From Yahoo Finance: 2025-05-08 10:07:00

Cadence Design Systems beat earnings expectations and raised full-year guidance, leading to a 17.1% rally in shares. The company reported strong Q1 earnings and reassured investors about the impact of tariffs. Cadence is positioned for steady double-digit growth in the AI era.

Despite concerns about tech and semiconductor stocks, Cadence reported revenue growth of 23.1% in the first quarter and increased its full-year guidance. The company’s focus on electronic design automation software and high-growth segments like chip IP blocks contribute to its success.

CEO Anirudh Devgan highlighted that Cadence’s customers continue to invest in next-generation designs, providing resilience and visibility. The company’s focus on custom chipmaking, even in a cyclical industry, ensures ongoing demand for its services, especially in the AI era.

With a lower-risk, double-digit growth outlook, Cadence trades at over 45 times this year’s adjusted earnings estimates. The company has shown consistent growth and margin expansion, making it a strong contender in the AI era. However, its current valuation may limit near-term upside potential.

Investors considering Cadence Design Systems should be aware of alternative stock options identified by The Motley Fool Stock Advisor team. While Cadence shows promise, other stocks may offer higher returns in the coming years based on historical performance.

Read more: Why Cadence Design Systems Rallied 17.1% in April