Cadence Design Systems (CDNS) saw a stock rally of 23.8% over the past three months, closing at $322.66, approaching a 52-week high of $330.09. The company has reported a strong performance driven by increasing demand for AI and verification business, with Core EDA revenue growth of 16% year-over-year and a 40% increase in IP revenue in Q1 2024.
Cadence’s management upgraded its revenue outlook for 2025 to between $5.15 billion and $5.23 billion, surpassing previous estimates of $5.14 billion to $5.22 billion. The expected non-GAAP EPS for 2025 is now projected to be between $6.73 and $6.83, with revenues for Q2 2025 estimated at $1.25 billion to $1.27 billion compared to $1.06 billion in Q2 2024.
Despite a premium valuation at a forward P/E ratio of 44.49x, the company is strategically partnered with tech giants like Qualcomm and NVIDIA to enhance its AI-driven offerings. Cadence reported an operating cash flow of $487 million in the latest quarter and plans to utilize at least 50% of its free cash flow for share repurchases in 2025.
