On February 18, Cadence Design Systems announced lower-than-expected annual revenue and profit, reflecting weakened demand for its chip design software amid tightening client budgets in a challenging economic environment. The San Jose, California-based company's shares dropped 5% in after-hours trading.
Being utilized by prominent clients such as Arm Holdings, Nvidia, and Tesla, Cadence offers software for a wide array of design applications, from chips to jet engines, in addition to specialized computing systems to support this software.
Given the downturn in the automotive industry, analysts from Berenberg foresee subdued demand for Cadence's products in 2025. Uncertainty also looms over the company's business in China, with potential U.S. restrictions on semiconductor technology sales to Chinese entities posing a significant risk.
Furthermore, Cadence faces market share challenges, notably from Synopsys' pending acquisition of Ansys for $35 billion in cash and stock.
For fiscal year 2025, Cadence anticipates revenue between $5.14 billion and $5.22 billion, falling short of analysts' $5.25 billion projection. The company also expects its annual profit, excluding exceptional items, to be in the $6.65 to $6.75 per share range, below the estimated $6.83 per share.
In the quarter ending December 31, Cadence reported revenue of $1.36 billion, marking a 26.8% year-over-year increase. Adjusted earnings per share for the same quarter were $1.88, exceeding the estimated $1.82 per share.