Cadence Design Systems has projected a fourth-quarter profit that slightly misses market expectations, highlighting ongoing concerns regarding Sino-U.S. trade relations that may impact demand for its chip design software in China. On Monday, the company announced an anticipated adjusted profit ranging from $1.88 to $1.94 per share, with the midpoint at $1.91 falling short of analysts’ forecasts of $1.92 per share. This news led to a nearly 2% decrease in its shares during after-hours trading.
The uncertainty surrounding trade relations between the United States and China continues to loom over Cadence’s business, which is significantly reliant on the Chinese semiconductor market. Despite the U.S. lifting temporary export restrictions on chip design software to China in July, the persistent tensions have prompted Chinese businesses to seek reduced dependence on American technology.
While the challenges in the Chinese market are evident, the demand for artificial intelligence-related technologies among U.S. firms, including major players like Nvidia and TSMC, lends some optimism to Cadence’s overall sales. These companies rely heavily on Cadence’s software, which may help offset losses from the Chinese market.
For the upcoming quarter, Cadence expects revenue to be between $1.41 billion and $1.44 billion, which aligns closely with analysts’ average estimate of $1.41 billion. Additionally, the company has improved its revenue outlook for 2025, now estimating between $5.26 billion and $5.29 billion, up from previous predictions of $5.21 billion to $5.27 billion.
In its third quarter, Cadence reported revenue of $1.34 billion, surpassing analysts’ expectations of $1.32 billion, showcasing its resilience in navigating the complexities of the current market environment. The company’s adjustment in revenue expectations could reflect a strategic awareness of the shifting landscape, with optimism for sustained growth ahead, particularly driven by the robust demand for AI technologies.