Synopsys shares fell 2% premarket Friday after Morgan Stanley downgraded the stock to Equal-weight, citing a decelerating core electronic design automation business. The brokerage slashed its price target to $480 from $550, expressing limited visibility on profit gains from AI initiatives and the Ansys integration despite strong first-quarter revenue.

First-quarter revenue reached $2.41 billion, up 66% year-over-year, helped by Ansys deal timing. However, Morgan Stanley noted underlying core EDA growth, excluding Ansys, has slowed to a high single-digit percentage rate. An unchanged full-year guidance suggests further easing in the second half without material wins from new converged products or stronger hardware demand.

The firm reduced its fiscal 2027 operating margin estimate to 42.5% from 45% and cut EPS forecasts by 6%, implying a three-year compound annual growth rate of about 11%. Uncertainty surrounds the ramp and pricing of the AgentEngineer offering and competitive pressures in 3D-IC. Investors now seek clearer profitable growth paths at the company’s March Converge event.