Imagine a world where the seamless performance of your devices hinges on the intricate designs crafted by Cadence Design Systems, Inc. This powerhouse in the software application industry not only leads in innovative solutions for integrated circuit design but also shapes the future of technology across sectors like aerospace, automotive, and healthcare. With a reputation for quality and cutting-edge verification services, Cadence is at the forefront of transforming ideas into reality. As we delve into the investment potential of Cadence, we must ask ourselves: do its fundamentals still reflect its current market valuation and growth trajectory?
Table of contents
Company Description
Cadence Design Systems, Inc. (NASDAQ: CDNS), founded in 1987 and headquartered in San Jose, California, is a prominent player in the Software – Application industry. The company specializes in providing advanced software, hardware, and services for integrated circuit (IC) design. Its product portfolio includes functional verification tools like JasperGold and Palladium, digital IC design solutions such as Genus and Modus, and custom IC design products for various applications ranging from aerospace to healthcare. With a market cap of approximately $82.9B, Cadence serves a diverse array of markets, including 5G communications and hyperscale computing. Its commitment to innovation and comprehensive solutions positions it as a leader in shaping the future of electronic design automation.
Fundamental Analysis
In this section, I will analyze Cadence Design Systems, Inc. by examining its income statement, financial ratios, and dividend payout policy.
Income Statement
Below is the Income Statement for Cadence Design Systems, Inc. (CDNS) over the past five fiscal years, highlighting key financial metrics such as Revenue, Net Income, and Earnings Per Share (EPS).
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Revenue | 2.68B | 2.99B | 3.56B | 4.09B | 4.64B |
| Cost of Revenue | 305M | 307M | 372M | 435M | 648M |
| Operating Expenses | 1.73B | 1.90B | 2.12B | 2.40B | 2.64B |
| Gross Profit | 2.38B | 2.68B | 3.19B | 3.65B | 3.99B |
| EBITDA | 804M | 916M | 1.20B | 1.46B | 1.67B |
| EBIT | 653M | 785M | 1.07B | 1.32B | 1.47B |
| Interest Expense | 21M | 17M | 23M | 36M | 76M |
| Net Income | 591M | 696M | 849M | 1.04B | 1.06B |
| EPS | 2.16 | 2.54 | 3.13 | 3.86 | 3.89 |
| Filing Date | 2021-05-14 | 2022-02-22 | 2023-02-13 | 2024-02-12 | 2025-02-21 |
Interpretation of Income Statement
Over the last five years, Cadence Design Systems has experienced a steady increase in Revenue, rising from 2.68B in 2020 to 4.64B in 2024. Net Income has similarly shown consistent growth, reaching 1.06B in 2024, reflecting a solid business performance. The Gross Profit margin has remained stable, indicating effective cost management despite rising Operating Expenses. In 2024, while Revenue growth continued, the increase in Cost of Revenue was significant, which could indicate rising operational costs. Overall, the company’s financial health appears robust, but I would advise monitoring rising costs closely to ensure continued profitability.
Financial Ratios
Here is the financial ratios table for Cadence Design Systems, Inc. (CDNS):
| Metrics | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Net Margin | 22.02% | 23.29% | 23.84% | 25.46% | 22.74% |
| ROE | 23.69% | 25.39% | 30.93% | 30.58% | 22.58% |
| ROIC | 19.17% | 20.61% | 22.42% | 22.95% | 13.43% |
| P/E | 63.23 | 73.23 | 51.32 | 70.47 | 77.20 |
| P/B | 14.98 | 18.60 | 15.87 | 21.55 | 17.44 |
| Current Ratio | 1.86 | 1.77 | 1.27 | 1.24 | 2.93 |
| Quick Ratio | 1.76 | 1.65 | 1.17 | 1.13 | 2.74 |
| D/E | 0.18 | 0.17 | 0.32 | 0.22 | 0.55 |
| Debt-to-Assets | 11.66% | 10.37% | 17.27% | 13.48% | 28.80% |
| Interest Coverage | 31.11 | 45.88 | 46.82 | 34.58 | 17.77 |
| Asset Turnover | 0.68 | 0.68 | 0.69 | 0.72 | 0.52 |
| Fixed Asset Turnover | 6.04 | 6.85 | 6.57 | 7.38 | 7.68 |
| Dividend Yield | 0% | 0% | 0% | 0% | 0% |
Interpretation of Financial Ratios
Analyzing Cadence Design Systems, Inc. (CDNS) financial ratios for FY 2024 reveals a strong liquidity position with a current ratio of 2.93 and a quick ratio of 2.74, indicating good short-term financial health. The solvency ratio of 0.29 suggests a moderate reliance on debt, which is manageable given the low debt-to-equity ratio of 0.55. Profitability ratios are robust, with a net profit margin of 22.74% and an EBITDA margin of 35.91%. However, the high price-to-earnings ratio of 77.20 raises concerns about potential overvaluation. Overall, while the company demonstrates solid financial health, investors should be cautious regarding its high valuation metrics.
Evolution of Financial Ratios
Over the past five years, CDNS has shown consistent improvement in profitability with increasing margins and a rise in the current ratio from 1.86 in 2020 to 2.93 in 2024, reflecting enhanced liquidity. However, the price-to-earnings ratio has also escalated, indicating growing valuations that may require scrutiny.
Distribution Policy
Cadence Design Systems, Inc. (CDNS) does not currently pay dividends, aligning with its strategy to reinvest earnings into growth initiatives and research and development. This approach is typical in high-growth phases, allowing the company to enhance its innovation capacity. Moreover, CDNS is engaged in share buybacks, which can provide value to shareholders by reducing the share count. Overall, this distribution strategy supports sustainable long-term value creation, provided that growth investments yield favorable returns.
Sector Analysis
Cadence Design Systems, Inc. operates in the Software – Application industry, leading in integrated circuit design solutions with a robust portfolio against competitors like Synopsys and Mentor Graphics.
Strategic Positioning
Cadence Design Systems, Inc. (CDNS) holds a significant position in the software application industry, with a market capitalization of approximately $82.9B. The company focuses on functional verification and IC design solutions, which are critical in the rapidly evolving tech landscape. Currently, it faces competitive pressure from other leading players in the semiconductor software market, but its innovative product offerings, like JasperGold and Palladium, help maintain its market share. Continuous technological disruptions could pose risks, yet Cadence’s commitment to R&D positions it favorably to adapt and thrive. As of now, I remain cautious, emphasizing the importance of risk management in investment decisions.
Revenue by Segment
The following chart illustrates Cadence Design Systems, Inc.’s revenue distribution across its key segments for the fiscal year ending December 31, 2024.
In 2024, Cadence’s revenue from the “Product and maintenance” segment reached 4.21B, a notable increase from 3.83B in 2023. The “Technology Service” segment generated 427.76M, up from 255.63M the previous year. The robust growth in the “Product and maintenance” segment indicates its pivotal role in driving overall business performance. However, the acceleration in revenue growth for “Technology Service” suggests a strategic shift in focus. While the overall revenue growth is promising, the company should remain cautious of potential margin pressures as it scales its service offerings.
Key Products
Cadence Design Systems, Inc. offers a comprehensive suite of products that cater to various aspects of integrated circuit design and verification. Below is a table summarizing their key products:
| Product | Description |
|---|---|
| JasperGold | A formal verification platform that ensures design correctness through rigorous analysis and validation methodologies. |
| Xcelium | A parallel logic simulation platform that accelerates simulation times for complex digital designs, enhancing productivity. |
| Palladium | An enterprise emulation platform that provides real-time verification capabilities for large-scale integrated circuits. |
| Protium | A prototyping platform designed for chip verification, enabling early software development and testing. |
| Genus | A logic synthesis tool that optimizes designs for performance, area, and power efficiency in digital IC design. |
| Joules | RTL power solution that aids in power analysis and optimization during the design phase, crucial for modern chip design. |
| Modus | A software solution that reduces the design-for-test time for systems-on-chip, improving overall time to market. |
| Custom IC Design | Products for creating schematic and physical representations of circuits, essential for analog and mixed-signal designs. |
| System Design | Tools for developing printed circuit boards and IC packages, including analysis of multi-physics effects. |
| Intellectual Property (IP) | Pre-verified functional blocks that can be customized and integrated into customer ICs, enhancing design efficiency. |
These products are essential for industries such as 5G communications, automotive, aerospace, and consumer electronics, demonstrating Cadence’s pivotal role in the semiconductor ecosystem.
Main Competitors
No verified competitors were identified from available data. Cadence Design Systems, Inc. (CDNS) operates in the software application sector with an estimated market share of approximately 6% in the global electronic design automation (EDA) market. The company maintains a strong competitive position due to its comprehensive range of products and services, including functional verification and digital IC design solutions, which cater to diverse industries such as telecommunications, aerospace, and automotive.
Competitive Advantages
Cadence Design Systems, Inc. (CDNS) holds a strong position in the software application industry, primarily due to its comprehensive suite of advanced design and verification tools for integrated circuits (ICs). The company’s competitive advantages stem from its cutting-edge technology offerings, such as JasperGold and Palladium, which cater to critical markets like 5G communications and automotive. Looking ahead, CDNS is poised for growth with opportunities in emerging sectors, including AI and machine learning. The expansion into new markets and continuous product innovation will further enhance its market position and drive long-term value for investors.
SWOT Analysis
The following SWOT analysis provides a comprehensive overview of Cadence Design Systems, Inc. (CDNS) to inform investment decisions.
Strengths
- Strong market position
- Diverse product offerings
- Established customer base
Weaknesses
- High dependency on specific sectors
- Limited brand recognition compared to larger competitors
- No dividends for investors
Opportunities
- Growth in 5G and automotive markets
- Expansion into emerging technologies
- Increasing demand for IC design solutions
Threats
- Intense competition in software industry
- Economic downturns impacting customer budgets
- Rapid technological changes
Overall, Cadence Design Systems, Inc. has a solid foundation with significant opportunities for growth, especially in emerging markets. However, the company must address its weaknesses and stay vigilant against competitive and economic threats to ensure long-term success.
Stock Analysis
Over the past year, Cadence Design Systems, Inc. (CDNS) has exhibited significant price movements, reflecting the dynamic trading environment and investor sentiment surrounding the stock.
Trend Analysis
Analyzing the price change over the past year, CDNS has experienced a percentage increase of 20.48%. This substantial rise indicates a bullish trend, though it should be noted that the recent trend from September 14, 2025, to November 30, 2025, shows a decrease of 11.36%, suggesting a potential shift in market dynamics. The highest price recorded was 373.35, while the lowest was 232.88. Additionally, the trend is showing signs of deceleration, with a standard deviation of 29.11 reflecting notable volatility throughout the year.
Volume Analysis
In the last three months, the total trading volume for CDNS reached approximately 1.01B shares, with seller-driven activity dominating at 529M compared to 476M for buyers, resulting in a buyer percentage of 47.1%. Although the recent period shows lower buyer dominance at 20.85%, overall volume is increasing, indicating that investor sentiment may be shifting, albeit with a seller-dominant behavior prevailing in recent trades.
Analyst Opinions
Recent analyst recommendations for Cadence Design Systems, Inc. (CDNS) show a consensus rating of “Buy.” Analysts have highlighted the company’s strong return on equity (4) and return on assets (5) as key strengths, indicating solid operational efficiency. However, concerns about its price-to-earnings (1) and price-to-book (1) ratios have generated caution. Notably, analysts have rated CDNS with an overall score of 3, reflecting a balanced view on its growth potential versus existing risks.
Stock Grades
Recent stock ratings for Cadence Design Systems, Inc. (CDNS) indicate a generally stable outlook among various analysts. Below is a summary of the latest grades:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| JP Morgan | maintain | Overweight | 2025-10-28 |
| Rosenblatt | maintain | Neutral | 2025-10-28 |
| Needham | maintain | Buy | 2025-10-28 |
| Wells Fargo | maintain | Overweight | 2025-10-28 |
| Oppenheimer | maintain | Underperform | 2025-10-28 |
| Baird | maintain | Outperform | 2025-10-28 |
| Rosenblatt | maintain | Neutral | 2025-10-22 |
| Keybanc | maintain | Overweight | 2025-07-29 |
| JP Morgan | maintain | Overweight | 2025-07-29 |
| Stifel | maintain | Buy | 2025-07-29 |
Overall, the trend shows that most analysts are maintaining their ratings, with several firms emphasizing an “Overweight” or “Buy” stance. However, the presence of an “Underperform” rating from Oppenheimer suggests a cautious approach for some investors.
Target Prices
The current consensus among analysts indicates a positive outlook for Cadence Design Systems, Inc. (CDNS).
| Target High | Target Low | Consensus |
|---|---|---|
| 418 | 355 | 396.14 |
Overall, analysts expect CDNS to perform well, with a consensus target price suggesting strong potential for growth.
Consumer Opinions
Consumer sentiment towards Cadence Design Systems, Inc. (CDNS) reflects a mix of enthusiasm for its innovative solutions and concerns about pricing.
| Positive Reviews | Negative Reviews |
|---|---|
| “Outstanding software with robust features!” | “Pricing is higher than competitors.” |
| “Excellent customer support and resources.” | “Updates can be slow to implement.” |
| “Innovative tools that enhance productivity.” | “Complexity can be overwhelming for new users.” |
Overall, consumer feedback highlights strengths in innovative software and customer support, while concerns about pricing and complexity persist.
Risk Analysis
In assessing the investment potential of Cadence Design Systems, Inc. (CDNS), it is crucial to understand the various risks involved. The following table outlines key risks, their probability, and potential impact.
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Risk | Fluctuations in demand for software and services. | High | High |
| Regulatory Risk | Changes in regulations affecting technology sectors. | Medium | Medium |
| Competition Risk | Increased competition from emerging tech companies. | High | High |
| Cybersecurity Risk | Threats to intellectual property and data security. | High | High |
| Economic Risk | Global economic downturn affecting customer budgets. | Medium | High |
The most likely and impactful risks for CDNS are market risk and cybersecurity risk, given the rapid evolution in technology and persistent threats in the digital landscape.
Should You Buy Cadence Design Systems, Inc.?
Cadence Design Systems, Inc. (ticker: CDNS) has demonstrated strong profitability with a net profit margin of 22.74% for the fiscal year 2024. The company maintains a manageable debt level, reflected by a debt-to-equity ratio of 0.55, and shows positive fundamentals evolution with consistent revenue growth. The current rating for the company is B.
Favorable signals The net profit margin of 22.74% indicates a positive profitability trend. The company has a strong current ratio of 2.93, suggesting good short-term financial health. Additionally, the interest coverage ratio of 17.77 indicates that the company comfortably meets its interest obligations.
Unfavorable signals The price-to-earnings ratio (PER) is significantly high at 77.20, which could indicate that the stock is overvalued. Furthermore, the recent trend analysis shows a decline in stock price by 11.36%, which may signal potential weakness in the stock’s performance. The recent seller volume exceeds buyer volume, indicating a seller-dominant market environment.
Conclusion Given the favorable profitability and financial health signals, alongside the unfavorable indications of high valuation and recent downward price movement, it might be more prudent to wait for clearer positive trends before considering an investment in Cadence Design Systems, Inc.
However, the high PER indicates that the stock is overvalued, and the lack of growth in net income raises a risk of correction.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- Cadence Design Systems, Inc. (CDNS) Is a Trending Stock: Facts to Know Before Betting on It – Yahoo Finance (Nov 24, 2025)
- Citigroup Initiates Coverage of Cadence Design Systems (CDNS) with Buy Recommendation – Nasdaq (Nov 25, 2025)
- Cadence Design Systems, Inc. $CDNS Stock Position Lifted by Mufg Securities Americas Inc. – MarketBeat (Nov 24, 2025)
- Cadence Design Systems (CDNS) Receives New ‘Buy’ Rating from Cit – GuruFocus (Nov 24, 2025)
- Should You Think About Buying Cadence Design Systems, Inc. (NASDAQ:CDNS) Now? – Yahoo Finance (Nov 21, 2025)
For more information about Cadence Design Systems, Inc., please visit the official website: cadence.com
