Rosenblatt Securities upgraded Cadence Design Systems to Buy from Neutral after the chip design software firm delivered fourth-quarter results that beat expectations. The upgrade follows Cadence's report of non-GAAP earnings of $1.99 per share on revenue of $1.44 billion, both exceeding analyst estimates. Shares jumped more than 5% in premarket trading Wednesday.

Cadence's backlog grew 11% sequentially to $7.8 billion, representing 14.7% year-over-year growth and roughly 67% of 2026 revenue visibility. The brokerage cited rising demand for AI-related tools and lower-node chip designs as key drivers, along with a stock pullback since September that created an attractive entry point. Rosenblatt raised its price target to $360 from $335 and increased 2026 and 2027 forecasts.

For 2026, Cadence projects first-quarter earnings of $1.89 to $1.95 per share and full-year earnings of $8.05 to $8.15 per share on revenue of $5.9 billion to $6 billion. The company noted that its initial 2026 outlook is typically conservative and excludes the pending $3.2 billion simulation acquisition from Hexagon, expected to close in coming weeks. China contributed 13% of quarterly revenue. Other analysts including Wolfe Research and Bank of America also issued positive assessments, with Wolfe calling it Cadence's largest quarterly beat and Bank of America citing a strong demand outlook protected against AI disruption.