Cadence Design Systems, Inc. (CDNS): A Bull Case Theory 

We came across a bullish thesis on Cadence Design Systems, Inc. on Expanse Stocks’s Substack by Nikotes. In this article, we will summarize the bulls’ thesis on CDNS. Cadence Design Systems, Inc.’s share was trading at $309.62 as of December 1st. CDNS’s trailing and forward P/E were 80.37 and 39.37 respectively according to Yahoo Finance.

Cadence Design Systems delivered a strong Q3 2025, underscoring its pivotal role in the AI infrastructure ecosystem. Revenue rose 10% year-over-year, surpassing guidance, while non-GAAP EPS increased 18%, and backlog climbed to a record $7 billion, reflecting robust demand despite partial normalization in China.

The standout performer was the IP segment, now on track for over 20% full-year growth, driven by focused exposure to AI and HPC interconnects such as HBM4, DDR5, and PCIe, expanding foundry partnerships with Samsung and Intel, and share gains over Synopsys. The hardware verification business (Palladium and Protium) also had a record quarter, becoming the preferred choice for AI chip designs that require massive verification capacity.

CEO Anirudh Devgan emphasized Cadence’s “generational opportunity” in AI, supported by real productivity gains at key customers like Samsung, NVIDIA, and Qualcomm, which reported 4–10x improvements using Cadence’s AI-powered verification tools. Management reinforced confidence through accelerated share repurchases, using half of free cash flow for buybacks. The acquisition of Hexagon’s MSC Software marks a strategic expansion into System Design & Analysis, positioning Cadence to capture the emerging “Physical AI” wave spanning robotics and autonomous systems.

While geopolitical risks in China remain a wildcard and have modestly tempered Q4 EPS expectations, Cadence’s diversified growth drivers, record backlog, and strong execution suggest durable momentum. With leadership in AI design tools, an expanding IP portfolio, and proactive strategic diversification, Cadence appears well-positioned to sustain double-digit growth and extend its competitive moat into 2026.

Previously we covered a bullish thesis on Synopsys, Inc. (SNPS) by The Equity Analyst in February 2025, which highlighted its leadership in EDA software and semiconductor IP. The company’s stock has depreciated by 17.51% since our coverage as AI-related demand shifted toward peers. The thesis still stands as Synopsys remains crucial to chip design, while Nikotes emphasizes Cadence’s faster IP growth and AI design edge.

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Disclosure: None.