Cadence Design Systems (CDNS) Helps NVIDIA and Tesla Design Electronics

Stock (Symbol)

Cadence Design Systems (CDNS)

Stock Price

$284

Sector

Data is as of

Expected to Report

Company Description

Cadence Design Systems, Inc. is an electronic system designing company.

The Company’s Custom IC Design and Simulation offerings are used by its customers to create schematic and physical representations of circuits down to the transistor level for analog, mixed-signal, custom digital, memory and radio frequency (RF) designs.

Its Digital IC Design and Signoff solutions are used to create logical representations of a digital circuit or an integrated circuit (IC) that can be verified for correctness prior to implementation.

The Company’s Functional Verification products are used by its customers to verify that the circuitry or the software they have designed is consistent with the functional specification.

Its IP offerings consist of pre-verified, customizable functional blocks.

Its System Design and Analysis offerings are used by its customers to develop printed circuit boards (PCBs) and advanced IC packages and to analyze electromagnetic, electro-thermal and other multi-physics effects. Source: Refinitiv

Sharek’s Take

Cadence Design Systems enables its customers to design electronics including smartphones, computers, autonomous driving systems, cloud data centers equipment, AI systems, medical equipment, as well as aerospace and defense systems. The company offers software, hardware, services, and reusable integrated circuit (IC) blocks to help customers develop complex electronic devices and systems, as well as conduct verification tasks to ensure that systems are working correctly. Partners include NVIDIA which is using Cadence for data analysis, system analysis, and AI, as well as Tesla which deploys Cadence solutions for the development of its Dojo AI supercomputer. Cadence also works with the military — US Army & Airforce, Northrop Grumman — in its digital transformation. 

Here are the company’s main segments, with stats from last qtr (Note, CDNS didn’t include year-over-year growth rates):

• Core EDA (Digital, Custom Analog, Verification Portfolios) accounted for 68% of total revenue.
  Design and verification of diverse semiconductor chips across various manufacturing technologies.
  • Cadence Virtuoso: Used to design analog parts of chips (like power, sensors, and signal processing)
  • Cadence Spectre: A simulation tool that lets engineers test how a circuit will behave before it’s built.
  • Cadence Palladium: A physical system used to test large and complex chips before manufacturing.
  • Cadence Cerebrus: Uses AI to automatically optimize chip designs.
• System Design and Analysis is accounted for 17% of revenue.
  Helps design and simulate electronics and complete systems.
  
• Semiconductor Intellectual Property (IP) is accounted for 15% of revenue.
  Essential design architectures for custom chips in automotive, computing, mobile, AI, and consumer electronics.
  • Cadence SimAI: An AI-powered platform that improves simulation and debugging workflows.

CDNS has been an amazing stock this past decade as its climbed around ten-fold in price. The stock currently has an Estimated Long-Term-Growth Rate of 15%, but I think this is a 20% to 25% grower. Management bought back $925 million of CDNS stock during 2025. CDNS is part of the Growth Portfolio. I think the stock is a good value here.

One Year Chart

CDNS stock has had a wild year, with big swings in the stock price. The stock actually rose after last qtr’s earnings were released.

The stock now has a P/E of 35, down from 52 last qtr. My Fair Value is a P/E of 45. I believe CDNS is currently undervalued.

The Est. LTG is 15%, up from 14% 2QtrsAgo. I think this is a 20%-plus profit grower long-term.

Profit growth was 25% last qr, but qtrly growth has been inconsistent.

Earnings Table

• Cadence expanded its AI portfolio to four AI super agents: AuraStack, ChipStack, ViraStack, and InnoStack, covering the electronic system design flow from chip design and verification to advanced packaging and PCB design.
• Core EDA revenue grew 18% year-over-year, driven by stronger adoption of AI solutions, digital design tools, and sign-off products.
• IP revenue grew more than 40% year-over-year, driven by strong demand for interface, memory and chiplet IP for AI, HPC and advanced-node designs.
• System Design and Analysis revenue grew 37% year-over-year, helped by growing demand for advanced packaging, PCB and 3DIC solutions as AI systems become more complex.
• Cadence’s hardware business delivered another record quarter, supported by strong demand from AI and high-performance computing customers, including hyperscalers and semiconductor companies.

Annual Profit Estimates increased this qtr. For 2026, management expects revenue to be ~$6.30 billion, implying ~19% revenue growth.

Qtrly Profit Estimates are 6%, 2%, 10%, and 11% for the next 4 qtrs. Cadence revenue and profit growth varies quarter to quarter. Analysts expect revenue to increase 23% next quarter.

Fair Value

CDNS is $284 this qtr and has a P/E of 35.

My Fair Value is a P/E of 45, that’s $366 a share, I think the stock is undervalued by 29%. 

2027 Fair Value is $430 a share, upside of +51%

CDNS is usually highly appreciated by investors, and often has little upside.

Bottom Line

Cadence Design Systems (CDNS) has been a publicly traded company since 1998, but the stock only started growing at a faster pace in 2017 when it broke out at $30.

CDNS stock has gone from overheated to undervalued during the past quarter. This is a good time to add shares, but I won’t as my Growth Portfolio is close to fully invested right now.

CDNS moves from 20th to 16th in the Growth Portfolio Power Rankings.

Power Rankings

16 of 32

Focus List

N/A

Conservative Stock Portfolio

N/A