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What this page is: Delvantic's full research page for Cadence Design Systems, Inc. (CDNS) — AI-driven forensic equity research: mechanical valuation models (DCF, EPV, anchored-PE, scenario) plus three independent AI lenses (Quality / Value / Sentiment). Everything below is rendered server-side; you are not missing content that requires JavaScript. All scores are predictions and research opinions, not financial advice.
Our current read (analysis of 2026-08-23): Designation Watch · Gem Score -5 (−100…+100 Quality+Value blend) · Quality 82 · Value -77 · Sentiment 50 (timing only, not weighted) · Composite fair value $82.20 vs $332.82 at analysis
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Cadence Design Systems, Inc.
CDNS NASDAQCadence Design Systems, Inc. is a multinational technology and computational software company specializing in electronic design automation and semiconductor intellectual property. The company develops AI-driven computational software, accelerated hardware platforms, and IP that engineers and scientists use to design integrated circuits, systems-on-chips, printed circuit boards, and increasingly full electronic systems. Its portfolio includes design and verification tools, emulation and prototyping hardware, system interconnect and analysis solutions, and a broad range of verification and design IP, supported by professional services such as design methodologies and custom process design kit development. Cadence Design Systems plays a central role in the semiconductor and electronics value chain, serving markets such as hyperscale and cloud computing, mobile communications, automotive, aerospace and defense, industrial IoT, medical technology, and life sciences. Through its Intelligent System Design strategy and global network of subsidiaries and offices, the company provides critical infrastructure that enables customers worldwide to bring complex silicon and system designs from concept to production. Founded in 1988, Cadence Design Systems is headquartered in San Jose, California.
Price Overview
Price History (1 Year)
Revenue & Net Income Trend
| Period | Revenue | Net Income | Net Margin | YoY/QoQ |
|---|
Key Metrics
EPS (Diluted): 4.06
Total Equity: $5.47B
Shares: 273,312,000
Total Debt: $0.00
Cash: $3.00B
EBITDA: $1.72B
Total Debt: $0.00
Cash: $3.00B
Revenue: $5.30B
Revenue: $5.30B
Revenue: $5.30B
Total Equity: $5.47B
Tax Rate: 27.1%
Equity: $5.47B
Total Debt: $0.00
Cash: $3.00B
Current Liabilities: $1.64B
Long-Term Debt: $0.00
Total Debt: $0.00
Total Equity: $5.47B
Shares: 273,312,000
Shares: 273,312,000
CapEx: -$141.87M
Shares: 273,312,000
Stock Price: $332.82
Net Income: $1.11B
Industry Benchmarks
Income Statement (Annual)
Last updated: Jul 30, 2026 9:54pm (23d ago)| Metric | 2022 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue | $3.0B | $3.6B | $4.1B | $4.6B | $5.3B |
| Cost of Revenue | — | — | — | — | — |
| Gross Profit | — | — | — | — | — |
| Operating Expenses | — | — | — | — | — |
| Operating Income | $779.1M | $1.1B | $1.3B | $1.4B | $1.5B |
| Net Income | $696.0M | $849.0M | $1.0B | $1.1B | $1.1B |
| EBITDA | $921.4M | $1.2B | $1.4B | $1.5B | $1.7B |
| EPS | $2.54 | $3.13 | $3.86 | $3.89 | $4.09 |
| EPS (Diluted) | $2.50 | $3.09 | $3.82 | $3.85 | $4.06 |
Balance Sheet (Annual)
Last updated: Jul 30, 2026 8:33pm (23d ago)| Metric | 2022 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Cash & Equivalents | $1.1B | $882.3M | $1.0B | $2.6B | $3.0B |
| Total Current Assets | $1.7B | $1.7B | $2.0B | $4.0B | $4.7B |
| Total Assets | $4.4B | $5.1B | $5.7B | $9.0B | $10.2B |
| Current Liabilities | $971.2M | $1.3B | $1.6B | $1.4B | $1.6B |
| Long-Term Debt | — | — | — | — | — |
| Total Liabilities | $1.6B | $2.4B | $2.3B | $4.3B | $4.7B |
| Total Equity | $2.7B | $2.7B | $3.4B | $4.7B | $5.5B |
| Retained Earnings | $3.0B | $3.9B | $4.9B | $6.0B | $7.1B |
Cash Flow (Annual)
Last updated: Jul 30, 2026 9:54pm (23d ago)| Metric | 2022 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Operating Cash Flow | $1.1B | $1.2B | $1.3B | $1.3B | $1.7B |
| Capital Expenditure | -$65.3M | -$123.2M | -$102.3M | -$142.5M | -$141.9M |
| Free Cash Flow | $1.0B | $1.1B | $1.2B | $1.1B | $1.6B |
| Acquisitions (net) | -$226.2M | -$613.8M | -$198.4M | -$737.6M | -$429.5M |
| Net Debt Issued / (Repaid) | — | — | — | — | — |
| Dividends Paid | — | — | — | — | — |
| Stock Buybacks | -$612.3M | -$1.1B | -$700.1M | -$550.0M | -$925.0M |
| Net Change in Cash | $160.5M | -$206.6M | $125.8M | $1.6B | $357.3M |
Growth Trends (YoY %)
Last updated: Jul 30, 2026 9:54pm (23d ago)| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Revenue Growth | +19.2% | +14.8% | +13.5% | +14.1% |
| Gross Profit Growth | — | — | — | — |
| Operating Income Growth | +37.8% | +16.5% | +8.0% | +10.5% |
| Net Income Growth | +22.0% | +22.6% | +1.4% | +5.1% |
| EBITDA Growth | +30.9% | +15.8% | +10.8% | +11.1% |
Deep Analysis
Risk : Reward — if the last quarter repeats
Live · as of 2026-08-19 08:41Even the bull case prices 75% below today — the ratio here measures the model-vs-market gap, not payoff odds. Another quarter like the worst recent one costs 88%.
| Case | Growth | Margin | Fair value | vs price ($332.82) |
|---|---|---|---|---|
| Bull — recovery | +25% | 24.4% | $83.59 | -75% |
| Base — stabilizes | +17% | 21.2% | $57.86 | -83% |
| Bear — keeps slipping | +8% | 18.0% | $39.07 | -88% |
| Stress — last quarter repeats | +6% | 20.2% | $40.38 | -88% |
Narrative Economics
market-narrative step).
Claude Reading
Independent read on the numbers first: revenue trajectory is genuinely strong and accelerating in absolute dollars — $1.06B → $1.22B → $1.36B → $1.24B → $1.28B → $1.34B → $1.44B → $1.47B across the last eight quarters. That's not decelerating; the Q1'26 print of $1.47B is 39% above Q2'24 and shows sequential strength. YoY on the latest quarter is ~18.5% ($1.47B vs $1.24B), running hotter than the 13.8% CAGR the momentum module cites. Net income is lumpier — Q2'25's $160M dip is real, but trailing four quarters aggregate to roughly $1.17B, so the TTM P/E on $91.66B market cap is closer to ~78x, roughly consistent with the reported 82x. Operating margin at 28%, ROIC at 44%, zero debt, $3B cash, and $1.59B FCF — this is a genuinely elite business. The insider activity is trivial noise, not a signal (a few thousand shares off option exercises).
Where I diverge from the prior models: the synthesis "fair value $87" is almost certainly a DCF that's under-crediting either terminal growth or the durability of the EDA duopoly. Synopsys trades at similar multiples (~55-60x forward earnings) — the market is not idiosyncratically mispricing CDNS; it's pricing the entire EDA duopoly as toll-road infrastructure on semiconductor complexity. A DCF that spits out $87 on a business compounding revenue at 14%+, generating 30%+ FCF margins, with switching costs measured in engineer-decades, is using a discount rate or terminal assumption that doesn't reflect the moat. That said, "fair value is $87" and "current price $333" cannot both be right, and the DCF being wrong by 4x is itself an extraordinary claim — the more honest read is fair value is probably $150-200, still implying meaningful overvaluation, not the $87 anchor.
The Market Forces claim that CDNS is "losing competitive ground to Synopsys in AI chip design" needs scrutiny — I see no evidence in these numbers. Revenue growth is accelerating, not decelerating; margins are holding at 28%; the Q2'25 net income dip looks like a one-time item (possibly acquisition-related, given the Beta CAE / OpenEye deals in the pipeline) rather than structural compression. If Synopsys were eating CDNS's lunch on AI, you'd see it in the top line first, and you don't. The bear case that carries more weight is simpler: at 82x earnings and 17x sales, CDNS needs to sustain 15%+ growth AND multiple expansion (or at least no compression) essentially indefinitely. Any deceleration to 8-10% growth — plausible on a semi-cycle downturn or customer consolidation — and the multiple compresses toward 40-50x, implying a $170-200 stock. That's not a thesis-breaking risk; that's a valuation-normalization risk.
Contrarian angle nobody's pressing: earnings CAGR of 3.2% vs revenue CAGR of 13.8% is a genuine yellow flag the models glossed over. Something is absorbing operating leverage — likely stock-based comp and acquisition amortization — and if that persists, GAAP earnings won't scale with revenue and the P/E stays structurally elevated. Verdict: I agree directionally with the synthesis that CDNS is overvalued, but I dissent hard on the magnitude. A $87 fair value is not credible for a zero-debt, 44% ROIC, duopoly software business compounding double-digits; that number reflects DCF assumption failure more than market irrationality. My own fair value anchor is $180-220 — meaning the stock is ~40-50% overvalued, not 74%. This is a "trim, don't short; wait for a semi-cycle drawdown to accumulate below $220" setup, not a fair-value-at-$87 setup. The narrative layer's read that fundamentals explain only 20-25% of price is wrong; fundamentals plus a defensible moat premium probably explain 55-65%, with the remaining 35-45% being AI-narrative froth that will deflate on the next disappointment.
GPT Reading
Cadence is a terrific business and, at this price, still a hard stock to own. The operating profile is exactly what investors want: revenue has compounded from $2.99B in 2021 to $5.30B in 2025, a 15%ish clip, while operating income rose from $779M to $1.49B and free cash flow reached $1.59B in 2025 on $1.73B of operating cash flow. The latest quarterly run-rate remains healthy, with Q1 2026 revenue of $1.47B up about 18.5% from $1.24B a year earlier. This is not a melting-ice-cube software name; it is a mission-critical EDA franchise with real pricing power, sticky workflows, and exposure to the secular rise in chip complexity. The balance sheet is also pristine, with $3.0B of cash and no debt, which gives the company strategic flexibility and lowers fundamental risk.
What stands out to me, though, is that the stock already asks investors to pay not just for quality but for near-perfection. At a $91.7B market cap, the stock trades around 17.2x sales, roughly 82x earnings, and over 51x EV/EBITDA. Against 2025 net income of $1.11B and free cash flow of $1.59B, that is an earnings yield of barely 1.2% and an FCF yield of only about 1.7%. Those are venture-style valuation levels applied to a company whose annual revenue growth is excellent but not explosive, and whose earnings growth is much less impressive: net income went from $1.06B in 2024 to $1.11B in 2025, only about 5%, despite revenue growing 14%. Even the quarterly margin pattern deserves more caution than the bull case usually allows. Net margin ranged from 12.5% to 27.0% across the last four quarters of 2025, and while some of that is normal lumpiness, it weakens the idea that operating leverage is steadily expanding. This looks more like a premium compounder than a hypergrowth platform, yet it is valued closer to the latter.
The simplest way to frame the disconnect is this: if Cadence can keep growing revenue at 12-15% for years and sustain net margins around 21-23%, it is still difficult to justify a low-80s P/E unless one assumes either a major margin step-up or a long duration of elevated growth that extends well beyond what mature software names usually achieve. On 2025 numbers, operating margin was 28.2% and net margin 20.9%—excellent, but not so extraordinary that they overcome the multiple. If revenue reached, say, $7B over the next few years with a 25% net margin, you get roughly $1.75B of earnings; even then, today’s price would still imply a rich multiple on forward earnings several years out. That is the core issue: the business quality is real, but the market is capitalizing it as if downside is negligible and upside from AI-driven silicon complexity is both very large and highly capturable by Cadence.
The strongest counterargument is that Cadence may be one of the rare software franchises that genuinely deserves a structural premium. Return on capital near 44% and ROE above 20% are elite. Revenue has been highly consistent, cash conversion is strong, and the no-debt balance sheet matters in a cyclical semiconductor ecosystem. If AI accelerators, custom silicon, advanced packaging, and chiplets drive a step-function increase in design complexity, EDA vendors can monetize that complexity without taking foundry or inventory risk. In that world, 14-18% growth may actually prove conservative, and investors paying 17x sales are effectively underwriting a scarce monopoly-like asset rather than a normal application software company. I take that seriously. But even if I grant the moat, the current valuation still embeds too much confidence that Cadence captures the lion’s share of that AI design spend while maintaining premium economics indefinitely. Great businesses can be bad stocks when bought at heroic multiples.
What would change my mind is not another quarter of “solid” execution; the company needs to grow into the valuation faster than it has so far. I’d want to see revenue acceleration sustained above 18% for several quarters, annual net income growth reaccelerating from 5% to 20%+, and free cash flow moving decisively above $2.0B without margin degradation. A major upward shift in annual operating margin from 28% toward the low-30s would also matter because that would support the thesis that complexity is driving operating leverage, not just top-line expansion. Short of that, I would need a much lower entry price—something closer to the mid-$200s before the risk/reward starts to feel defensible for a business of this maturity.
Grok Reading
Cadence is a genuinely elite business being priced as if the AI design-tool monopoly will compound at venture rates forever. Revenue has scaled cleanly from $2.99B to $5.30B over five years at a 13.8% CAGR, with the last four quarters printing $1.24B → $1.28B → $1.34B → $1.44B → $1.47B and recent year-over-year still at 14.1%. Free cash flow of $1.59B on only $142M of capex, a net-cash balance sheet ($3.0B cash, zero debt), 44% ROIC and 28% operating margins are the signature of a mature software oligopoly with real customer lock-in. That is not the problem. The problem is that net income has barely moved—$1.04B to $1.06B to $1.11B across the last three years, a 3.2% earnings CAGR—while the stock clears 82× trailing earnings, 17× sales and 52× EBITDA at $333. At a $91.7B enterprise, the FCF yield is roughly 1.7%. The quantitative fair-value cluster around $80–$87 is directionally correct: even generous terminal assumptions cannot bridge a 3–4× gap when earnings growth is a fraction of revenue growth and quarterly margins still swing from 12.5% to 27%.
The numbers also undercut the clean “AI chokepoint” acceleration story. Operating income only rose from $1.35B to $1.49B in the latest year despite the semiconductor supercycle narrative, and the secondary signals already flag decelerating quarterly revenue plus heavy insider selling around option exercises. Cadence remains a high-quality compounder, but it is compounding earnings at low-single digits while the market capitalizes it like a hyper-growth platform. That is the contradiction the models correctly surface and the narrative layer papers over: fundamentals explain maybe a quarter of the $333 price; the rest is story premium on irreplaceability that has not yet shown up in the income statement.
The strongest pushback is straightforward and deserves weight. EDA is a true duopoly with multi-year switching costs, and Cadence’s 44% ROIC and fortress balance sheet mean almost every incremental dollar of growth drops hard to cash. If custom AI silicon and chiplet architectures push sustained revenue growth into the high teens or low twenties while margins re-expand toward the upper 20s, the current multiple becomes less absurd on a five-year view—especially if Synopsys stumbles and Cadence takes share in the highest-value flows. Zero leverage and $1.6B of annual FCF also give management unlimited optionality for buybacks or tuck-in M&A without balance-sheet risk. A smart bull argues you are underpaying for scarcity of assets that sit upstream of every advanced tape-out, and that DCF anchors built on historical 14% growth systematically undervalue a structural step-up in TAM. I weigh that less because the last three years of reported earnings already include the early AI buildout and still delivered only mid-single-digit profit growth; the market is paying today for an inflection that has not appeared in the numbers.
I would flip to neutral or constructive only on two concrete developments: four consecutive quarters of revenue growth reaccelerating above 18% with operating margins sustainably above 30%, or clear evidence—via customer disclosures or design-win data—that Cadence is taking material share from Synopsys in AI accelerator flows while earnings CAGR closes the gap toward mid-teens. Absent that, multiple compression is the base case.
Big-3 Panel — where each AI stands
Advanced Analysis Forensic deep-dive · separate lenses
Cadence has grown revenue from $2.99B (2022) to $5.30B (2025), a ~15% CAGR, with operating margins holding in a tight 26-30% band and net income roughly doubling to $1.11B. FCF ended at $1.59B in 2025 with OCF/NI of 1.42x and accruals at -6.1% of assets - cash conversion is exceeding accounting profit, the opposite of the earnings-inflation pattern. Altman Z of 14.1 and $3.16B net cash confirm the balance sheet is a fortress with zero survival risk. Capital allocation is disciplined: diluted shares actually shrank (-0.5% CAGR) despite 8.6%-of-revenue SBC, because buybacks ran 232% of SBC - per-share value is being concentrated. The EDA duopoly with Synopsys is one of the more durable moat structures in software: mission-critical tools embedded in every semiconductor design flow, high switching costs, and structural tailwinds from chip complexity and AI silicon proliferation. The one soft spot is a slight operating-margin drift from 30.6% (2023) to 28.2% (2025), likely tied to the Beta CAE / systems-analysis acquisitions and hardware (Palladium/Protium) mix - worth watching but not alarming given absolute margin level and revenue acceleration. Insider tape is routine option-exercise-and-sell (M then S same day), $58.7M sold with zero buys, which is typical for a mega-cap tech at elevated share levels and not a directional red flag.
Verify before trusting this (5)
- Segment/product mix disclosure to confirm whether margin compression is hardware (Palladium/Protium) or acquired systems businesses
- Customer concentration and China exposure given export-control sensitivity in EDA
- Details of Beta CAE and any other recent acquisitions - goodwill, earn-outs, integration progress
- Backlog / RPO trajectory to confirm ratable software-revenue durability
- 10b5-1 plan disclosures behind the routine executive sales to confirm they are pre-scheduled
The e2e composite pins fair value at $79.79 and the signal-adjusted number at $86.65, implying roughly -74% downside from $332.82. Even the most generous method here (DCF at $92.79) leaves the stock trading at ~3.6x deserved value, and the anchored-PE ($86.89) and EPV floor ($46.67) both scream that mid-teens growth and ~28% margins do not support a >$90B market cap. Earnings quality is high, so no haircut is warranted - but that only firms up the deserved number, it does not close a 74% gap.
Verify before trusting this (4)
- Whether operating margin recovers from 28.2% as recent acquisitions lap - key input to deserved multiple
- Forward bookings/backlog growth to test the AI-design tailwind durability
- Any guidance shift on 2025-26 revenue growth below mid-teens
- Buyback pace vs SBC to confirm real share-count shrinkage net of dilution
The dominant force on CDNS right now is a strong, durable platform-monopoly narrative: the market treats Cadence as irreplaceable AI-chip-design infrastructure. That story just got fresh oxygen from a Q2 beat, 24.2% revenue growth, an $8.1B record backlog, and a raised full-year outlook. News flow is unambiguously positive and analyst tone is leaning into the AI-demand framing rather than fading it. For a beta-1.15 name, this narrative tailwind is doing more work than the tape. The macro backdrop is a mild crosswind, not a gale: neutral regime, VIX 17, 10y at 4.67% and a market PE of 26 create ambient pressure on high-multiple software, and CDNS trades far above DCF anchors, so it is exposed if the AI-infrastructure trade rotates. The Synopsys drawdown headline is a reminder that this cohort can crack hard on any moat scare - the July 17 Kimi K3 -10% episode already showed how twitchy the tape is around competitive-threat news. Net: strong narrative + strong earnings print + medium cult coefficient outweighs a neutral-to-slightly-hostile macro tape. Direction is up, but the pressure is narrative-dependent, not bulletproof.
Verify before trusting this (4)
- Any follow-through crack in the AI-chip-design moat story (new open-source EDA, hyperscaler in-house tooling news)
- Sell-side target revisions and consensus tone shift post-Q2 print
- Whether the AI-infra trade holds or rotates in the next few weeks
- 10y yield behavior - a move above 4.8-5% would pressure the multiple harder
This lens hasn't been run for this ticker yet.
When we made this prediction on Jul 31, 2026, CDNS was $332.82. We expect it to be $298.00 by Jan 2027, and we consider it great value under $180.00. This is an early model (v0.6.0) — the direction is more reliable than the exact price. Made Jul 31, 2026.
Blue is our prediction, starting the day we made it. Grey is a slower route to the same place — the same destination, taking longer. Black is the actual price, so you can see how we are doing.