• Revenue: $1.242 billion, 23% year-over-year growth.
• Non-GAAP EPS: $1.57, 34% increase year-over-year.
• GAAP EPS: $1.00.
• Non-GAAP Operating Margin: 41.7%.
• GAAP Operating Margin: 29.1%.
• Cash Balance: $2.778 billion at quarter end.
• Operating Cash Flow: $487 million.
• Debt Outstanding: $2.5 billion.
• Share Repurchase: $350 million used to repurchase shares.
• IP Business Growth: 40% year-over-year in Q1.
• Core EDA Revenue Growth: 16% year-over-year in Q1.
• System Design & Analysis Revenue Growth: Over 50% year-over-year in Q1.

• Warning! GuruFocus has detected 4 Warning Sign with CDNS.

Release Date: April 28, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cadence Design Systems Inc (NASDAQ:CDNS) reported a 23% year-over-year revenue growth and a 34% increase in non-GAAP EPS for Q1 2025, exceeding guidance on all key financial metrics.
• The company raised its financial outlook for 2025, reflecting confidence in continued business strength and resilience.
• Cadence's IP business grew 40% year-over-year in Q1, driven by strong market opportunities in AI, chiplet-based architectures, and the foundry ecosystem.
• The company expanded its partnerships with major industry players like NVIDIA, Intel, and Rapidus, enhancing its ecosystem and market reach.
• Cadence was recognized as one of the 100 best companies to work for by Fortune and Great Place to Work, highlighting its strong corporate culture.

Negative Points

• Despite strong performance, Cadence remains cautious about its China business, maintaining a flat revenue outlook for the region due to macroeconomic uncertainties.
• The company faces potential risks from export control regulations and tariffs, although it currently reports no significant impact on its operations.
• Cadence's hardware revenue is limited by production capacity, with demand outstripping supply, which could constrain growth in this segment.
• The acquisition of Arm's Artisan Foundation IP business has not yet closed and is not included in the current guidance, adding uncertainty to future financial projections.
• The company acknowledges the dynamic macro environment and continues to monitor potential impacts on customer behavior and market conditions.

Q & A Highlights

Q: On your China business, given the growth acceleration and domestic focus on chip design, is this a potential tailwind for your China business? Are you more optimistic about growth in China this year? A: Anirudh Devgan, CEO, stated that while pleased with the Q1 performance and strong design activity in China, they remain prudent and assume China revenue will be flat for the year. John Wall, CFO, added that design activity remains strong, but they are maintaining a cautious outlook.

Q: Can you confirm if Cadence has any exposure to the tariffing regime announced by the US government? A: Anirudh Devgan, CEO, explained that software and services are not subject to tariffs, and their diversified supply chain mitigates hardware tariff impacts. They have manufacturing lines in the US and outside, reducing tariff exposure.

Q: How does the shift to GPU-based servers impact your licensing model and annual contract value? A: Anirudh Devgan, CEO, noted that while they maintain traditional licensing models, they are also offering more cloud solutions, including packaging hardware and software together. This shift could influence business models as hardware offerings become richer.

Q: What is Cadence's share gain opportunity with Intel, and how soon can it start to show up tangibly? A: Anirudh Devgan, CEO, acknowledged that Intel has been a weak spot for Cadence historically. However, with new leadership at Intel and ongoing discussions, they see a great opportunity to engage more deeply and potentially gain share.

Q: Could you provide insights into your hardware deliveries and any impact from tariffs or capacity issues? A: John Wall, CFO, stated that hardware revenue is limited by production capacity due to high demand. Their resilient supply chain setup minimizes tariff impacts, with production optimized for US and international markets.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.