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1. Company Snapshot

1.a. 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.

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1.b. Last Insights on CDNS

Breaking News: Cadence Design Systems has been gaining attention in the market. The company has recently been featured in a Motley Fool Scoreboard episode, where expert analysts discussed its potential. Although there is no recent earnings release mentioned, the feature highlights the company's exciting prospects. Analysts seem optimistic about Cadence Design Systems, suggesting it as a stock worth watching in 2025. Some analysts recommend a buy, citing potential investment opportunities, while others advise a hold, but no sell recommendations have been mentioned.

1.c. Company Highlights

2. Cadence Design Systems' Strong Q3 Performance Drives Upward Revision in Full-Year Outlook

Cadence Design Systems delivered a robust financial performance in the third quarter of 2025, with revenue reaching $1.339 billion, accompanied by a GAAP operating margin of 31.8% and a non-GAAP operating margin of 47.6%. The company's EPS stood at $1.05 on a GAAP basis and $1.93 on a non-GAAP basis, beating analyst estimates of $1.79. The strong bookings resulted in a substantial backlog of $7 billion, underscoring the company's momentum.

Publication Date: Oct -28

📋 Highlights
  • Strong Q3 Financials:: Revenue reached $1.339 billion with GAAP operating margin of 31.8% and non-GAAP margin of 47.6%, EPS of $1.05 (GAAP) and $1.93 (non-GAAP).
  • Record Backlog:: Bookings drove a $7 billion backlog, supporting full-year revenue growth of ~14% and EPS growth of 18%.
  • AI/High-Performance Computing (HPC) IP Growth:: IP business expanded via demand for design IP in AI/HPC, bolstered by partnerships with TSMC, Samsung, and Intel.
  • AI-Driven Productivity Gains:: 5–10x improvement in logic simulation efficiency and 4x productivity boost in physical design anticipated from AI integration.
  • Hardware & Custom Silicon Momentum:: Q3 hardware revenue hit record levels; Cadence’s platforms support 1 trillion transistor designs, with R&D investment at 35% of revenue.

Segment Performance

The IP business continued to perform well, driven by growing demand for design IP focused on AI and HPC at advanced nodes. Cadence's core EDA business also delivered strong results, driven by the increasing adoption of AI-driven design and verification solutions. The system design and analysis (SD&A) business is gaining traction, fueled by the acquisition of BETA CAE and MSC software, positioning the company for growth across multiple industries.

Growth Prospects and Outlook

Cadence is raising its full-year outlook, expecting revenue growth of approximately 14% and EPS growth of 18%. The company expects Q4 revenue to be in the range of $1.405 billion to $1.435 billion. For 2025, Cadence expects revenue of $5.262 billion to $5.292 billion, with a GAAP operating margin of 27.9% to 28.9% and a non-GAAP operating margin of 43.9% to 44.9%. Analysts estimate next year's revenue growth at 12.2%, indicating a continued growth trajectory.

Valuation

With a P/E Ratio of 89.81 and an EV/EBITDA of 56.14, Cadence's valuation suggests that the market has already priced in significant growth expectations. The company's ROE stands at 20.15%, and ROIC at 14.26%, indicating a strong ability to generate returns on equity and invested capital. The current valuation metrics imply that the company's strong growth prospects are reflected in its stock price.

Strategic Positioning

Cadence is well-positioned to capitalize on the growing trend of AI-driven design and verification, with a comprehensive portfolio spanning EDA, IP, 3D-IC, PCB, and system analysis. The company's strategic acquisitions and partnerships, including the recent partnership between NVIDIA and Intel, are expected to drive growth and increase demand for its products and services.

3. NewsRoom

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Cadence Design Systems: A Stock Worth Watching in 2025?

Dec -03

Source: fool.com

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Cadence Design Systems, Inc. (CDNS) Presents at UBS Global Technology and AI Conference 2025 Transcript

Dec -02

Source: seekingalpha.com

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Prologic Mgmt (OTCMKTS:PRLO) and Cadence Design Systems (NASDAQ:CDNS) Head to Head Review

Dec -01

Source: defenseworld.net

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Cadence to Present at UBS Global Technology and AI Conference

Nov -25

Source: businesswire.com

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Here are Monday's Top Wall Street Analyst's Research Calls: Baidu, Carvana, Exact Sciences, Ferrari, Marvell Technology, Meta Platforms and More

Nov -24

Source: 247wallst.com

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Cadence Design Systems, Inc. (CDNS) Presents at Wells Fargo's 9th Annual TMT Summit Transcript

Nov -18

Source: seekingalpha.com

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Cadence Appoints Luc Van den hove to Board of Directors

Nov -17

Source: businesswire.com

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Jefferies Group's Strategic Move: Vanguard Information Technology ETF Takes Center Stage

Nov -13

Source: gurufocus.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (9.00%)

6. Segments

CAD / CAM Software

Expected Growth: 9.0%

The CAD/CAM software segment growth of 9.0% is driven by increasing demand for 3D modeling, simulation, and analysis in industries like aerospace, automotive, and healthcare. Cadence Design Systems, Inc.'s software solutions enable companies to accelerate design-to-manufacturing processes, improve product quality, and reduce costs, fueling growth in this segment.

7. Detailed Products

Cadence Digital Design Solutions

A comprehensive suite of tools for digital system design, including synthesis, simulation, and verification. This segment provides solutions for designing and verifying digital circuits, from RTL (Register-Transfer Level) to GDSII (Graphic Data System II) format.

Cadence Analog and Mixed-Signal Design Solutions

A set of tools for designing and verifying analog and mixed-signal circuits, including schematic capture, simulation, and physical implementation. This segment provides solutions for designing and verifying analog circuits, such as amplifiers, filters, and converters.

Cadence Verification Solutions

A suite of tools for verifying the functionality and performance of digital systems, including simulation, emulation, and formal verification. This segment provides solutions for verifying the correctness of digital systems, from IP (Intellectual Property) blocks to complete SoCs.

Cadence Design-to-Silicon Solutions

A set of tools for physical implementation and manufacturing of digital systems, including place-and-route, signoff, and mask creation. This segment provides solutions for taking digital systems from design to silicon, ensuring that they are optimized for performance, power, and area.

Cadence IP Solutions

A portfolio of pre-designed and verified IP blocks, including processors, interfaces, and analog circuits. This segment provides pre-designed and verified IP blocks that can be used by semiconductor companies to speed up their design process.

Cadence Cloud Services

A suite of cloud-based solutions for design, verification, and manufacturing of digital systems, including access to compute resources, software, and data management. This segment provides cloud-based solutions for accessing design, verification, and manufacturing tools, enabling collaboration and scalability.

8. Cadence Design Systems, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Cadence Design Systems, Inc. provides software and hardware solutions for the design and verification of integrated circuits and electronic systems. The threat of substitutes is low as the company's solutions are highly specialized and integrated into the design and verification process, making it difficult for customers to switch to alternative solutions.

Bargaining Power Of Customers

Cadence Design Systems, Inc. serves a diverse range of customers in the semiconductor and electronics industries. While customers have some bargaining power due to the availability of alternative solutions, Cadence's strong brand reputation, comprehensive product offerings, and high-quality customer support limit the customers' ability to negotiate.

Bargaining Power Of Suppliers

Cadence Design Systems, Inc. has a large and diverse supplier base, which reduces the bargaining power of individual suppliers. Additionally, the company has a strong market position and can negotiate favorable terms with its suppliers.

Threat Of New Entrants

The threat of new entrants is low due to the high barriers to entry in the EDA (Electronic Design Automation) industry. The industry requires significant investments in research and development, as well as a strong brand reputation and established relationships with customers.

Intensity Of Rivalry

The EDA industry is highly competitive, with a few large players, including Synopsys, Inc. and Mentor Graphics Corporation (acquired by Siemens). The competition is intense, with companies competing on factors such as product features, pricing, and customer support.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 35.61%
Debt Cost 4.29%
Equity Weight 64.39%
Equity Cost 9.40%
WACC 7.58%
Leverage 55.31%

11. Quality Control: Cadence Design Systems, Inc. passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Value: 1.2

Growth: 8.2

Quality: 8.6

Yield: 1.0

Momentum: 6.5

Volatility: 7.7

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Salesforce

A-Score: 5.0/10

Value: 2.2

Growth: 8.9

Quality: 8.4

Yield: 1.0

Momentum: 2.5

Volatility: 7.0

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Cadence Design Systems

A-Score: 4.9/10

Value: 0.0

Growth: 7.3

Quality: 8.4

Yield: 0.0

Momentum: 8.0

Volatility: 5.7

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A-Score: 4.9/10

Value: 0.0

Growth: 9.7

Quality: 8.0

Yield: 0.0

Momentum: 10.0

Volatility: 1.7

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ServiceNow

A-Score: 4.6/10

Value: 0.0

Growth: 9.1

Quality: 8.0

Yield: 0.0

Momentum: 4.0

Volatility: 6.3

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FICO

A-Score: 4.0/10

Value: 2.0

Growth: 8.1

Quality: 7.6

Yield: 0.0

Momentum: 2.0

Volatility: 4.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

337.3$

Current Price

337.3$

Potential

-0.00%

Expected Cash-Flows