Did Cadence’s Industry Carry Its Stock?

When compared with 125 companies in its industry, one software stock performed better than 119 of them over the past five years. That stock is Cadence Design Systems (CDNS). The company makes chip and system design software within the application software industry. A lead that wide can come from a strong industry or from the company itself. So which do you think it was, the industry or Cadence itself?

How Far Cadence Is Ahead Of Its Industry

Cadence stock rose 105.2% over the five years to October 19, 2026. During that same period, the share price of the typical application software company fell 48.2%. This performance places Cadence a long way ahead of its industry.

The industry and sector figures represent the typical company in each group, regardless of size. The S&P 500 represents the index itself, which the largest companies dominate. Read that way, Cadence roughly doubled over the past five years, whereas the typical company in its industry roughly halved.

Was It Cadence’s Industry?

No. The broader market provided some help, as the S&P 500 rose 70.2% over the same five years. Even so, Cadence finished well ahead of the index.

Below the index level, Cadence received little help. The typical company in the Information Technology sector fell 23.9%. In addition, application software ranked 11th of the 12 industries in that sector based on its typical company’s return. Cadence rose against its own industry’s tide.

What Did Cadence’s Business Do?

Cadence’s business grew faster than its peers’ and kept growing. Revenue rose an average of 15.5% a year over the past three years, compared with 11.1% for the typical company in its industry. In the four quarters to June 2026, revenue was up 101.9%, roughly doubling the total from the four quarters to July 2021.

Earnings per share rose 107.0% over the same five years. This closely tracks the stock’s own rise, while the multiple investors pay for those earnings changed little. Cadence currently trades at 64.8 times earnings, compared with 38.9 for the typical peer. The rise in Cadence’s stock therefore came from its growing earnings.

Most of that business consists of core EDA, Cadence’s electronic design automation software. This segment made up 70% of revenue in fiscal 2025. Management said on the fiscal Q2 2026 call that core EDA grew, driven by rising adoption of its AI solutions. They also reported that the IP business grew over 40% in the quarter from a year earlier.

Is Cadence Still Ahead Over The Past Year?

Cadence remains ahead of most peers, though by a smaller margin. It beat 66.2% of them over the past year, compared with 95.2% over five years.

During the fiscal Q2 2026 call, management raised its fiscal 2026 guidance to 19% revenue growth. They called it their biggest raise to a full-year revenue forecast in a single quarter. That remains a forecast, not a result.

Cadence’s revenue growth, which reached 24.2% in fiscal Q2 2026, is the figure to watch when the company reports fiscal Q3 2026 results. Those results are expected on or around October 26, 2026.

How To Act On CDNS?

Not necessarily on Cadence Design Systems alone, if your goal is long-term wealth. Wealth is built by owning the companies that keep outperforming, the leaders of their industries, wherever they are. Cadence Design Systems is one. Over the five years to October 2026, its stock rose 105.2%, ahead of 119 of the 125 other companies in Application Software, where the typical company fell 48.2%.

Finding companies like these takes comparison across industries and sectors, and that is what the Trefis High Quality (HQ) Portfolio does. It holds 30 quality companies in equal weight and, since its inception in September 2020, has returned more than 105%, ahead of a benchmark that combines the S&P 500, S&P Mid-cap and Russell 2000. See how we find the leaders.

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