KeyBanc reaffirmed its Overweight rating on Cadence Design Systems and preserved a $405.00 price objective in the wake of the chip design software company's fourth-quarter results. The analyst target equates to roughly a 43% premium over the stock's then-current trading level of $283.46, though InvestingPro's Fair Value assessment indicates the share price is marginally above that model's estimate.
Cadence reported an $800 million sequential increase in backlog, bringing the quarter-end backlog to $7.8 billion. Alongside that metric, the company issued a 2026 revenue growth projection of 12.3% - a figure KeyBanc characterized as conservative when compared with Cadence's recent operating momentum. Over the trailing twelve months the business delivered 19.72% revenue growth.
InvestingPro data included in the review highlighted Cadence's strong profitability profile, showing gross profit margins of 85.54%.
In its note, KeyBanc stressed that the 2026 guidance begins at a higher starting point than the original 2025 outlook, a shift the bank attributed to accelerating recurring revenue trends. The firm said this framing of the outlook helped to allay some market concerns.
KeyBanc also pointed out that the guidance embeds conservative assumptions for intellectual property and hardware-related revenue in the second half of the fiscal year. Despite those cautious assumptions, the analyst suggested there is upside potential, noting Cadence could attain mid-teens revenue growth through the year if those areas perform better than the guidance assumes.
Describing Cadence as a high-conviction idea, KeyBanc recommended investors consider using recent weakness across the software sector as an opportunity to build positions in the stock.
Product announcements accompanied the financial update. Cadence introduced its ChipStack AI Super Agent, an artificial intelligence tool intended to automate front-end silicon design and verification tasks. According to the company, the technology can improve productivity on tasks such as coding designs, generating test plans, and debugging by as much as tenfold.
The company also unveiled the Tensilica HiFi iQ digital signal processor, the sixth generation in the HiFi DSP family. Cadence states this processor delivers twice the compute performance and eight times the AI performance of the HiFi 5s DSP, along with energy savings in excess of 25% for most workloads and more than 40% performance improvement on various audio codecs. Cadence framed these advances as part of its continued effort to expand capabilities in AI and DSP applications.
For investors seeking valuation context, InvestingPro offers a Fair Value calculator that aggregates a set of industry valuation models to assess whether CDNS represents value at current prices.