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CDNS posted Q2 EPS of $1.65 and revenues of $1.275B, beating estimates and rising 28.9% and 20.3% Y/Y.
Strong AI-led demand amid robust design activity boosted performance across EDA, IP and system analysis units.
Management raised FY25 EPS and revenue outlook, citing strong results and a robust pipeline.
Cadence Design Systems (CDNS - Free Report) reported second-quarter 2025 non-GAAP earnings per share (EPS) of $1.65, which beat the Zacks Consensus Estimate by 5.1%. The bottom line increased 28.9% year over year, exceeding management’s guided range of $1.55-$1.61.
Revenues of $1.275 billion beat the Zacks Consensus Estimate by 1.3% and increased 20.3% year over year. The figure beat the management’s guided range of $1.25-$1.27 billion. The top line was driven by broad-based demand for its solutions, especially the AI-driven portfolio, amid robust design activity. CDNS added that its efforts to unify EDA, IP, 3D-IC, PCB and system analysis are aiding in capitalizing on the opportunity presented by the AI super cycle. Also, customer R&D investments, especially in AI, remain robust.
CDNS also settled with the Department of Justice and BIS, related to previously disclosed investigations into certain China sales (worth $45 million) from 2015 to 2021. The company will have to shell out approximately $141 million as a settlement in the third quarter. With the enactment of the One Big Beautiful Bill Act, management expects the company’s U.S. federal tax payments for the remainder of fiscal 2025 to decrease by approximately $140 million.
CDNS ended the quarter with a backlog of $6.4 billion and current-remaining performance obligations of $3.1 billion.
Driven by strong results and a strong pipeline, management upgraded its outlook for 2025. Revenues for 2025 are now estimated to be in the range of $5.21-$5.27 billion compared with $5.15-$5.23 billion guided earlier. The Zacks Consensus Estimate is currently pegged at $5.20 billion, which indicates growth of 12% from the year-ago levels. Non-GAAP EPS for 2025 is expected to be between $6.85 and $6.95 compared with $6.73-$6.83 guided earlier. The Zacks Consensus Estimate is pegged at $6.77 per share, which implies a rise of 13.4% from the prior-year actuals.
Price Performance
Image Source: Zacks Investment Research
CDNS stock jumped 6.6% in the after-market trading yesterday, while pre-market shares are up 8.5%. It has gained 31.9% compared with the Computer - Software industry’s growth of 24.1% in the past year.
CDNS’ Segmental Performance
Product & Maintenance revenues (91.8% of total revenues) of $1.17 billion rose 21.7% year over year. Services revenues (8.2%) of $105 million increased 5% year over year. Our estimate for revenues from Product & Maintenance and Service segments was $1.144 billion and $113.5 million, respectively. Geographically, the Americas, China, Other Asia, Europe, the Middle East and Africa, and Japan contributed 49%, 9%, 19%, 16% and 7%, respectively, to total revenues in the reported quarter.
Product-wise, Core EDA, Intellectual Property (IP) and Systems Design & Analysis accounted for 71%, 13% and 16% of total revenues, respectively.
The System Design & Analysis business benefited from the adoption of 3DIC technologies and the AI-driven Advanced Substrate Router. Higher demand for BETA CAE solutions in the automotive space and increased demand for its Allegro X PCB design wins with Aerospace and Defense, hyperscale and EV customers were additional tailwinds.
CDNS’ Core EDA business, which includes Custom IC, Digital IC and Functional Verification, experienced 16% year-over-year revenue growth in the second quarter. The main driver was the continued demand for new hardware systems, especially among AI, automotive and HPC clients, along with the rapid adoption of digital full-flow solutions and the Spectre X circuit simulator. The verification software suite also continued to expand, adding 27 new logos during the quarter.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
CDNS also unveiled Cerebrus AI Studio, which is an agentic AI multi-block and multi-user SoC design platform. It offers up to 20% PPA improvement, while speeding up chip delivery time by 5-10 times. It was endorsed by Samsung and ST Microelectronics at launch.
The IP business benefited owing to a broadening silicon solutions portfolio and increasing demand for solutions in AI, HPC, foundry ecosystem buildout and chiplet use cases, with revenues from the segment up 25% year over year in the second quarter.
CDNS’ Margin Performance
Total non-GAAP costs and expenses increased 14.8% year over year to $729 million.
Non-GAAP gross margin contracted 130 basis points (bps) to 87.2%. Non-GAAP operating margin expanded 270 bps on a year-over-year basis to 42.8%.
CDNS’ Balance Sheet & Cash Flow
As of June 30, 2025, CDNS had cash and cash equivalents of $2.823 billion compared with $2.778 billion as of March 31.
Long-term debt was $2.478 billion as of June 30, 2025, compared with $2.477 million as of March 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 $378 million in the reported quarter compared with the prior quarter’s $487 million. Free cash flow was $334 million compared with $464 million in the previous quarter.
The company repurchased its shares worth $175 million in the second quarter. It expects to execute $200 million in repurchases in the third quarter.
CDNS Provides Q3 & FY25 Outlook
Non-GAAP operating margin for 2025 is forecasted to be in the range of 43.5% to 44.5% (previous view: 43.25% to 44.25%) compared with 42.5% reported in 2024. Also, operating cash flow is expected to be between $1.65 billion and $1.75 billion (earlier view: $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 third quarter of 2025, revenues are estimated to be in the $1.305-$1.335 billion band. The company reported sales of $1.215 billion in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.33 billion.
Non-GAAP EPS for the third quarter is anticipated to be between $1.75 and $1.81. CDNS reported an EPS of $1.64 in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.75 per share.
Non-GAAP operating margin is estimated to be between 45% and 46% in the third quarter.
Recent Performance of Other Companies in the Same Space
BlackBerry Limited (BB - Free Report) reported first-quarter fiscal 2026 non-GAAP EPS of 2 cents. The figure surpassed the company’s estimate of a loss of 1 cent per share to breakeven. In the year-ago quarter, it reported a non-GAAP loss of 2 cents per share. The Zacks Consensus Estimate was pegged at breakeven. Quarterly total revenues of $121.7 million exceeded its guidance ($107-$115 million) but fell 1.4% year over year.
Over the past year, shares of BB have gained 59.6%.
Simulations Plus, Inc. (SLP - Free Report) reported third-quarter fiscal 2025 adjusted earnings of 45 cents per share, which expanded 66.7% year over year. The figure also beat the Zacks Consensus Estimate of 26 cents per share. Quarterly revenues jumped 10% year over year to $20.4 million, driven by continued momentum across its software and services business segments, along with a $2.4 million boost from the Pro-ficiency acquisition.
Over the past year, shares of SLP have declined 66.1%.
SAP SE (SAP - Free Report) reported second-quarter 2025 non-IFRS earnings of €1.50 ($1.70) per share, climbing 37% from the year-ago quarter’s levels. The Zacks Consensus Estimate was pegged at $1.63 per share. Driven by robust cloud growth, disciplined cost control and expanding AI capabilities, SAP reported total revenues of €9.03 billion ($10.24 billion) on a non-IFRS basis, representing a 9% year-over-year increase (up 12% at constant currency). The Zacks Consensus estimate was pegged at $10.37 billion.
Shares of SAP have surged 36.6% in the past year.
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Cadence Q2 Earnings & Revenues Surpass Estimates, Rise Y/Y, Stock Up
Key Takeaways
Cadence Design Systems (CDNS - Free Report) reported second-quarter 2025 non-GAAP earnings per share (EPS) of $1.65, which beat the Zacks Consensus Estimate by 5.1%. The bottom line increased 28.9% year over year, exceeding management’s guided range of $1.55-$1.61.
Revenues of $1.275 billion beat the Zacks Consensus Estimate by 1.3% and increased 20.3% year over year. The figure beat the management’s guided range of $1.25-$1.27 billion. The top line was driven by broad-based demand for its solutions, especially the AI-driven portfolio, amid robust design activity. CDNS added that its efforts to unify EDA, IP, 3D-IC, PCB and system analysis are aiding in capitalizing on the opportunity presented by the AI super cycle. Also, customer R&D investments, especially in AI, remain robust.
CDNS also settled with the Department of Justice and BIS, related to previously disclosed investigations into certain China sales (worth $45 million) from 2015 to 2021. The company will have to shell out approximately $141 million as a settlement in the third quarter. With the enactment of the One Big Beautiful Bill Act, management expects the company’s U.S. federal tax payments for the remainder of fiscal 2025 to decrease by approximately $140 million.
CDNS ended the quarter with a backlog of $6.4 billion and current-remaining performance obligations of $3.1 billion.
Driven by strong results and a strong pipeline, management upgraded its outlook for 2025. Revenues for 2025 are now estimated to be in the range of $5.21-$5.27 billion compared with $5.15-$5.23 billion guided earlier. The Zacks Consensus Estimate is currently pegged at $5.20 billion, which indicates growth of 12% from the year-ago levels. Non-GAAP EPS for 2025 is expected to be between $6.85 and $6.95 compared with $6.73-$6.83 guided earlier. The Zacks Consensus Estimate is pegged at $6.77 per share, which implies a rise of 13.4% from the prior-year actuals.
Price Performance
Image Source: Zacks Investment Research
CDNS stock jumped 6.6% in the after-market trading yesterday, while pre-market shares are up 8.5%. It has gained 31.9% compared with the Computer - Software industry’s growth of 24.1% in the past year.
CDNS’ Segmental Performance
Product & Maintenance revenues (91.8% of total revenues) of $1.17 billion rose 21.7% year over year. Services revenues (8.2%) of $105 million increased 5% year over year. Our estimate for revenues from Product & Maintenance and Service segments was $1.144 billion and $113.5 million, respectively. Geographically, the Americas, China, Other Asia, Europe, the Middle East and Africa, and Japan contributed 49%, 9%, 19%, 16% and 7%, respectively, to total revenues in the reported quarter.
Product-wise, Core EDA, Intellectual Property (IP) and Systems Design & Analysis accounted for 71%, 13% and 16% of total revenues, respectively.
The System Design & Analysis business benefited from the adoption of 3DIC technologies and the AI-driven Advanced Substrate Router. Higher demand for BETA CAE solutions in the automotive space and increased demand for its Allegro X PCB design wins with Aerospace and Defense, hyperscale and EV customers were additional tailwinds.
CDNS’ Core EDA business, which includes Custom IC, Digital IC and Functional Verification, experienced 16% year-over-year revenue growth in the second quarter. The main driver was the continued demand for new hardware systems, especially among AI, automotive and HPC clients, along with the rapid adoption of digital full-flow solutions and the Spectre X circuit simulator. The verification software suite also continued to expand, adding 27 new logos during the quarter.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. price-consensus-eps-surprise-chart | Cadence Design Systems, Inc. Quote
CDNS also unveiled Cerebrus AI Studio, which is an agentic AI multi-block and multi-user SoC design platform. It offers up to 20% PPA improvement, while speeding up chip delivery time by 5-10 times. It was endorsed by Samsung and ST Microelectronics at launch.
The IP business benefited owing to a broadening silicon solutions portfolio and increasing demand for solutions in AI, HPC, foundry ecosystem buildout and chiplet use cases, with revenues from the segment up 25% year over year in the second quarter.
CDNS’ Margin Performance
Total non-GAAP costs and expenses increased 14.8% year over year to $729 million.
Non-GAAP gross margin contracted 130 basis points (bps) to 87.2%. Non-GAAP operating margin expanded 270 bps on a year-over-year basis to 42.8%.
CDNS’ Balance Sheet & Cash Flow
As of June 30, 2025, CDNS had cash and cash equivalents of $2.823 billion compared with $2.778 billion as of March 31.
Long-term debt was $2.478 billion as of June 30, 2025, compared with $2.477 million as of March 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 $378 million in the reported quarter compared with the prior quarter’s $487 million. Free cash flow was $334 million compared with $464 million in the previous quarter.
The company repurchased its shares worth $175 million in the second quarter. It expects to execute $200 million in repurchases in the third quarter.
CDNS Provides Q3 & FY25 Outlook
Non-GAAP operating margin for 2025 is forecasted to be in the range of 43.5% to 44.5% (previous view: 43.25% to 44.25%) compared with 42.5% reported in 2024. Also, operating cash flow is expected to be between $1.65 billion and $1.75 billion (earlier view: $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 third quarter of 2025, revenues are estimated to be in the $1.305-$1.335 billion band. The company reported sales of $1.215 billion in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.33 billion.
Non-GAAP EPS for the third quarter is anticipated to be between $1.75 and $1.81. CDNS reported an EPS of $1.64 in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.75 per share.
Non-GAAP operating margin is estimated to be between 45% and 46% in the third quarter.
CDNS’ Zacks Rank
Cadence currently carries a Zacks Rank #4 (Sell).
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
BlackBerry Limited (BB - Free Report) reported first-quarter fiscal 2026 non-GAAP EPS of 2 cents. The figure surpassed the company’s estimate of a loss of 1 cent per share to breakeven. In the year-ago quarter, it reported a non-GAAP loss of 2 cents per share. The Zacks Consensus Estimate was pegged at breakeven. Quarterly total revenues of $121.7 million exceeded its guidance ($107-$115 million) but fell 1.4% year over year.
Over the past year, shares of BB have gained 59.6%.
Simulations Plus, Inc. (SLP - Free Report) reported third-quarter fiscal 2025 adjusted earnings of 45 cents per share, which expanded 66.7% year over year. The figure also beat the Zacks Consensus Estimate of 26 cents per share. Quarterly revenues jumped 10% year over year to $20.4 million, driven by continued momentum across its software and services business segments, along with a $2.4 million boost from the Pro-ficiency acquisition.
Over the past year, shares of SLP have declined 66.1%.
SAP SE (SAP - Free Report) reported second-quarter 2025 non-IFRS earnings of €1.50 ($1.70) per share, climbing 37% from the year-ago quarter’s levels. The Zacks Consensus Estimate was pegged at $1.63 per share. Driven by robust cloud growth, disciplined cost control and expanding AI capabilities, SAP reported total revenues of €9.03 billion ($10.24 billion) on a non-IFRS basis, representing a 9% year-over-year increase (up 12% at constant currency). The Zacks Consensus estimate was pegged at $10.37 billion.
Shares of SAP have surged 36.6% in the past year.