Cadence Design (CDNS) AI Stock Analysis

• Market Cap: $83.02B
• Dividend Yield: N/A
• Average Volume (3M): 2.51M
• Price to Earnings (P/E): 73.1
• Beta (1Y): 1.40
• Revenue Growth: 19.72%
• EPS Growth: 1.59%
• Country: US
• Employees: 12,837
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 1.99
• Shares Outstanding: 272,201,000
• 10 Day Avg. Volume: 2,967,576
• 30 Day Avg. Volume: 2,514,996
• PEG Ratio: 14.88
• Price to Book (P/B): 15.49
• Price to Sales (P/S): 16.01
• P/FCF Ratio: 53.45
• Enterprise Value/Market Cap: 0.91
• Enterprise Value/Revenue: 14.28
• Enterprise Value/Gross Profit: 14.85
• Enterprise Value/Ebitda: 41.81
• 1Y Price Target: $369.08
• Price Target Upside: 24.57% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 12
• EPS Forecast (FY): 8.15
• Revenue Forecast (FY): $5.97B

• Rating: 72 Outperform
• Price Target: $329.00 ▲(11.04% Upside)
• Action: Reiterated Date: 02/24/26
• Date: Action: Reiterated 02/24/26

CDNS scores well on business quality and forward outlook, driven by strong multi-year growth, solid profitability and free-cash-flow generation, and upbeat guidance with record backlog visibility. The score is held back by weak-to-mixed technicals (below key moving averages with negative MACD) and a demanding valuation (P/E ~73), which increases sensitivity to any growth or margin setbacks.

Positive Factors

Cash generation

Consistent, large operating cash flow (~$1.7B TTM) and FCF (~$1.6B TTM) support durable financial flexibility: funds R&D, product investment, buybacks and M&A without relying on external financing. Strong conversion (FCF ~0.91x net income) underpins multi-year capital allocation.

High margins & profitability

Very high non‑GAAP operating margins (~44.6%) and historical net margins provide structural competitive advantage: excess cash to reinvest, sustain higher R&D intensity, and maintain pricing power. Even with some year‑to‑year compression, margins remain industry-leading and durable.

AI/product momentum

New AI tools (ChipStack, Cerebrus) and strong IP growth (~25%) expand addressable markets and raise switching costs. Measurable productivity gains cited by customers (4x–10x in examples) suggest sustainable adoption that can drive multi-year revenue expansion and deeper platform entrenchment.

Negative Factors

Rising leverage

Material step-up in debt reduces financial flexibility versus earlier years. Higher leverage can constrain capital allocation during downturns, increase interest expense risk, and limit optionality for opportunistic M&A or accelerated R&D if cash generation weakens or hardware cycles soften.

GAAP vs non‑GAAP divergence

Large recurring adjustments create modeling and comparability challenges: substantial gap between GAAP and non‑GAAP metrics can obscure cash economics and persistently affect investor modeling. This increases uncertainty around sustainable reported profitability and tax/compensation impacts.

Hardware revenue lumpiness

A meaningful (~20%) hardware revenue stream is inherently lumpy and pipeline-driven, creating quarter-to-quarter volatility in revenue and margins. That structural lumpiness complicates forecasting, can amplify cycles during softer capex periods, and pressures near-term visibility despite software strength.

Cadence Design Business Overview & Revenue Model

Company Description

Cadence Design Systems, Inc. provides software, hardware, services, and reusable integrated circuit (IC) design blocks worldwide. The company offers functional verification services, including emulation and prototyping hardware. Its functional verification offering consists of JasperGold, a formal verification platform; Xcelium, a parallel logic simulation platform; Palladium, an enterprise emulation platform; and Protium, a prototyping platform for chip verification. The company also provides digital IC design and sign off products, including Genus logic synthesis and Joules RTL power solutions, as well as Modus software solution to reduce systems-on-chip design-for-test time; physical implementation tools, such as place and route, optimization, and multiple patterning preparation; and signoff products to signoff the design as ready for silicon manufacturing. In addition, it offers custom IC design and simulation products to create schematic and physical representations of circuits down to the transistor level for analog, mixed-signal, custom digital, memory, and radio frequency designs; and system design and analysis products to develop printed circuit boards and IC packages, as well as to analyze electromagnetic, electro-thermal, and other multi-physics effects. Further, the company provides intellectual property (IP) products comprising pre-verified and customizable functional blocks to integrate into customer's ICs; and verification IP and memory models to emulate and model the expected behavior and interaction of standard industry system interface protocols. Additionally, it offers services related to methodology, education, and hosted design solutions, as well as technical support and maintenance services. The company serves 5G communications, aerospace and defense, automotive, industrial and healthcare, mobile, consumer, and hyperscale computing markets. Cadence Design Systems, Inc. was incorporated in 1987 and is headquartered in San Jose, California.

How the Company Makes Money

Cadence Design generates revenue primarily through the sale of software licenses, maintenance, and support services. The company's revenue model includes both perpetual licenses and subscription-based licensing, allowing customers to choose their preferred payment structure. Key revenue streams consist of software sales, professional services, and training related to their products. Additionally, Cadence engages in partnerships with semiconductor companies and technology firms, which not only enhances its product offerings but also expands its customer base. The company benefits from recurring revenue through maintenance contracts, which provide ongoing updates and support to clients, thus ensuring a stable income stream.

Cadence Design Financial Statement Overview

Summary

High-quality fundamentals: strong multi-year revenue growth (2020 $2.7B to 2024 $4.6B; TTM $5.3B), durable profitability (TTM net margin ~21%) and robust free cash flow (TTM FCF ~$1.6B). Offsets include increased leverage since 2023 (debt rising to ~$2.5B; debt-to-equity ~0.45 TTM) and some recent margin compression versus 2023–2024.

Income Statement

CDNS shows strong and improving scale, with revenue rising from $2.7B (2020) to $4.6B (2024) and $5.3B in TTM (Trailing-Twelve-Months). Profitability remains solid with healthy net margins around ~21–25% historically (TTM ~21%). The main watch-out is some margin compression versus prior years (TTM operating profitability is lower than 2023–2024 levels), even as growth in the latest period is very strong.

Balance Sheet

The balance sheet is generally sound, supported by a growing equity base (about $5.5B in TTM (Trailing-Twelve-Months)) and strong returns on equity (~22% TTM). However, leverage has stepped up meaningfully since 2023: total debt increased from ~$0.8B (2023) to ~$2.5B (2024) and remains elevated in TTM, with debt-to-equity rising to ~0.45 (TTM) from ~0.22 (2023). This higher leverage reduces financial flexibility compared with earlier years.

Cash Flow

Cash generation is strong and consistent: operating cash flow is $1.7B in TTM (Trailing-Twelve-Months) and free cash flow is $1.6B, with free cash flow closely tracking net income (about ~0.91x in TTM). After a dip in free cash flow growth in 2024, TTM shows a sharp rebound in free cash flow growth. A mild caution is that operating cash flow relative to profitability is slightly below 1.0x in TTM, suggesting working-capital or timing effects, though overall conversion remains solid.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	5.30B	4.64B	4.09B	3.56B	2.99B
Gross Profit	4.53B	3.99B	3.65B	3.19B	2.68B
EBITDA	1.88B	1.67B	1.46B	1.20B	916.12M
Net Income	1.11B	1.06B	1.04B	848.95M	695.96M
Balance Sheet
Total Assets	10.15B	8.97B	5.67B	5.14B	4.39B
Cash, Cash Equivalents and Short-Term Investments	3.00B	2.78B	1.14B	886.82M	1.09B
Total Debt	2.48B	2.59B	764.41M	887.41M	454.71M
Total Liabilities	4.68B	4.30B	2.27B	2.39B	1.65B
Stockholders Equity	5.47B	4.67B	3.40B	2.75B	2.74B
Cash Flow
Free Cash Flow	1.59B	1.12B	1.25B	1.12B	1.03B
Operating Cash Flow	1.73B	1.26B	1.35B	1.24B	1.10B
Investing Cash Flow	-460.52M	-837.12M	-412.25M	-738.63M	-292.95M
Financing Cash Flow	-948.98M	1.24B	-803.57M	-657.05M	-643.79M

Cadence Design Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 296.28
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CDNS, the sentiment is Neutral. The current price of 296.28 is above the 20-day moving average (MA) of 295.99, below the 50-day MA of 309.60, and below the 200-day MA of 324.18, indicating a neutral trend. The MACD of -4.34 indicates Negative momentum. The RSI at 48.36 is Neutral, neither overbought nor oversold. The STOCH value of 66.13 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for CDNS.

Cadence Design Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
CDNS	72 Outperform	$83.02B	73.14	21.85%	―	19.72%	1.59%
TYL	72 Outperform	$13.65B	44.37	8.90%	―	10.62%	31.43%
HUBS	70 Outperform	$13.19B	275.14	2.31%	―	19.21%	75.32%
ADSK	64 Neutral	$48.70B	44.48	40.33%	―	15.62%	2.59%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
SNOW	52 Neutral	$60.25B	-44.41	-53.32%	―	28.48%	-19.12%
MSTR	47 Neutral	$35.98B	―	-11.11%	0.08%	1.65%	―

Cadence Design Corporate Events

Cadence Design Completes Hexagon Smart Solutions Acquisition

Cadence Design Systems, Inc. completed the acquisition of the design and engineering business of Hexagon Smart Solutions AB, a Swedish private limited liability company, on February 23, 2026, under an Equity Purchase Agreement entered into on September 4, 2025. As partial consideration for the transaction, Cadence issued 3,224,473 shares of its common stock to the seller, relying on exemptions from U.S. securities registration requirements, which underscores the strategic significance of the deal for Cadence’s design and engineering capabilities.

The most recent analyst rating on (CDNS) stock is a Buy with a $340.00 price target. To see the full list of analyst forecasts on Cadence Design stock, see the CDNS Stock Forecast page.