Rosenblatt upgrades Cadence on AI-driven demand, strong backlog after Q4 beat

Investing.com -- Rosenblatt upgraded Cadence Design Systems to Buy from Neutral after the chip design software firm reported fourth-quarter results ahead of expectations and pointed to steady demand tied to AI and advanced chip development. Shares rose more than 5% in premarket trading Wednesday

The brokerage said revenue growth, rising backlog and continued uptake of AI-related tools supported the upgrade, along with a pullback in the stock since September that it sees as an entry point.

Rosenblatt raised its price target to $360 from $335 and increased its forecasts for 2026 and 2027.

Cadence reported non-GAAP earnings of $1.99 per share for the quarter, topping estimates of $1.91. Revenue rose to $1.44 billion from $1.356 billion a year earlier and came in ahead of the $1.42 billion consensus.

Rosenblatt said fourth-quarter revenue grew about 6.2% year on year on a tough comparison, supported by demand across lower-node chip designs, AI-related projects, systems customers and intellectual property. Backlog rose about 11% sequentially to $7.8 billion and was up 14.7% from a year earlier, giving visibility into roughly 67% of 2026 revenue, the note said. China contributed 13% of quarterly revenue.

The brokerage added that Cadence’s initial 2026 outlook is typically conservative and does not yet include the pending roughly $3.2 billion simulation acquisition from Hexagon, which is expected to close in the coming weeks.

For 2026, Cadence forecast first-quarter earnings of $1.89 to $1.95 per share, above expectations of $1.81. It sees full-year earnings of $8.05 to $8.15 per share on revenue of $5.9 billion to $6 billion, broadly in line with estimates.

Other analysts were also positive. Wolfe Research called it Cadence’s “largest quarterly beat, with record backlog and an FY26 outlook ahead of expectations,” while Bank of America reiterated its Buy rating, citing a “strong demand outlook protected against AI disruption,” though it trimmed its price target to $375 from $400.

You May Also Be Interested In

• BofA maintains underperform ratings on six BDC stocks
• Is the global equity rally broadening? UBS weighs in
• Walmart (WMT) PT Lowered to $130 at UBS on Investment Narrative's Competing Dynamics