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Cadence Q3 Earnings Top on Upbeat AI Trends, Backlog Remains Robust
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Key Takeaways
Cadence reported Q3 EPS of $1.93 and revenues of $1.339B, both topping consensus estimates.
Backlog hit a record $7B, powered by AI, HPC and automotive design demand.
Full-year outlook was raised with 2025 EPS guided at $7.02-$7.08 on $5.26-$5.29B revenues
Cadence Design Systems (CDNS - Free Report) , a well-known player in the electronic design automation (“EDA”) space, recently reported better-than-expected third-quarter 2025 results and exceeded management’s guidance.
Non-GAAP earnings per share (EPS) of $1.93 beat the Zacks Consensus Estimate by 7.8% and increased 17.7% year over year. Revenues of $1.339 billion beat the Zacks Consensus Estimate by 0.9% and increased 10.2% year over year. CDNS has guided EPS to be in $1.75-$1.81 on revenues of 1.305-$1.335 billion.
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.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
CDNS recorded an increase in backlog, fueled by accelerating demand across various end markets including artificial intelligence (“AI”), high-performance computing (“HPC”) and automotive.
Management noted that bookings were strong, driving the company’s backlog to a record $7 billion at the third quarter end, underscoring sustained customer demand and growing visibility into 2026. The Zacks Consensus Estimate for order backlog stood at $6.107 billion. The current remaining performance obligations were $3.5 billion at the quarter-end.
Record Backlog Underscores AI Tailwinds
AI is driving a major transformation in semiconductor and system design. Cadence is deeply integrated into this shift. Design activity across several verticals, especially data centers and automotive, has been robust, due to AI, hyperscale computing and 5G. The focus on Generative AI, Agentic AI and Physical AI has been leading to an exponential increase in computing demand and semiconductor innovation.
Customers have been significantly increasing their R&D budgets in AI-driven automation. On the last earnings call, Cadence highlighted that its efforts to unify EDA, IP, 3D-IC, PCB and system analysis have been aiding in capitalizing on the opportunity presented by the AI super cycle. These factors are likely to have driven demand for Cadence’s solutions, particularly its AI portfolio. Cadence.AI portfolio is powered by autonomous silicon agents and built the JedAI platform using NVIDIA accelerated compute capacity.
In the third quarter, the company deepened strategic partnerships with Samsung, TSMC and OpenAI, among others. OpenAI leveraged the Palladium emulation platform in the third quarter. All these factors bode well for CDNS as reflected in the strong quarterly numbers.
Management also noted that Core EDA and IP backlog are weighed toward multiyear recurring arrangements, which will support “durable double-digit growth.” CDNS added that after a record $7 billion backlog, it expects 2025 backlog “at a fresh high” given visibility and renewal timing in the fourth quarter.
CDNS’ Upbeat Outlook
CDNS raised its full-year outlook, indicating broad-based momentum across its business segments. 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 $5.27 billion, which indicates growth of 13.5% 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 $7.03 per share, which implies a rise of 17.8% from the prior-year actuals.
Zacks Rank & Stock Price
CDNS carries a Zacks Rank #3 (Hold).
Image Source: Zacks Investment Research
In the past year, its shares have gained 19.1% compared with the Computer-Software industry’s rise of 22%.
The Zacks Consensus Estimate for SLP’s fiscal 2026 EPS is pegged at 95 cents, up 9 cents in the past 30 days. SLP’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average surprise being 35.4%. Shares of SLP have declined 38.2% in the past year.
The Zacks Consensus Estimate for PRO’s 2025 EPS is pegged at 67 cents, up 1 cent in the past seven days. PRO Holdings earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 34.6%. Shares of PRO have gained 9.9% in the past year.
The Zacks Consensus Estimate for SMSI’s 2025 EPS is pegged at a loss of 51 cents. SMSI’s earnings beat the Zacks Consensus Estimate in two of the last four quarters, matching in one quarter and missing in the remaining quarter, with the average negative surprise of 12.48%. Shares of SMSI have declined 18.2% in the past year.
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Cadence Q3 Earnings Top on Upbeat AI Trends, Backlog Remains Robust
Key Takeaways
Cadence Design Systems (CDNS - Free Report) , a well-known player in the electronic design automation (“EDA”) space, recently reported better-than-expected third-quarter 2025 results and exceeded management’s guidance.
Non-GAAP earnings per share (EPS) of $1.93 beat the Zacks Consensus Estimate by 7.8% and increased 17.7% year over year. Revenues of $1.339 billion beat the Zacks Consensus Estimate by 0.9% and increased 10.2% year over year. CDNS has guided EPS to be in $1.75-$1.81 on revenues of 1.305-$1.335 billion.
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.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. price-consensus-eps-surprise-chart | Cadence Design Systems, Inc. Quote
CDNS recorded an increase in backlog, fueled by accelerating demand across various end markets including artificial intelligence (“AI”), high-performance computing (“HPC”) and automotive.
Management noted that bookings were strong, driving the company’s backlog to a record $7 billion at the third quarter end, underscoring sustained customer demand and growing visibility into 2026. The Zacks Consensus Estimate for order backlog stood at $6.107 billion. The current remaining performance obligations were $3.5 billion at the quarter-end.
Record Backlog Underscores AI Tailwinds
AI is driving a major transformation in semiconductor and system design. Cadence is deeply integrated into this shift. Design activity across several verticals, especially data centers and automotive, has been robust, due to AI, hyperscale computing and 5G. The focus on Generative AI, Agentic AI and Physical AI has been leading to an exponential increase in computing demand and semiconductor innovation.
Customers have been significantly increasing their R&D budgets in AI-driven automation. On the last earnings call, Cadence highlighted that its efforts to unify EDA, IP, 3D-IC, PCB and system analysis have been aiding in capitalizing on the opportunity presented by the AI super cycle. These factors are likely to have driven demand for Cadence’s solutions, particularly its AI portfolio. Cadence.AI portfolio is powered by autonomous silicon agents and built the JedAI platform using NVIDIA accelerated compute capacity.
In the third quarter, the company deepened strategic partnerships with Samsung, TSMC and OpenAI, among others. OpenAI leveraged the Palladium emulation platform in the third quarter. All these factors bode well for CDNS as reflected in the strong quarterly numbers.
Management also noted that Core EDA and IP backlog are weighed toward multiyear recurring arrangements, which will support “durable double-digit growth.” CDNS added that after a record $7 billion backlog, it expects 2025 backlog “at a fresh high” given visibility and renewal timing in the fourth quarter.
CDNS’ Upbeat Outlook
CDNS raised its full-year outlook, indicating broad-based momentum across its business segments. 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 $5.27 billion, which indicates growth of 13.5% 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 $7.03 per share, which implies a rise of 17.8% from the prior-year actuals.
Zacks Rank & Stock Price
CDNS carries a Zacks Rank #3 (Hold).
Image Source: Zacks Investment Research
In the past year, its shares have gained 19.1% compared with the Computer-Software industry’s rise of 22%.
Stocks to Consider
Some better-ranked stocks worth consideration in the broader technology space are Simulations Plus (SLP - Free Report) , PRO Holdings, Inc (PRO - Free Report) and Smith Microwave Software (SMSI - Free Report) . SLP currently sports a Zacks Rank #1 (Strong Buy), while PRO and SMSI carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for SLP’s fiscal 2026 EPS is pegged at 95 cents, up 9 cents in the past 30 days. SLP’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average surprise being 35.4%. Shares of SLP have declined 38.2% in the past year.
The Zacks Consensus Estimate for PRO’s 2025 EPS is pegged at 67 cents, up 1 cent in the past seven days. PRO Holdings earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 34.6%. Shares of PRO have gained 9.9% in the past year.
The Zacks Consensus Estimate for SMSI’s 2025 EPS is pegged at a loss of 51 cents. SMSI’s earnings beat the Zacks Consensus Estimate in two of the last four quarters, matching in one quarter and missing in the remaining quarter, with the average negative surprise of 12.48%. Shares of SMSI have declined 18.2% in the past year.