Cadence Design Systems Surges on Strong Q3 Results and AI-Driven Growth

Cadence raises midpoint of 2024 profit forecast on robust demand from chip designers

Oct 28 (Reuters) - Cadence Design Systems (CDNS.O), opens new tab raised the midpoint of its annual profit forecast on Monday, betting on the boom in generative AI to drive demand for its software used to design complex chips that power those systems, sending its shares up 6.4% in extended trading. The company, which supplies both software and specialized computer servers to leading AI-chip designer Nvidia (NVDA.O), opens new tab and Apple (AAPL.O), opens new tab, among others, raised the midpoint of its adjusted annual profit forecast to $5.90 per share, versus the prior $5.87 per share for 2024. Advertisement · Scroll to continue Cadence's software helps automate parts of the chip design process, while allowing firms to sketch the placements of billions of transistors as they look to develop the fastest, most powerful semiconductors that act as the brains of AI systems. The company reported a close to 20% rise in revenue for the September quarter to $1.22 billion- its biggest jump in at least six quarters. This compares to estimates of $1.18 billion, according to data compiled by LSEG. Advertisement · Scroll to continue Cadence's revenue could also benefit from the new generation of its Palladium supercomputer, that Nimish Modi, senior vice president of strategy and new ventures had said in April, would go on sale in the third quarter, with sales ramping in the fourth quarter. The company's revenue growth is deeply tied to semiconductor firms' research and development expenditure, which has remained resilient in the face of macroeconomic pressures and is also rising, Berenberg analysts said earlier in October. Cadence expects full-year adjusted earnings in a range of $5.87 to $5.93 per share, versus its prior forecast in a range of $5.77 to $5.97. Cadence also narrowed the range for its annual revenue forecast for 2024. It now expects revenue in a range of $4.61 billion to $4.65 billion, compared to its earlier forecast of $4.60 billion to $4.66 billion. Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shailesh Kuber Our Standards: The Thomson Reuters Trust Principles., opens new tab

Cadence Design Systems Tops S&P 500 After Strong Third Quarter

Cadence sales skyrocketed in its intellectual property and system design and analysis businesses. Shares of Cadence Design Systems (CDNS) shares climbed more than 12% on Tuesday to notch the top daily performance of any S&P 500 stock after the electronic design automation firm posted strong quarterly results and boosted its full-year guidance. The provider of design software, hardware, intellectual property (IP) and other solutions posted revenue of $1.215 billion for the third quarter of 2024, up around 19% year-over-year. Non-GAAP earnings per share (EPS), at $1.64, was up more than 30% from the year-ago period. Both figures came in ahead of consensus forecasts. Cadence also lifted its revenue and non-GAAP earnings forecasts for the full year. Q3 Highlights Cadence specializes in integrated circuits and electronic systems to aid in design processes across industries including communications, automotive, defense, and industrial markets. Robust demand for artificial intelligence (AI) design products underpinned Cadence's strong quarterly performance. In the earnings report, the company touted the productivity benefits of its Cadence.AI portfolio, which incorporates generative AI technology along with AI-driven big data analytics. Revenue from Cadence.AI nearly tripled year-over-year. "Customers are achieving outstanding results with Cadence.AI, and I'm excited by its accelerating proliferation as AI rapidly becomes an integral part of the design workflow," said CEO Anirudh Devgan. Analyst Reaction and Stock Performance Following the strong financial results, analysts at Baird lifted their price target on Cadence Design stock to $340 from $332. Needham analysts, meanwhile, trimmed their price target to $315 from $320 but maintained their buy rating. Cadence Design shares have been volatile so far in 2024. Tuesday's gains returned the stock to positive territory for the year.

Cadence Design Systems surges 6.5% on earnings beat, raised outlook By Investing.com

SAN JOSE, California - Cadence Design (NASDAQ:CDNS) Systems, Inc. (NASDAQ:CDNS) saw its stock surge 6.5% after the company reported third-quarter earnings that exceeded analyst expectations and raised its full-year outlook. The electronic design automation software maker delivered strong results driven by broad-based strength across its portfolio. Cadence reported adjusted earnings per share of $1.64 for the third quarter, surpassing the analyst consensus of $1.44 by $0.20. Revenue came in at $1.22 billion, beating estimates of $1.18 billion and representing a 19% increase YoY from $1.023 billion in the same quarter last year. The company's president and CEO, Anirudh Devgan, attributed the exceptional results to "broad-based strength across our portfolio, especially in IP, SD&A, and hardware systems." Devgan also highlighted the rapid adoption of Cadence.AI, stating, "Customers are achieving outstanding results with Cadence.AI, and I'm excited by its accelerating proliferation as AI rapidly becomes an integral part of the design workflow." Looking ahead, Cadence raised its full-year 2024 guidance. The company now expects revenue between $4.61 billion and $4.65 billion, compared to the analyst consensus of $4.627 billion. Adjusted EPS is projected to be in the range of $5.87 to $5.93, in line with the consensus estimate of $5.89. CFO John Wall expressed optimism about the company's outlook, stating, "Our Q4 bookings pipeline looks exceptionally strong, and we are well positioned to deliver a strong 2024." Cadence's System Design & Analysis business achieved 47% YoY revenue growth in the third quarter, while its IP business saw a 59% YoY increase. The company's Functional Verification segment also delivered strong results with 22% YoY revenue growth.

Cadence raises fourth-quarter profit forecast on robust demand from chip designers

(Reuters) - Cadence Design Systems raised the midpoint of its annual profit forecast on Monday, betting on the boom in generative AI to drive demand for its software used to design complex chips that power those systems, sending its shares up 6.4% in extended trading. The company, which supplies both software and specialized computer servers to leading AI-chip designer Nvidia and Apple, among others, raised the midpoint of its adjusted annual profit forecast to $5.90 per share, versus the prior $5.87 per share for 2024. Cadence's software helps automate parts of the chip design process, while allowing firms to sketch the placements of billions of transistors as they look to develop the fastest, most powerful semiconductors that act as the brains of AI systems. The company reported a close to 20% rise in revenue for the September quarter to $1.22 billion- its biggest jump in at least six quarters. This compares to estimates of $1.18 billion, according to data compiled by LSEG. Cadence's revenue could also benefit from the new generation of its Palladium supercomputer, that Nimish Modi, senior vice president of strategy and new ventures had said in April, would go on sale in the third quarter, with sales ramping in the fourth quarter. The company's revenue growth is deeply tied to semiconductor firms' research and development expenditure, which has remained resilient in the face of macroeconomic pressures and is also rising, Berenberg analysts said earlier in October. Cadence expects full-year adjusted earnings in a range of $5.87 to $5.93 per share, versus its prior forecast in a range of $5.77 to $5.97. Cadence also narrowed the range for its annual revenue forecast for 2024. It now expects revenue in a range of $4.61 billion to $4.65 billion, compared to its earlier forecast of $4.60 billion to $4.66 billion. (Reporting by Arsheeya Bajwa in Bengaluru; Editing by Shailesh Kuber)

Why Cadence Design Systems Rocketed Higher Today | The Motley Fool

Cadence is one of two major firms producing software that enables chipmakers to design semiconductors. With more and more companies now designing their own semiconductors, and with the major chip companies diversifying their offerings, Cadence made news Monday night by delivering a third-quarter report featuring accelerating growth and a strong forecast for even more in the current quarter. In the third quarter, Cadence's revenue grew by 19% to $1.215 billion, slightly beating expectations, but adjusted (non-GAAP) earnings per share rose by 30.2% to $1.64, smashing analysts' consensus expectation for $1.44. That 19% growth was a big acceleration over the prior quarter's 9% increase, and well above the company's guidance. Management also forecast sequential growth for Q4 to $1.345 billion at the midpoint. That would amount to a 10.7% sequential growth and 25.8% growth over the prior-year period. Management also forecast further margin expansion: It anticipates an adjusted operating margin of 45.8% at the midpoint in Q4, up from an already-robust 45% in the third quarter. Cadence shares had dipped somewhat over the summer due to the company's decelerating growth in the prior quarters. However, its Q3 results and management's strong guidance for Q4 are a reminder of just how lumpy Cadence's quarter-to-quarter growth figures can be. If it meets that guidance, it would lift its overall 2024 revenue growth back to around 14%, in line with the mid-teens growth percentages it has achieved since 2020. On the earnings call, management touted the huge benefits artificial intelligence is bringing to Cadence, not only from a demand perspective but also for its internal use. CEO Anirudh Devgan noted that Cadence's IP blocks, which the company designs for third-party chipmakers to use in their larger designs, have already seen big improvements thanks to its use of AI, infused with Cadence's software. Thus, it appears AI is driving a virtuous circle for Cadence: Infusing generative AI into its platform produces better chips, leading to better AI, which can then produce even better chips, and so on. So, the AI revolution appears to have the potential to keep Cadence's growth strong for years. That seems to justify the company's high valuation of 75 times earnings.