Cadence Design Systems Tops Q3 Views But Misses With Outlook

Cadence Design Systems (CDNS), a maker of electronic design automation software, late Monday beat Wall Street’s targets for the third quarter, but disappointed with its outlook for the current period. CDNS stock fell in extended trading.

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The San Jose, Calif.-based company earned an adjusted $1.26 a share on sales of $1.02 billion in the September-ended quarter. Analysts polled by FactSet had expected Cadence earnings of $1.20 a share on sales of $1 billion. On a year-over-year basis, Cadence earnings rose 19% while sales increased 13%.

For the current quarter, Cadence forecast adjusted earnings of $1.33 a share on sales of $1.06 billion. That’s based on the midpoint of its guidance. Wall Street had been modeling earnings of $1.37 a share on sales of $1.07 billion. In the fourth quarter last year, Cadence earned 96 cents a share on sales of $900 million.

In after-hours trading on the stock market today, CDNS stock dropped 4.1% to 230.10. During the regular session Monday, CDNS stock rose 0.5% to close at 239.92.

AI Fueling Design Activity

“Generational trends including AI (artificial intelligence), HPC (high-performance computing), and autonomous driving continue to fuel robust design activities,” Chief Executive Anirudh Devgan said in a news release.

The company also is seeing accelerating growth in 3D integrated circuit designs, he said. Plus, the company’s JedAI generative AI platform is showing momentum, Devgan said.

Cadence completed two acquisitions recently. In September, Cadence bought the PHY IP business from Rambus (RMBS). And earlier this month, it purchased Intrinsix from CEVA (CEVA).

CDNS Stock Is Recent Breakout

CDNS stock is on three IBD stock lists: IBD 50, Long-Term Leaders and Tech Leaders.

On Oct. 9, CDNS stock broke out of a cup-with-handle base at a buy point of 247.50, according to IBD MarketSmith charts. It climbed to an all-time high of 255.85 three days later before retreating in the current stock market correction.

But in a positive sign, CDNS stock found support above its 50-day moving average line.

Cadence ranks third out of 12 stocks in IBD’s Computer Software-Design industry group, according to IBD Stock Checkup. CDNS stock has an IBD Composite Rating of 96 out of 99.

Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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