Cadence Design Systems Inc. Shares Fall After Forecast Falls Short of Expectations

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Cadence Design Systems Inc. (symbol: CDNS) experienced a decline in its shares during the extended session on Monday. The drop in share price came as a result of a forecast that did not meet Wall Street’s expectations. Despite raising its forecast for the year, Cadence Design Systems failed to impress investors with its projections for the current quarter.

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Share Performance

After trading down 0.7% in the regular session to close at $241.27, Cadence CDNS shares fell more than 4% after hours.

Forecast Details

Despite reporting increased sales related to artificial intelligence (AI), Cadence expects its earnings for the third quarter to range between $1.18 and $1.22 per share. The company also predicts revenue to be somewhere between $990 million and $1.01 billion for the same period. However, analysts surveyed by FactSet had higher expectations, with a consensus of $1.26 earnings per share on revenue of $1.01 billion.

CEO Statement on AI

Cadence’s CEO, Anirudh Devgan, expressed his belief in the potential of Generative AI and its impact on a global scale. Devgan stated that Cadence’s focus on AI over the past few years, combined with their expertise in computational software and valuable core data, uniquely positions them to harness the transformative power of this technology.

Full-Year Forecast

For the full year, Cadence now expects earnings per share to range between $5.05 and $5.11, with revenue falling within the range of $4.05 billion to $4.09 billion. Analysts’ average forecast for full-year earnings is $5.03 per share on revenue of $4.06 billion.

Revenue Growth Outlook

Cadence’s CFO, John Wall, stated that their revenue outlook for the second half of the year indicates a year-over-year growth of approximately 15%. As a result, the company has raised its revenue guidance for 2023 to reflect over 14% growth compared to 2022.

Second Quarter Results

In the second quarter, Cadence reported a net income of $221.1 million, equivalent to 81 cents per share. This shows an improvement from the year-ago period, which had a net income of $186.9 million, or 68 cents per share. Adjusted earnings, which exclude stock-based compensation expenses and other items, were $1.22 per share, compared to $1.08 per share in the year-ago period.

Revenue Growth

Cadence experienced a rise in revenue from $857.5 million in the year-ago quarter to $976.6 million in the second quarter of this year. However, this fell slightly short of analysts’ expectations, with a FactSet survey predicting revenue of $974.8 million.

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