As the Q3 earnings season wraps, let’s dig into this quarter’s best and worst performers in the design software industry, including Cadence (NASDAQ:CDNS) and its peers.
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 6 design software stocks we track reported a strong Q3. As a group, revenues beat analysts’ consensus estimates by 4.4% while next quarter’s revenue guidance was 2.9% below.
While some design software stocks have fared somewhat better than others, they have collectively declined. On average, share prices are down 2.4% since the latest 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 $1.22 billion, up 18.8% year on year. This print exceeded analysts’ expectations by 2.9%. Overall, it was a very strong quarter for the company with an impressive beat of analysts’ billings estimates and a solid beat of analysts’ EBITDA estimates.
“Cadence delivered exceptional results for the third quarter of 2024, driven by broad-based strength across our portfolio, especially in IP, SD&A, and hardware systems,” said Anirudh Devgan, president and chief executive officer.
Interestingly, the stock is up 18.2% since reporting and currently trades at $298.77.
Read why we think that Cadence is one of the best design software stocks, our full report is free.
Best Q3: 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 $601.9 million, up 31.2% year on year, outperforming analysts’ expectations by 14.9%. The business had a stunning quarter with a solid beat of analysts’ EBITDA estimates and an impressive beat of analysts’ annual contract value estimates.
ANSYS delivered the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems content with the results as the stock is up 2% since reporting. It currently trades at $339.99.
Is now the time to buy ANSYS? Access our full analysis of the earnings results here, it’s free.
Weakest Q3: 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 $5.41 billion, up 10.6% year on year, exceeding analysts’ expectations by 0.6%. Still, it was a slower quarter as it posted revenue guidance for next quarter slightly missing analysts’ expectations.
Adobe delivered the weakest performance against analyst estimates in the group. As expected, the stock is down 10.4% since the results and currently trades at $526.10.
Read our full analysis of Adobe’s results here.
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 $626.5 million, up 14.6% year on year. This result topped analysts’ expectations by 1%. More broadly, it was a mixed quarter with EPS guidance for the next quarter missing analysts’ expectations significantly.
The stock is down 4% since reporting and currently trades at $190.01.
Read our full, actionable report on PTC here, it’s free.
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 $446.5 million, down 18% year on year. This print surpassed analysts’ expectations by 4.3%. Zooming out, it was a mixed quarter as it also produced an impressive beat of analysts’ billings estimates but EBITDA guidance for next quarter missing analysts’ expectations.
Unity had the slowest revenue growth and weakest full-year guidance update among its peers. The stock is down 16.2% since reporting and currently trades at $18.64.
Read our full, actionable report on Unity here, it’s free.
Market Update
In response to the Fed's rate hikes in 2022 and 2023, inflation has been gradually trending down from its post-pandemic peak, trending closer to the Fed's 2% target. Despite higher borrowing costs, the economy has avoided flashing recessionary signals. This is the much-desired soft landing that many investors hoped for. The recent rate cuts (0.5% in September and 0.25% in November 2024) have bolstered the stock market, making 2024 a strong year for equities. Donald Trump’s presidential win in November sparked additional market gains, sending indices to record highs in the days following his victory. However, debates continue over possible tariffs and corporate tax adjustments, raising questions about economic stability in 2025.
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