Cadence Design Systems Beats Analyst Expectations with Q4 Earnings
Cadence Design Systems, Inc. (NASDAQ: CDNS) has reported its fourth-quarter and fiscal year 2023 financial results, surprising analysts with higher-than-expected earnings. The company’s fourth-quarter earnings per share (EPS) came in at $1.38, $0.04 higher than the consensus of $1.34. Additionally, Cadence’s quarterly revenue exceeded estimates, reaching $1.07 billion compared to the anticipated $1.06 billion. However, despite the positive earnings beat, the company’s shares fell by 7.5%.
The fourth-quarter revenue demonstrated strong year-over-year growth, marking an 18.8% increase from the same quarter last year, which reported $900 million. Adjusted operating margins also expanded significantly, rising from 36% in Q4 2022 to 43% in the current quarter.
Cadence’s President and CEO, Anirudh Devgan, credited the company’s success to its innovative solutions and execution of their Intelligent System Design strategy, with a particular emphasis on AI and 3D-IC opportunities.
For the fiscal year 2023, Cadence achieved a 15% increase in total revenue, reaching $4.090 billion compared to $3.562 billion in 2022. Adjusted EPS for the year also saw growth of over 20% at $5.15, up from $4.27 in the previous year. The company reported a record backlog of $6.0 billion and current remaining performance obligations (cRPO) of $3.2 billion.
Looking ahead, Cadence provided guidance for the fiscal year 2024, projecting an EPS range of $5.87 to $5.97, which brackets the analyst consensus of $5.89. Revenue forecasts for the year are set between $4.55 billion and $4.61 billion, with the midpoint slightly below the consensus of $4.583 billion.
However, for the first quarter of 2024, the company expects revenue to range between $990 million and $1.01 billion, falling short of the $1.08 billion consensus. The projected first-quarter adjusted EPS range of $1.10 to $1.14 is also below the analyst estimate of $1.37.
CFO John Wall expressed satisfaction with Cadence’s growth and record backlog, highlighting the company’s well-positioned status for 2024. The company’s System Design and Analysis segment experienced a 22% year-over-year growth, while strategic collaborations with industry leaders like NVIDIA, Arm, and Intel were expanded.
Analyst comment
Positive news. The market is likely to have a slightly negative reaction to the lower-than-expected revenue and EPS projections for the first quarter of 2024, but overall, Cadence Design Systems’ strong fourth-quarter and fiscal year 2023 results suggest continued growth and success in the future.
