Cadence Design (CDNS) AI Stock Analysis

• Market Cap: $86.80B
• Dividend Yield: N/A
• Average Volume (3M): 1.57M
• Price to Earnings (P/E): 82.3
• Beta (1Y): 1.48
• Revenue Growth: 19.72%
• EPS Growth: 1.59%
• Country: US
• Employees: 12,837
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 1.93
• Shares Outstanding: 272,201,000
• 10 Day Avg. Volume: 1,620,237
• 30 Day Avg. Volume: 1,570,560
• 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: 1.10
• Enterprise Value/Revenue: 18.40
• Enterprise Value/Gross Profit: 20.95
• Enterprise Value/Ebitda: 53.28
• 1Y Price Target: $378.58
• Price Target Upside: 18.72% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 13
• EPS Forecast (FY): 7.06
• Revenue Forecast (FY): $5.28B

• Rating: 78 Outperform
• Price Target: $385.00 ▲(20.73% Upside)

Cadence Design's overall stock score is driven by its strong financial performance and positive earnings call, highlighting robust growth and strategic advancements. However, high valuation and potential geopolitical risks in China temper the outlook. Technical indicators suggest caution due to potential overbought conditions.

Positive Factors

Revenue Growth

Cadence's raised revenue outlook reflects strong demand and effective business strategies, indicating robust market position and growth potential.

Strategic Acquisitions

The acquisition of Hexagon's D&E business enhances Cadence's multiphysics portfolio, supporting long-term growth in strategic areas like SDA.

Board Expertise Enhancement

Dr. Van den hove's expertise in nanoelectronics strengthens Cadence's strategic initiatives in AI-driven design, supporting innovation and competitiveness.

Negative Factors

China Market Volatility

Geopolitical tensions in China pose risks to Cadence's operations and revenue, potentially impacting its market stability and growth in the region.

OpEx Timing Concerns

Higher operating expenses due to acquisitions could pressure margins, affecting short-term profitability and financial flexibility.

Decline in Free Cash Flow Growth

A decline in free cash flow growth may limit Cadence's ability to invest in growth opportunities and manage financial obligations effectively.

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

Cadence Design exhibits strong financial health with consistent revenue growth and profitability. The balance sheet is stable with moderate leverage, and cash flows are generally robust despite recent declines in free cash flow growth. The company is well-positioned in the software application industry, but should monitor cost pressures and cash flow trends.

Income Statement

Cadence Design has demonstrated consistent revenue growth with a TTM revenue growth rate of 2.42%. The company maintains strong profitability with a gross profit margin of 85.39% and a net profit margin of 19.88% in the TTM period. However, there is a slight decline in margins compared to previous years, indicating potential cost pressures.

Balance Sheet

The balance sheet shows a moderate debt-to-equity ratio of 0.49, indicating a balanced approach to leveraging. The return on equity is robust at 21.28%, reflecting efficient use of equity. However, the equity ratio stands at 68.77%, suggesting a reliance on equity financing.

Cash Flow

The cash flow statement reveals a decline in free cash flow growth by 6.72% in the TTM period, which could be a concern. The operating cash flow to net income ratio is healthy at 1.15, indicating strong cash generation relative to net income. The free cash flow to net income ratio is also solid at 0.92.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	5.21B	4.64B	4.09B	3.56B	2.99B	2.68B
Gross Profit	4.58B	3.99B	3.65B	3.19B	2.68B	2.38B
EBITDA	1.80B	1.67B	1.46B	1.20B	916.12M	803.63M
Net Income	1.06B	1.06B	1.04B	848.95M	695.96M	590.64M
Balance Sheet
Total Assets	9.60B	8.97B	5.67B	5.14B	4.39B	3.95B
Cash, Cash Equivalents and Short-Term Investments	2.75B	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	4.40B	4.30B	2.27B	2.39B	1.65B	1.46B
Stockholders Equity	5.20B	4.67B	3.40B	2.75B	2.74B	2.49B
Cash Flow
Free Cash Flow	1.48B	1.12B	1.25B	1.12B	1.03B	810.11M
Operating Cash Flow	1.62B	1.26B	1.35B	1.24B	1.10B	904.92M
Investing Cash Flow	-411.73M	-837.12M	-412.25M	-738.63M	-292.95M	-292.16M
Financing Cash Flow	-1.25B	1.24B	-803.57M	-657.05M	-643.79M	-415.29M

Cadence Design Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 318.89
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• 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 318.89 is below the 20-day moving average (MA) of 323.58, below the 50-day MA of 323.70, and above the 200-day MA of 316.67, indicating a neutral trend. The MACD of -1.68 indicates Positive momentum. The RSI at 47.14 is Neutral, neither overbought nor oversold. The STOCH value of 32.48 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	78 Outperform	$86.80B	82.29	21.74%	―	19.72%	1.59%
ADSK	74 Outperform	$63.75B	58.38	40.33%	―	15.62%	2.59%
TYL	66 Neutral	$19.84B	64.20	9.17%	―	10.62%	31.43%
HUBS	65 Neutral	$20.86B	-5,728.92	-0.20%	―	19.21%	75.32%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
MSTR	55 Neutral	$45.63B	7.39	25.59%	0.08%	1.65%	―
SNOW	54 Neutral	$76.61B	-55.48	-53.32%	―	28.48%	-19.12%

Cadence Design Corporate Events

Cadence Design Appoints Dr. Luc Van den hove

On November 17, 2025, Cadence Design Systems announced the appointment of Dr. Luc Van den hove to its board of directors, effective January 1, 2026. Dr. Van den hove, currently CEO of imec, brings extensive expertise in nanoelectronics and digital technologies, which is expected to enhance Cadence’s strategic initiatives in AI-driven design solutions and innovation. His appointment reflects Cadence’s commitment to advancing its strategy and delivering value to shareholders.