Cadence Design Systems Inc. (NASDAQ:CDNS)

The analysis of the quarterly financial ratios reveals several important trends over the reported periods.

Gross Profit Margin

The gross profit margin demonstrated a relatively stable pattern from late 2020 through early 2023, maintaining values close to or above 89%. However, starting from 2023, there is a noticeable gradual decline, with the margin decreasing from around 89.4% to approximately 85.9% by the first quarter of 2025. This trend indicates a slight erosion in the core profitability of the company’s products or services over time.

Operating Profit Margin

The operating profit margin exhibited a generally upward trend from early 2021, improving from about 24% to a peak near 30.8% by late 2021. While this margin experienced some fluctuations subsequently, it mostly remained in the high 20% to low 30% range through the first quarter of 2025, ending at 30%. This indicates sustained operational efficiency with occasional variations but generally strong control over operating expenses.

Net Profit Margin

The net profit margin showed a steady increase from the early 2021 level of approximately 22% up to a peak of 25.68% in mid-2023. Thereafter, a gradual decline was observed, with the margin falling back to roughly 22.2% by early 2025. This suggests that while the company was able to improve its bottom-line profitability for a period, it faced some pressures affecting net earnings after mid-2023.

Return on Equity (ROE)

ROE improved significantly from around 23.7% in early 2021 to nearly 30.9% by late 2022, indicating strong returns generated on shareholders’ equity during this period. Following this peak, ROE began to decline steadily, settling around 22.6% by the first quarter of 2025. This trend reflects an initial period of high value creation for shareholders followed by a reduction in effectiveness in deploying equity capital.

Return on Assets (ROA)

The return on assets increased from approximately 15% in early 2021 to a high near 18.4% in late 2023, demonstrating improving asset efficiency and profitability. However, a marked decrease took place after that peak, with ROA falling sharply to about 11.3% by mid-2024, before a modest recovery to 12% by early 2025. This pronounced dip suggests challenges in asset utilization or reduced profitability relative to total assets during this latter timeframe.

In summary, the company's profitability margins and returns enhanced significantly from early 2021 and peaked during the 2022-2023 period, after which there was a general trend of decline across most metrics. While operating margins remained relatively robust, declines in gross profit margin, net profit margin, ROE, and particularly ROA suggest that the company has faced operational or market challenges that are impacting overall profitability and asset utilization in recent quarters.

Revenue Trends

Revenue displayed an overall upward trajectory from March 2020 through March 2025, beginning at approximately $618 million and rising to a peak exceeding $1.35 billion in December 2024, before slightly decreasing to around $1.24 billion by March 2025. Notably, there were periods of minor fluctuations, such as a dip between April 2022 and June 2023, followed by a strong recovery in the subsequent quarters.

Gross Margin Trends

Gross margin in absolute terms also increased steadily across the same period, from about $543 million in March 2020 to over $1.13 billion in December 2024. Slight declines were observed intermittently, particularly in the first quarters of 2024 and 2025, mirroring some of the variability in revenue, yet the general pattern indicates robust growth in gross profits.

Gross Profit Margin Percentage Trends

The gross profit margin percentage remained consistently high, starting around 88.61% in late 2020 (as earlier data points are missing) and peaking at approximately 89.87% by the end of 2022. Following this peak, a gradual downward trend emerged, reaching about 85.86% by the first quarter of 2025. Although still strong, this decline suggests a slight compression in profitability relative to revenue.

Insight on Margins and Profitability

Despite the gradual decrease in gross profit margin percentage towards the later periods, the growing revenue base enabled gross margins to continue increasing in absolute terms. This indicates that while cost of goods sold may have increased proportionally, the company managed to sustain overall profitability improvements due to higher sales volumes. The margin compression, however, could signal emerging cost pressures or changes in product mix that warrant further investigation.

Overall Financial Health Indications

The data reflects strong growth dynamics with consistent revenue and gross margin expansion over the analyzed timeframe. The slight decline in gross profit margin percentage suggests a need for monitoring cost efficiency. Nevertheless, the financial performance implies effective scale leverage and solid market positioning.

The analysis of the quarterly financial data reveals several notable trends and fluctuations in key financial metrics over the observed periods.

Income from Operations

Income from operations generally shows a positive trajectory with fluctuations in various quarters. From March 2020 to December 2020, there is a steady increase from approximately 139 million USD to just under 185 million USD. The first half of 2021 experiences some volatility, with a dip in Q2 2021, but the figure rebounds toward the end of 2021. The year 2022 shows a peak in Q1 at nearly 319 million USD, followed by a decline during the remainder of the year, hitting a low in December 2022 at roughly 211 million USD. Beginning 2023, income from operations increases again, reaching a substantial peak of 457 million USD in Q4 2024, before retreating slightly in the first quarter of 2025.

Revenue

Revenue exhibits a general upward trend throughout the entire period. Starting from approximately 618 million USD in March 2020, revenue steadily climbs, reaching the mid-700 million range by late 2020 and remaining relatively stable in 2021 with a slight upward movement. In 2022, revenue shows stronger growth and crosses the 900 million USD threshold in several quarters. The growth continues into 2023 and 2024, with notable spikes surpassing 1.3 billion USD in late 2024. However, there is a moderate decline in the first quarter of 2025, though revenue remains elevated compared to earlier years.

Operating Profit Margin

Operating profit margin data is available starting in late 2020. Margins exhibit a consistent and gradual improvement over time, beginning at approximately 24% in Q4 2020 and gradually increasing in subsequent quarters. By 2021 the margin consistently stays around 25-26%, before strengthening further in 2022 and beyond, oscillating in the range of around 28% to 30%. The margin peaks close to 30.81% by Q3 2022, then fluctuates mildly but remains strong above 28% through the end of the available data in 2025. This trend indicates improving operational efficiency or cost management relative to revenue throughout most of the periods analyzed.

Overall, there is clear evidence of growth in both revenue and operating income, with operating margins strengthening markedly after 2020. Despite some quarters experiencing volatility—particularly in income from operations—the general directional trends indicate improving profitability and scaled business operations over the period under review.

The financial data reflects a general upward trend in revenue over the periods analyzed, with some fluctuations. Starting at approximately 618 million US dollars in March 2020, revenue increased steadily, reaching a peak of around 1.36 billion US dollars in December 2024, before slightly declining to roughly 1.24 billion US dollars in March 2025. This indicates overall growth with short-term variability toward the latter periods.

Net income demonstrates a more volatile pattern compared to revenue. It increased from about 124 million US dollars in March 2020 to a significant peak of nearly 324 million US dollars by December 2023. Following this peak, net income experienced fluctuations, including declines and partial recoveries, concluding with around 274 million US dollars in March 2025. Despite the variability, the general trend in net income over the years is positive.

The net profit margin, measured in percentages, presents a generally consistent pattern with gradual improvement over time. Although early data points are not available, from the first recorded measurement in December 2020, the margin hovered around 22% to 23%, then rose steadily to exceed 25% by mid-2023. Subsequently, it exhibited a slight decline during the later periods, ending near 22% to 23% by March 2025. This suggests some compression in profitability margins after reaching higher levels.

Revenue

Exhibited consistent growth from early 2020 through 2024, with peak revenue realized in late 2024, followed by modest decline.

Net Income

Showed considerable growth with notable peaks and intermittent declines, culminating in a strong but variable performance over the periods.

Net Profit Margin

Displayed gradual improvement initially, reaching a peak in mid-2023, then experienced slight decreases in the final periods under review.

Overall, the company demonstrated robust revenue growth accompanied by increasing net income, albeit with some volatility. Profit margins improved steadily during the middle periods but faced pressure toward the end of the timeline. These patterns suggest the company’s ability to expand its market presence and enhance profitability, though some recent periods indicate emerging challenges in maintaining margin levels.

Net Income

The net income exhibits a generally upward trend over the analyzed periods, with some fluctuations. Starting from approximately $124 million in early 2020, net income increased significantly to more than $323 million by the end of 2023, peaking in the fourth quarter of 2023. However, there were intermittent declines during mid-2021 and late 2022, indicating some volatility. The latest figures for 2025 show a strong rebound to over $273 million, implying a positive recovery or growth phase.

Stockholders’ Equity

Stockholders’ equity steadily progressed upward across all periods, growing from roughly $2.16 billion in early 2020 to about $4.78 billion by the first quarter of 2025. Despite minor dips in mid-2022 and early 2023, the overall pattern reflects consistent accumulation of equity. The growth suggests ongoing profitability and possible retained earnings contributing to an increase in total equity.

Return on Equity (ROE)

The return on equity was not available for the earlier periods but becomes accessible from the fourth quarter of 2020 onward. The ROE remained strong throughout the measured quarters, maintaining values mostly between 22% and 31%. After peaking near 31% in late 2022 and early 2023, ROE showed a slight declining trend, stabilizing around 22-23% by early 2025. This indicates that while profitability relative to equity remains high, returns slightly decreased over time.

Overall Analysis

The data evidences sustained growth in net income and stockholders’ equity, along with a robust ROE, suggesting effective utilization of equity and consistent profitability. Net income increases, although with periodic fluctuations, align with a steady rise in equity, reflecting strong operational performance and financial management. The somewhat declining ROE in later quarters may signal increased equity base growth relative to net income growth, or other factors influencing return efficiency.

The analysis of the financial data reveals several noteworthy trends across the observed periods. Net income exhibits a generally upward trajectory with notable fluctuations. Starting from a level of 123,988 in March 2020, net income rises steadily through 2021 and significantly peaks during the December 2023 quarter at 323,899. Although occasional declines are observed, particularly in mid-2024, the overall pattern points to growth in profitability over the entire timeframe.

Total assets steadily increase throughout the periods, indicating expansion and asset accumulation. Beginning at around 3,767,973 in the first quarter of 2020, the asset base grows with minor variability and reaches a substantial peak close to 9,167,031 by the December 2024 quarter. This steady rise suggests ongoing investments and potential scaling of operations.

Return on Assets (ROA) data is available from the December 2020 quarter onward. ROA remains relatively stable and strong, fluctuating mostly between approximately 15.8% and 18.4%, with the highest rates occurring in the quarters between March 2023 and June 2024. However, a gradual decline in ROA is observed after mid-2024, falling to the range near 11%-12% by the last quarter analyzed. This decline may indicate diminishing efficiency in asset utilization despite growing total assets.

Net Income Trends

Steady growth with periodic fluctuations, peaking at 323,899 in December 2023, followed by variability but remaining at higher levels than earlier periods.

Total Assets Trends

Consistent increase from under 3.8 million to over 9 million, indicating asset growth and expansion of the company’s resource base.

Return on Assets (ROA)

Stable high ROA for nearly four years, around 16%-18%, followed by a decline to approximately 11%-12% in late 2024 and early 2025, suggesting reduced efficiency in asset use over time.

Overall, while profitability and asset growth are positive signals, the decreasing trend in ROA toward the end of the period warrants attention, as it could signal challenges in maintaining asset efficiency despite higher absolute net income values and asset size.