Cadence Design Systems Stock Slides After Company Issues Soft Outlook

Chip design software giant Cadence Design Systems (CDNS) topped first-quarter estimates but its guidance missed Wall Street’s current-quarter earnings and sales forecasts, sending its shares tumbling in extended trading Monday evening.

For the current quarter, the provider of semiconductor-design software and tools said it expects adjusted earnings to range between $1.20 and $1.24 per share, with the high end of that band falling considerably short of the $1.43-a-share figure expected by analysts. The company’s revenue guidance for the period of $1.03 billion to $1.05 billion also missed the mark, which Wall Street had modeled at $1.11 billion.

Cadence’s general manager for strategy and new ventures, Nimish Modi, attributed the softer-than-expected outlook to the timing of shipments connected to the company’s new generation of design and verification tools, which the company launched earlier this month. However, Modi added that customers have provided positive feedback about the company’s suit of new tools and emphasized that no deals have been delayed.

For the full year, the company upwardly revised its top-line forecast to between $4.56 billion and $4.62 billion from $4.55 billion to $4.61 billion, indicating that the company’s results are going to be slightly more second-half loaded than it previously anticipated.

For the quarter ending March 31, the company reported an adjusted profit of $1.17 per share on revenue of $1.009 billion, topping estimates of $1.13 in earnings and sales of $1 billion. Notably, Cadence said it closed out the quarter with a record backlog of about $6 billion in orders.

Cadence shares remained in a steady uptrend between January 2023 and March of this year, apart from several minor retracements to the 50-day moving average. However, more recently, the price continues to track lower, with the stock last week breaking down below an established 16-month trendline. Amid earnings-related weakness, investors should monitor how the shares respond to a zone of support between a key horizontal line and the 200-day moving average from $247 to $266.

Cadence shares fell 5.8% to $268.50 in after-hours trading on Monday. The stock has gained about 33% over the past 12 months.

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