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Investing.com -- Cadence Design Systems Inc (NASDAQ:CDNS) reported third-quarter financial results that exceeded analyst expectations, with the design automation software provider raising its full-year revenue guidance amid strong demand across its business segments.
The company posted adjusted earnings per share of $1.93 for the third quarter, surpassing the analyst consensus of $1.79. Revenue reached $1.34 billion, beating estimates of $1.32 billion and representing a 10.1% increase from $1.22 billion in the same quarter last year.
Cadence shares dipped nearly 2% in premarket trading Tuesday despite the earnings beat and raised outlook.
"Cadence delivered excellent results for the third quarter of 2025," said Anirudh Devgan, president and chief executive officer. "With a record backlog and ongoing broad-based strength of our business, we are raising our full year revenue outlook to ~14% growth year-over-year."
The company reported a quarter-end backlog of $7.0 billion, with $3.5 billion expected to be recognized as revenue in the next 12 months. Cadence’s non-GAAP operating margin improved to 47.6% from 44.8% in the year-ago quarter.
For fiscal year 2025, Cadence raised its outlook, now projecting revenue between $5.26 billion and $5.29 billion, above the analyst consensus of $5.25 billion. The company also increased its full-year adjusted EPS guidance to $7.02-$7.08, exceeding the consensus estimate of $6.93.
Commenting on the report, Bank of America analyst Vivek Arya said Cadence "remains well-positioned to reap AI benefits."
"CDNS remains our top EDA (Electronic Design Automation) pick given higher profitability, higher exposure to TSMC ecosystem, more advanced hardware offerings, lower SBC, and lack of large-scale M&A vs. EDA peer SNPS," he noted.
Separately, Wolfe Research analyst Joshua Tilton raised the price target on Cadence to $385 from $370 after the report, citing "a clean beat-and-raise quarter with broad-based strength across the board."
"We believe the results should ease near-term concerns regarding China and increase conviction in CDNS’ ability to deliver LT durable double- digit growth," he wrote.
In the earnings release, Cadence senior vice president and CFO John Wall said: "I am pleased to report that Cadence delivered strong results for the third quarter of 2025, with broad-based momentum across all our businesses. Strong financial and operational performance resulted in Q3 backlog of $7.0 billion, putting us on track to deliver a strong 2025."
During the quarter, Cadence completed its acquisition of Arm Artisan foundation IP and signed a definitive agreement to acquire Hexagon’s D&E business, expanding its portfolio with structural analysis and multi-body dynamics technologies.
(Luke Juricic contributed to this report.)