Cadence Design Systems’ third quarter results surpassed Wall Street’s expectations for both revenue and non-GAAP earnings per share, yet the market responded with a modestly negative reaction. Management attributed the solid performance to broad-based demand across electronic design automation (EDA), intellectual property (IP), and hardware platforms, particularly as AI-driven design activity accelerated across multiple industries. CEO Anirudh Devgan highlighted strong bookings and a record backlog, emphasizing that Cadence’s partnerships with major semiconductor and system companies continue to drive consistent growth. The company also benefited from a normalization of activity in China and robust hardware demand, which, according to Devgan, has “become almost an annual subscription” for large customers.
Is now the time to buy CDNS? Find out in our full research report (it’s free for active Edge members).
Cadence Design Systems (CDNS) Q3 CY2025 Highlights:
- Revenue: $1.34 billion vs analyst estimates of $1.33 billion (10.1% year-on-year growth, 0.9% beat)
- Adjusted EPS: $1.93 vs analyst estimates of $1.79 (7.8% beat)
- Adjusted Operating Income: $637.9 million vs analyst estimates of $601.5 million (47.6% margin, 6.1% beat)
- Management raised its full-year Adjusted EPS guidance to $7.05 at the midpoint, a 2.2% increase
- Operating Margin: 31.8%, up from 28.8% in the same quarter last year
- Billings: $1.36 billion at quarter end, up 8.9% year on year
- Market Capitalization: $92.19 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Cadence Design Systems’s Q3 Earnings Call
- Vivek Arya (Bank of America Securities) asked about sustainability of IP growth given concerns from competitors. CEO Anirudh Devgan explained that Cadence’s focus on AI, advanced nodes, and partnerships differentiates its IP strategy for continued outperformance.
- Lee Simpson (Morgan Stanley) questioned drivers of strong China results. CFO John Wall noted normalization after regulatory changes and emphasized that growth was broad-based, with some backlog catch-up from earlier quarters.
- Harlan Sur (JPMorgan) asked about hardware platform demand and its outlook. Devgan and Wall said hardware demand is robust, driven by AI and HPC, and highlighted ongoing investments to support future customer needs.
- Gary Mobley (Loop Capital) sought clarification on backlog composition and China’s impact. Devgan estimated that about 25% of the $600 million backlog increase was from deferred China activity, with the remainder due to broader business strength.
- Ruben Roy (Stifel) asked about Cadence’s agentic AI initiatives. Devgan described investments in the JedAI platform, aimed at automating chip design workflows and enabling both standardized and customer-specific AI solutions.
Catalysts in Upcoming Quarters
In coming quarters, our analysts will be watching (1) the pace of adoption and monetization for Cadence’s AI-driven EDA and hardware products, (2) integration progress and revenue impact from recent acquisitions in system design and analysis, and (3) the resilience of IP and hardware demand amid evolving macro and regulatory environments. Developments in China and the rollout of agentic AI solutions will also be key markers for trajectory.
Cadence Design Systems currently trades at $338.37, down from $351.80 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free for active Edge members).
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