Cadence's Q4 Earnings & Revenues Surpass Estimates, Surge Y/Y

Core Insights - Cadence Design Systems (CDNS) reported fourth-quarter 2024 non-GAAP earnings per share (EPS) of $1.88, exceeding the Zacks Consensus Estimate by 3.3% and reflecting a year-over-year increase of 36.2% [1] - Revenues for the quarter reached $1.356 billion, surpassing the Zacks Consensus Estimate by 0.6% and showing a year-over-year growth of 26.9% [2] - The company highlighted a new phase in the AI super cycle, emphasizing the demand for Generative AI, Agentic AI, and Physical AI, which is driving semiconductor innovation [3] Financial Performance - CDNS ended the quarter with a backlog of $6.8 billion and current remaining performance obligations of $3.4 billion [2] - Management's outlook for 2025 estimates revenues between $5.14 billion and $5.22 billion, a 13.5% increase from the $4.64 billion reported in 2024 [5] - Non-GAAP EPS for 2025 is projected to be between $6.65 and $6.75, reflecting a 15.9% increase from the $5.97 reported in 2024 [6] Revenue Breakdown - Product & Maintenance revenues, which constitute 91.4% of total revenues, amounted to $1.239 billion, a year-over-year increase of 26.2% [7] - Services revenues, making up 8.6% of total revenues, reached $117 million, up 34.5% year over year [7] - Geographically, the Americas contributed 49%, China 13%, Other Asia 17%, Europe, the Middle East and Africa 15%, and Japan 6% to total revenues [9] Business Segment Performance - The System Design & Analysis business saw a revenue increase of 40% in 2024, driven by AI-driven design-optimization platforms and the acquisition of BETA CAE [10] - The core EDA business experienced a 15% year-over-year revenue growth, supported by demand for new hardware systems and digital full-flow solutions [11] - The IP business reported a 28% year-over-year revenue increase, benefiting from rising demand in AI, HPC, and chiplet use cases [12] Margin and Cash Flow - Total non-GAAP costs and expenses rose 20.2% year over year to $733 million, while non-GAAP gross margin contracted by 620 basis points to 85.5% [13] - Non-GAAP operating margin expanded by 310 basis points year over year to 46% [13] - Operating cash flow for the quarter was $441 million, with free cash flow at $404 million [15] Future Outlook - For the first quarter of 2025, revenues are estimated to be between $1.23 billion and $1.25 billion, compared to $1.01 billion in the year-ago quarter [17] - Non-GAAP EPS for the first quarter is anticipated to be between $1.46 and $1.52, up from $1.17 in the prior-year quarter [17] - Non-GAAP operating margin is projected to be between 40% and 41% for the first quarter [18]