Cadence Set to Release Q1 Earnings: Here's What to Expect

Cadence Design Systems, Inc CDNS is scheduled to release first-quarter 2025 results on April 28.

The Zacks Consensus Estimate for first-quarter 2025 earnings has been unchanged in the past 60 days at $1.49 per share. The consensus mark implies an increase of 27.4% from the year-ago actual. The Zacks Consensus Estimate for revenues is pegged at $1.24 billion, indicating a 22.7% uptick from the year-ago actual.

For the first quarter of 2025, CDNS expects revenues to be in the $1.23-$1.25 billion band. The company reported sales of $1.01 billion in the year-ago quarter. Non-GAAP EPS for the first quarter is anticipated to be between $1.46 and $1.52 compared with $1.17 in the year-ago quarter.

Cadence has an impressive earnings surprise history. The company’s earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 6.2%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

CDNS stock has lost 0.2% in the past year compared with its Computer-Software industry’s decline of 3.9%. The S&P 500 composite and the Zacks Computer and Technology sector have risen 5.5% and 1.2%, respectively, in the same time frame.

Factors Shaping CDNS’ Q1 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. 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.

On the last earnings call, management highlighted that the AI super cycle has entered a new phase. The focus on Generative AI, Agentic AI and Physical AI is leading to an exponential increase in computing demand and semiconductor innovation. This is a tailwind for CDNS. 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.

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. Cadence has been also eyeing new AI markets like Life Sciences through its OpenEye drug discovery software.

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.  Momentum in Spectre and Virtuoso Studio solutions is expected to have acted as a tailwind.

Cadence Design Systems, Inc. Price and EPS Surprise

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

Our estimate for revenues from Core EDA is pegged at $901.7 million, indicating year-over-year growth of 17.6%.

The System Design and Analysis division is likely to have gained from increasing demand for solutions like Allegro X, Integrity 3D-IC platform and Millenium CFD simulation platform across multiple verticals, especially aerospace & defense and automotive. Our estimate for revenues from System Design and Analysis is pegged at $182.5 million, indicating year-over-year growth of 50.7%.

Increasing demand for solutions (PCIe, UCIe, DDR and HBM) in AI, high-performance computing (“HPC”) and chiplet use cases are likely to have cushioned the performance of the IP business division. We expect revenues to be up 23.6% to $149.6 million on a year-over-year basis in the to-be-reported quarter.

Ongoing uncertainty prevailing over global macroeconomic conditions. Stiff competition in the EDA space and inflation remain concerns.

CDNS’ Key Developments

On April 21, 2025, CDNS unveiled the industry’s first DDR5 12.8Gbps MRDIMM Gen2 memory IP system solution, designed on the advanced TSMC N3 process node. This leading-edge memory solution is poised to address the skyrocketing demand for memory bandwidth fueled by the explosion AI, machine learning, HPC and enterprise data processing workloads.

On April 16, 2025, CDNS announced a definitive agreement with Arm Holdings to acquire its Artisan foundation IP business. The acquisition includes a suite of standard cell libraries, memory compilers and general-purpose I/Os (GPIOs), all finely tuned for advanced process nodes at leading global foundries. This move is expected to bolster Cadence’s rapidly growing IP portfolio, which already encompasses protocol and interface IP, SerDes IP, memory interface IP and embedded security IP.

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 0.00%. 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.

Sprouts Farmers Market, Inc. SFM currently has an Earnings ESP of +0.44% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sprouts Farmers Market is scheduled to report quarterly earnings on April 30. The Zacks Consensus Estimate for SFM’s to-be-reported quarter’s earnings and revenues is pegged at $1.53 per share and $2.19 billion, respectively. Shares of SFM have gained 148.9% in the past year.

Qorvo, Inc QRVO has an Earnings ESP of +3.42% and a Zacks Rank #2 at present. QRVO is scheduled to report quarterly figures on April 29. The Zacks Consensus Estimate for QRVO’s to-be-reported quarter’s earnings and revenues is pegged at $1.01 per share and $851.7 million, respectively. Shares of Qorvo have plunged 45.6% in the past year.

Woodward, Inc. WWD has an Earnings ESP of +3.88% and a Zacks Rank #3 at present. It is scheduled to report quarterly figures on April 28. The Zacks Consensus Estimate for Woodward’s to-be-reported quarter’s earnings and revenues is pegged at $1.44 per share and $830.3 million, respectively. Shares of WWD have gained 20.2% in the past year.

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

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