Cadence Q4 Earnings & Revenues Surpass Estimates, Both Rise Y/Y

Cadence Design Systems CDNS reported fourth-quarter 2025 non-GAAP earnings per share (EPS) of $1.99, which beat the Zacks Consensus Estimate by 4.7%. The bottom line increased 5.9% year over year, exceeding management’s guided range of $1.88-$1.94.

Revenues of $1.44 billion beat the Zacks Consensus Estimate by 1.1% and increased 6.2% year over year. The figure beat management’s guided range of $1.405-$1.435 billion. The top line was driven by broad-based demand for its solutions, especially the AI-driven portfolio, amid robust design activity. CDNS added that it is witnessing momentum on both “AI for Design” and “Design for AI” fronts. 

CDNS ended the quarter with a backlog of $7.8 billion and current-remaining performance obligations of $3.8 billion.

For 2025, revenues surged 14% to $5.297 billion, while non-GAAP EPS came in at $7.14, up 20%. 

Cadence has provided an outlook for 2026. Revenues are estimated to be in the range of $5.9-$6 billion. The Zacks Consensus Estimate is currently pegged at $5.95 billion, which indicates growth of 12.6% from the year-ago levels. Non-GAAP EPS for 2026 is expected to be between $8.05 and $8.15. The Zacks Consensus Estimate is currently pinned at $8.03 per share, which implies a rise of 13.8% from the prior-year actuals.

Price Performance

CDNS’ Segment Performance

Product & Maintenance revenues (92.5% of total revenues) of $1.332 billion rose 7.5% year over year. Services revenues (7.5%) of $108 million fell 7.7% year over year. Geographically, the Americas, China, Other Asia, Europe, the Middle East and Africa, and Japan contributed 47%, 12%, 20%, 14% and 7%, respectively, to total revenues in the reported quarter.

Product-wise, Core EDA, Intellectual Property (“IP”) and Systems Design & Analysis accounted for 69%, 15% and 16% of total revenues, respectively.

The System Design & Analysis business, up 13% in 2025, is gaining from higher demand for BETA CAE solutions, Millennium M2000 AI Supercomputer, 3D-IC platform, Allegro X and Reality data center digital twin solution. 

The pending acquisition of Design & Engineering division of Hexagon AB, including its renowned MSC Software business aid in accelerating footprint expansion in SDA and gain access to newer opportunities across automotive, aerospace, industrial and physical AI.

Cadence Design Systems, Inc. Price, Consensus and EPS Surprise

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

CDNS’ Core EDA business, which includes Custom IC, Digital IC and Functional Verification, experienced 13% growth in 2025, driven by strong growth in AI-driven solutions like Cerebrus AI Studio, Virtuoso Studio and Spectre. The demand for new hardware systems remained robust, with more than 30 new customers and substantially higher repeat demand from AI and hyperscalers. CDNS had a strong backlog and expects 2026 to be a record year for the hardware business.  Further, CDNS added 25 new digital full-flow logos in 2025. Moreover, the recurring software business grew in double digits in the fourth quarter.

The IP business was up 25% in 2025, benefiting from a broadening silicon solutions portfolio and increasing demand for solutions in AI, HPC, automotive, foundry and chiplet use cases. It is witnessing increasing demand for the memory IP solutions, including LPDDR6 memory IP. Cadence unveiled the Tensilica HiFi iQ DSP IP, the sixth-generation addition to its widely adopted HiFi DSP family, marking a significant step forward for next-generation voice AI and immersive audio applications.

CDNS’ Margin Performance

Total non-GAAP costs and expenses increased 6.5% year over year to $781 million.

Non-GAAP gross margin expanded 300 basis points (bps) to 88.5%. Non-GAAP operating margin contracted 20 bps on a year-over-year basis to 45.8%.

CDNS’ Balance Sheet & Cash Flow

As of Dec. 31, 2025, CDNS had cash and cash equivalents of $3 billion compared with $2.753 billion as of Sept. 30.

Long-term debt was $2.48 billion as of Dec. 31, 2025, compared with $2.479 million as of Sept. 30. CDNS issued $2.5 billion of senior notes at a weighted average interest rate of 4.44% in September 2024.

Cadence generated an operating cash flow of $553 million in the reported quarter compared with the prior quarter’s $311 million. Free cash flow was $512 million compared with $277 million in the previous quarter.

 For 2025, operating cash flow was $1.729 billion while free cash flow was $1.587 billion. 

The company repurchased its shares worth $200 million in the fourth quarter and $925 million in 2025.

CDNS Provides Q1 & FY26 Outlook

Non-GAAP operating margin for 2026 is forecasted to be in the range of 44.75% to 45.75%. Also, operating cash flow is expected to be $2 billion. CDNS expects to utilize at least 50% of its free cash flow to repurchase shares in 2026.

For the first quarter of 2026, revenues are estimated to be $1.42-$1.46 billion. The company reported sales of $1.24 billion in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.38 billion.

Non-GAAP EPS is anticipated to be between $1.89 and $1.95. CDNS reported an EPS of $1.57 in the year-ago quarter. The Zacks Consensus Estimate is currently pegged at $1.82 per share.

Non-GAAP operating margin is estimated to be between 44% and 45% in the first quarter.

CDNS’ Zacks Rank

Cadence currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here. 

Recent Performance of Other Companies in the Same Space

SAP SE SAP reported fourth-quarter 2025 on-IFRS EPS of €1.62, which increased 16% from the year-ago quarter. The company’s fourth quarter was defined by strong cloud bookings and profitability. SAP reported total revenues on a non-IFRS basis of €9.68 billion, which increased 3% year over year (up 9% at constant currency or cc). At the center of this performance is SAP Business AI, which has rapidly evolved from a feature set into a meaningful growth driver across the ERP suite. Two-thirds of cloud order entry included SAP Business AI, signaling AI’s growing importance in deal conversion and expansion.

For 2025, total revenues were €36.8 billion, up 8% (up 11% at cc). Predictable revenues increased to 86% in 2025, reinforcing SAP’s transformation into a high-quality recurring revenue business.
Over the past year, shares of SAP are down 30.2%.

PTC Corporation PTC reported first-quarter fiscal 2026 non-GAAP EPS of $1.92, up 75% year over year. The figure beat the Zacks Consensus Estimate of $1.59 as well as management’s guidance of $1.26-$1.82. Revenues came in at $686 million, up 21% year over year (up 19% at constant currency or cc). The top line beat the consensus estimate by 7.4%. Management projected revenues in the $600-$660 million band. In addition, PTC continues to progress toward the divestiture of Kepware and ThingWorx, a move aimed at sharpening its focus on core product lifecycle software.

Over the past year, shares of PTC have declined 9.9%.

Blackbaud BLKB reported fourth-quarter 2025 non-GAAP EPS of $1.19, which surpassed the Zacks Consensus Estimate by 3.5%. The bottom line increased around 11.2% year over year. For 2025, BLKB reported non-GAAP EPS of $4.45 compared with $4.06 in 2024. Total revenues decreased 2.3% year over year to $295.3 million. This was due to the divestiture of EVERFI. The top line surpassed the Zacks Consensus Estimate by 0.5%. For 2025, the company reported total revenues of $1.13 billion, down 2.3% year over year.

Shares of BLKB have declined 30.9% in the past year.

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