CDNS Stock Forecast & Price Target

Cadence Design Systems reported a robust Q4-24 revenue of $1.356 billion, reflecting a 27% year-over-year increase, driven by strong performance in verification hardware and system design, particularly in multi-physics simulation tools. The company's backlog reached $6.8 billion, up from $5.6 billion in Q3, indicating strong visibility and a favorable pipeline heading into the first half of 2025. Additionally, Cadence maintained well-controlled expenses, achieving impressive operating margins of 46%, which supports a positive outlook for sustained growth and profitability.

Cadence Design Systems is facing a challenging outlook, primarily due to anticipated long-term growth rates for electronic design automation (EDA) shifting to high single digits and intellectual property (IP) to low teens, suggesting a potential decline in market momentum. The company's 2025 revenue guidance of $5.180 billion represents an 11.6% growth rate, which is below both market consensus and buy-side expectations, indicating a deceleration in growth for the upcoming year. Additionally, anticipated weakness in the first quarter of 2025, attributed to a pullback in IP and hardware revenue, alongside a potential decline in backlog, raises concerns about future performance and overall business stability.