Cadence Design Systems Tops S&P 500 After Strong Third Quarter

Cadence Design Systems (CDNS) shares rose more than 12% on Tuesday to mark the highest daily performance of any S&P 500 stock after the electronic design automation company reported strong quarterly results and boosted its full-year guidance.

The provider of design software, hardware, intellectual property (IP) and other solutions generated revenue of $1.215 billion for the third quarter of 2024, up about 19% year over year. Non-GAAP earnings per share (EPS), of $1.64, increased more than 30% from the same period last year. Both numbers came ahead of consensus expectations.

Cadence also raised its full-year non-GAAP revenue and earnings forecasts.

Q3 Highlights

Cadence specializes in integrated circuits and electronic systems to aid design processes across industries including communications, automotive, defense and industrial markets.

Strong demand for artificial intelligence (AI) design products fueled Cadence’s strong quarterly performance. In the earnings report, the company touted the productivity benefits of its Cadence.AI portfolio, which includes generative AI technology combined with AI-based big data analytics. Revenue from Cadence.AI has nearly tripled compared to last year.

“Clients are achieving great results with Cadence.AI, and I am excited about its accelerating adoption as AI quickly becomes an integral part of the design workflow,” said CEO Anirudh Devgn.

Analyst reaction and stock performance

Following the strong financial results, analysts at Baird raised their price target on Cadence Design stock to $340 from $332. Meanwhile, Needham analysts cut their price target to $315 from $320, but maintained their buy rating.

Cadence Design shares have been volatile so far in 2024. Tuesday’s gains put the stock back into positive territory for the year.