Dive Brief:
- Cadence Design Systems reported strong sales for the fourth quarter driven by expanded partnerships with Nvidia, Intel and other chipmakers using its design software to create blueprints for their products.
- The San Jose, California-based company generated Q4 2024 revenue of $1.36 billion, up 27% over the previous year, as progress in artificial intelligence fuels growth and demand for innovative semiconductor products and services. Net income increased 5% to $340.2 million over the same period.
- Beyond the positive results, the company’s 2025 financial outlook came in lower than Wall Street analysts expected. In an earnings call, President and CEO Anirudh Devgan attributed the muted guidance to unknowns within its China business as global trade restrictions evolve.
Dive Insight:
Cadence, founded in 1989, is one of two major U.S. companies that make the digital tools that Apple, Nvidia, Intel, AMD and other chipmakers use to design their products. Customers also use its software, hardware and intellectual property for making cars, planes, phones and more.
As demand for new tech accelerates, Cadence has been closely collaborating with chipmakers on their next-generation AI designs and is positioned to increase market share with its AI-driven digital tools, Devgan said in the earnings call.
“Insatiable demand for more compute along with system complexity and the need for first time right silicon, continued to drive strong demand for our best-in-class Palladium Z3 and Protium X3 systems,” Devgan said.
Cadence generated $4.6 billion in revenue for fiscal year 2024, up 8% from a year ago. Electronic design automation systems used by chipmakers comprise about 70% of the company’s total revenue, according to an earnings report. Annual net income totaled about $1 billion.
Despite the positive momentum, Cadence’s fiscal year 2025 outlook, which includes revenue between $5.14 billion and $5.22 billion, came in below Wall Street estimates. Devgan said the company assumed China’s growth would be flat in the guidance because the country’s results are “notoriously hard to predict.”
Recently, Cadence has seen strong growth across its domestic and international businesses, except for China, which had a decline of more than $100 million from 2023 to 2024, John Wall, SVP and CFO, said on the call. The company has only reported three down years for China over its history, and they have never been consecutive, he added.
“Given all this macro uncertainty, we thought it's better to be prudent on the guide. But the design activity seems to be actually picking up,” Devgan said.
