Synopsys, Inc. (NASDAQ: SNPS) announced a multi-year agreement with Amazon valued at over $1 billion, under which Amazon will use Synopsys silicon IP and engineering software for its custom chip development, according to a company press release.

The deal designates Amazon as the lead customer for Synopsys' application-optimized silicon IP business and expands on more than 15 years of collaboration between the two companies. The agreement covers Synopsys' electronic design automation (EDA), simulation and analysis, and agentic AI technologies to support Amazon's chip portfolio, which includes Nitro, Graviton, and Trainium processors.

The agreement introduces a license-plus-royalty business model, under which payments to Synopsys are structured to grow alongside Amazon's production volumes.

Peter DeSantis, SVP of foundational AI, custom silicon, and quantum computing at Amazon, said the collaboration helps Amazon "move faster across the design cycle, helping us deliver more capable, efficient computing for customers worldwide."

As part of the arrangement, Synopsys will adopt Amazon Web Services infrastructure for its own product development, including Amazon Elastic Compute Cloud (Amazon EC2), cloud storage services, and Amazon Bedrock to build and deploy AI applications. Synopsys will also work to optimize its software for Amazon's Trainium and Graviton chips.

Sassine Ghazi, president and CEO of Synopsys, said the agreement represents "the next phase of growth" for its IP business and that combining the two companies' capabilities could "dramatically increase the productivity of our teams."