Cadence Design Systems, Inc. (CDNS): A Bull Case Theory

We came across a bullish thesis on Cadence Design Systems, Inc. on Stock Analysis Compilation’s Substack. In this article, we will summarize the bulls’ thesis on CDNS. Cadence Design Systems, Inc.'s share was trading at $326.46 as of July 23^rd. CDNS’s trailing and forward P/E were 82.86 and 48.08 respectively according to Yahoo Finance.

Cadence, a leading provider of electronic design automation (EDA) software, stands at the forefront of semiconductor design, commanding a dominant share of the market alongside Synopsys. EDA solutions are indispensable to the chip industry, especially as design complexity escalates, yet they represent only a small fraction of customers’ overall spend.

This creates significant room for value-based pricing and positions Cadence for sustained double-digit sales growth with ongoing margin expansion. The company’s revenue model, largely based on recurring subscriptions, provides exceptional visibility and stability, mitigating the inherent volatility of the semiconductor industry. As chipmakers continue to demand more advanced design tools to meet next-generation performance requirements, Cadence’s solutions become increasingly mission-critical, cementing its competitive positioning.

Management’s disciplined execution has enabled the company to steadily grow its top line while maintaining attractive profitability metrics. The recent market pullback offered an opportunity to build a position in a durable, high-growth franchise at a compelling valuation of just over 30x one-year forward earnings. With a robust subscription base, strong pricing power, and a market environment that continues to favor advanced EDA tools, Cadence is well-positioned to deliver consistent growth and margin expansion.

This combination of high visibility, structural demand tailwinds, and recurring revenue streams makes Cadence a compelling long-term investment opportunity, offering a rare mix of growth, resilience, and financial strength in the broader semiconductor ecosystem.

Previously, we covered a bullish thesis on Cadence Design Systems, Inc. (CDNS) by The Equity Analyst in February 2025, which highlighted its dominance in EDA software, recurring revenue model, and leadership in semiconductor design. The stock has appreciated about 7% since, as demand for advanced tools persisted. The thesis still stands. Stock Analysis Compilation shares a similar view but emphasizes pricing power and margin expansion.

Cadence Design Systems, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 59 hedge fund portfolios held CDNS at the end of the first quarter which was 59 in the previous quarter. While we acknowledge the potential of CDNS as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None.