Cadence Design Systems Forecasts Annual Profit Below Estimates, Shares Drop

Cadence Design Systems, a leading chip design software maker, announced on Tuesday that it expects its annual revenue and profit to fall short of analysts’ estimates, signaling a slowdown in demand for its products as clients reduce spending amid a challenging economic environment. The San Jose, California-based company’s shares dropped by 5% in after-hours trading following the announcement.

Cadence, which serves prominent clients such as Arm Holdings, Nvidia, and Tesla, specializes in software for designing a wide range of products, from chips to jet engines. The company also offers computing systems designed to run its complex software.

Analysts at Berenberg have noted that demand for Cadence’s system design and analysis products is expected to remain subdued throughout 2025 due to the ongoing downturn in the automotive sector. China represents a significant portion of Cadence’s business, and further restrictions from the U.S. government on semiconductor technology sales to Chinese entities could significantly impact the company’s operations in the country.

Cadence’s market share in the highly competitive industry is also under threat from Synopsys’ proposed acquisition of engineering software firm Ansys in a $35 billion cash-and-stock deal.

The company anticipates its fiscal 2025 revenue to be between $5.14 billion and $5.22 billion, falling short of the analysts’ average estimate of $5.25 billion, according to data compiled by LSEG. Cadence also forecasted its annual profit, excluding items, in the range of $6.65 to $6.75 per share, below the estimate of $6.83 a share.

For the quarter ended December 31, Cadence reported revenue of $1.36 billion, a 26.8% increase from the previous year. Excluding items, the company earned $1.88 per share in the fourth quarter, surpassing the estimate of $1.82.