CDNS Stock Forecast & Price Target

Cadence Design Systems reported a robust backlog of $7.0 billion in Q3, marking a 9.4% increase from Q2, which enhances visibility and suggests a healthy demand pipeline heading into Q4. The company achieved a year-over-year growth of 11.7% in core EDA revenue, contributing to a forecasted revenue growth of approximately 13.7% for FY25 and continuing strong performance in subsequent fiscal years. Additionally, significant growth in intellectual property (IP) revenue by 10.1% year-over-year reinforces the strength of Cadence’s offerings in the electronic design automation market.

Cadence Design Systems is facing a decline in growth rates, with anticipated growth for FY25 expected to decrease to approximately 13% from the previous year's 19%, amidst challenging comparisons and uncertain market conditions, particularly in China. Furthermore, both non-GAAP and GAAP operating margins are projected to decline, with non-GAAP margins peaking in 2025 before slipping to 41-42%, and GAAP margins reducing to 28-29%, which signals deteriorating profitability. The overall revenue growth forecast indicates a deceleration to less than 5% year-over-year, compounded by a sustained lack of GAAP earnings growth, suggesting heightened risks to the sustainability of Cadence's financial performance.