Cadence reports strong revenue growth but 2025 forecast disappoints investors

Shares in Cadence Design Systems Inc. fell in after-hours trading today after the electronics and system design company’s 2025 outlook fell short of expectations despite reporting earnings and revenue beats in its fiscal 2024 fourth quarter.

For the quarter that ended on Dec. 31, Cadence reported adjusted earnings per share of $1.88, up from $1.38 per share in the fourth quarter of 2023, on revenue of $1.356 billion, up 27% year-over-year. Both figures were beats, coming in ahead of the $1.82 per share and revenue of $1.35 billion expected by analysts.

Across its product lines, Cadence saw product and maintenance revenue of $1.239 billion in the quarter, up 26% year-over-year, while service revenue came in at $116.7 million, up 35%. The company ended the year with $2.644 billion in cash and cash equivalents on hand.

For the full fiscal year 2024, Cadence reported adjusted earnings per share of $5.97, up from $5.15 in 2023, on revenue of $4.641 billion, up 13.5% year-over-year.

Business highlights include strong momentum across Cadence’s artificial intelligence-driven portfolio and core product lines. The company’s AI optimization tools, including Cadence Cerebrus, Verisium SimAI and Allegro X AI, saw significant adoption among top-tier customers. Meanwhile, Cadence’s large language model-based Design Agents, powered by the JedAI data platform, also demonstrated early success in key engagements.

Cadence’s system design and analysis segment achieved over 40% growth in 2024, driven by the company’s multi-physics analysis platform and AI-driven optimization. The technologies have delivered strong results across multiple industries, with aerospace, defense and automotive seeing notably high adoption.

Its IP business also grew 28% year-over-year in the quarter, fueled by demand for its AI high-performance computing protocols. Core EDA, spanning digital, custom and analog, and verification portfolios, posted a 15% year-over-year increase in the fourth quarter.

Additionally, Cadence’s hardware business, featuring the Palladium Z3 and Protium X3, delivered record-breaking performance, with the company describing the fourth quarter as its best ever.

“Our momentum continues to build as we exited 2024 with record bookings and record backlog,” Anirudh Devgan, president and chief executive officer of Cadence, said in the company’s earnings release. “Cadence is very well-positioned to benefit from the various phases of AI, including the current AI infrastructure buildout, applying AI to our own products and expanding into new markets such as life sciences.”

For fiscal 2025, Cadence expects adjusted earnings per share of $6.65 to $6.75 on revenue of $5.14 billion to $5.22 billion. Both were misses, as analysts were expecting $6.80 per share on revenue of $5.23 billion.

As a result of the misses, Cadence shares fell nearly 4% in after-hours trading.

Image: Cadence