Chip Design Specialist Cadence on the Rise Thanks to AI

The software specialist Cadence, known as one of the leading providers of semiconductor design solutions, has presented impressive results with its third-quarter report. Particularly in times when more companies are designing their own chips independently and large chip manufacturers are diversifying their offerings, Cadence is showing remarkable growth. Cadence's revenue rose by 19 percent in the third quarter to $1.215 billion, slightly exceeding expectations. Particularly noteworthy was the 30.2 percent increase in adjusted earnings per share to $1.64, significantly surpassing analysts' forecasts of $1.44. Looking ahead to the fourth quarter, the company predicts further impressive growth. Revenue is expected to reach $1.345 billion, representing sequential growth of 10.7 percent and annual growth of 25.8 percent. Additionally, an expansion of the operating margin to 45.8 percent is anticipated, up from 45 percent in the previous quarter. The results send a clear signal that Cadence's growth figures can vary significantly between quarters. If the forecast is met, overall growth of 14 percent in 2024 is well within reach. During the earnings call, management highlighted the key advantages of artificial intelligence for both demand and Cadence's internal applications. CEO Anirudh Devgan stated that the IP blocks designed by Cadence, which are integrated into larger designs by third parties, have already been significantly improved thanks to AI integration. The interconnection of AI and chip technology, therefore, appears to ensure sustainable growth for Cadence and underscores the company's high valuation at 75 times earnings.