Cadence Design (CDNS) AI Stock Analysis

• Market Cap: $91.90B
• Dividend Yield: N/A
• Average Volume (3M): 1.69M
• Price to Earnings (P/E): 93.4
• Beta (1Y): 1.47
• Revenue Growth: 22.29%
• EPS Growth: -4.94%
• Country: US
• Employees: 12,837
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 1.65
• Shares Outstanding: 272,490,000
• 10 Day Avg. Volume: 1,629,431
• 30 Day Avg. Volume: 1,692,077
• PEG Ratio: 99.34
• Price to Book (P/B): 17.44
• Price to Sales (P/S): 17.56
• P/FCF Ratio: 72.89
• Enterprise Value/Market Cap: 0.91
• Enterprise Value/Revenue: 16.46
• Enterprise Value/Gross Profit: 19.27
• Enterprise Value/Ebitda: 49.59
• 1Y Price Target: $371.94
• Price Target Upside: 7.78% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 16

• Rating: 75 Outperform
• Price Target: $379.00 ▲(9.82% Upside)

Cadence Design's strong financial performance and positive earnings call sentiment are the primary drivers of its stock score. However, technical indicators suggest a lack of strong momentum, and the high P/E ratio indicates potential overvaluation. The company's strategic growth in AI and geographic diversification provide a solid foundation for future growth.

Positive Factors

Strategic Partnerships

The partnership with TSMC enhances Cadence's capabilities in AI-driven design solutions, strengthening its competitive position in advanced semiconductors.

Revenue Growth

Consistent revenue growth, particularly in AI-driven products, indicates robust demand and a strong market position, supporting long-term business expansion.

Cash Flow Generation

Efficient cash generation from operations ensures financial flexibility, enabling strategic investments and resilience against market fluctuations.

Negative Factors

Decreased ROE

A decline in ROE suggests reduced efficiency in generating profits from shareholders' equity, potentially impacting investor confidence and long-term returns.

Settlement Payment Impact

The substantial settlement payment affects cash reserves, which could limit short-term financial flexibility and delay strategic initiatives.

Net Profit Margin Decline

A decrease in net profit margin indicates rising costs or pricing pressures, which could affect profitability if not addressed.

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 generates revenue primarily through the sales of its software licenses, which include both perpetual and subscription-based models. Additionally, the company earns substantial income from maintenance and support services associated with these software products. Key revenue streams include licensing fees from its flagship tools such as the Cadence Allegro platform for PCB design and the Virtuoso platform for analog design. Furthermore, Cadence enhances its earnings through the sale of IP cores, which provide reusable design components for semiconductor companies. Strategic partnerships with major semiconductor manufacturers and collaborations in emerging technologies such as AI and machine learning also contribute to the company's revenue growth by expanding its customer base and enhancing product offerings.

Cadence Design Financial Statement Overview

Summary

Cadence Design exhibits robust financial health with strong revenue growth, high profitability margins, and excellent cash flow generation. The low debt levels and strong equity position provide stability, though a slight decrease in net profit margins and ROE should be monitored.

Income Statement

Cadence Design has demonstrated strong revenue growth with a consistent increase in revenue over the years, highlighted by a TTM (Trailing-Twelve-Months) revenue of $5.09 billion, reflecting a robust revenue growth rate of 9.64% from 2024 to TTM 2025. The gross profit margin remains strong at 85.39%, indicating efficient cost management relative to revenue. The net profit margin has slightly decreased to 19.88% in TTM 2025 from 22.74% in 2024, yet it remains healthy. EBIT and EBITDA margins are solid, reflecting operational efficiency. Overall, the income statement shows strong growth trajectories and profitability, though a slight decline in net margins warrants attention.

Balance Sheet

The balance sheet reflects a solid equity position with a debt-to-equity ratio of 0.38 in TTM 2025, suggesting low financial leverage and stability. The equity ratio has improved to 68.39%, indicating a strong equity base relative to total assets. Return on equity has decreased to 15.56% from 22.58% in 2024, potentially signaling reduced efficiency in generating profits from shareholders' equity. The company's liquidity remains robust with significant cash reserves. Overall, the balance sheet is strong, with a stable financial position, though the drop in ROE requires monitoring.

Cash Flow

Cadence Design's cash flow is very healthy, with strong operating cash flow exceeding net income, resulting in a high operating cash flow to net income ratio of 1.70. The free cash flow growth rate has been impressive, growing by 41.78% from 2024 to TTM 2025. The company maintains an excellent free cash flow to net income ratio of 1.57, indicating efficient cash generation from operations. Overall, the cash flow statement reflects strong cash generation capabilities and efficient capital management.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	5.09B	4.64B	4.09B	3.56B	2.99B	2.68B
Gross Profit	4.35B	3.99B	3.65B	3.19B	2.68B	2.38B
EBITDA	1.69B	1.67B	1.46B	1.20B	916.12M	803.63M
Net Income	1.01B	1.06B	1.04B	848.95M	695.96M	590.64M
Balance Sheet
Total Assets	9.51B	8.97B	5.67B	5.14B	4.39B	3.95B
Cash, Cash Equivalents and Short-Term Investments	2.82B	2.78B	1.14B	886.82M	1.09B	928.43M
Total Debt	2.48B	2.59B	764.41M	887.41M	454.71M	460.71M
Total Liabilities	4.50B	4.30B	2.27B	2.39B	1.65B	1.46B
Stockholders Equity	5.01B	4.67B	3.40B	2.75B	2.74B	2.49B
Cash Flow
Free Cash Flow	1.59B	1.12B	1.25B	1.12B	1.03B	810.11M
Operating Cash Flow	1.72B	1.26B	1.35B	1.24B	1.10B	904.92M
Investing Cash Flow	-276.67M	-837.12M	-412.25M	-738.63M	-292.95M	-292.16M
Financing Cash Flow	282.80M	1.24B	-803.57M	-657.05M	-643.79M	-415.29M

Cadence Design Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 345.10
• 50DMA: Negative
• 100DMA: Positive
• 200DMA: Positive
• 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 Positive. The current price of 345.1 is above the 20-day moving average (MA) of 338.96, below the 50-day MA of 346.98, and above the 200-day MA of 307.99, indicating a neutral trend. The MACD of -4.22 indicates Negative momentum. The RSI at 53.60 is Neutral, neither overbought nor oversold. The STOCH value of 72.00 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CDNS.

Cadence Design Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
PAYC	81 Outperform	$11.71B	27.09	25.76%	0.75%	10.21%	-10.56%
PCTY	77 Outperform	$8.38B	37.83	20.04%	―	13.74%	10.99%
CDNS	75 Outperform	$91.90B	93.38	21.84%	―	22.29%	-4.94%
MANH	73 Outperform	$11.76B	55.33	73.58%	―	4.10%	-0.21%
ADSK	72 Outperform	$66.00B	64.87	40.20%	―	13.99%	-0.95%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%

Cadence Design Corporate Events

Cadence Design Acquires Hexagon Smart Solutions Unit

On September 4, 2025, Cadence Design Systems announced an agreement to acquire the design and engineering business of Hexagon Smart Solutions for €2.70 billion. The acquisition, expected to close in the first quarter of 2026, will be funded through cash and stock, with regulatory approvals being a key condition for completion.

The most recent analyst rating on (CDNS) stock is a Buy with a $395.00 price target. To see the full list of analyst forecasts on Cadence Design stock, see the CDNS Stock Forecast page.

Cadence Design Systems Reports Strong Q2 Earnings

Cadence Design Systems’ recent earnings call showcased a robust and positive performance, driven by substantial revenue growth and an optimistic financial outlook. The company highlighted strong demand across its product segments, particularly in AI-driven technologies. Despite facing challenges such as temporary export restrictions with China and a significant settlement payment, the overall sentiment was overwhelmingly positive, with the benefits far outweighing the negatives.

Cadence Design Systems Surpasses Q2 2025 Expectations

Cadence Design Systems is a leading company in the field of computational software, specializing in the engineering design of silicon to systems, serving a wide array of markets such as hyperscale computing, mobile communications, and automotive industries. In its latest earnings report, Cadence reported a strong second quarter for 2025, surpassing its guidance for revenue and non-GAAP earnings per share, and subsequently raising its outlook for the full year. The company achieved a revenue of $1.275 billion, marking a 20% increase from the previous year, and a non-GAAP operating margin of 42.8%, up from 40.1% in the same quarter last year. Despite a one-time charge related to legal settlements, Cadence’s non-GAAP diluted net income per share rose to $1.65 from $1.28 a year ago. The company’s AI-driven portfolio continues to drive growth across its core businesses, with significant contributions from its IP and System Design & Analysis segments. Looking ahead, Cadence has raised its 2025 revenue outlook to a range of $5.21 billion to $5.27 billion, with expectations of continued strong performance across its business segments, driven by its strategic focus on AI and digital innovation.

Cadence Design Settles Export Violation Charges

Cadence Design Systems has reached settlements with the Bureau of Industry and Security and the Department of Justice regarding export law violations between 2015 and 2021. These violations involved unauthorized sales and technology transfers to China, valued at $45.3 million. As part of the resolution, Cadence will pay $140.6 million in penalties and has agreed to enhance its export compliance programs, including a plea agreement with a three-year probationary term and additional compliance obligations.

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.