Lesser-Known Cadence Design Systems Just Landed Google and Nvidia Deals. Should You Buy CDNS Stock?

At a time when most software stocks have taken a beating, some companies are slowly emerging from the downturn not as casualties but as direct beneficiaries of improvements in AI. Cadence Design Systems (CDNS) is one such company making headlines not just because of the technology it is working on but also because of the two massive deals it has just signed with Alphabet (GOOG) (GOOGL) and Nvidia (NVDA).

The deal with Google Cloud will allow Cadence to optimize its ChipStack AI Super Agent on Google Cloud. This will allow the company to implement agentic design automation, helping develop the next generation of chips using the reasoning power of large language models (LLMs) and Cadence’s proprietary systems.

The deal with Nvidia reinforces the company’s already strong position in digital twins and simulation. Over time, this is where AI and robotics will converge to build the next-generation factories powered by autonomous robotic workers. Cadence has already secured a front-row seat in this AI-driven transformation.

About Cadence Design Systems Stock

Founded in 1987, Cadence Design Systems develops AI-driven hardware, software, and silicon intellectual property solutions. The company offers a range of tools, including functional verification platforms such as Jasper and Xcelium, AI-based solutions such as Verisium, and hardware systems like Palladium and Protium. It also provides digital IC design and sign-off tools, as well as custom IC design and simulation platforms for analog design and verification. 

Over the last year, Cadence Design Systems delivered returns of about 18%, while the S&P 500 ($SPX) gained around 35%. So far this year, CDNS stock has underperformed the broader market, falling under 1% on a year-to-date (YTD) basis, compared to a gain of more than 4% in the S&P 500.

Cadence Design is expected to grow at a reasonable rate over the next three years. While the 2026 growth is only expected to be 10.5%, 2027 and 2028 are set to clock in at 20% and 15.5% growth, according to Wall Street. This growth, unfortunately, does not justify the 64.02x forward P/E multiple, so the company needs to deliver concrete results before it can convince investors. Currently, it does seem to be riding the hype, and with autonomous robotics still a few years away, one wonders if the valuation is not too stretched.

Cadence Design Systems' Solid Q4 Results

Cadence Design Systems reported its fourth-quarter fiscal 2025 results on Feb. 17. The company generated $1.440 billion in revenue for the quarter. For the full year, revenue reached $5.297 billion. Non-GAAP operating margin was 45.8%, while GAAP operating margin stood at 32.2%. Non-GAAP earnings per share came in at $1.99. Operating cash flow totalled $1.729 billion for the year and $553 million in the fourth quarter. 

For 2026, the company projects revenue in the range between $5.9 billion and $6 billion. GAAP operating margin is expected to be in the range of 31.75% to 32.75%, while non-GAAP operating margin is expected to stay in the 44.75% to 45.75% range. Revenue for the first quarter of 2026 is forecast between $1.420 billion and $1.460 billion. The firm is set to announce its Q1 2026 earnings on April 27.

What Analysts Are Saying About CDNS Stock

According to a report released on April 17, KeyBanc analyst Jason Celino reaffirmed a “Buy” rating on CDNS stock, along with the price target of $405. The update came shortly after the company announced the expansion of its existing partnership with Nvidia. 

The 23 Wall Street analysts tracked by Barchart covering CDNS stock have a consensus “Strong Buy” rating. This rating reflects strong analyst support with a mean price target of $374.95. This price target offers 20% upside from the current levels.