Letter, Term Loan, Revolving Credit Facilities and Senior Notes

On January 15, 2024, we entered into the Bridge Commitment Letter with certain financial institutions that committed to provide, subject to the satisfaction of customary closing conditions, the bridge commitment (the Bridge Commitment) for the purpose of financing a portion of the aggregate Cash Consideration in the Ansys Merger and paying related fees and expenses in connection with the Ansys Merger and the other transactions contemplated by the Merger Agreement.

On October 3, 2024, we reduced the Bridge Commitment by $1.1 billion to $10.6 billion following the closing of the Software Integrity Divestiture. On March 17, 2025, we further reduced the Bridge Commitment by $9.9 billion following the issuance of the Senior Notes. On the Acquisition Date, we terminated the approximately $690.0 million in remaining Bridge Commitment, reducing total Bridge Commitment to $0.

On February 13, 2024, we entered into a term loan facility credit agreement (the Term Loan Agreement) in connection with the financing of the Ansys Merger. On July 17, 2025, we borrowed the full $4.3 billion available under the Term Loan Agreement to fund a portion of the Cash Consideration in the Ansys Merger and to pay transaction fees, premiums and expenses related to the Ansys Merger.

The Term Loan Agreement provides for two tranches of senior unsecured term loans: a $1.45 billion tranche (Tranche 1) that matures on July 17, 2027 and a $2.85 billion tranche (Tranche 2) that matures on July 17, 2028. On October 17, 2025, we made an early repayment of $850.0 million on the Tranche 1 Term Loan. The outstanding balance under the Term Loan Agreement as of October 31, 2025 was $3.5 billion.

Under the Term Loan Agreement, borrowings will bear interest on the principal amount outstanding at a floating rate based on, at Synopsys' election, (i) the Adjusted Term SOFR Rate (as defined in the Term Loan Agreement) plus an applicable margin based on the credit ratings of Synopsys ranging from 0.875% to 1.375% (in the case of Tranche 1) or 1.000% to 1.500% (in the case of Tranche 2) or (ii) the ABR (as defined in the Term Loan Agreement) plus an applicable margin based on the credit ratings of Synopsys ranging from 0.000% to 0.375% (in the case of Tranche 1) or 0.000% to 0.500% (in the case of Tranche 2).

The Term Loan Agreement contains a financial covenant requiring that Synopsys maintain a maximum consolidated leverage ratio, as well as certain other non-financial covenants. As of October 31, 2025, we were in compliance with the financial covenant.

In March 2025, we issued $10.0 billion in aggregate principal amount of senior notes (the Senior Notes). Our total proceeds were approximately $9.9 billion, net of original issuance discount of $17.0 million and total issuance costs of $70.2 million. The net proceeds of the Senior Notes were used to fund a portion of the Cash Consideration in the Ansys Merger and pay related transaction fees and expenses.

On February 13, 2024, we entered into a Sixth Amendment Agreement (the Sixth Amendment), which amended and restated our previous revolving credit agreement, dated as of December 14, 2022 (as amended and restated, the Revolving Credit Agreement).

Under the Sixth Amendment, certain amendments became effective on February 13, 2024 and certain additional amendments became effective on the Acquisition Date. The Sixth Amendment amended the financial covenant to allow netting of the cash proceeds of certain debt incurred to finance the Ansys Merger as well as certain other modifications set forth therein. The Sixth Amendment, among other things, also amended: (i) the applicable margin used to determine the interest that accrues on loans and the facility fee payable under the revolving credit facility to be based on our credit ratings, (ii) the financial covenant thresholds under the financial covenant in the Revolving Credit Agreement requiring us to maintain a maximum consolidated leverage ratio and (iii) certain conditions to borrowing, other non-financial covenants and events of default.

The Revolving Credit Agreement provides an unsecured $850.0 million committed multicurrency revolving credit facility and an unsecured uncommitted incremental revolving loan facility of up to $150.0 million. The maturity date of the revolving credit facility is December 14, 2027, which may be extended at our option. There was no outstanding balance under the Revolving Credit Agreement as of October 31, 2025.

Interest under the Revolving Credit Agreement accrues on dollar-denominated loans at a floating rate based on, at Synopsys' election, (i) the Adjusted Term SOFR Rate (as defined in the Revolving Credit Agreement) plus an applicable margin based on our credit ratings ranging from 0.795% to 1.200% or (ii) the ABR (as defined in the Revolving Credit Agreement) plus an applicable margin based on our credit ratings ranging from 0.000% to 0.200%. In addition to the interest on any outstanding loans, Synopsys is also required to pay a facility fee on the entire portion of the revolving credit facility ranging from 0.080% to 0.175% based on the credit ratings of Synopsys on the daily amount of the revolving commitment.

The Revolving Credit Agreement contains a financial covenant requiring us to maintain a maximum consolidated leverage ratio, as well as other non-financial covenants. As of October 31, 2025, we were in compliance with the financial covenant.

In July 2018, we entered into a 12-year 220.0 million Renminbi (approximately $33.0 million) credit agreement with a lender in China to support our facilities expansion. Borrowings bear interest at a floating rate based on the 5-year Loan Prime Rate plus 0.74%. As of October 31, 2025, we had $13.1 million outstanding balance under the agreement.

See Note 10. Senior Notes, Bridge Commitment Letter, Term Loan and Revolving Credit Facilities of the Notes to Consolidated Financial Statements in this Annual Report for further discussion.

Stock Repurchase Program

In fiscal 2022, our Board of Directors approved a stock repurchase program (the Program) with authorization to purchase up to $1.5 billion of our common stock. As of October 31, 2025, $194.3 million remained available for future stock repurchases under the Program. In connection with the Ansys Merger, we have suspended our stock repurchase program until we reduce our expected debt levels.

The IR Act was enacted in the United States on August 16, 2022. The IR Act imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. The total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year. As of October 31, 2025, this has not had any impact on our consolidated financial statements.

Material Cash Requirements

Our material cash requirements include the following contractual and other obligations.

Leases

We have operating lease arrangements for office space, data center, equipment and other corporate assets. As of October 31, 2025, we had lease payment obligations, net of immaterial sublease income, of $812.4 million, with $132.8 million payable within 12 months.

Purchase Obligations

Purchase obligations represent an estimate of all open purchase orders and contractual obligations in the ordinary course of business for which we have not received the goods or services. As of October 31, 2025, we had $1.2 billion of purchase obligations, with $832.2 million payable within 12 months. Although open purchase orders are considered enforceable and legally binding, the terms may allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to the delivery of goods or performance of services.

Debt Obligations

Refer to "Bridge Commitment Letter, Term Loan, Revolving Credit Facilities and Senior Notes" under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations included in this Annual Report for more information.

Long Term Accrued Income Taxes

As of October 31, 2025, we had $93.8 million of long-term accrued income taxes which represent uncertain tax benefits. Currently, a reasonably reliable estimate of timing of payments related to uncertain tax benefits in individual years beyond fiscal 2025 cannot be made due to uncertainties in timing of the commencement and settlement of potential tax audits.