Cadence Boosts Profit Forecast Amid Rising Demand for AI Chips

Cadence Design Systems Inc. (NASDAQ:CDNS) updated its earnings forecast for the fourth quarter, signaling continued demand for chip design software in the context of the generative artificial intelligence boom. The company's shares rose by 6.4% in extended trading on Monday.

The firm, which provides software and custom computer servers to industry giants like Nvidia (NASDAQ:NVDA) and Apple (NASDAQ:AAPL), raised its previously anticipated earnings per share for 2024 from $5.87 to $5.90.

Cadence's software is critical for automating certain aspects of the chip design process and plays a significant role in developing advanced semiconductors necessary for AI systems. The company's revenue saw a substantial increase of approximately 20% in the September quarter, reaching $1.22 billion, surpassing the estimated $1.18 billion according to LSEG data.

The revenue boost is partly attributed to Cadence's next-generation Palladium supercomputer. Senior VP of Strategy and New Initiatives Nimish Modi indicated that the supercomputer is expected to be launched in the third quarter, with sales anticipated to increase in the fourth quarter.

Berenberg analysts emphasized in early October that despite macroeconomic challenges, semiconductor firms are maintaining strong research and development spending, which is viewed as a positive sign for Cadence's revenue growth.

Cadence narrowed its full-year adjusted earnings per share forecast from a previously expected range of $5.77 to $5.97 down to a range of $5.87 to $5.93. The company also revised its annual revenue forecast for 2024, narrowing the range from $4.60 billion to $4.66 billion to between $4.61 billion and $4.65 billion.