Cadence Design Systems CDNS reported first-quarter 2025 non-GAAP earnings per share (EPS) of $1.57, which beat the Zacks Consensus Estimate by 5.4%. The bottom line increased 34.2% year over year, exceeding management’s guided range of $1.46-$1.52.
Revenues of $1.242 billion topped the Zacks Consensus Estimate by 0.3% and increased 23% year over year. The figure was within management’s guided range of $1.23-$1.25 billion. The top line was driven by broad-based demand for its solutions amid robust design activity. The company is well-positioned to navigate the tough macro backdrop owing to its AI-focused product innovations and strong software business model and backlog.
CDNS ended the quarter with a backlog of $6.4 billion and current-remaining performance obligations of $3.2 billion. The company highlighted that it has not seen any shifts in customers’ behavior presently, as they continue to invest in next-generation designs.
Amid rapid AI proliferation, the Cadence.ai portfolio has been gaining momentum along with AI-powered products such as Cadence Cerebrus. The product had more than 1000 tapeouts year to date and 50 new logos in the first quarter. The company also expanded its partnership with NVIDIA for the latter’s Grace Blackwell architecture to accelerate computing and agentic AI solutions. CDNS is among the first adopters of the NVIDIA Omniverse blueprint for AI factory digital twins, which will augment data center design and operations.
Driven by strong results, management upgraded its outlook for 2025. Revenues for 2025 are now estimated to be in the range of $5.15-$5.23 billion compared with $5.14-$5.22 billion guided earlier. The Zacks Consensus Estimate is currently pegged at $5.19 billion, which indicates growth of 11.8% from the year-ago levels. Non-GAAP EPS for 2025 is expected to be between $6.73 and $6.83 compared with $6.65-$6.75 guided earlier. The Zacks Consensus Estimate is pegged at $6.70 per share, which implies a rise of 12.2% from the prior-year actuals.
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Shares of Cadence have gained 3.6% against the Computer - Software industry’s growth of 4.5% in the past year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
CDNS’ Segment Performance
Product & Maintenance revenues (89.5% of total revenues) of $1.11 billion rose 21.7% year over year. Services revenues (10.5%) of $131 million increased 36.5% year over year. Our estimate for revenues from Product & Maintenance and Service segments was $1.119 billion and $114 million, respectively. Geographically, the Americas, China, Other Asia, Europe, the Middle East and Africa, and Japan contributed 48%, 11%, 19%, 16% and 6%, respectively, to total revenues in the reported quarter.
Product-wise, Core EDA, Intellectual Property (IP) and Systems Design & Analysis accounted for 71%, 14% and 15% of total revenues, respectively.
The System Design & Analysis business benefited from the multi-physics simulation portfolio along with AI-driven design-optimization platforms, with revenues from this segment increasing 50% in the first quarter. Acquisition of BETA CAE and higher demand for its Allegro X design and digital twin Reality datacenter product were other tailwinds.
CDNS’ core EDA business (which constitutes Custom IC, Digital IC and Functional Verification businesses) witnessed 16% year-over-year revenue growth in the first quarter. Demand for the new hardware systems, especially among AI and hyperscale clients, was the primary catalyst, along with the rapid adoption of digital full-flow solutions and Virtuoso Studio.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. price-consensus-eps-surprise-chart | Cadence Design Systems, Inc. Quote
The IP business benefited owing to increasing demand for solutions in AI, HPC, foundry ecosystem buildout and chiplet use cases, with revenues from the segment up 40% year over year in the first quarter. The acquisition of Secure-IC will expand its IP portfolio, including interface, memory, AI and DSP solutions.
In April 2025, Cadence signed a definitive agreement with Arm Holdings to acquire its Artisan foundation IP business. The acquisition includes a suite of standard cell libraries, memory compilers and general-purpose I/Os, all finely tuned for advanced process nodes at leading global foundries. This move is expected to bolster Cadence’s rapidly growing IP portfolio, which already encompasses protocol and interface IP, SerDes IP, memory interface IP and embedded security IP.
CDNS’ Margin Performance
Total non-GAAP costs and expenses increased 15.5% year over year to $724 million.
Non-GAAP gross margin contracted 70 basis points (bps) to 88.4%. Non-GAAP operating margin expanded 390 bps on a year-over-year basis to 41.7%.
CDNS’ Balance Sheet & Cash Flow
As of March 31, 2025, CDNS had cash and cash equivalents of $2.778 billion compared with $2.64 billion as of Dec. 31.
Long-term debt was $2.477 billion as of March 31, 2025, compared with $2.476 million as of Dec 31. CDNS issued $2.5 billion of senior notes at a weighted average interest rate of 4.44% in September 2024.
Cadence generated an operating cash flow of $487 million in the reported quarter compared with the prior quarter’s $441 million. Free cash flow was $464 million compared with $404 million in the previous quarter.
The company repurchased its shares worth $350 million in the first quarter. It expects to execute $175 million in repurchases in the second quarter.
CDNS Provides Q2 & FY25 Outlook
Non-GAAP operating margin for 2025 is forecasted to be in the range of 43.25% to 44.25% compared with 42.5% reported in 2024. Also, operating cash flow is expected to be between $1.6 billion and $1.7 billion. CDNS expects to utilize at least 50% of its free cash flow to repurchase shares in 2025.
For the second quarter of 2025, revenues are estimated to be in the $1.25-$1.27 billion band. The company reported sales of $1.06 billion in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.25 billion.
Non-GAAP EPS for the second quarter is anticipated to be between $1.55 and $1.61. CDNS reported an EPS of $1.28 in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.58 per share.
Non-GAAP operating margin is estimated to be between 41.5% and 42.5% for the second quarter.
CDNS’ Zacks Rank
Cadence currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Recent Performance of Other Companies in the Same Space
SAP SE SAP reported first-quarter 2025 non-IFRS EPS of €1.44 ($1.51), which increased 79% from the year-ago quarter. The Zacks Consensus Estimate was pegged at $1.39. Driven by momentum in the cloud business, SAP reported total revenues on a non-IFRS basis of €9.01 billion ($9.48 billion), which increased 12.1% year over year (up 11% at constant currency or cc). The Zacks Consensus estimate was pegged at $9.78 billion. Shares of SAP have gained 57.3% in the past year.
Simulations Plus, Inc. SLP reported second-quarter fiscal 2025 adjusted earnings of 31 cents per share, which fell 3% year over year. However, the figure surpassed the Zacks Consensus Estimate of 25 cents per share. Quarterly revenues jumped 23% year over year to $22.4 million, driven by increasing momentum across its software and services business segments. The growing uptake of its flagship solutions, including GastroPlus, MonolixSuite and ADMET Predictor, fueled the top-line expansion. Shares of Simulations Plus have lost 22.4% in the past year.
Salesforce CRM reported fourth-quarter fiscal 2025 non-GAAP earnings of $2.78 per share, which beat the Zacks Consensus Estimate by 6.9%. The bottom line increased from the year-ago quarter’s earnings of $2.29 per share by 21.4%. Salesforce’s fiscal fourth-quarter revenues of $9.99 billion missed the consensus mark by 0.3%. CRM’s top line rose 7.5% year over year, demonstrating the benefits of its go-to-market strategy and sustained focus on customer success. The initiatives to integrate generative AI into its offerings also boosted demand for Salesforce’s solutions during the reported quarter. Shares of CRM are down 1.2% in the past year.
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