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Cadence Q3 Earnings & Revenues Surpass Estimates, Both Rise Y/Y
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Key Takeaways
Cadence posted Q3 EPS of $1.93, up 17.7% Y/Y, and revenues of $1.339B, rising 10.2%.
AI-powered solutions gaining traction amid broad-based demand across key segments
Management raised 2025 revenues to $5.262-$5.292B and EPS to $7.02-$7.08 amid strong momentum.
Cadence Design Systems (CDNS - Free Report) reported third-quarter 2025 non-GAAP earnings per share (EPS) of $1.93, which beat the Zacks Consensus Estimate by 7.8%. The bottom line increased 17.7% year over year, exceeding management’s guided range of $1.75-$1.81.
Revenues of $1.339 billion beat the Zacks Consensus Estimate by 0.9% and increased 10.2% year over year. The figure also beat the management’s guided range of $1.305-$1.335 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.
CDNS ended the quarter with a backlog of $7 billion and current-remaining performance obligations of $3.5 billion.
Driven by strong momentum, management upgraded its outlook for 2025. Revenues for 2025 are now estimated to be in the range of $5.262-$5.292 billion compared with $5.21-$5.27 billion guided earlier. The Zacks Consensus Estimate is currently pegged at $5.25 billion, which indicates growth of 13.1% from the year-ago levels.
Non-GAAP EPS for 2025 is expected to be between $7.02 and $7.08 compared with $6.85-$6.95 guided earlier. The Zacks Consensus Estimate is currently pinned at $6.91 per share, which implies a rise of 15.8% from the prior-year actuals.
Image Source: Zacks Investment Research
CDNS stock is down 2.2% in the pre-market trading today. It has gained 23.5% compared with the Computer - Software industry’s growth of 20.4% in the past year.
CDNS’ Segment Performance
Product & Maintenance revenues (90.2% of total revenues) of $1.208 billion rose 9.8% year over year. Services revenues (9.8%) of $131 million increased 13.9% year over year. Our estimate for revenues from Product & Maintenance and Service segments was $1.201 billion and $122 million, respectively. Geographically, the Americas, China, Other Asia, Europe, the Middle East and Africa, and Japan contributed 43%, 18%, 18%, 14% and 7%, 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 higher demand for BETA CAE solutions, AI-powered Allegro X, Clarity and Sigrity solutions. In the third quarter, Cadence announced a major expansion of its Cadence Reality Digital Twin Platform with the addition of a digital twin of NVIDIA DGX SuperPOD with DGX GB200 systems.
CDNS also signed a definitive agreement to acquire the Design & Engineering division of Hexagon AB, including its renowned MSC Software business. The buyout will aid in accelerating footprint expansion in SDA and gain access to newer opportunities across automotive, aerospace, industrial and physical AI.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
CDNS’ Core EDA business, which includes Custom IC, Digital IC and Functional Verification, experienced strong growth driven by AI-driven design and verification solutions like Cerebrus AI Studio, Virtuoso Studio, Spectre and Verisium SimAI. The demand for new hardware systems remained robust among AI and HPC clients. OpenAI also leveraged the Palladium emulation platform in the third quarter.
The IP business benefited owing to a broadening silicon solutions portfolio and increasing demand for solutions in AI, HPC, automotive, foundry and chiplet use cases. In the quarter under review, Cadence completed its acquisition of Arm’s Artisan foundation IP business — covering standard cell libraries, memory compilers and GPIOs optimized for advanced process nodes. The deal strengthens Cadence’s design IP portfolio, adding to its leadership in protocol, memory interface and SerDes IP at advanced nodes.
CDNS’ Margin Performance
Total non-GAAP costs and expenses increased 4.5% year over year to $701 million.
Non-GAAP gross margin contracted 60 basis points (bps) to 88%. Non-GAAP operating margin expanded 280 bps on a year-over-year basis to 47.6%.
CDNS’ Balance Sheet & Cash Flow
As of Sept. 30, 2025, CDNS had cash and cash equivalents of $2.753 billion compared with $2.823 billion as of June 30.
Long-term debt was $2.479 billion as of Sept. 30, 2025, compared with $2.478 million as of June 30. 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 $311 million in the reported quarter compared with the prior quarter’s $378 million. Free cash flow was $277 million compared with $334 million in the previous quarter.
The company repurchased its shares worth $200 million in the third quarter and expects another $200 million worth of buybacks in the fourth quarter
CDNS Provides Q4 & FY25 Outlook
Non-GAAP operating margin for 2025 is forecasted to be in the range of 43.9% to 44.9% (previous view: 43.5% to 44.5%) compared with 42.5% reported in 2024. Also, operating cash flow is expected to be between $1.65 billion and $1.75 billion. CDNS expects to utilize at least 50% of its free cash flow to repurchase shares in 2025.
For the fourth quarter of 2025, revenues are estimated to be in the $1.405-$1.435 billion band. The company reported sales of $1.356 billion in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.33 billion.
Non-GAAP EPS is anticipated to be between $1.88 and $1.94. CDNS reported an EPS of $1.88 in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.79 per share.
Non-GAAP operating margin is estimated to be between 44.5% and 45.5% in the fourth quarter.
Recent Performance of Other Companies in the Same Space
SAP SE (SAP - Free Report) reported third-quarter 2025 non-IFRS earnings of €1.59 ($1.86) per share, climbing 29% from the year-ago quarter’s levels. The Zacks Consensus Estimate was pegged at $1.69. Driven by robust cloud growth, disciplined cost control and expanding AI capabilities, SAP reported total revenues on a non-IFRS basis of €9.08 billion ($10.6 billion), representing a 7% year-over-year increase (up 11% at constant currency or cc). The Zacks Consensus Estimate was pegged at $10.56 billion.
Over the past year, shares of SAP have gained 12.3%.
Oracle Corporation (ORCL - Free Report) reported first-quarter fiscal 2026 non-GAAP earnings of $1.47 per share, which met the Zacks Consensus Estimate and increased 6% year over year in USDOracle Corporation and 4% in cc. Revenues rose 12% in USD and 11% in cc year over year to $14.9 billion, driven by Oracle becoming the go-to place for AI workloads. Oracle signed four multi-billion-dollar contracts with three different customers in the fiscal first quarter, securing significant cloud infrastructure contracts with leading AI companies, including OpenAI, xAI, Meta, NVIDIA and AMD. The figure lagged the Zacks Consensus Estimate by 0.59%.
Over the past year, shares of ORCL have gained 62.2%.
Synopsys (SNPS - Free Report) delivered lower-than-expected third-quarter fiscal 2025 results. The company reported non-GAAP earnings of $3.39 per share for the fiscal third quarter, missing the Zacks Consensus Estimate of $3.84 and the guided range of $3.82-$3.87. The bottom line decreased 1.2% on a year-over-year basis. Synopsys’ fiscal third-quarter revenues jumped 14% year over year to $1.74 billion, but missed the Zacks Consensus Estimate of $1.768 billion. The top line was primarily driven by an increase in revenues of Time-Based Product and Upfront Product businesses.
Shares of SNPS have declined 12.1% in the past year.
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Cadence Q3 Earnings & Revenues Surpass Estimates, Both Rise Y/Y
Key Takeaways
Cadence Design Systems (CDNS - Free Report) reported third-quarter 2025 non-GAAP earnings per share (EPS) of $1.93, which beat the Zacks Consensus Estimate by 7.8%. The bottom line increased 17.7% year over year, exceeding management’s guided range of $1.75-$1.81.
Revenues of $1.339 billion beat the Zacks Consensus Estimate by 0.9% and increased 10.2% year over year. The figure also beat the management’s guided range of $1.305-$1.335 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.
CDNS ended the quarter with a backlog of $7 billion and current-remaining performance obligations of $3.5 billion.
Driven by strong momentum, management upgraded its outlook for 2025. Revenues for 2025 are now estimated to be in the range of $5.262-$5.292 billion compared with $5.21-$5.27 billion guided earlier. The Zacks Consensus Estimate is currently pegged at $5.25 billion, which indicates growth of 13.1% from the year-ago levels.
Non-GAAP EPS for 2025 is expected to be between $7.02 and $7.08 compared with $6.85-$6.95 guided earlier. The Zacks Consensus Estimate is currently pinned at $6.91 per share, which implies a rise of 15.8% from the prior-year actuals.
Image Source: Zacks Investment Research
CDNS stock is down 2.2% in the pre-market trading today. It has gained 23.5% compared with the Computer - Software industry’s growth of 20.4% in the past year.
CDNS’ Segment Performance
Product & Maintenance revenues (90.2% of total revenues) of $1.208 billion rose 9.8% year over year. Services revenues (9.8%) of $131 million increased 13.9% year over year. Our estimate for revenues from Product & Maintenance and Service segments was $1.201 billion and $122 million, respectively. Geographically, the Americas, China, Other Asia, Europe, the Middle East and Africa, and Japan contributed 43%, 18%, 18%, 14% and 7%, 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 higher demand for BETA CAE solutions, AI-powered Allegro X, Clarity and Sigrity solutions. In the third quarter, Cadence announced a major expansion of its Cadence Reality Digital Twin Platform with the addition of a digital twin of NVIDIA DGX SuperPOD with DGX GB200 systems.
CDNS also signed a definitive agreement to acquire the Design & Engineering division of Hexagon AB, including its renowned MSC Software business. The buyout will aid in accelerating footprint expansion in SDA and gain access to newer opportunities across automotive, aerospace, industrial and physical AI.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. price-consensus-eps-surprise-chart | Cadence Design Systems, Inc. Quote
CDNS’ Core EDA business, which includes Custom IC, Digital IC and Functional Verification, experienced strong growth driven by AI-driven design and verification solutions like Cerebrus AI Studio, Virtuoso Studio, Spectre and Verisium SimAI. The demand for new hardware systems remained robust among AI and HPC clients. OpenAI also leveraged the Palladium emulation platform in the third quarter.
The IP business benefited owing to a broadening silicon solutions portfolio and increasing demand for solutions in AI, HPC, automotive, foundry and chiplet use cases. In the quarter under review, Cadence completed its acquisition of Arm’s Artisan foundation IP business — covering standard cell libraries, memory compilers and GPIOs optimized for advanced process nodes. The deal strengthens Cadence’s design IP portfolio, adding to its leadership in protocol, memory interface and SerDes IP at advanced nodes.
CDNS’ Margin Performance
Total non-GAAP costs and expenses increased 4.5% year over year to $701 million.
Non-GAAP gross margin contracted 60 basis points (bps) to 88%. Non-GAAP operating margin expanded 280 bps on a year-over-year basis to 47.6%.
CDNS’ Balance Sheet & Cash Flow
As of Sept. 30, 2025, CDNS had cash and cash equivalents of $2.753 billion compared with $2.823 billion as of June 30.
Long-term debt was $2.479 billion as of Sept. 30, 2025, compared with $2.478 million as of June 30. 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 $311 million in the reported quarter compared with the prior quarter’s $378 million. Free cash flow was $277 million compared with $334 million in the previous quarter.
The company repurchased its shares worth $200 million in the third quarter and expects another $200 million worth of buybacks in the fourth quarter
CDNS Provides Q4 & FY25 Outlook
Non-GAAP operating margin for 2025 is forecasted to be in the range of 43.9% to 44.9% (previous view: 43.5% to 44.5%) compared with 42.5% reported in 2024. Also, operating cash flow is expected to be between $1.65 billion and $1.75 billion. CDNS expects to utilize at least 50% of its free cash flow to repurchase shares in 2025.
For the fourth quarter of 2025, revenues are estimated to be in the $1.405-$1.435 billion band. The company reported sales of $1.356 billion in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.33 billion.
Non-GAAP EPS is anticipated to be between $1.88 and $1.94. CDNS reported an EPS of $1.88 in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.79 per share.
Non-GAAP operating margin is estimated to be between 44.5% and 45.5% in the fourth quarter.
CDNS’ Zacks Rank
Cadence currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Performance of Other Companies in the Same Space
SAP SE (SAP - Free Report) reported third-quarter 2025 non-IFRS earnings of €1.59 ($1.86) per share, climbing 29% from the year-ago quarter’s levels. The Zacks Consensus Estimate was pegged at $1.69. Driven by robust cloud growth, disciplined cost control and expanding AI capabilities, SAP reported total revenues on a non-IFRS basis of €9.08 billion ($10.6 billion), representing a 7% year-over-year increase (up 11% at constant currency or cc). The Zacks Consensus Estimate was pegged at $10.56 billion.
Over the past year, shares of SAP have gained 12.3%.
Oracle Corporation (ORCL - Free Report) reported first-quarter fiscal 2026 non-GAAP earnings of $1.47 per share, which met the Zacks Consensus Estimate and increased 6% year over year in USDOracle Corporation and 4% in cc. Revenues rose 12% in USD and 11% in cc year over year to $14.9 billion, driven by Oracle becoming the go-to place for AI workloads. Oracle signed four multi-billion-dollar contracts with three different customers in the fiscal first quarter, securing significant cloud infrastructure contracts with leading AI companies, including OpenAI, xAI, Meta, NVIDIA and AMD. The figure lagged the Zacks Consensus Estimate by 0.59%.
Over the past year, shares of ORCL have gained 62.2%.
Synopsys (SNPS - Free Report) delivered lower-than-expected third-quarter fiscal 2025 results. The company reported non-GAAP earnings of $3.39 per share for the fiscal third quarter, missing the Zacks Consensus Estimate of $3.84 and the guided range of $3.82-$3.87. The bottom line decreased 1.2% on a year-over-year basis. Synopsys’ fiscal third-quarter revenues jumped 14% year over year to $1.74 billion, but missed the Zacks Consensus Estimate of $1.768 billion. The top line was primarily driven by an increase in revenues of Time-Based Product and Upfront Product businesses.
Shares of SNPS have declined 12.1% in the past year.