Cadence Design Systems shares pop on earnings beat, custom chip optimism

Core Insights - Cadence Design Systems' stock increased by 9% following the release of earnings that surpassed analysts' expectations, reporting an adjusted EPS of $1.99 and revenue of $1.44 billion for Q4 2025, reflecting a 6% year-over-year growth in both metrics [1] Group 1: Financial Performance - The company reported an adjusted earnings per share (EPS) of $1.99 and revenue of $1.44 billion for the fourth quarter of 2025, exceeding analysts' expectations of $1.91 EPS and $1.42 billion in revenue [1] - For the next fiscal year, Cadence expects revenue between $5.9 billion and $6 billion, aligning with FactSet's expectation of $5.94 billion [4] Group 2: Business Strategy and Market Trends - Approximately 45% of Cadence's business now comes from "system companies," which include hyperscalers and end producers of phones and cars, indicating a shift towards integrated hardware and software solutions [2] - The trend of system companies designing their own chips to optimize their hardware and software stack is expected to accelerate, as highlighted by examples from Apple and Google [3] Group 3: Competitive Landscape - Cadence competes with other companies in the chip design software market, including Synopsys and Siemens [4]