CADENCE DESIGN SYSTEMS (CDNS)·Q4 2025 Earnings Summary

Cadence Delivers 14% Revenue Growth, Issues FY26 Guidance Above Street

February 17, 2026 · by Fintool AI Agent

Cadence Design Systems (NASDAQ: CDNS) reported Q4 2025 results that beat consensus on both revenue and EPS, capping off a strong FY 2025 with 14% revenue growth and record backlog of $7.8 billion. However, shares declined ~5% as investors digested decelerating growth expectations for FY 2026 and ongoing regulatory overhang from the DOJ/BIS settlement.

Did Cadence Beat Earnings?

Yes. Cadence delivered solid beats on both top and bottom line:

Full Year FY 2025 Results:

Cadence has now beaten EPS estimates for 8 consecutive quarters.

What Did Management Guide?

Cadence issued FY 2026 guidance materially above street consensus, though growth rates are decelerating from FY 2025 levels:

Q1 2026 Guidance:

vs. Street Consensus (pre-earnings):

• FY 2026 Revenue guidance midpoint of ~$5.95B is +$670M above prior consensus of ~$5.28B*
• FY 2026 EPS guidance midpoint of ~$8.10 is +$1.06 above prior consensus of ~$7.04*

*Values retrieved from S&P Global

Guidance excludes the pending Hexagon design and engineering business acquisition.

How Did the Stock React?

Despite the earnings beat and above-consensus guidance, CDNS shares fell 5.3% to $283.46 on the day of the release. The stock is now:

• Down 9% from 50-day moving average ($312.94)
• Down 13% from 200-day moving average ($324.35)
• Down 25% from 52-week high of $376.45

Why the negative reaction?

1. Growth deceleration: FY 2025 delivered 14% revenue growth and 20% EPS growth. FY 2026 guidance implies 11-13% revenue growth and 13-14% EPS growth — a meaningful slowdown.

2. DOJ/BIS overhang: The company continues to reference "ongoing compliance, cooperation, audit and other obligations" from its July 2025 settlement agreements, with potential impact on China operations and U.S. government contracting.

3. Hexagon acquisition uncertainty: The pending acquisition of Hexagon's D&E business remains subject to closing conditions and integration risk.

What Changed From Last Quarter?

Segment Performance (FY 2025):

Key highlights:

• Core EDA grew 13% in 2025, driven by hyperscaler adoption and AI-driven product proliferation
• Semiconductor IP grew nearly 25% YoY, powered by HBM, UCIe, PCIe, DDR, and SerDes adoption
• Hardware delivered another record year, adding 30+ new customers with seven of the top ten purchasing both Palladium Z3 and Protium X3 systems
• System Design & Analysis grew 13%, supported by strong 3D-IC platform demand for AI infrastructure

Geographic Mix (Q4 2025):

China revenue remained stable at 12-13% of total, though Q3 2025 saw a spike to 18% that normalized in Q4.

What Did Management Say?

"Cadence delivered excellent results for the fourth quarter, closing an outstanding 2025 with over 14% revenue growth and 20% non-GAAP EPS growth. Strong customer demand for our expanding AI-driven product portfolio and the essential nature of Cadence's engineering software position us well to capture the massive opportunities in the AI era."

— Anirudh Devgan, President & CEO

"Cadence closed 2025 with a strong finish and broad-based strength across the business. We delivered a 44.6% non-GAAP operating margin, reflecting continued productivity-driven profitability improvement. With strong Q4 bookings, we began 2026 with a record backlog of $7.8 billion and excellent momentum."

— John Wall, CFO

AI Product Momentum:

Management highlighted the introduction of ChipStack, a "groundbreaking agentic AI Super Agent for chip design and verification" built on Cadence's foundational EDA platform. ChipStack leverages intelligent agents that autonomously call underlying Cadence tools, enabling faster design convergence and improved engineering productivity.

Capital Allocation & Balance Sheet

FY 2026 capital allocation:

• Expects to use ~50% of free cash flow for share repurchases
• Q1 2026 repurchase expectation: ~$200M
• Approximately 71% of cash is held in the U.S.

Headcount grew to 13,800 employees at year-end, up from 12,705 at end of FY 2024.

Forward Catalysts & Risks

Catalysts:

• Hexagon D&E acquisition closing — Expected to add design and engineering capabilities; guidance currently excludes this
• ChipStack agentic AI adoption — New product with potential to accelerate design productivity
• Hyperscaler AI infrastructure buildout — Core driver of demand across EDA, IP, and hardware segments
• Semiconductor IP expansion — HBM, UCIe adoption continues with advanced packaging trends

Risks:

• DOJ/BIS compliance — Ongoing obligations from July 2025 settlement could impact China business and U.S. government contracts
• Growth deceleration — Guidance implies slower growth than FY 2025 levels
• China exposure — 12-13% of revenue from China amid geopolitical uncertainty
• Hexagon integration — Acquisition complexity and execution risk

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Data sourced from Cadence Design Systems Q4 2025 8-K filing dated February 17, 2026. Stock price data from market close February 17, 2026.

Related: CDNS Company Profile | Q4 2025 Transcript | Q3 2025 Earnings