So, here's a classic market puzzle: a company reports quarterly earnings that beat expectations, raises part of its full-year profit outlook, and announces a massive new stock buyback. Its stock should go up, right? Not for Synopsys Inc. (SNPS) on Thursday. The shares fell more than 3%, and the reason is a familiar one in earnings season: guidance.

Synopsys, which makes software for designing semiconductors and electronics, posted solid first-quarter numbers. Adjusted earnings per share came in at $3.77, beating the Street estimate of $3.56. Revenue was $2.41 billion, also topping the consensus of $2.39 billion. CEO Sassine Ghazi pointed to the AI boom as a tailwind, saying, "AI continues to fuel robust system-level and semiconductor R&D, and the increasing AI capabilities throughout our portfolio strengthen our strategic advantage and accelerate our customers' innovation."

But then the company started talking about the future, and that's where the mood shifted. For the current second quarter, Synopsys sees sales coming in between $2.225 billion and $2.275 billion. The midpoint of that range is below the analyst consensus estimate of $2.236 billion. More notably, the company cut its fiscal 2026 GAAP earnings per share guidance to below estimates. It did raise its adjusted EPS outlook for that year to a range of $14.38 to $14.46, but that was essentially in line with expectations of $14.38. The full-year sales outlook was reiterated.

In an attempt to cushion the blow, the company also announced that its board approved a replenishment of its stock buyback program, authorizing up to $2 billion in repurchases. That's a significant vote of confidence in its own shares, but it wasn't enough to stop the slide.

The market's disappointment was echoed by analysts. Piper Sandler's Clarke Jeffries slashed his price target on Synopsys to $430 from $520, while keeping a Neutral rating. In his view, the quarter was "largely uneventful," with a revenue beat of less than 1% and unchanged fiscal 2026 sales guidance. He noted that investors hoping for a sharp rebound in the company's Intellectual Property (IP) revenue were "disappointed," as that revenue was flat from the prior quarter. Management expects growth to resume later in the year, but with a skew toward the fourth quarter.

Jeffries also highlighted a continuing challenge: revenue from China, excluding a specific segment, edged lower, "reflecting the ongoing effects of technology restrictions." It's a reminder that geopolitical tensions remain a tangible business headwind for tech companies with global footprints.

So, what's the takeaway? Synopsys is executing well in the current quarter, and its leadership is bullish on the long-term AI-driven demand for chip design tools. But the stock market is a forward-looking machine, and today it decided that the near-term path—embodied in that soft Q2 sales guide and the cut to long-term GAAP EPS—wasn't quite as bright as hoped. The $2 billion buyback is a nice bonus, but it seems investors wanted more growth to go with it. Synopsys shares closed the day down 3.44% at $433.72.