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Key Factors to Note Ahead of Cadence's (CDNS) Q3 Earnings
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Cadence Design Systems (CDNS - Free Report) is scheduled to release third-quarter 2023 results on Oct 23.
For the third quarter, Cadence expects total revenues in the range of $990-$1,010 million. The Zacks Consensus Estimate for revenues is currently pegged at $1 billion, suggesting an increase of 10.9% year over year.
Management projects non-GAAP earnings per share (EPS) in the range of $1.18-$1.22. The Zacks Consensus Estimate for EPS is pegged at $1.21, indicating an increase of 14.2% from the prior-year quarter’s reported figure.
Image Source: Zacks Investment Research
The company has a trailing four-quarter earnings surprise of 5.3%, on average. Shares of Cadence have rallied 62.6% in the past year compared with the sub-industry’s growth of 43.4%.
Cadence Design Systems, Inc. Price and EPS Surprise
The top-line performance is likely to have benefited from continued strength across all segments, driven by higher customer demand.
Customers are significantly increasing their R&D budget in artificial intelligence (AI)-driven automation, which bodes well for the company. Most of the generational trends like 5G, hyperscale computing and autonomous driving are being reinforced by the use of Generative AI. This is accelerating chip design activity and thereby creating plenty of business prospects for the company.
Frequent product launches are expected to have driven the company’s third-quarter performance. In September 2023, the company unveiled its new AI technology and software tools to meet the growing demand for on-device and edge AI processing. The new Cadence Neo Neural Processing Units are highly scalable and offer a wide range of AI performance while being energy-efficient.
Further, CDNS also rolled out the next-generation AI-powered OrCAD X platform, which is also enabled with Cadence OnCloud Platform. With cloud scalability and AI-powered placement automation technology, the platform is capable of reducing design turnaround time by 5X, per Cadence.
These, along with the strong uptake of the company’s existing solutions like Palladium Z2 and Protium X2 systems, Cerebrus, Clarity 3D Transient Solver, Sigrity-X and Xcelium Logic, are likely to have driven the third-quarter performance.
Secular demand for CDNS’ hardware platforms is likely to have driven verification business performance. Our estimate for revenues from the company’s Functional Verification, including the Emulation and Prototyping Hardware segment, is pegged at $277.3 million, representing a rise of 22.9% year over year.
Cadence’s digital IC business performance is driven by the rapid adoption of digital full-flow solutions. Our estimate for revenues from the company’s Digital IC Design and Signoff segment is pegged at $274.9 million, representing a rise of 5% year over year.
The company's System Design and Analysis division is likely to have benefited from its growing presence in industries like 5G, aerospace & defense, wireless and communications. Our estimate for revenues from the company’s System Design and Analysis is pegged at $127.5 million, representing a rise of 17.7% year over year.
However, ongoing uncertainty prevailing over global macroeconomic conditions and inflation remains a concern. Increasing expenses on product development amid stiff competition in the electronic design automation space might have impeded margin expansion in the quarter to be reported.
Recent Developments
On Oct 2, 2023, Cadence announced that it has completed the acquisition of Intrinsix Corporation from CEVA. Intrinsix is a leading provider of design engineering solutions for the U.S. aerospace and defense industry. CDNS had entered into a definite agreement with CEVA to acquire its subsidiary in September 2023. The company, however, did not disclose the financial terms of the deal.
On Sep 7, 2023, CDNS acquired Rambus SerDes and memory interface PHY IP business from Rambus. The acquisition will help it extend its reach across geographies and key vertical markets.
What Our Model Says
Our proven model does not predict an earnings beat for Cadence this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, this is not the case here.
Cadence has an Earnings ESP of 0.00% and carries a Zacks Rank #2 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are some stocks you may consider, as our model shows that these have the right combination of elements to beat on earnings this season.
The Zacks Consensus Estimate for MTDR’s to-be-reported quarter’s earnings and revenues is pegged at $1.54 per share and $686.3 million, respectively. Shares of MTDR have lost 0.5% of their value in the past year.
Spotify Technology S.A. (SPOT - Free Report) has an Earnings ESP of +48.11% and presently carries a Zacks Rank #2. SPOT is slated to release quarterly numbers on Oct 24.
The Zacks Consensus Estimate for SPOT’s to-be-reported quarter’s loss per share is pegged at 21 cents compared with a loss of 99 cents reported in the prior-year quarter. The consensus estimate for revenues is pegged at $3.64 billion. Shares of SPOT have gained 77.3% in the past year.
Cathay General Bancorp (CATY - Free Report) has an Earnings ESP of +3.36% and a Zacks Rank #3 at present. CATY is set to report quarterly figures on Oct 23.
The Zacks Consensus Estimate for CATY’s to-be-reported quarter’s earnings and revenues is pegged at $1.12 per share and $197.2 million, respectively. Shares of CATY have lost 17.5% of their value in the past year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Key Factors to Note Ahead of Cadence's (CDNS) Q3 Earnings
Cadence Design Systems (CDNS - Free Report) is scheduled to release third-quarter 2023 results on Oct 23.
For the third quarter, Cadence expects total revenues in the range of $990-$1,010 million. The Zacks Consensus Estimate for revenues is currently pegged at $1 billion, suggesting an increase of 10.9% year over year.
Management projects non-GAAP earnings per share (EPS) in the range of $1.18-$1.22. The Zacks Consensus Estimate for EPS is pegged at $1.21, indicating an increase of 14.2% from the prior-year quarter’s reported figure.
Image Source: Zacks Investment Research
The company has a trailing four-quarter earnings surprise of 5.3%, on average. Shares of Cadence have rallied 62.6% in the past year compared with the sub-industry’s growth of 43.4%.
Cadence Design Systems, Inc. Price and EPS Surprise
Cadence Design Systems, Inc. price-eps-surprise | Cadence Design Systems, Inc. Quote
Factors to Note
The top-line performance is likely to have benefited from continued strength across all segments, driven by higher customer demand.
Customers are significantly increasing their R&D budget in artificial intelligence (AI)-driven automation, which bodes well for the company. Most of the generational trends like 5G, hyperscale computing and autonomous driving are being reinforced by the use of Generative AI. This is accelerating chip design activity and thereby creating plenty of business prospects for the company.
Frequent product launches are expected to have driven the company’s third-quarter performance. In September 2023, the company unveiled its new AI technology and software tools to meet the growing demand for on-device and edge AI processing. The new Cadence Neo Neural Processing Units are highly scalable and offer a wide range of AI performance while being energy-efficient.
Further, CDNS also rolled out the next-generation AI-powered OrCAD X platform, which is also enabled with Cadence OnCloud Platform. With cloud scalability and AI-powered placement automation technology, the platform is capable of reducing design turnaround time by 5X, per Cadence.
These, along with the strong uptake of the company’s existing solutions like Palladium Z2 and Protium X2 systems, Cerebrus, Clarity 3D Transient Solver, Sigrity-X and Xcelium Logic, are likely to have driven the third-quarter performance.
Secular demand for CDNS’ hardware platforms is likely to have driven verification business performance. Our estimate for revenues from the company’s Functional Verification, including the Emulation and Prototyping Hardware segment, is pegged at $277.3 million, representing a rise of 22.9% year over year.
Cadence’s digital IC business performance is driven by the rapid adoption of digital full-flow solutions. Our estimate for revenues from the company’s Digital IC Design and Signoff segment is pegged at $274.9 million, representing a rise of 5% year over year.
The company's System Design and Analysis division is likely to have benefited from its growing presence in industries like 5G, aerospace & defense, wireless and communications. Our estimate for revenues from the company’s System Design and Analysis is pegged at $127.5 million, representing a rise of 17.7% year over year.
However, ongoing uncertainty prevailing over global macroeconomic conditions and inflation remains a concern. Increasing expenses on product development amid stiff competition in the electronic design automation space might have impeded margin expansion in the quarter to be reported.
Recent Developments
On Oct 2, 2023, Cadence announced that it has completed the acquisition of Intrinsix Corporation from CEVA. Intrinsix is a leading provider of design engineering solutions for the U.S. aerospace and defense industry. CDNS had entered into a definite agreement with CEVA to acquire its subsidiary in September 2023. The company, however, did not disclose the financial terms of the deal.
On Sep 7, 2023, CDNS acquired Rambus SerDes and memory interface PHY IP business from Rambus. The acquisition will help it extend its reach across geographies and key vertical markets.
What Our Model Says
Our proven model does not predict an earnings beat for Cadence this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. However, this is not the case here.
Cadence has an Earnings ESP of 0.00% and carries a Zacks Rank #2 at present. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Stocks to Consider
Here are some stocks you may consider, as our model shows that these have the right combination of elements to beat on earnings this season.
Matador Resources Company (MTDR - Free Report) has an Earnings ESP of +6.38% and currently sports a Zacks Rank #1. MTDR is scheduled to report quarterly earnings on Oct 24. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MTDR’s to-be-reported quarter’s earnings and revenues is pegged at $1.54 per share and $686.3 million, respectively. Shares of MTDR have lost 0.5% of their value in the past year.
Spotify Technology S.A. (SPOT - Free Report) has an Earnings ESP of +48.11% and presently carries a Zacks Rank #2. SPOT is slated to release quarterly numbers on Oct 24.
The Zacks Consensus Estimate for SPOT’s to-be-reported quarter’s loss per share is pegged at 21 cents compared with a loss of 99 cents reported in the prior-year quarter. The consensus estimate for revenues is pegged at $3.64 billion. Shares of SPOT have gained 77.3% in the past year.
Cathay General Bancorp (CATY - Free Report) has an Earnings ESP of +3.36% and a Zacks Rank #3 at present. CATY is set to report quarterly figures on Oct 23.
The Zacks Consensus Estimate for CATY’s to-be-reported quarter’s earnings and revenues is pegged at $1.12 per share and $197.2 million, respectively. Shares of CATY have lost 17.5% of their value in the past year.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.