Cadence Design Systems, Inc.
CEO : Dr. Anirudh Devgan Ph.D.
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q2 | 13.9% YoY | 5.8% | 18.8% | 2023-07-24 |
Anirudh Devgan says,
Strong Q2 Financial Results
- Exceeded guidance on all key metrics
- 14% year-over-year revenue growth
- 19% non-GAAP EPS growth
Generative AI Impact
- Generative AI technology is making a significant impact globally
- AI-driven design automation crucial for customers to realize innovation potential
- Customers adopting Cadence’s Generative AI portfolio for exceptional quality and productivity benefits
Partnerships with Marquee Customers
- Expanded partnership with a marquee electronic system company for EDA, hardware, IP, and systems
- Demand for hardware platforms drove 27% year-over-year revenue growth in verification business
- Successful collaborations with Nvidia and Tesla for AI-driven solutions
Product Highlights
- Proliferation of digital full flow and Cadence Cerebrus solution in the digital IC business
- Strong demand for design IP, including multiyear agreement with Samsung Foundry
- Continued momentum in system design and analysis business with 23% year-over-year revenue growth
Updated Outlook for 2023
- Raising financial outlook for the year
- Continued investment in EDA, system design, analysis, and AI capabilities
- Aiming to deliver cutting-edge innovation to customers and partners
John Wall says,
Financial Highlights
- Total revenue for Q2 2023 was $977 million.
- GAAP operating margin was 30.7% and non-GAAP operating margin was 41.8%.
- GAAP EPS was $0.81 and non-GAAP EPS was $1.22.
- Cash balance at quarter end was $874 million, and debt outstanding was $650 million.
- Operating cash flow was $414 million, and $325 million was used to repurchase Cadence shares in Q2.
Updated Outlook for the Year
- Revenue for fiscal 2023 is expected to be in the range of $4.05 billion to $4.09 billion.
- GAAP operating margin is expected to be in the range of 30.2% to 31.2%.
- Non-GAAP operating margin is expected to be in the range of 41.2% to 42.2%.
- GAAP EPS is expected to be in the range of $3.35 to $3.41, and non-GAAP EPS is expected to be in the range of $5.5 to $5.11.
- Operating cash flow is expected to be in the range of $1.3 billion to $1.4 billion.
- At least 50% of the annual free cash flow will be used to repurchase Cadence shares.
Q3 Outlook
- Revenue for Q3 is expected to be in the range of $990 million to $1.01 billion.
- GAAP operating margin is expected to be approximately 29%, and non-GAAP operating margin is expected to be approximately 40%.
- GAAP EPS is expected to be in the range of $0.76 to $0.80, and non-GAAP EPS is expected to be in the range of $1.18 to $1.22.
- Approximately $125 million of cash will be used to repurchase Cadence shares.
Overall Performance
- Cadence achieved strong results for Q2 2023, driven by the broad-based strength of their business.
- Their Generative AI portfolio has been well-adopted by customers, leading to exceptional quality results and productivity benefits.
- The updated outlook indicates a continued broad-based strength across Cadence’s technology portfolio.
- Demand for functional verification hardware solutions remains particularly strong.
- The increase in outlook suggests revenue growth for the year exceeding 14% and non-GAAP EPS growth of approximately 19%.
Q & A sessions,
The Implications of AI
- CDNS enables the development of AI systems as a horizontal application
- Partnerships with companies like Nvidia and Tesla for AI systems
- CDNS has a comprehensive product portfolio for chip package system design
- Aims to capitalize on emerging applications of AI in life sciences
Differences between Semi and System Companies
- System companies have both hardware and software, while semi companies traditionally focus on chip design
- CDNS strengths in hardware business also apply to software bring-up
- Investment in system design and analysis for the merger of electrical and mechanical
- CDNS provides strategic services to help system companies with chip development
Automation and Productivity Improvement
- AI enables higher-level abstraction, automating mundane tasks and improving productivity
- CDNS applies AI to design technology codesign, floor planning, verification, package and PCB design, and system simulation
- Verification has a significant potential for AI application in EDA
- CDNS has promising results in optimizing designs using AI
Growth and Deployment of AI Tools
- CDNS expects almost all customers to adopt AI tools in the future
- AI tools are being extended beyond placement and route to foundries, floor planning, higher-level functions, and verification
- A significant impact of AI is expected in verification and system simulation
3D-IC and Chiplet Design
- Chiplet-based design activity is increasing in various verticals, driven by leading foundries and the intersection of chip and system
- CDNS is uniquely positioned to benefit from chiplet and 3D-IC with its software offerings for chip implementation, package design, and thermal and system analysis
- CDNS sees strong growth in SD&A due to the 3D-IC chiplet market
AI Infrastructure and Applications
- CDNS is involved in building AI infrastructure for both horizontal and vertical applications
- Partnerships with companies like Tesla and hyperscalers for AI chip development
- CDNS’s products for AI applications are not node dependent
No bad stock 