CDNS: Advanced Chip Designs in AI Will Drive Share Performance Higher

Analysts have raised their price target for Cadence Design Systems from $390 to $405, citing strong Q3 results and continued growth in advanced chip design activities, particularly in artificial intelligence and high performance computing.

Analyst Commentary

• Bullish analysts point to Cadence's consistently strong earnings performance, highlighting impressive Q3 results and positive forward guidance.
• There is confidence in the company's ability to maintain above-market growth, particularly as demand rises for advanced chip design in artificial intelligence and high performance computing.
• The addition to key watchlists reflects conviction in Cadence's long-term prospects, supported by interest from a broader range of non-traditional customers.
• Rising price targets, now reaching up to $405, indicate optimism about the company’s execution and its position as a leader in custom chip design solutions.

• Some cautious analysts note that much of the valuation upside may have already been reflected in the current share price.
• Execution risks exist if Cadence cannot maintain its advantage amid increasing industry competition in AI and high performance compute markets.
• Continued growth is closely tied to ongoing innovation and customer expansion, both of which could be affected by broader economic cycles or changes in technology demand.

What's in the News

• Cadence completed a tranche of its share buyback program, repurchasing 583,872 shares for $200.01 million and reaching a total of 12.84% of shares bought back since 2017 (Buyback Tranche Update).
• The company raised its earnings guidance for 2025, now expecting revenue between $5.262 billion and $5.292 billion and GAAP EPS of $3.80 to $3.86. This reflects approximately 14% year-over-year growth (Corporate Guidance: Raised).
• New guidance for Q4 2025 was announced, projecting revenue of $1.405 billion to $1.435 billion and GAAP net income between $319 million and $335 million (Corporate Guidance: New/Confirmed).
• Cadence Molecular Sciences launched ROCS X, an AI-powered virtual screening tool to enhance drug discovery. This tool was developed in partnership with Treeline Biosciences and is offering early access ahead of a 2026 general release (Product-Related Announcements).
• A collaboration with TSMC was announced to accelerate AI and HPC chip design, introducing new Cadence IP and advanced solutions for next-generation memory, connectivity, and energy-efficient infrastructure (Strategic Alliances).

Valuation Changes

• Fair Value has risen slightly from $381.64 to $382.20.
• Discount Rate edged up marginally from 8.48% to 8.49%.
• Revenue Growth estimate increased modestly from 11.32% to 11.35%.
• Net Profit Margin dipped slightly from 24.48% to 24.42%.
• Future P/E ratio inched higher from 73.63x to 73.86x.