Cadence Set to Report Q2 Earnings: What's in the Offing?

Cadence Design Systems, Inc. CDNS will release results for the second quarter of 2025 on July 28.

The Zacks Consensus Estimate for second-quarter 2025 earnings has been unchanged in the past 60 days at $1.57 per share. The consensus mark implies an increase of 22.7% from the year-ago actual. The Zacks Consensus Estimate for revenues is pegged at $1.26 billion, indicating an 18.7% uptick from the year-ago actual.

For the second quarter of 2025, CDNS expects revenues to be in the $1.25-$1.27 billion band. The company reported sales of $1.06 billion in the year-ago quarter. Non-GAAP EPS for the second quarter is anticipated to be between $1.55 and $1.61 compared with $1.28 in the year-ago quarter.

Cadence has an impressive earnings surprise history. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 6.7%.

Price Performance

CDNS stock has gained 25.4% in the past year compared with its Computer-Software industry’s growth of 21.4%. The S&P 500 composite and the Zacks Computer and Technology sector have risen 22.1% and 16.9%, respectively, in the same time frame.

Factors Shaping CDNS’ Q2 Results

Design activity across several verticals, especially data centers and automotive, has been robust, due to transformative generational trends, such as artificial intelligence (“AI”), hyperscale computing, 5G and autonomous driving. The focus on Generative AI, Agentic AI and Physical AI is leading to an exponential increase in computing demand and semiconductor innovation. Customers have been significantly increasing their R&D budgets in AI-driven automation. This is likely to have driven demand for Cadence’s solutions in the to-be-reported quarter.

Cadence’s ratable software model, strong backlog and high mix of recurring revenues are other positives. At the end of the first quarter, Cadence had a backlog of $6.4 billion and current-remaining performance obligations of $3.2 billion.

It has been collaborating with several tech giants, including Qualcomm and NVIDIA, on their next-generation AI designs across both training and inferencing. Expanding partnerships with its foundry partners like Taiwan Semiconductor Manufacturing, Intel and Arm Holdings bodes well.

Cadence Design Systems, Inc. Price and EPS Surprise

Cadence Design Systems, Inc. price-eps-surprise | Cadence Design Systems, Inc. Quote

Core electronic design automation (“EDA”) business (which constitutes Custom IC, Digital IC and Functional Verification businesses) is likely to have gained from demand for the new hardware systems, along with the rapid adoption of digital full-flow solutions. The new hardware is likely to have witnessed increasing demand, particularly from AI, hyperscale and automotive clients.

CDNS’ solutions, especially Cadence.AI portfolio, Cerebrus, Verisium AI, Sim AI and Allegro X AI, are likely to have witnessed rapid uptake as system companies continue to build their next-gen AI and agentic-AI products, amid increasing chip complexity. Momentum in Spectre and Virtuoso Studio solutions is expected to have acted as a tailwind. Our estimate for revenues from Core EDA is pegged at $905.6 million, indicating year-over-year growth of 17%.

The System Design and Analysis division is likely to have gained from the increasing demand for solutions like Allegro X and AI-powered Substrate Router across multiple verticals. CDNS’ digital twin Reality datacenter product is likely to have gained traction with large hyperscalers and cloud service providers. Our estimate for revenues from System Design and Analysis is pegged at $177.5 million, indicating year-over-year growth of 19.5%.

Increasing demand for solutions (PCIe, UCIe, DDR and HBM) in AI, foundry ecosystem buildout and chiplet use cases is likely to have cushioned the performance of the IP business division. We expect revenues to be up 26.5% to $174.5 million on a year-over-year basis in the to-be-reported quarter.

Ongoing uncertainty prevailing over global macroeconomic conditions, especially U.S.-China tech tensions, along with stiff competition in the EDA space, and inflation remain concerns.

Earnings Whispers for CDNS

Our proven model does not predict an earnings beat for Cadence this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. This is not the case here.

CDNS currently has a Zacks Rank #4 (Sell) and an Earnings ESP of -1.27%. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Stocks to Consider

Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Meta Platforms, Inc. META currently has an Earnings ESP of +1.65% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

META is scheduled to report quarterly earnings on July 30. The Zacks Consensus Estimate for META’s to-be-reported quarter’s earnings and revenues is pegged at $5.83 per share and $44.84 billion, respectively. Shares of META have gained 53.7% in the past year.

Amazon.com, Inc. AMZN has an Earnings ESP of +7.37% and a Zacks Rank #1 at present. AMZN is scheduled to report quarterly figures on July 31. The Zacks Consensus Estimate for AMZN’s to-be-reported quarter’s earnings and revenues is pegged at $1.33 per share and $162.28 billion, respectively. Shares of AMZN have plunged 27.2% in the past year.

Woodward, Inc. WWD has an Earnings ESP of +4.29% and a Zacks Rank #2 at present. It is scheduled to report quarterly figures on July 28. The Zacks Consensus Estimate for Woodward’s to-be-reported quarter’s earnings and revenues is pegged at $1.62 per share and $887.75 million, respectively. Shares of WWD have gained 39.4% in the past year.

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This article originally published on Zacks Investment Research (zacks.com).

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