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Cadence Design Systems (CDNS)
NASDAQ:CDNS

Cadence Design (CDNS) AI Stock Analysis

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Cadence Design

(NASDAQ:CDNS)

Rating:78Outperform
Price Target:
$334.00
▲(13.86%Upside)
Cadence Design's overall score reflects strong financial performance and positive earnings guidance. However, the high valuation and potential regulatory risks weigh down the score. While technicals indicate some support, the market's reaction to corporate events and valuation concerns suggests caution.
Positive Factors
Earnings Performance
Cadence reported a slightly better-than-expected earnings performance, indicating good cost control.
Growth Opportunities
Opportunities with Intel and custom silicon are seen as promising for Cadence.
Revenue Trends
Cadence's hardware business and recurring revenue trends are highlighted as key strengths.
Negative Factors
China Exposure
Despite trade tensions, the expectation is for at least low single-digit growth in China revenue, which could alleviate investor concerns.
Currency Impact
CDNS pointed to weakening USD as a potential margin headwind.
Valuation Concerns
EDA stocks, including Cadence, trade at a more premium PEG ratio, creating a headwind when earnings upgrades are modest compared to other growth stocks.

Cadence Design (CDNS) vs. SPDR S&P 500 ETF (SPY)

Cadence Design Business Overview & Revenue Model

Company DescriptionCadence Design Systems, Inc. (CDNS) is a leading provider of electronic design automation (EDA) software, hardware, and semiconductor intellectual property (IP). Headquartered in San Jose, California, the company primarily serves the high-tech electronics industry, including sectors such as consumer electronics, automotive, aerospace, and telecommunications. Cadence's core products include design tools for chip and system-level design, verification, and implementation, which enable engineers to develop advanced electronic systems and semiconductor devices efficiently.
How the Company Makes MoneyCadence Design Systems generates revenue primarily through the sale of its electronic design automation (EDA) software licenses and related services. The company offers both perpetual and time-based licenses, allowing clients to choose purchasing models that best suit their needs. Cadence also earns money from its semiconductor IP offerings, which are pre-designed functional blocks that customers can incorporate into their integrated circuits, thus speeding up design times and reducing costs. Additionally, the company provides maintenance and support services, which generate recurring revenue. Key partnerships with major technology firms and ongoing investments in research and development further bolster Cadence's revenue streams by ensuring its products remain at the forefront of technological advancement and meet the evolving needs of its diverse customer base.

Cadence Design Key Performance Indicators (KPIs)

Any
Any
Revenue Segments as a Percent of Total Revenue
Revenue Segments as a Percent of Total Revenue
Shows the contribution of each revenue segment to the total revenue, highlighting which areas are driving growth and which may need strategic adjustments.
Chart InsightsCadence Design's System Design and Analysis segment has shown a notable upward trend, increasing its share of total revenue significantly since 2023, reflecting robust demand and strategic advancements. This aligns with the earnings call, where the segment's growth was highlighted alongside strong partnerships and technological innovations. Meanwhile, the IP segment's contribution has stabilized after a decline, with a 40% year-over-year growth reported, indicating recovery and potential future gains. However, caution is advised due to potential impacts from trade regulations, particularly in the China market.
Data provided by:Main Street Data

Cadence Design Earnings Call Summary

Earnings Call Date:Apr 28, 2025
(Q1-2025)
|
% Change Since: 2.66%|
Next Earnings Date:Jul 28, 2025
Earnings Call Sentiment Positive
Cadence reported a strong financial performance with significant year-over-year growth and strategic advancements in technology and partnerships. However, the company remains cautious regarding its outlook for the China market and potential impacts from trade regulations.
Q1-2025 Updates
Positive Updates
Strong Financial Performance
Cadence exceeded its guidance with 23% year-over-year revenue growth and a 34% increase in non-GAAP EPS, leading to a raised financial outlook for the year.
Robust Demand Across Segments
The IP business grew 40% year-over-year, and core EDA revenue grew 16% year-over-year in Q1.
Strategic Partnerships and Acquisitions
Cadence expanded partnerships with NVIDIA, Rapidus, Socionext, and Intel Foundry. The company also announced the acquisition of Arm's Artisan foundation IP business.
Technological Advancements in AI
Cadence.AI portfolio demonstrated significant enhancements, including an 80x acceleration of Cadence Solvers in collaboration with NVIDIA.
Recognition as a Top Employer
Cadence was named by Fortune and Great Place to Work as one of the 100 best companies to work for, ranking #11.
Negative Updates
Prudence in China Market
Despite growth, Cadence remains prudent with its China revenue outlook, assuming it will remain flat year-over-year due to macroeconomic uncertainties.
Exposure to Tariff and Trade Regulations
Cadence's hardware business could potentially be impacted by changes in tariff and trade regulations, although current impacts are mitigated by diversified supply chains.
Company Guidance
During the Cadence First Quarter 2025 Earnings Conference Call, the company reported strong financial results, surpassing guidance on key metrics. Revenue grew by 23% year-over-year, while non-GAAP EPS increased by 34%. The company announced a higher outlook for the year, driven by robust design activity and customer demand. Total revenue reached $1.242 billion, with a GAAP operating margin of 29.1% and a non-GAAP operating margin of 41.7%. The cash balance at quarter-end was $2,778 million, and operating cash flow was $487 million. The company also provided an updated 2025 outlook, projecting revenue between $5.15 billion and $5.23 billion, with a GAAP EPS range of $4.21 to $4.31 and non-GAAP EPS between $6.73 and $6.83. For Q2, Cadence anticipates revenue between $1,250 million and $1,270 million, with a non-GAAP EPS range of $1.55 to $1.61.

Cadence Design Financial Statement Overview

Summary
Cadence Design's financial statements reveal a well-managed company with robust revenue growth, strong profitability margins, and a solid balance sheet. The company's ability to generate consistent free cash flow further solidifies its financial position, enabling strategic reinvestment and shareholder value creation. While the company maintains moderate leverage, its strong equity base and effective cost management mitigate potential risks, positioning the company well in the competitive software application industry.
Income Statement
92
Very Positive
Cadence Design exhibits strong profitability with a consistent increase in total revenue and substantial growth in net income over the years. The company maintains an excellent gross profit margin, indicating effective cost management and pricing strategies. The net profit margin and EBIT margin are solid, showcasing operational efficiency. Revenue growth remains robust, with a positive trajectory over multiple periods, reinforcing the company's competitive position in the market.
Balance Sheet
88
Very Positive
The balance sheet reflects a solid financial structure with a strong equity position, evidenced by a high equity ratio. The company's debt-to-equity ratio suggests a balanced approach to leveraging, minimizing financial risks. Return on equity is impressive, indicating effective use of shareholders' capital to generate income. The stability in stockholders' equity growth supports long-term business sustainability and financial health.
Cash Flow
85
Very Positive
Cadence Design showcases a strong cash flow position with consistent growth in free cash flow, reflecting efficient capital management and operational success. The operating cash flow to net income ratio is healthy, suggesting high-quality earnings. The free cash flow to net income ratio further supports strong liquidity and the potential for reinvestment or shareholder returns. The company demonstrates effective cash flow management, contributing to overall financial stability.
Breakdown
TTMDec 2024Dec 2023Dec 2022Mar 2022Mar 2021
Income StatementTotal Revenue
4.87B4.64B4.09B3.56B2.99B2.68B
Gross Profit
4.19B3.99B3.65B3.19B2.68B2.38B
EBIT
1.46B1.35B1.25B1.07B779.09M645.55M
EBITDA
1.75B1.67B1.42B1.20B927.72M799.15M
Net Income Common Stockholders
1.08B1.06B1.04B848.95M695.96M590.64M
Balance SheetCash, Cash Equivalents and Short-Term Investments
1.14B2.78B1.14B882.33M1.09B928.43M
Total Assets
5.67B8.97B5.67B5.14B4.39B3.95B
Total Debt
806.03M2.59B806.03M748.08M347.59M346.79M
Net Debt
-202.12M-58.95M-202.12M-134.25M-741.35M-581.64M
Total Liabilities
2.27B4.30B2.27B2.39B1.65B1.46B
Stockholders Equity
3.40B4.67B3.40B2.75B2.74B2.49B
Cash FlowFree Cash Flow
1.38B1.12B1.25B1.12B1.03B810.11M
Operating Cash Flow
1.49B1.26B1.35B1.24B1.10B904.92M
Investing Cash Flow
-779.13M-837.12M-412.25M-738.63M-292.95M-292.16M
Financing Cash Flow
1.05B1.24B-803.57M-657.05M-643.79M-415.29M

Cadence Design Technical Analysis

Technical Analysis Sentiment
Positive
Last Price293.33
Price Trends
50DMA
283.87
Positive
100DMA
280.94
Positive
200DMA
282.67
Positive
Market Momentum
MACD
1.66
Positive
RSI
46.01
Neutral
STOCH
30.71
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CDNS, the sentiment is Positive. The current price of 293.33 is below the 20-day moving average (MA) of 308.88, above the 50-day MA of 283.87, and above the 200-day MA of 282.67, indicating a neutral trend. The MACD of 1.66 indicates Positive momentum. The RSI at 46.01 is Neutral, neither overbought nor oversold. The STOCH value of 30.71 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CDNS.

Cadence Design Risk Analysis

Cadence Design disclosed 39 risk factors in its most recent earnings report. Cadence Design reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 1 New Risks
1.
Our bylaws designate the Court of Chancery of the State of Delaware as the exclusive forum for certain disputes between us and our stockholders. Q4, 2024

Cadence Design Peers Comparison

Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
80
Outperform
$15.01B37.0524.99%0.58%9.86%-14.34%
79
Outperform
$63.17B64.1842.36%12.89%1.23%
78
Outperform
$79.87B74.2925.92%19.55%2.35%
78
Outperform
$10.52B47.5519.70%14.63%17.15%
77
Outperform
$11.20B53.3089.60%9.18%14.35%
75
Outperform
$29.24B49.7210.23%15.98%35.52%
61
Neutral
$11.55B10.41-6.86%2.93%7.50%-8.30%
* Technology Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
CDNS
Cadence Design
293.33
-3.09
-1.04%
ANSS
Ansys
334.89
7.82
2.39%
ADSK
Autodesk
299.52
83.24
38.49%
MANH
Manhattan Associates
186.98
-33.11
-15.04%
PAYC
Paycom
263.80
120.51
84.10%
PCTY
Paylocity
190.72
52.19
37.67%

Cadence Design Corporate Events

Business Operations and StrategyRegulatory Filings and Compliance
Cadence Design Faces New Export License Requirement
Negative
May 29, 2025

On May 23, 2025, the U.S. Department of Commerce’s Bureau of Industry and Security informed Cadence Design Systems that a license is now required for the export, re-export, or in-country transfer of certain electronic design automation software and technology to China or Chinese military end users. This decision, due to concerns about military use, may impact Cadence’s business operations and financial results, prompting the company to seek further clarification from the authorities.

The most recent analyst rating on (CDNS) stock is a Sell with a $225.00 price target. To see the full list of analyst forecasts on Cadence Design stock, see the CDNS Stock Forecast page.

Shareholder MeetingsStock Buyback
Cadence Design Expands Share Repurchase Program
Neutral
May 12, 2025

At the 2025 Annual Meeting of Stockholders held on May 8, Cadence Design Systems, Inc. announced the election of ten directors to serve until the 2026 Annual Meeting, with all nominees successfully elected. Additionally, stockholders approved executive officer compensation and the selection of PricewaterhouseCoopers LLP as the independent auditor for the fiscal year ending December 31, 2025, while a proposal on political spending was not approved. Furthermore, the board authorized an additional $1.5 billion for the company’s share repurchase program, allowing for flexible repurchase strategies based on market conditions and other factors.

The most recent analyst rating on (CDNS) stock is a Sell with a $225.00 price target. To see the full list of analyst forecasts on Cadence Design stock, see the CDNS Stock Forecast page.

Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.