Design Software Stocks Q1 Teardown: Cadence (NASDAQ:CDNS) Vs The Rest
The end of an earnings season can be a great time to discover new stocks and assess how companies are handling the current business environment. Let’s take a look at how Cadence (NASDAQ:CDNS) and the rest of the design software stocks fared in Q1.
The demand for rich, interactive 2D, 3D, VR and AR experiences is growing, and while the ubiquitous metaverse might still be more of a buzzword than a real thing, what is real is the demand for the tools to create these experiences, whether they are games, 3D tours or interactive movies.
The 7 design software stocks we track reported a weak Q1; on average, revenues were in line with analyst consensus estimates. while next quarter's revenue guidance was 4% below consensus. Stocks, especially growth stocks where cash flows further in the future are more important to the story, had a good end of 2023. But the beginning of 2024 has seen more volatile stock performance due to mixed inflation data, and design software stocks have had a rough stretch, with share prices down 6.8% on average since the previous earnings results.
Cadence (NASDAQ:CDNS)
With the name chosen to reflect the idea of a repeating pattern or rhythm in electronic design, Cadence Design Systems (NASDAQ:CDNS) offers a software-as-a-service platform for semiconductor engineering and design.
Cadence reported revenues of $1.01 billion, down 1.2% year on year, falling short of analysts' expectations by 0.9%. It was a weak quarter for the company, with a miss of analysts' billings estimates and a decline in its gross margin.
“Q1 was a strong start to the year for Cadence as we delivered solid Q1 results,” said Anirudh Devgan, president and chief executive officer.
The stock is up 3.7% since the results and currently trades at $295.81.
Is now the time to buy Cadence? Access our full analysis of the earnings results here, it's free.
Best Q1: Unity (NYSE:U)
Started as a game studio by three friends in a Copenhagen apartment, Unity (NYSE:U) is a software as a service platform that makes it easier to develop and monetize new games and other visual digital experiences.
Unity reported revenues of $460.4 million, down 8% year on year, outperforming analysts' expectations by 6.2%. It was a solid quarter for the company, with a significant improvement in its gross margin and a narrow beat of analysts' billings estimates.
Unity delivered the biggest analyst estimates beat among its peers. The stock is down 25.3% since the results and currently trades at $18.05.
Is now the time to buy Unity? Access our full analysis of the earnings results here, it's free.
Weakest Q1: ANSYS (NASDAQ:ANSS)
Used to help design the Mars Rover, Ansys (NASDAQ:ANSS) offers a software-as-a-service platform that enables simulation for engineering and design.
ANSYS reported revenues of $466.6 million, down 8.4% year on year, falling short of analysts' expectations by 15.9%. It was a weak quarter for the company, with a decline in its gross margin and a miss of analysts' average contract value estimates.
ANSYS had the weakest performance against analyst estimates and slowest revenue growth in the group. The stock is down 0.4% since the results and currently trades at $320.
Read our full analysis of ANSYS's results here.
Adobe (NASDAQ:ADBE)
One of the most well-known Silicon Valley software companies around, Adobe (NASDAQ:ADBE) is a leading provider of software as service in the digital design and document management space.
Adobe reported revenues of $5.18 billion, up 11.3% year on year, in line with analysts' expectations. It was a slower quarter for the company, with and underwhelming revenue guidance for the next quarter.
The stock is down 19.8% since the results and currently trades at $458.5.
Read our full, actionable report on Adobe here, it's free.
PTC (NASDAQ:PTC)
Used to design the Airbus A380 and Boeing 787 Dreamliner commercial airplanes, PTC’s (NASDAQ:PTC) software-as-service platform helps engineers and designers create and test products before manufacturing.
PTC reported revenues of $603.1 million, up 11.2% year on year, surpassing analysts' expectations by 4.6%. It was a slower quarter for the company, with full-year revenue guidance missing analysts' expectations.
PTC had the weakest full-year guidance update among its peers. The stock is up 0.8% since the results and currently trades at $176.19.
Read our full, actionable report on PTC here, it's free.
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