What is driving Cadence Design Systems Inc (NASDAQ: CDNS) stock

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Cadence Design Systems Inc (NASDAQ: CDNS) stock surged over 3.5% on July 20th, 2020 and continued its bullish momentum on July 21st, 2020 pre market session rising over 3.7% (Source: Google finance) driven by positive second quarter of 2020 performance and outlook. For the fiscal year of 2020, the firm raised outlook to 11% revenue growth and 33% non-GAAP operating margin.

For the second quarter of 2020, the revenue rose to $638 million, against $580 million in the prior corresponding period. The group’s Design Excellence division strengthened their partnership with Renesas to boost their innovation, through a wide-ranging expansion of their EDA and hardware solutions. Their new digital full flow with the innovative iSpatial technology continued its momentum with 10 new full flow wins during the quarter. The firm expanded its partnership with Micron through a broader proliferation of EDA solutions, including the deployment of digital full flow for developing their next generation products. The firm’s royalty revenue was also solid despite being related to the consumer electronics market rising to over $21 million for the first half of the year against just under $17 million for the first half last year. Hardware sales were also solid during the quarter, with the compelling value proposition of the integrated Z1 and X1 combinations being increasingly attractive to customers. The Palladium Z1 emulator saw new customer wins while Protium X1 prototyping platform also ramped up. The firm’s IP business delivered double-digit revenue growth driven by Star IP coupled with ongoing demand of high-speed SerDes and DDR IP and Tensilica.

The firm’s operating margin rose to 24% against 23% in pcp while recognized net income rose to $131 million, or $0.47 per share on a diluted basis, against net income of $107 million, or $0.38 per share on a diluted basis, for the same period in 2019.

Taking into account the ongoing uncertainties aroused from COVID-19 pandemic, the firm updated outlook for fiscal 2020 with revenue now estimated in the range of $2.585 billion to $2.615 billion, while non-GAAP operating margin of approximately 33%, GAAP EPS in the range of $1.84 to $1.90, while operating cash flow forecasted to be in the range of $810 to $840 million

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