Cadence Design Systems Outperforms Q3 Expectations Driven By Hardware, China

Shares of Cadence Design Systems Inc (NASDAQ:CDNS) remain under pressure on Tuesday, despite the company’s upbeat third-quarter results.

Here are some key analyst takeaways:

• Rosenblatt Securities analyst Blair Abernethy reiterated a Neutral rating and raised the price target from $320 to $335.
• Needham analyst Charles Shi maintained a Buy rating and a $390 price target.
• Piper Sandler analyst Clarke Jeffries reaffirmed a Neutral rating and a $355 price target.

Check out other analyst stock ratings.

Rosenblatt Securities: Cadence’s revenue grew around 10% year-on-year to $1,339 million. It topped consensus of $1,323 million. Abernethy noted that a sharp recovery in China, strong Upfront revenue growth and continued uptake of AI tools drove revenue.

Backlog grew by about 9% sequentially to $7 billion. That includes $150 million from China, and the company expects it to grow again by year-end, the analysts stated. "With these solid results, Cadence marginally increased its outlook for FY25," he further wrote.

Needham: This marks the third consecutive year in which Cadence generated around 14% revenue growth, "despite the drastically changing macro environment" during the same period, Shi said. Both hardware and China revenues reached record highs, he added.  

The company's third-quarter results and fourth-quarter guidance were both higher than their respective consensus estimates, the analysts stated. "CDNS also reported strong backlog growth to $7B, implying ~$1.9B net bookings in the quarter," he further wrote.

Piper Sandler: Cadence reported non-GAAP earnings of $1.93 per share, topping consensus of $1.79 per share, Jeffries said. The company's non-GAAP operating margins of 47.6% came in 220 basis points (bps) higher than consensus, "based on a small reorganization in quarter," he added.

Demand from China quickly bounced back despite around 33 days of uncertainty due to U.S. export controls in the previous quarter, the analyst stated. "CDNS raised FY25 revenue expectations by $37M or +80bps driven by stronger than expected bookings & improvement in China," he further wrote.

CDNS Price Action: Shares of Cadence had declined by 3.32% to $339.74 at the time of publication on Tuesday.

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