Cadence’s first quarter was shaped by strong customer demand for its semiconductor design software and related technologies, which management attributed to continued investment in next-generation chip design across multiple industries. CEO Anirudh Devgan pointed to the company’s broadening AI-driven portfolio, expanded partnerships, and robust recurring revenue mix as key contributors to the positive quarterly performance. Devgan highlighted, “We haven't seen any shifts in customer behavior at this time, as they continue investing in their next-generation designs, recognizing that today's R&D efforts are critical to deliver the groundbreaking products of tomorrow.”
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Cadence (CDNS) Q1 CY2025 Highlights:
- Revenue: $1.24 billion vs analyst estimates of $1.24 billion (23.1% year-on-year growth, in line)
- The company slightly lifted its revenue guidance for the full year to $5.19 billion at the midpoint from $5.18 billion
- Management raised its full-year Adjusted EPS guidance to $6.78 at the midpoint, a 1.2% increase
- Operating Margin: 29.1%, up from 24.8% in the same quarter last year
- Market Capitalization: $80.66 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Cadence’s Q1 Earnings Call
- Harlan Sur (JPMorgan) asked if domestic China design activity could drive outperformance. CEO Anirudh Devgan said design activity is strong but reiterated a prudent full-year outlook for China revenue.
- Lee Simpson (Morgan Stanley) questioned Cadence’s exposure to U.S. tariffs. Devgan explained that software and services are not subject to tariffs and highlighted the company’s diversified supply chain for hardware.
- Gary Mobley (Loop Capital) probed the impact of cloud and GPU-based compute on licensing. Devgan described an evolving business model, including traditional and cloud-based licensing with bundled hardware-software solutions.
- Vivek Arya (Bank of America) asked about potential share gains at Intel. Devgan noted recent improvements in Cadence’s IP and relationships, and sees an opportunity to expand engagement with Intel.
- Jay Vleeschhouwer (Griffin Securities) sought details on key R&D priorities. Devgan identified AI, 3D-IC, and hardware-software co-optimization as top technical focus areas for the year.
Catalysts in Upcoming Quarters
In the coming quarters, the StockStory team will watch for (1) adoption rates of Cadence’s new AI-driven design and verification tools, (2) successful integration and revenue contribution from recent and pending IP acquisitions, and (3) evidence of continued expansion in system design and analysis, especially with hyperscaler and data center customers. Execution in China and resilience to trade policy shifts will also be important markers.
Cadence currently trades at $295, up from $285.73 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).
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