Semiconductor design software provider Cadence Design Systems (NASDAQ:CDNS) met Wall Street’s revenue expectations in Q4 CY2024, with sales up 26.9% year on year to $1.36 billion. On the other hand, the company’s full-year revenue guidance of $5.18 billion at the midpoint came in 1.3% below analysts’ estimates. Its non-GAAP profit of $1.88 per share was 3.2% above analysts’ consensus estimates.
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Revenue: $1.36 billion vs analyst estimates of $1.35 billion (26.9% year-on-year growth, in line)
Adjusted EPS: $1.88 vs analyst estimates of $1.82 (3.2% beat)
Management’s revenue guidance for the upcoming financial year 2025 is $5.18 billion at the midpoint, missing analyst estimates by 1.3% and implying 11.6% growth (vs 13.3% in FY2024)
Adjusted EPS guidance for the upcoming financial year 2025 is $6.70 at the midpoint, missing analyst estimates by 2%
Operating Margin: 33.7%, up from 31.5% in the same quarter last year
Free Cash Flow Margin: 29.8%, down from 31.5% in the previous quarter
Market Capitalization: $80.65 billion
“Cadence delivered exceptional results in the fourth quarter, capping off a strong 2024 with 13.5% revenue growth and 42.5% non-GAAP operating margin for the year,” said Anirudh Devgan, president and chief executive officer.
With the name chosen to reflect the idea of a repeating pattern or rhythm in electronic design, Cadence Design Systems (NASDAQ:CDNS) offers a software-as-a-service platform for semiconductor engineering and design.
The demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games, 3D tours or interactive movies.
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last three years, Cadence grew its sales at a 15.8% annual rate. Although this growth is acceptable on an absolute basis, it fell slightly short of our benchmark for the software sector, which enjoys a number of secular tailwinds. Luckily, there are other things to like about Cadence.
This quarter, Cadence’s year-on-year revenue growth of 26.9% was excellent, and its $1.36 billion of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 12.7% over the next 12 months, a deceleration versus the last three years. Still, this projection is above average for the sector and implies the market sees some success for its newer products and services.
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