CDNS Stock Forecast & Price Target

Cadence Design Systems demonstrated a strong financial performance in Q4-24, with revenue reaching $1,356 million, representing a 27% year-over-year growth, driven by a robust verification hardware cycle, significant progress in the System's business, and consistent sales of intellectual property. The company's backlog increased to $6.8 billion from $5.6 billion in the previous quarter, signifying healthy demand and providing substantial visibility into future revenues. Additionally, Cadence maintained operating margins at an impressive 46%, reflecting effective expense management and solidifying the company's financial stability and growth potential.

The analysis indicates a negative outlook for Cadence Design Systems's stock due to anticipated long-term growth deceleration, with expectations of revenue growth for electronic design automation (EDA) dropping to high single digits and intellectual property (IP) growth lagging at low teens. Guidance for 2025 shows a projected revenue increase of only 11.6%, which falls short of the market consensus of 12.7%, signaling potential weakness in demand and further downgrades in financial forecasts for both FY25 and FY26. Additionally, management's warning of a slowdown in bookings activity and a possible decline in backlog further underscores concerns regarding the company's near-term revenue trajectory, compounded by potential declines in key revenue sources such as Intel IP.