Synopsys Inc. (NASDAQ:SNPS)

The profitability ratios demonstrate a generally positive trend over the observed period, with notable fluctuations, particularly in the later quarters. Gross profit margin exhibited a gradual increase from 78.81% in January 2021 to a peak of 80.25% in July 2024, followed by a decline to 76.98% in July 2025. Operating profit margin showed a more substantial improvement, rising from 17.82% to 24.22% by July 2024, before decreasing to 12.97% in October 2025. Net profit margin experienced the most significant volatility, increasing from 18.91% to 24.60% and then sharply declining to 18.89% in July 2025. Return on Equity (ROE) and Return on Assets (ROA) generally followed the upward trend of the profit margins until mid-2024, after which both ratios experienced considerable declines.

Gross Profit Margin

The gross profit margin consistently remained above 78% throughout the period. The initial years showed incremental gains, peaking in mid-2024. The subsequent decline in the latter half of 2025 warrants further investigation to determine the underlying causes, such as increased cost of goods sold or pricing pressures.

Operating Profit Margin

Operating profit margin demonstrated a strong upward trajectory from 2021 to 2024, indicating improved operational efficiency and cost management. However, the substantial decrease in late 2024 and early 2025 suggests a potential reversal in these efficiencies or increased operating expenses. The peak in July 2024 at 24.22% represents the highest level of operational profitability observed during the analyzed timeframe.

Net Profit Margin

Net profit margin exhibited the greatest degree of fluctuation. While it generally increased alongside the other profitability metrics until mid-2024, the dramatic drop to 18.89% in July 2025 is a significant concern. This decline could be attributed to factors beyond operational performance, such as increased interest expenses, tax liabilities, or one-time charges. The peak of 36.94% in October 2024 is a notable outlier, suggesting a particularly profitable quarter.

Return on Equity (ROE)

ROE mirrored the trends observed in the profit margins, increasing from 14.80% to over 20% before declining sharply in the final quarters. The decrease in ROE suggests a diminishing ability to generate profits from shareholder investments. The substantial drop to 4.70% in October 2025 is particularly noteworthy and requires further scrutiny.

Return on Assets (ROA)

ROA followed a similar pattern to ROE, indicating a weakening ability to generate profits from the company’s assets. The decline from a peak of 17.31% in October 2024 to 2.76% in October 2025 is a significant reduction in asset utilization efficiency. This decrease could be due to underperforming assets or an increase in total assets without a corresponding increase in profitability.

Overall, the period from 2021 to mid-2024 demonstrated improving profitability, but the latter portion of the analyzed timeframe reveals a concerning trend of declining profitability across all measured ratios. The sharp declines observed in the final quarters necessitate a detailed investigation to identify the root causes and implement corrective measures.

The gross profit margin exhibited a generally stable pattern over the observed period, with some fluctuations. Initially, the margin demonstrated a slight upward trend from January 2021 through April 2022, followed by a period of relative stability and then a modest decline. More recently, the margin has shown some recovery, though with increased volatility.

Initial Upward Trend (Jan 31, 2021 – Apr 30, 2022)

The gross profit margin increased from 78.81% in January 2021 to 80.05% in April 2022. This suggests improving efficiency in cost of goods sold relative to revenue during this period. The increase, while consistent, was incremental, indicating a steady rather than dramatic improvement.

Period of Stability and Decline (Jul 31, 2022 – Jan 31, 2023)

Following April 2022, the gross profit margin experienced a slight decline, decreasing to 78.51% by January 2023. This suggests potential pressures on pricing or increases in the cost of goods sold. The fluctuation during this period was relatively small, indicating the impact was contained.

Recent Volatility and Recovery (Apr 30, 2023 – Oct 31, 2025)

From April 2023 onwards, the gross profit margin demonstrated increased volatility. It rose to 79.85% in April 2023, then decreased to 76.98% in October 2025. This period shows a wider range of fluctuation than previously observed. The most recent value, 76.98% in October 2025, represents the lowest point in the observed timeframe, warranting further investigation into the underlying causes. However, the margin did recover to 79.12% in July 2025, indicating some resilience.

Overall Trend

Despite the recent volatility, the gross profit margin has largely remained within a narrow band between approximately 78.5% and 80.25% over the entire period. This suggests a relatively stable business model with consistent cost management, although the recent decline and subsequent partial recovery require monitoring.

The gross margin in US$ thousands generally increased over the period, aligning with the increase in revenue. However, the fluctuations in the gross profit margin percentage indicate that the rate of increase in gross margin did not consistently match the rate of increase in revenue.

The operating profit margin exhibited a generally increasing trend over the observed period, punctuated by some quarterly fluctuations. Initial values ranged between 17.82% and 18.81% in the first four quarters of 2021. A significant increase was then observed, peaking at 23.18% in April 2022, before settling into a range of approximately 20% to 24% through the end of 2023.

Overall Trend

From January 2021 to October 2023, the operating profit margin demonstrated an overall upward trajectory. This suggests improving operational efficiency or increased pricing power. However, the final quarters of the period show a marked decline.

Peak Performance

The highest operating profit margin was recorded in April 2022 at 23.18%. This represents the company’s most profitable quarter during the analyzed timeframe, indicating strong revenue generation relative to operating costs. Subsequent quarters remained at a high level, but did not surpass this peak.

Recent Decline

A substantial decrease in the operating profit margin is evident in the latter part of the period. The margin fell from 21.72% in October 2023 to 17.16% in July 2025, and further to 12.97% in October 2025. This decline warrants further investigation to determine the underlying causes, such as increased costs, pricing pressures, or shifts in revenue mix.

Revenue Correlation

While revenue generally increased throughout the period, the operating profit margin did not consistently rise in tandem. The decline in margin during the final quarters occurred despite continued revenue growth, suggesting that revenue increases were not translating into proportional increases in profitability. This could indicate rising costs outpacing revenue gains.

In summary, the operating profit margin initially demonstrated positive growth, reaching a peak in early 2022. However, a concerning downward trend emerged in the most recent quarters, indicating potential challenges to maintaining profitability despite increasing revenue.

The net profit margin exhibited fluctuations over the observed period, generally trending upwards with notable peaks in later quarters. Initial values ranged from 18.91% to 20.27% in the first four quarters of 2021. A subsequent increase was observed through 2022, reaching a high of 21.19% before experiencing a decline to 19.38% by the end of the year.

Overall Trend

From 2023 through the first half of 2024, the net profit margin continued to climb, peaking at 24.60% in July 2024. This was followed by a significant surge in October 2024, reaching 36.94%, which represents the highest value in the observed period. The margin then decreased substantially in January 2025, falling to 34.75%, and remained relatively stable through April 2025 at 34.77%. A decline was then observed in July 2025 to 31.04%, followed by a further decrease to 18.89% in October 2025.

Year-over-Year Comparisons

Comparing the same quarters across years reveals a generally positive trend in net profit margin. For example, the net profit margin in January 2022 (20.18%) was higher than in January 2021 (18.91%). Similarly, April 2023 (17.41%) showed an increase compared to April 2022 (21.19%), although this was followed by a substantial increase in July 2023 (18.71%) and October 2023 (21.05%). The most dramatic year-over-year change occurred in October 2024, with a significant increase from 19.38% in October 2023 to 36.94% in October 2024.

Recent Performance

The most recent quarters demonstrate a notable decrease in net profit margin. The value decreased from 34.75% in January 2025 to 31.04% in July 2025, and then to 18.89% in October 2025. This recent downward trend warrants further investigation to determine the underlying causes, such as changes in cost of goods sold, operating expenses, or revenue recognition policies.

The substantial increase in net profit margin in October 2024, followed by the subsequent decline, suggests a potentially unusual event or a shift in the company’s financial performance during that period. Further analysis, considering revenue and net income figures in conjunction, is recommended to fully understand these fluctuations.

The Return on Equity (ROE) for the analyzed period demonstrates a generally increasing trend with notable fluctuations, particularly in later periods. Initial values indicate a range between 14.31% and 16.87% from January 2021 through October 2022. A significant increase is then observed, culminating in a peak of 25.17% in October 2024, before experiencing a substantial decline in subsequent quarters.

Overall Trend (Jan 2021 – Oct 2023)

From January 2021 to October 2023, ROE generally trended upwards, exhibiting a growth from 14.80% to 20.01%. This suggests improving profitability relative to shareholder equity during this timeframe. The increases were not consistent quarter-to-quarter, but the overall direction was positive.

Peak and Subsequent Decline (Oct 2024 – Oct 2025)

A pronounced peak in ROE was recorded at 25.17% in October 2024. However, this was followed by a dramatic decrease in the following quarters, falling to 7.23% by July 2025 and further declining to 4.70% by October 2025. This sharp decline warrants further investigation to determine the underlying causes, potentially related to changes in net income, equity, or both.

Net Income and Equity Relationship

The observed ROE fluctuations correlate with movements in both net income and total stockholders’ equity. The increase in ROE through October 2023 appears to be driven by a combination of rising net income and a steady increase in equity. The subsequent decline in ROE, despite continued growth in equity, indicates a significant decrease in net income relative to the equity base. The substantial increase in equity in the final periods, coupled with a lower ROE, suggests that the company is reinvesting capital at a rate that is not yet generating commensurate returns.

Quarterly Variability

The analysis reveals quarterly variability in ROE. While the general trend is upward until October 2024, there are instances of quarter-over-quarter decreases, indicating that profitability is not consistently increasing. The volatility increases significantly in the final year of the analyzed period, highlighting a potential shift in the company’s financial performance.

In conclusion, the ROE demonstrates a period of growth followed by a sharp decline. The substantial decrease in the most recent quarters, despite increasing equity, suggests a need for further analysis to understand the factors impacting net income and overall profitability.

The Return on Assets (ROA) for the analyzed period demonstrates a generally positive trajectory, albeit with notable fluctuations. Initially, the ROA exhibited an increase from 9.02% in January 2021 to a peak of 10.21% in January 2022. Subsequent quarters in 2022 showed continued strength, remaining above 10% through July, before declining to 10.45% by October 2022.

Overall Trend (2021-2024)

From January 2021 through October 2023, the ROA generally trended upward, with some quarterly variations. A significant surge occurred in the latter half of 2023, reaching 11.90% in October 2023, and peaking at 13.33% in January 2024. This suggests improved efficiency in utilizing assets to generate profit during this period.

Significant Increase (2024)

A substantial increase in ROA is observed in October 2024, reaching 17.31%. This is accompanied by a considerable rise in total assets, indicating a potentially transformative event or strategic shift within the company that significantly boosted profitability relative to its asset base. The ROA remained elevated at 16.18% in January 2025.

However, a marked decline in ROA is evident beginning in April 2025, falling to 9.11%. This downward trend continues through the remainder of the analyzed period, with ROA decreasing to 4.14% in July 2025 and further to 2.76% in October 2025. This decline coincides with a substantial increase in total assets, suggesting that while net income remained positive, it did not grow proportionally to the asset expansion.

Net Income and ROA Relationship

The ROA is directly influenced by fluctuations in net income and total assets. Periods of increasing net income, such as the rise from January 2021 to January 2022, generally correlate with increases in ROA. Conversely, the decline in ROA observed in late 2025 appears to be driven by a slower growth rate of net income relative to the rapid expansion of total assets.

In summary, the ROA demonstrates a period of growth and strong performance followed by a recent decline. The significant asset increase in early 2025, coupled with the subsequent ROA decrease, warrants further investigation to understand the underlying factors impacting profitability and asset utilization.