Cadence Design Systems ( CDNS Quick Quote CDNS - Free Report) is the $40 billion provider of Electronic Design Automation (EDA) and System Design Enablement (SDE) software tools for semiconductor manufacturers. Cadence calls their unique brand and strategy of platform capabilities Intelligent System Design. In fact, NVIDIA ( NVDA Quick Quote NVDA - Free Report) is a Cadence customer precisely because Jensen Huang and his teams of engineers are highly focused on simulating all facets of their chip design and testing. Through its Intelligent System Design strategy, the company offers software, hardware, services and reusable IC (integrated circuit) design blocks to electronic systems and semiconductor customers. Cadence's core EDA software and services enable engineers to develop different types of ICs. Its design IPs are directly integrated into the ICs. Here's what I wrote in May when I was recommending CDNS shares near $130 and they rallied to $164 before the current tech rout... Nexus of Software and Industrial Design The software to design semiconductors has become ever more important for at least 3 reasons... First, transistor architecture has slipped to sub-microscopic levels under 10 nanometers, smaller than the coronavirus. Second, the proliferation of applications in autos, mobile, home, factory, and datacenter are accelerating demand and custom solutions for OEMs. Third, the engineering, testing and simulation of these ultra-miniature designs are critical before they are shipped to a chip foundry, or "fab." (end of notes from May) This Zacks #1 Rank is not cheap trading over 11X sales -- just like NVIDIA -- but after a solid beat-and-raise Q1 reported in late April, several analyst price targets moved above $200. We'll look at the analyst moves and commentary after we go over some of the report details. Another Beat-and-Raise Quarter Cadence posted non-GAAP earnings of $1.17 per share in Q1 2022, which topped the Zacks Consensus Estimate by 15.8% and increased 41% year over year. Revenues of $902 million surpassed the Zacks Consensus Estimate by 5% and increased 23% on a year-over-year basis. The top line benefited from continued strength across all segments driven by higher demand for its products, also reflected in an order backlog of $5.1 billion. Driven by strong first-quarter results, the company raised its outlook for 2022. Revenues for the full year are now projected in the range of $3.395-$3.435 billion compared with the earlier guidance of $3.32-$3.38 billion. The Zacks Consensus Estimate for 2022 revenues moved up from $3.36 billion to $3.4B, which indicates annual growth of 13.8%. Non-GAAP earnings for 2022 are expected in the range of $3.89-$3.97 per share compared with the earlier guidance of $3.70-$3.80 per share. The Zacks Consensus Estimate for 2022 earnings subsequently jumped from $3.73 per share to EPS of $3.89, which suggests yearly growth of 18.25%. Performance Details In the first quarter, Product & Maintenance revenues (93.8% of total revenues) of $846 million were up 21% year over year. Services revenues (6.2%) of $56 million increased 51.4% from the year-ago quarter’s figure. Geographically, Americas, China, Other Asia, Europe, Middle East and Africa (EMEA) and Japan contributed 47%, 16%, 18%, 14% and 5%, respectively, to total revenues in the quarter under review. Product-wise, Custom IC Design & Simulation, Digital IC Design & Signoff, Functional Verification, IP and Systems Design & Analysis contributed 22%, 27%, 28%, 13% and 10% to total revenues, respectively. The company's digital and signoff business delivered 23% year-over-year growth in revenues. Digital Full Flow saw robust traction with 15 new customer wins. The company’s Cadence Cerebrus solution witnessed accelerating momentum and was deployed by several customers. Palladium and Protium (especially Z2 and X2) platforms witnessed continued momentum with many deal wins. The company noted that it won 10 new clients and 50 repeat orders in the first quarter which included more than half for both the platforms. Most of the deal wins came from clients in the hyperscale, AI/ML and networking domains. In 2021, Cadence introduced 13 new products, including Cadence Helium Virtual and Hybrid Studio, Midas Safety platform and Allegro X. Cadence’s System Design & Analysis Business reported 22% year-over-year growth. Analyst Reactions CDNS PT raised to $215 from $205 at KeyBanc: Analyst Jason Celino highlighted the Q1 $45 million revenue beat on broad-based strength and the 2022 revenue guide bump of $56M at the midpoint of $3.395B-$3.435B. CDNS PT lowered to $203 from $211 at Baird: Analyst Joe Vruwink kept an Outperform rating on the shares and said he remains a buyer of the shares following its earnings report as all business groups saw strength with recurring revenues increasing 19% and upfront revenues increasing 49%. He raised the full-year outlook given 1Q strength, upside in 2Q, and favorable backlog development. CDNS PT raised to $193 from $185 at Needham: Analyst Charles Shi noted that yet another beat-and-raise quarter proves that Cadence can accelerate growth and expand margins in spite of the macro headwinds -- inflation and semiconductor cycles -- that have been weighing on most software and chip stocks. Shi also observes that his recent conversations with investors indicate growing interest in EDA stocks like Cadence Design, which is "increasingly seen as a potential hedge against a recession and the semiconductor cycle." In May's Top Stock Picks video, I highlighted why I think the comments from Shi are noteworthy and why I think you can buy CDNS shares now under $140 as they exhibit good relative strength vs the broader Semi sector. Disclosure: I own NVDA and CDNS shares for the Zacks TAZR Trader portfolio.