Cadence
Design Systems shares are heading lower in late trading after the provider of chip design software provided disappointing financial guidance for the first quarter.
Cadence shares—like those of chief rival Synopsys—have been on the rise in recent months, buoyed by a view that semiconductor design software tools would get a boost from the aggressive growth in the market for chips targeted at artificial intelligence software workloads.
Through Monday’s regular session close, the stock had rallied 13% for the year, and 67% over the last 12 months. But the stock was 5.8% lower in late trading Monday, at $288.01.
For the fourth quarter, Cadence posted revenue of $1.069 billion, up 19% from a year ago, within the guidance range of $1.039 billion to $1.079 billion, and slightly above the Street consensus forecast as tracked by
FactSet
of $1.06 billion. Profits on an adjusted basis were $1.38 a share, above the guidance range of $1.30 to $1.36 a share, and ahead of consensus at $1.34 a share.
For the March quarter, Cadence sees revenue of between $990 million and $1.01 billion, with adjusted profits of $1.10 to $1.14 a share, which is short of the Street consensus at $1.09 billion in revenue and profits of $1.37 a share.
Asked to comment about the the softer-than-expected outlook, the company pointed to a tough comparison in its hardware business.
“It’s tied to an exceptionally strong Q1 2023 quarter for hardware,” said Nimish Modi, senior vice president and general manager for strategy and new ventures. “We had a very strong hardware backlog built up in Q4 2022 that we shipped in Q1 ’23 as we ramped up our hardware production capacity. Hardware in Q1 ’24 is at more seasonal levels as our lead times for hardware have significantly improved. 2023 was a record year for hardware and we expect 2024 to be another record year for hardware. We’re investing in hardware yet again this year to meet the continued strong demand.”
Cadence sees full-year 2024 revenue of $4.55 billion to $4.61 billion, with profits on an adjusted basis of $5.87 to $5.97 a share. The Wall Street consensus forecasts had been for $4.57 billion and $5.87 a share.
Write to Eric J. Savitz at [email protected]
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