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Income Taxes | 9 Months Ended
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Jul. 31, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Effective Tax Rate We estimate our annual effective tax rate at the end of each fiscal quarter. The effective tax rate reflects our estimations of annual pre-tax income, the geographic mix of pre-tax income, interpretations of applicable tax laws and the potential outcomes of audits. The following table presents the provision for income taxes and the effective tax rates:
| Three Months Ended July 31, |  | Nine Months Ended July 31,
| 2025 |  | 2024 |  | 2025 |  | 2024
| (in thousands)
Income before income taxes | $ | 189,310 |  |  | $ | 391,995 |  |  | $ | 876,618 |  |  | $ | 1,190,979 |
Provision (benefit) for income taxes | $ | (52,967) |  |  | $ | (30,712) |  |  | $ | (12,080) |  |  | $ | 37,634 |
Effective tax rate | (28.0) | % |  | (7.8) | % |  | (1.4) | % |  | 3.2 | %
Our effective tax rate decreased in the three months ended July 31, 2025, as compared to the same period in fiscal 2024, primarily due to the tax benefits from a full valuation allowance release against California research credits. Our effective tax rate for the nine months ended July 31, 2025, is lower than the statutory federal corporate tax rate of 21% primarily due to the capital loss on the sale of our ownership in OpenLight in the first quarter of 2025, tax benefits from the release of a full valuation allowance against California research credits, U.S. federal research tax credits, foreign-derived intangible income deduction, excess tax benefits from stock-based compensation and U.S. foreign tax credits, partially offset by state taxes, capitalized transaction costs and the effect of non-deductible stock-based compensation. The timing of the resolution of income tax examinations, and the amounts and timing of various tax payments that are part of the settlement process, are highly uncertain. Variations in such amounts and/or timing could cause large fluctuations in the balance sheet classification of current and non-current assets and liabilities. During the next 12 months, it is reasonably possible that certain audits and ongoing tax litigation will be resolved, or that the statute of limitations on certain state and foreign income and withholding taxes will expire, or both. Given the uncertainty as to ultimate settlement terms, the timing of payment and the impact of such settlements on other uncertain tax positions, we estimate a potential decrease in underlying unrecognized tax benefits to be between $0 and $9.0 million. Non-U.S. Examinations One of our Korean subsidiaries, Ansys Korea, is currently involved in various stages of Tax Tribunal and Korea's High Court appeals regarding Korea's National Tax Service assessments of withholding taxes against Ansys Korea for 2017-2023. In connection with this matter, we have recorded the net impact of the unrecognized tax benefit and offsetting foreign tax credit. We are under examinations by tax authorities in certain jurisdictions. No material assessments have been proposed in these examinations. Legislative Developments On July 4, 2025, President Donald J. Trump signed H.R. 1, the One Big Beautiful Bill Act (OBBB) into law. The OBBB includes many changes to corporate income tax law and will go into effect in fiscal 2026 and fiscal 2027 for Synopsys. We are currently evaluating the impacts of OBBB. Effective in fiscal 2024, we are subject to the new 15% corporate alternative minimum tax (CAMT) enacted as part of the Inflation Reduction Act of 2022 (IR Act). We do not expect to be subject to CAMT in fiscal 2025, due to our regular tax liability exceeding CAMT. The details of the computation will be subject to final regulations issued by the U.S. Department of the Treasury. We will monitor regulatory developments and will continue to evaluate the impact, if any, of the CAMT. The IR Act generally imposes a 1% excise tax on the fair market value of stock repurchases made by covered corporations after December 31, 2022. In general, the total taxable value of shares repurchased is reduced by the fair market value of any newly issued shares during the taxable year. There has been no impact to our consolidated financial statements for this. On June 27, 2024, California enacted SB-167, which suspends the use of California net operating loss and limits the use of California research tax credits to $5 million for our fiscal 2025-2027. On June 29, 2024, California enacted SB-175, which provides a refund mechanism effective beginning in our fiscal 2025 for the incremental tax that was paid as a result of SB-167. The Organization for Economic Co-operation and Development (OECD) has a two-pillar solution to address tax challenges arising from digitalization of the economy. This two-pillar solution includes the Pillar Two Model Rules (Pillar Two) which define global minimum tax rules and imposes a 15% minimum tax rate. Various countries have started to enact new laws related to Pillar Two, including certain new laws effective beginning in fiscal 2025. As of July 31, 2025, the impact of Pillar 2 is not material.

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