In the dynamic world of technology, Cadence Design Systems, Inc. (CDNS) and SoundHound AI, Inc. (SOUN) stand out with distinct yet overlapping ambitions in software innovation. Cadence leads in integrated circuit design tools, while SoundHound pioneers voice AI platforms. Both operate within the software application industry, targeting evolving tech demands. This article will help you uncover which company offers the most compelling investment opportunity in 2026.
Table of contents
Companies Overview
I will begin the comparison between Cadence Design Systems, Inc. and SoundHound AI, Inc. by providing an overview of these two companies and their main differences.
Cadence Design Systems, Inc. Overview
Cadence Design Systems, Inc. is a global provider of software, hardware, and services focused on integrated circuit (IC) design and verification. The company supports diverse markets including 5G communications, aerospace and defense, automotive, and healthcare. Founded in 1987 and headquartered in San Jose, California, Cadence offers advanced platforms for functional verification, digital IC design, and system analysis, positioning itself as a leader in electronic design automation.
SoundHound AI, Inc. Overview
SoundHound AI, Inc. develops voice artificial intelligence platforms to enable businesses to create conversational experiences. Its flagship product, the Houndify platform, integrates tools like speech recognition and natural language understanding to build custom voice assistants. Founded more recently and based in Santa Clara, California, SoundHound operates in the technology sector with a focus on AI-driven voice solutions across various industries.
Key similarities and differences
Both Cadence and SoundHound operate in the software application industry within the technology sector and are listed on NASDAQ. They differ significantly in scale, with Cadence commanding a market cap of approximately 86B USD versus SoundHound’s 4.7B USD. Cadence focuses on hardware-related IC design and verification tools, while SoundHound specializes in voice AI platforms, highlighting distinct business models despite both serving technology-driven markets.
Income Statement Comparison
This table presents a clear comparison of key income statement metrics for Cadence Design Systems, Inc. and SoundHound AI, Inc. for the fiscal year 2024.
| Metric | Cadence Design Systems, Inc. | SoundHound AI, Inc. |
|---|---|---|
| Market Cap | 86.4B | 4.7B |
| Revenue | 4.64B | 85M |
| EBITDA | 1.67B | -329M |
| EBIT | 1.47B | -348M |
| Net Income | 1.06B | -351M |
| EPS | 3.89 | -1.04 |
| Fiscal Year | 2024 | 2024 |
Income Statement Interpretations
Cadence Design Systems, Inc.
Cadence Design Systems showed a strong upward trend in revenue, reaching $4.64B in 2024, with net income increasing to $1.06B. Margins remained stable and favorable, with a gross margin of 86.05% and an EBIT margin of 31.71%. In 2024, revenue growth of 13.48% was accompanied by a slight net margin decline of 10.66%, indicating some pressure on profitability despite overall growth.
SoundHound AI, Inc.
SoundHound AI experienced rapid revenue growth, reaching $84.7M in 2024, up 84.62% year-over-year, but continued to report net losses of $351M. Its gross margin was positive at 48.86%, yet EBIT and net margins were deeply negative, reflecting operational challenges. The company’s high operating expenses grew in line with revenue, contributing to worsening EBIT and net margin performance in 2024.
Which one has the stronger fundamentals?
Cadence Design Systems exhibits stronger fundamentals, with consistent revenue and net income growth, favorable margin profiles, and controlled interest expenses. Conversely, SoundHound AI, despite impressive revenue growth, faces significant losses and unfavorable EBIT and net margins, indicating less stable financial health. Overall, Cadence’s income statement metrics appear more robust and sustainable.
Financial Ratios Comparison
The table below presents key financial ratios for Cadence Design Systems, Inc. (CDNS) and SoundHound AI, Inc. (SOUN) based on their most recent fiscal year 2024 data.
| Ratios | Cadence Design Systems, Inc. (CDNS) | SoundHound AI, Inc. (SOUN) |
|---|---|---|
| ROE | 22.6% | -191.99% |
| ROIC | 13.4% | -68.1% |
| P/E | 77.2 | -19.1 |
| P/B | 17.4 | 36.8 |
| Current Ratio | 2.93 | 3.77 |
| Quick Ratio | 2.74 | 3.77 |
| D/E (Debt-to-Equity) | 0.55 | 0.02 |
| Debt-to-Assets | 28.8% | 0.78% |
| Interest Coverage | 17.8 | -28.1 |
| Asset Turnover | 0.52 | 0.15 |
| Fixed Asset Turnover | 7.68 | 14.28 |
| Payout ratio | 0 | 0 |
| Dividend yield | 0% | 0% |
Interpretation of the Ratios
Cadence Design Systems, Inc.
Cadence Design Systems shows predominantly favorable financial ratios, including a strong net margin of 22.74% and a robust return on equity at 22.58%. Its current and quick ratios above 2.7 indicate good short-term liquidity, though its high PE of 77.2 and PB of 17.44 suggest a potentially overvalued stock. The company does not pay dividends, likely focusing on reinvestment and growth.
SoundHound AI, Inc.
SoundHound AI faces significant challenges with predominantly unfavorable ratios, including a negative net margin of -414.06% and a return on equity at -191.99%. Despite a strong quick ratio and low debt to equity, its negative interest coverage and poor asset turnover raise concerns. The company does not distribute dividends, consistent with a high-growth phase and reinvestment strategy.
Which one has the best ratios?
Cadence Design Systems holds the advantage with a majority of favorable ratios, reflecting profitability, liquidity, and moderate leverage. SoundHound AI’s ratios reflect high risk and operational difficulties, with many unfavorable metrics. Thus, Cadence appears to have the stronger financial profile based on this ratio analysis.
Strategic Positioning
This section compares the strategic positioning of Cadence Design Systems, Inc. (CDNS) and SoundHound AI, Inc. (SOUN) regarding market position, key segments, and exposure to technological disruption:
Cadence Design Systems, Inc.
- Market leader in software and hardware for IC design; faces moderate competitive pressure in technology sector.
- Focuses on IC design software, verification, and IP products serving diverse markets like 5G, automotive, aerospace.
- Moderate exposure to technological disruption through continuous innovation in IC design verification and software.
SoundHound AI, Inc.
- Emerging player in voice AI platforms; operates under high competitive pressure with high beta volatility.
- Concentrates on conversational AI and voice assistant platforms, targeting businesses across industries.
- High exposure to disruption in AI voice technology and conversational interfaces, driving product evolution.
CDNS vs SOUN Positioning
CDNS pursues a diversified approach with broad product lines in semiconductor design and verification, serving multiple industries. SOUN focuses narrowly on AI voice platforms, offering specialized conversational services but with higher market volatility and smaller scale.
Which has the best competitive advantage?
CDNS demonstrates a slightly favorable moat status by creating value despite declining profitability, indicating a moderate competitive advantage. SOUN shows a slightly unfavorable moat, currently shedding value but improving profitability, reflecting higher risk and less established advantage.
Stock Comparison
The stock price dynamics of Cadence Design Systems, Inc. (CDNS) and SoundHound AI, Inc. (SOUN) over the past 12 months reveal significant price movements and trading volume shifts, with both experiencing a recent pullback after prolonged bullish trends.
Trend Analysis
Cadence Design Systems, Inc. showed a bullish trend over the past year with a 4.59% price increase, though this growth has decelerated. The stock reached a high of 373.35 and a low of 232.88, with recent weeks showing a 6.27% decline indicating short-term weakness.
SoundHound AI, Inc. exhibited a strong bullish trend with a 183.16% price increase over the past year, also decelerating recently. The stock fluctuated between 3.55 and 23.95, but experienced a sharp 37.0% drop in the last weeks analyzed.
Comparing the two, SoundHound AI delivered the highest market performance with a much larger overall price gain despite recent volatility, outperforming Cadence Design Systems over the 12-month period.
Target Prices
The current analyst consensus indicates a positive outlook for both Cadence Design Systems, Inc. and SoundHound AI, Inc.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Cadence Design Systems, Inc. | 418 | 275 | 381 |
| SoundHound AI, Inc. | 15 | 11 | 13.33 |
Analysts expect Cadence’s stock to appreciate above its current price of $317.45, reflecting confidence in its market position. SoundHound’s consensus target of $13.33 also suggests potential upside from its current price near $11.10.
Analyst Opinions Comparison
This section compares analysts’ ratings and grades for Cadence Design Systems, Inc. and SoundHound AI, Inc.:
Rating Comparison
CDNS Rating
- Rating: B, indicating a very favorable status.
- Discounted Cash Flow Score: 3, moderate status.
- ROE Score: 4, favorable status.
- ROA Score: 5, very favorable status.
- Debt To Equity Score: 2, moderate status.
- Overall Score: 3, moderate status.
SOUN Rating
- Rating: C-, indicating a very unfavorable status.
- Discounted Cash Flow Score: 1, very unfavorable status.
- ROE Score: 1, very unfavorable status.
- ROA Score: 1, very unfavorable status.
- Debt To Equity Score: 4, favorable status.
- Overall Score: 1, very unfavorable status.
Which one is the best rated?
Based on the provided data, Cadence Design Systems holds a higher overall rating and stronger scores in ROE and ROA, while SoundHound AI scores better only on debt to equity. Overall, CDNS is better rated.
Scores Comparison
Here is a comparison of the Altman Z-Score and Piotroski Score for Cadence Design Systems, Inc. and SoundHound AI, Inc.:
CDNS Scores
- Altman Z-Score: 14.5, indicating a safe zone with very low bankruptcy risk.
- Piotroski Score: 7, reflecting strong financial health.
SOUN Scores
- Altman Z-Score: 6.6, indicating a safe zone with low bankruptcy risk.
- Piotroski Score: 3, reflecting very weak financial strength.
Which company has the best scores?
Cadence Design Systems exhibits stronger financial health with a higher Piotroski Score of 7 versus SoundHound’s 3. Both companies are in the safe zone for Altman Z-Score, but CDNS’s score is notably higher, indicating stronger stability.
Grades Comparison
Here is a detailed comparison of the recent grades assigned to Cadence Design Systems, Inc. and SoundHound AI, Inc.:
Cadence Design Systems, Inc. Grades
The table below summarizes the latest grades from recognized financial institutions for Cadence Design Systems, Inc.:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Needham | Maintain | Buy | 2025-12-22 |
| Wells Fargo | Maintain | Overweight | 2025-10-28 |
| Baird | Maintain | Outperform | 2025-10-28 |
| Needham | Maintain | Buy | 2025-10-28 |
| JP Morgan | Maintain | Overweight | 2025-10-28 |
| Oppenheimer | Maintain | Underperform | 2025-10-28 |
| Rosenblatt | Maintain | Neutral | 2025-10-28 |
| Rosenblatt | Maintain | Neutral | 2025-10-22 |
| Needham | Maintain | Buy | 2025-07-29 |
| Loop Capital | Maintain | Buy | 2025-07-29 |
Overall, Cadence Design Systems, Inc. has a predominantly positive grade trend with most institutions maintaining Buy or Outperform ratings, although there is some caution reflected by a few Neutral and one Underperform rating.
SoundHound AI, Inc. Grades
Presented below are the recent grades issued by recognized grading companies for SoundHound AI, Inc.:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Piper Sandler | Maintain | Neutral | 2026-01-05 |
| Cantor Fitzgerald | Upgrade | Overweight | 2025-12-12 |
| DA Davidson | Maintain | Buy | 2025-11-18 |
| Piper Sandler | Maintain | Neutral | 2025-11-07 |
| HC Wainwright & Co. | Maintain | Buy | 2025-10-16 |
| HC Wainwright & Co. | Maintain | Buy | 2025-09-17 |
| Wedbush | Maintain | Outperform | 2025-09-11 |
| DA Davidson | Maintain | Buy | 2025-09-10 |
| Ladenburg Thalmann | Upgrade | Buy | 2025-08-11 |
| Wedbush | Maintain | Outperform | 2025-08-08 |
SoundHound AI, Inc. shows a positive and improving pattern with several Buy and Outperform ratings and recent upgrades from Neutral to Overweight and Buy.
Which company has the best grades?
Both companies hold a consensus “Buy” rating, but Cadence Design Systems, Inc. has a larger number of Buy ratings (24 vs. 5) and a wider range of analyst opinions. SoundHound AI, Inc. exhibits recent upgrades and consistent positive ratings despite fewer total votes. Investors may interpret Cadence’s broader analyst coverage as more established confidence, while SoundHound’s upgrades suggest growing optimism.
Strengths and Weaknesses
Below is a comparison of key strengths and weaknesses for Cadence Design Systems, Inc. (CDNS) and SoundHound AI, Inc. (SOUN) based on their latest financial and operational data.
| Criterion | Cadence Design Systems, Inc. (CDNS) | SoundHound AI, Inc. (SOUN) |
|---|---|---|
| Diversification | Strong product and maintenance revenue (4.21B USD in 2024) with technology services expanding | Limited revenue streams, mainly hosted services, licensing, and professional services with smaller scale (57M USD hosted services in 2024) |
| Profitability | High net margin (22.74%) and ROIC (13.43%), creating value but with a declining ROIC trend | Negative net margin (-414%) and ROIC (-68%), shedding value but with improving ROIC trend |
| Innovation | Established in semiconductor design software with sustained R&D | Focused on AI voice and speech recognition, showing growth potential but still unprofitable |
| Global presence | Large global footprint as a key semiconductor software provider | Smaller, emerging presence with niche AI technology |
| Market Share | Leading position in electronic design automation (EDA) market | Emerging player in AI voice tech, limited market share |
Key takeaways: Cadence (CDNS) offers strong profitability and diversification with a solid global presence, though profitability shows signs of decline. SoundHound (SOUN) is in a growth phase with rising ROIC but currently faces significant profitability challenges and limited scale. Investors should weigh CDNS’s stability against SOUN’s growth potential and risks.
Risk Analysis
Below is a comparative table of key risk factors for Cadence Design Systems, Inc. (CDNS) and SoundHound AI, Inc. (SOUN) based on 2024 data:
| Metric | Cadence Design Systems, Inc. (CDNS) | SoundHound AI, Inc. (SOUN) |
|---|---|---|
| Market Risk | Moderate (Beta 1.02) | High (Beta 2.88) |
| Debt Level | Moderate (Debt-to-Equity 0.55) | Very Low (Debt-to-Equity 0.02) |
| Regulatory Risk | Low (Established in mature tech) | Moderate (Emerging AI sector) |
| Operational Risk | Low (Strong financials, robust ops) | High (Negative margins, losses) |
| Environmental Risk | Low (Software sector, low footprint) | Low (Software sector, low footprint) |
| Geopolitical Risk | Moderate (Global supply chains) | Moderate (US-based, emerging tech) |
The most impactful and likely risks stem from SoundHound’s operational losses and higher market volatility, while Cadence’s main concern lies in valuation premiums and moderate leverage. SoundHound’s negative profitability and weak financial scores increase its risk profile significantly.
Which Stock to Choose?
Cadence Design Systems, Inc. (CDNS) shows consistent income growth over 2020-2024, with favorable profitability and strong financial ratios including a 22.74% net margin and 22.58% ROE. Its debt levels are moderate, and the company holds a very favorable B rating.
SoundHound AI, Inc. (SOUN) exhibits high revenue growth but negative profitability, with unfavorable income statement metrics such as a -414.06% net margin and weak financial ratios. It carries low debt but has a very unfavorable overall rating of C-, reflecting significant financial challenges.
Considering ratings and financial evaluations, CDNS may appear more suitable for investors seeking stability and quality, while SOUN might attract those with a tolerance for risk focused on high growth potential despite current losses and weaker financial health.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of Cadence Design Systems, Inc. and SoundHound AI, Inc. to enhance your investment decisions:
