Cadence Tops Q4 Earnings on Upbeat AI Trends, Posts Solid Backlog

Cadence Design Systems CDNS, a well-known player in the electronic design automation (“EDA”) space, recently reported fourth-quarter 2025 results that exceeded management’s guidance, with a record backlog that underscores sustained demand for its solutions.

Revenues of $1.44 billion (compared with guidance of $1.405-$1.435 billion) beat the Zacks Consensus Estimate by 1.1% and increased 6.2% year over year. Non-GAAP earnings per share (EPS) of $1.99 (compared with guidance of $1.88-$1.94) beat the Zacks Consensus Estimate by 4.7% and increased 5.9% year over year.

Backlog stood at $7.8 billion and current remaining performance obligations were $3.8 billion, underscoring sustained customer demand and enhanced visibility into 2026.

CDNS recorded a significant increase in backlog, driven by accelerating demand across various end markets and higher contributions from AI solutions. Management noted that the fourth-quarter bookings were “exceptionally strong,” contributing to a strong backlog entering 2026.

The Zacks Consensus Estimate for order backlog stood at $7.425 billion.

Record Backlog Underscores AI Tailwinds

AI is driving a major transformation in semiconductor and system design. Cadence is deeply integrated into this shift. Design activity across several verticals, especially data centers and automotive, has been robust, due to AI, hyperscale computing and 5G. The focus on Generative AI, Agentic AI and Physical AI has been leading to an exponential increase in computing demand and semiconductor innovation. Customers have been significantly increasing their R&D budgets in AI-driven automation.

On the recent earnings call, Cadence added that it is witnessing momentum on both “AI for Design” and “Design for AI” fronts. The recent launch of ChipStack AI Super Agent, described as “the world’s first Agentic AI solution for automating chip design and verification,” and expanding adoption of products such as Cerebrus, Verisium and Allegro X AI are driving deeper engagement. These trends are driving stronger bookings, supporting the record backlog.

Cadence’s hardware business also contributed to backlog growth. 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.

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

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

The company is deepening its strategic partnerships with Samsung, TSMC and OpenAI, among others. All these factors bode well for CDNS as reflected in the strong quarterly numbers.

CDNS’ Upbeat Outlook  

Revenues are estimated to be in the range of $5.9-$6 billion. Non-GAAP EPS for 2026 is expected to be between $8.05 and $8.15.

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

However, 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.

CDNS’ Zacks Rank & Stock Price

CDNS carries a Zacks Rank #4 (Sell).

In the past year, shares have gained 14.9% against the Computer-Software industry’s decline of 7.3%

Stocks to Consider

Some better-ranked stocks worth consideration in the broader technology space are Commvault Systems CVLT, Pegasystems Inc PEGA and Blackbaud BLKB. CVLT and PEGA currently sport a Zacks Rank #1 (Strong Buy) each, while BLKB carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CVLT’s fiscal 2026 EPS is pegged at $4.19, unchanged in the past seven days. CVLT’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average surprise being 7.8%. Shares of Commvault have declined 45.9% in the past year. 

The Zacks Consensus Estimate for PEGA’s 2026 EPS is pegged at $2.63 cents, up 25 cents in the past seven days. PEGA’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 80.4%. Shares of Pegasystems have gained 15% in the past year.

The Zacks Consensus Estimate for BLKB’s 2026 EPS is pegged at $5.19. BLKB’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, with the average surprise of 7.05%. Shares of BLKB have declined 27.8% in the past year.

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

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