Cadence Boosts 2024 Profit Outlook on Chip Design Demand

On Monday, Cadence Build Systems raised the midpoint of its annual profit forecast

The company is betting that the rise in generative AI will increase demand for its software, which is used to build complex chips that power these systems. This caused the company’s shares to rise 6.4% in late trading.

The company, which makes software and specialized computers for Apple, Nvidia, and other top AI chipmakers, raised the midpoint of its 2024 adjusted annual profit prediction to $5.90 per share, up from $5.87 per share before.

Some parts of the chip design process can be automated with Cadence’s software. It also lets companies draw where billions of transistors will go as they try to make the fastest, most powerful semiconductors that AI systems use as brains.

Its sales increased almost 20% in September to $1.22 billion. This was the biggest jump in at least six quarters. Based on facts from LSEG, this is less than the estimated $1.18 billion.

The new version of Cadence’s Palladium supercomputer could also help the company’s sales. In April, Nimish Modi, senior vice president of strategy and new ventures, said that the computer would go on sale in the third quarter, with sales picking up in the fourth quarter.

Berenberg analysts said earlier in October that the company’s sales growth is closely linked to how much semiconductor companies spend on research and development. These costs have stayed strong despite pressures from the economy as a whole and are also going up.

Cadence now thinks its adjusted earnings for the year will be between $5.87 and $5.93 per share, up from the $5.77 to $5.97 per share range it had previously predicted.

Cadence also narrowed how much it thinks it will make each year in 2024. It used to think it would make between $4.60 billion and $4.66 billion, but now it thinks it will make between $4.61 billion and $4.65 billion.

(This story has been fixed to show that the company raised the middle point of its annual profit forecast, not the range of its fourth-quarter profit estimate.)