Electronic design automation company Cadence Design Systems (NASDAQ: CDNS) announced better-than-expected revenue in Q4 CY2025, with sales up 6.2% year on year to $1.44 billion. The company expects the full year’s revenue to be around $5.95 billion, close to analysts’ estimates. Its non-GAAP profit of $1.99 per share was 4.1% above analysts’ consensus estimates.

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“Cadence delivered excellent results for the fourth quarter, closing an outstanding 2025 with over 14% revenue growth and 20% non-GAAP EPS growth,” said Anirudh Devgan, president and chief executive officer.

Company Overview

Powering the chips behind everything from smartphones to AI accelerators for over 35 years, Cadence Design Systems (NASDAQ: CDNS) provides essential computational software, hardware, and intellectual property used by engineers to design and verify advanced electronic systems and semiconductors.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Cadence Design Systems grew its sales at a 14.6% compounded annual growth rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Cadence Design Systems.

Long-term growth is the most important, but within software, a half-decade historical view may miss new innovations or demand cycles. Cadence Design Systems’s annualized revenue growth of 13.8% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, Cadence Design Systems reported year-on-year revenue growth of 6.2%, and its $1.44 billion of revenue exceeded Wall Street’s estimates by 1%.

Looking ahead, sell-side analysts expect revenue to grow 12.1% over the next 12 months, a slight deceleration versus the last two years. This projection doesn't excite us and implies its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

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Customer Acquisition Efficiency

The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.

Cadence Design Systems is extremely efficient at acquiring new customers, and its CAC payback period checked in at 8.1 months this quarter. The company’s rapid recovery of its customer acquisition costs means it can attempt to spur growth by increasing its sales and marketing investments.

Key Takeaways from Cadence Design Systems’s Q4 Results

We were impressed by Cadence Design Systems’s optimistic EPS guidance for next quarter, which blew past analysts’ expectations. We were also glad its full-year EPS guidance slightly exceeded Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock traded up 4.4% to $295.46 immediately following the results.

Indeed, Cadence Design Systems had a rock-solid quarterly earnings result, but is this stock a good investment here? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).