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Synopsys to implement royalty model for hyperscaler custom chips amid IP revenue slowdown
Monday, January 19, 2026 at 04:00 PM
Synopsys is shifting its semiconductor intellectual property business model to include royalty charges for custom silicon developed by hyperscalers. While the IP segment currently faces a revenue decline, the company expects a return to mid-teen growth after fiscal year 2026. Additionally, revenue from Intel Foundry 18A is not expected to recover significantly until the 18A-P node becomes a potential tailwind in fiscal year 2027.
Context
Synopsys is pivoting its Intellectual Property (IP) strategy to offset a significant slowdown in a segment accounting for 25% of total revenue. Following an 8% revenue decline in FY25, the company expects growth to remain muted through FY26. To counter this, Synopsys is implementing a new royalty-based model for custom chips designed by hyperscalers. This shift moves the company away from one-time licensing fees toward recurring revenue tied to the production volume of high-scale AI hardware.
The near-term outlook is also impacted by the loss of revenue from Intel Foundry’s 18A process, which is not expected to recover until FY27 with the launch of 18A-P. Despite these headwinds, Synopsys projects its IP business will return to a long-term compound annual growth rate in the mid-teens post-FY26. For investors, the transition to royalties and the eventual tailwind from Intel represent critical components for returning to historical growth levels as the semiconductor supply chain adjusts to custom silicon demands.
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