Core Insights - Cadence Design Systems (CDNS) reported fourth-quarter 2025 results that surpassed management's guidance, highlighting a record backlog that indicates sustained demand for its solutions [1][9] Financial Performance - Revenues reached $1.44 billion, exceeding guidance of $1.405-$1.435 billion, and increased by 6.2% year over year [2] - Non-GAAP earnings per share (EPS) were $1.99, above the guidance of $1.88-$1.94, marking a 5.9% year-over-year increase [2] - The backlog stood at $7.8 billion, with current remaining performance obligations at $3.8 billion, reflecting strong customer demand [2] Market Demand and Trends - The significant increase in backlog was driven by accelerating demand across various end markets, particularly due to AI solutions [3] - AI is transforming semiconductor and system design, with robust design activity in sectors like data centers and automotive [4] - Customers are increasing their R&D budgets for AI-driven automation, contributing to the strong demand for Cadence's solutions [4] Product Innovations - Cadence is experiencing momentum in both "AI for Design" and "Design for AI," with the launch of ChipStack AI Super Agent and the adoption of products like Cerebrus, Verisium, and Allegro X AI [5] - The hardware business also contributed to backlog growth, with over 30 new customers and increased repeat demand from AI and hyperscalers [6] Future Outlook - For 2026, revenues are projected to be between $5.9 billion and $6 billion, with non-GAAP EPS expected to range from $8.05 to $8.15 [7] - In 2025, revenues surged by 14% to $5.297 billion, while non-GAAP EPS increased by 20% to $7.14 [7]

Financial Data and Key Metrics Changes - Cadence reported a 14% revenue growth for the fourth quarter and a 45% operating margin for the year, finishing 2025 with a record backlog of $7.8 billion [5][16] - Total revenue for Q4 was $1.44 billion and $5.297 billion for the year, with GAAP operating margin at 32.2% for the quarter and 28.2% for the year [16][17] - Non-GAAP operating margin was 45.8% for the quarter and 44.6% for the year, with GAAP EPS at $1.42 for the quarter and $4.06 for the year [17] Business Line Data and Key Metrics Changes - The core EDA business grew by 13% in 2025, with the recurring software business re-accelerating to double-digit growth in Q4 [10] - The IP business saw nearly 25% revenue growth in 2025, reflecting strong demand in AI, HPC, and automotive verticals [12][13] - The System Design and Analysis (SDA) business delivered 13% revenue growth in 2025, with a strategic shift towards annual subscription arrangements impacting year-over-year comparisons [51] Market Data and Key Metrics Changes - The semiconductor industry is projected to reach $1 trillion this year, indicating a healthier environment for Cadence's solutions [61] - China accounted for 12%-13% of revenue in 2024 and 2025, with expectations to maintain this range in 2026 [31] Company Strategy and Development Direction - Cadence is focusing on AI-driven solutions, with the launch of ChipStack AI Super Agent aimed at automating chip design and verification, providing up to 10x productivity improvements [7][8] - The company is expanding partnerships with leading foundries, including TSMC and Intel, to enhance AI flows and support next-generation designs [9] - The strategy includes a strong emphasis on agentic AI workflows, which are expected to increase the usage of Cadence's tools rather than displace them [25][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for Cadence's engineering software, emphasizing that AI tools are increasing the usage of their products [27] - The outlook for 2026 includes expected revenue in the range of $5.9 billion to $6 billion, with a GAAP operating margin of 31.75%-32.75% and non-GAAP EPS in the range of $8.05-$8.15 [19][20] Other Important Information - The company plans to use approximately 50% of its free cash flow for share repurchases in 2026 [19] - Cadence's AI-driven EDA, SDA, and IP portfolio positions the company well to capture significant opportunities in the evolving market landscape [15] Q&A Session Summary Question: Disruption in AI affecting demand for EDA or IP tools - Management clarified that there has been no discussion from customers about reducing the usage of Cadence's tools; instead, AI tools are increasing the usage of their software [24][27] Question: Key contributors to recurring revenue improvements - Management noted that strong backlog and broad portfolio proliferation across EDA, IP, hardware, and SDA are driving recurring revenue growth [30][32] Question: Verification and emulation hardware cycle - Management indicated that demand for hardware systems remains strong, with expectations for continued growth in this segment [34][36] Question: Benefits from AI workflows - Management highlighted significant productivity improvements from AI, with customers reporting up to 10x productivity gains in certain areas [43][44] Question: Transition to one-year license terms for SDA - Management acknowledged that the shift to annual subscriptions impacted SDA revenue growth but remains optimistic about its strategic trajectory [51] Question: COT chip proliferation among hyperscalers - Management confirmed that the trend of hyperscalers designing their own chips is accelerating, with expectations for increased EDA consumption [56][59]

Financial Data and Key Metrics Changes - Cadence reported a 14% revenue growth for the fourth quarter and a 45% operating margin for the year 2025, with total revenue reaching $1.44 billion for the quarter and $5.297 billion for the year [5][16] - The company achieved a GAAP operating margin of 32.2% for the quarter and 28.2% for the year, while the non-GAAP operating margin was 45.8% for the quarter and 44.6% for the year [17] - GAAP EPS was $1.42 for the quarter and $4.06 for the year, with non-GAAP EPS at $1.99 for the quarter and $7.14 for the year [17] Business Line Data and Key Metrics Changes - The core EDA business grew by 13% in 2025, with the recurring software business re-accelerating to double-digit growth in Q4 [10] - The IP business saw nearly 25% revenue growth in 2025, reflecting the strength of the expanding IP portfolio [12] - The hardware business had over 30 new customers and significantly higher repeat demand from AI and hyperscalers, with expectations for another record year in 2026 [10] Market Data and Key Metrics Changes - The company finished 2025 with a record backlog of $7.8 billion, indicating strong demand across all business lines [5][16] - China accounted for 12%-13% of revenue in 2025, with expectations to maintain this range in 2026 [31] - The semiconductor industry is projected to reach $1 trillion in revenue, indicating a robust market environment for Cadence [62] Company Strategy and Development Direction - Cadence is focusing on AI-driven solutions, with the launch of ChipStack AI Super Agent, which automates chip design and verification, providing up to 10x productivity improvement [7] - The company is expanding its partnerships with leading foundries, including TSMC and Intel, to enhance its AI capabilities [9] - Cadence aims to capture opportunities in the emerging physical AI market, particularly in autonomous driving and robotics [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing demand for Cadence's engineering software, emphasizing that AI tools are increasing the usage of their software rather than displacing it [27] - The outlook for 2026 includes expected revenue in the range of $5.9 billion to $6 billion, with GAAP EPS projected between $4.95 and $5.05 [19] - Management noted that the design activity is accelerating across both semiconductor and system companies, indicating a healthier environment for 2026 compared to the previous year [62] Other Important Information - The company plans to use approximately 50% of its free cash flow for share repurchases in 2026 [19] - Cadence's AI workflows are expected to enhance productivity significantly, with customers reporting improvements of up to 10x in certain areas [43] Q&A Session Summary Question: Disruption in AI affecting EDA demand - Management indicated that there has been no discussion among customers about reducing the usage of EDA tools due to AI; instead, AI is increasing the usage of Cadence's tools [27] Question: Recurring revenue outlook for 2026 - Management highlighted that 67% of 2026 revenue is expected to come from beginning backlog, providing strong visibility into recurring revenue growth [32] Question: Verification and emulation hardware cycle - Management expects continued strong demand for hardware systems, which are essential for designing complex chips, and anticipates that this trend will continue [35] Question: Benefits of AI workflows - Management reported significant productivity improvements from AI workflows, with customers achieving up to 4x productivity gains in certain tasks [43] Question: Transition to one-year license terms for SDA - Management acknowledged that the transition to annual subscription arrangements has impacted SDA revenue growth but remains optimistic about its strategic trajectory [51]

Cadence Design Systems (NasdaqGS:CDNS) Q4 2025 Earnings call February 17, 2026 05:00 PM ET Speaker14Ladies and gentlemen, good afternoon. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Cadence fourth quarter and fiscal year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that ...

Core Insights - Cadence Design Systems, Inc. (CDNS) is set to release its second-quarter 2025 results on July 28, with earnings expected to be $1.57 per share, reflecting a 22.7% increase year-over-year, and revenues estimated at $1.26 billion, indicating an 18.7% growth from the previous year [1][2] Financial Expectations - For Q2 2025, CDNS anticipates revenues between $1.25 billion and $1.27 billion, up from $1.06 billion in the same quarter last year. Non-GAAP EPS is projected to be between $1.55 and $1.61, compared to $1.28 in the prior year [2][8] - The company has a strong earnings surprise history, having beaten the Zacks Consensus Estimate in the last four quarters with an average surprise of 6.7% [2] Stock Performance - CDNS stock has increased by 25.4% over the past year, outperforming the Computer-Software industry, which grew by 21.4%, and the S&P 500 composite, which rose by 22.1% [5] Market Drivers - Robust design activity in sectors such as data centers and automotive is driven by trends in artificial intelligence (AI), hyperscale computing, 5G, and autonomous driving, leading to increased demand for Cadence's solutions [6][10] - The company's ratable software model, strong backlog of $6.4 billion, and high recurring revenue mix are additional positive factors [7][8] Revenue Breakdown - The Core EDA business is expected to generate revenues of $905.6 million, reflecting a 17% year-over-year growth, driven by demand for new hardware systems and digital solutions [11] - The System Design and Analysis division is projected to achieve revenues of $177.5 million, indicating a 19.5% increase year-over-year, supported by demand for AI-powered solutions [12] - The IP business division is anticipated to see revenues rise by 26.5% to $174.5 million year-over-year, bolstered by demand for AI solutions and chiplet use cases [13] Strategic Collaborations - CDNS is collaborating with major tech companies like Qualcomm and NVIDIA on next-generation AI designs, which is expected to enhance its market position [9]

Core Insights - Cadence Design Systems, Inc (CDNS) is set to release its first-quarter 2025 results on April 28, with earnings expected at $1.49 per share, reflecting a 27.4% increase year-over-year, and revenues estimated at $1.24 billion, indicating a 22.7% growth from the previous year [1][2] - The company anticipates revenues between $1.23 billion and $1.25 billion for the quarter, compared to $1.01 billion in the same quarter last year [2] Earnings Performance - CDNS has a strong earnings surprise history, exceeding the Zacks Consensus Estimate in the last four quarters with an average beat of 6.2% [3] - The stock has experienced a slight decline of 0.2% over the past year, while the Computer-Software industry has decreased by 3.9% [3] Market Trends and Drivers - Robust design activity in sectors like data centers and automotive is driven by trends such as AI, hyperscale computing, 5G, and autonomous driving, leading to increased R&D budgets in AI-driven automation [4] - The AI super cycle is entering a new phase, with a focus on Generative AI and Physical AI, resulting in heightened demand for computing and semiconductor innovation, benefiting CDNS [5] Product and Solution Demand - CDNS's Cadence.AI portfolio and solutions like Cerebrus, Verisium AI, Sim AI, and Allegro X AI are expected to see rapid adoption as companies develop next-gen AI products [6] - The core electronic design automation (EDA) business is projected to grow due to demand for new hardware systems, particularly from AI and automotive clients [7] Revenue Estimates - Revenue from the Core EDA segment is estimated at $901.7 million, reflecting a year-over-year growth of 17.6% [9] - The System Design and Analysis division is expected to generate $182.5 million in revenue, indicating a significant year-over-year growth of 50.7% [9] Intellectual Property Business - The IP business division is anticipated to see revenues increase by 23.6% to $149.6 million, driven by demand for solutions in AI and high-performance computing [10] Recent Developments - On April 21, 2025, CDNS launched the first DDR5 12.8Gbps MRDIMM Gen2 memory IP system solution, addressing the growing demand for memory bandwidth in AI and enterprise data processing [11] - On April 16, 2025, CDNS announced an agreement to acquire Arm Holdings' Artisan foundation IP business, enhancing its IP portfolio [12]

Core Insights - Cadence Design Systems (CDNS) has strengthened its collaboration with NVIDIA (NVDA) to enhance computing and AI solutions, aiming to tackle global technology challenges through improved computational performance and innovation across industries [1] Group 1: Technological Advancements - The integration of NVIDIA's Blackwell architecture into Cadence's solutions has led to significant computational speed improvements, including up to 80X faster computational fluid dynamics (CFD) simulations, 10X acceleration in Cadence Spectre X Simulator, and 7X speedup in 3D-IC design and analysis [2] - The Cadence Fidelity CFD Platform, utilizing NVIDIA GB200 GPUs, can now perform multi-billion cell simulations in under 24 hours, a task that previously required extensive CPU clusters and several days [3] Group 2: Industry Impact - The advancements in CFD simulations are particularly beneficial for the aerospace industry, where they help reduce wind tunnel testing costs and accelerate time-to-market for new products [4] - The collaboration also focuses on developing a full-stack agentic AI solution for electronic and system design, integrating the Cadence JedAI Platform with NVIDIA's generative AI frameworks to enhance chip design and verification processes [5] Group 3: Drug Discovery and AI Applications - Cadence is advancing drug discovery efforts by integrating NVIDIA BioNeMo NIM microservices with its Orion platform, enabling faster and scalable GPU access for complex calculations in therapeutic design [6] - The companies are also leveraging digital twin technology through NVIDIA Omniverse to enhance data center design and operations, improving collaboration across design teams [7][8] Group 4: Market Demand and Growth - There is a heightened demand for Cadence's solutions driven by robust design activity and a focus on Generative AI, Agentic AI, and Physical AI, leading to increased computing demand and semiconductor innovation [9] - Cadence's AI-powered products, including Cadence Cerebrus, SimAI, and Allegro X AI, are gaining traction, with Cadence Cerebrus achieving over 300 tape-outs in the fourth quarter [10]