Overview
Rosenblatt upgraded Cadence Design Systems (NASDAQ: CDNS) from Neutral to Buy on Tuesday and raised its price target to $360 from $335. The new target implies roughly a 27% premium to Cadence’s then-current share price of $283.46. InvestingPro data included in the filing shows Cadence trading slightly above its assessed Fair Value.
Quarterly performance
Cadence reported fourth-quarter fiscal 2025 revenue of $1.44 billion, an increase of 6.2% year-over-year. That total was about 1% higher than Rosenblatt’s $1.42 billion forecast and aligned with consensus estimates at the same level. Over the trailing twelve months, Cadence generated $5.21 billion in revenue, representing 19.7% growth.
Geographically, China accounted for 13% of fourth-quarter revenue. Product mix shifted toward upfront revenue, which rose to 21% of total revenue from 18% in the prior quarter, driven by hardware and license sales.
Backlog and visibility
Backlog expanded sequentially by 11% to $7.8 billion from $7.0 billion in the third quarter, a year-over-year gain of 14.7%. Management indicated this backlog provides visibility to approximately 67% of 2026 revenues. Rosenblatt cited design complexity at lower process nodes, AI-related chip initiatives, demand from systems customers, and intellectual property needs as contributors to the quarter’s strength.
Profitability and balance sheet
Cadence continued to report high gross margins, with an 85.5% gross profit margin noted for the quarter. InvestingPro data referenced by Rosenblatt characterized the company as operating with a moderate level of debt and provided additional ProTips on Cadence’s financial position.
Analyst estimates and acquisition note
Following the quarterly results, Rosenblatt modestly raised its estimates for fiscal 2026 and 2027, and said Cadence’s initial fiscal 2026 outlook is marginally ahead of its prior forecast. The firm did not include the pending $3.2 billion Hexagon simulation acquisition in its forecast assumptions; that deal is expected to close in the coming weeks but remains outside current projections.
Rosenblatt cited the stock’s pullback since September and its view that artificial intelligence is a tailwind for electronic design automation as factors behind the upgrade and higher price target.
Other analyst and product developments
KeyBanc reiterated an Overweight rating on Cadence and maintained a price target of $405.00 following the results. Separately, Cadence announced several product initiatives, including the ChipStack AI Super Agent, designed to automate front-end silicon design and verification workstreams with claims of up to tenfold productivity gains for users.
Cadence also introduced a new member of its Tensilica HiFi DSP family, the HiFi iQ digital signal processor, which the company positioned for next-generation voice AI and immersive audio applications. The new processor architecture was described as delivering double the compute and eight times the AI performance of its predecessor, while offering energy savings of more than 25% for typical workloads and a 40% performance improvement on a range of audio codecs.
Implications
The combination of an above-consensus quarterly revenue result, expanding backlog and product introductions underpinned Rosenblatt’s move to a Buy rating. The pending Hexagon acquisition remains outside current forecasts and will be incorporated after closing. Investors and market participants will likely watch fiscal 2026 guidance and the integration of new products and the acquisition for indications of sustained revenue and margin trends.
Note on promotional content
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