Dive Brief:
- Cadence Design Systems has raised its earnings outlook for the year, betting on continued momentum following a better-than-expected first quarter amid trade uncertainty.
- The chip design software company revised its full-year revenue outlook to a range of $5.15 billion to $5.23 billion, an estimated increase of $10 million from a few months ago.
- Even as tariff talks escalated and pressured customers, executives said on an April 28 earnings call that demand for the company’s products and services has been resilient. Cadence generated Q1 revenue of $1.24 billion, a 23% increase year over year.
Dive Insight:
Despite broader economic uncertainty, companies are continuing to invest in research and development for their next-generation technology designs, fueled by artificial intelligence and data center build-outs.
Supporting this effort is Cadence, one of the major U.S. providers of software, services and hardware for designing products like microchips, planes, automobiles and digital systems.
The company’s quarter-end backlog totaled $6.4 billion, according to its earnings report.
Notably, the company saw a 40% YoY increase from its semiconductor IP segment, which benefited from AI and foundry ecosystem buildout, according to the report. Meanwhile, its core electronic design automation segment grew 16% YoY, driven by momentum for Cadence’s chip design automation tool, the Cerebrus Intelligent Chip Explorer.
The company posted net income of $273.6 million in Q1, up 10.4% YoY.
While tariffs have rattled markets and spurred companies to reevaluate their operations, Cadence has been largely immune because software and services are not subject to tariffs, according to President and CEO Anirudh Devgan.
The company’s supply chain is diversified enough that Devgan said he doesn’t believe tariffs will have an effect even as the hardware business is exposed.
“On the other hand, we continue to monitor the situation,” Devgan said on the call. “It is a dynamic situation. But I feel that we are more resilient…and we feel that we have enough confidence and visibility to raise our outlook for 2025.”
In addition to stronger full-year revenue, Cadence revised its outlook to include an operating margin as high as 31.25%. It also expects earnings to be as high as $4.31 per share.
As AI evolves and reshapes chip and system development, Devgan said on the call that Cadence’s portfolio is well positioned for future growth.
“I’m pleased with our Q1 results and the continued momentum of our business,” Devgan said. “The growing complexity of chip and system design, coupled with the transformative potential of AI-driven automation, creates significant opportunities for our products to enable and empower our customers.”
Cadence is collaborating with a host of partners on technology advancements, including with Nvidia on its Grace Blackwell chip. It also officially joined the Intel Foundry Accelerator Design Services Alliance, which Degan said will help foundry customers remain at the forefront of innovation.
