Semiconductor design software provider Cadence Design Systems (NASDAQ:CDNS) met Wall Street’s revenue expectations in Q1 CY2025, with sales up 23.1% year on year to $1.24 billion. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $5.19 billion at the midpoint. Its GAAP profit of $1 per share was 1.9% above analysts’ consensus estimates.
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Revenue: $1.24 billion vs analyst estimates of $1.24 billion (23.1% year-on-year growth, in line)
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EPS (GAAP): $1 vs analyst estimates of $0.98 (1.9% beat)
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The company slightly lifted its revenue guidance for the full year to $5.19 billion at the midpoint from $5.18 billion
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Operating Margin: 29.1%, up from 24.8% in the same quarter last year
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Free Cash Flow Margin: 37.3%, up from 29.8% in the previous quarter
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Market Capitalization: $79.45 billion
“Cadence delivered excellent results for the first quarter of 2025 with robust ongoing customer demand for our innovative technologies driving 23% revenue growth and 34% non-GAAP EPS growth year-over-year,” said Anirudh Devgan, president and chief executive officer.
With the name chosen to reflect the idea of a repeating pattern or rhythm in electronic design, Cadence Design Systems (NASDAQ:CDNS) offers a software-as-a-service platform for semiconductor engineering and design.
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last three years, Cadence grew its sales at a 15.6% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Cadence.
This quarter, Cadence’s year-on-year revenue growth of 23.1% was excellent, and its $1.24 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 9% over the next 12 months, a deceleration versus the last three years. This projection doesn’t excite us and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.
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