Have you looked into how Cadence Design Systems (CDNS) performed internationally during the quarter ending December 2024? Considering the widespread global presence of this maker of hardware and software products for validating chip designs, examining the trends in international revenues is essential for assessing its financial resilience and prospects for growth.

The global economy today is deeply interlinked, making a company's engagement with international markets a critical factor in determining its financial success and growth path. It has become essential for investors to comprehend how much a company relies on these foreign markets, as this understanding reveals the firm's potential for consistent earnings, its capacity to harness different economic cycles, and its overall growth prospects.

International market involvement serves as insurance against economic downturns at home and enables engagement with economies that are growing more quickly. Still, this move toward diversification is not without its challenges, as it involves navigating through the fluctuations of currencies, geopolitical threats, and the distinctive nature of various markets.

While analyzing CDNS' performance for the last quarter, we found some intriguing trends in revenues from its overseas segments that Wall Street analysts commonly model and monitor.

The company's total revenue for the quarter amounted to $1.36 billion, showing rise of 26.9%. We will now explore the breakdown of CDNS' overseas revenue to assess the impact of its international operations.

A Dive into CDNS' International Revenue Trends

Total Asia accounted for 30.21% of the company's total revenue during the quarter, translating to $409.68 million. Revenues from this region represented a surprise of -4.32%, with Wall Street analysts collectively expecting $428.18 million. When compared to the preceding quarter and the same quarter in the previous year, Total Asia contributed $367.84 million (30.26%) and $363.57 million (34.02%) to the total revenue, respectively.

During the quarter, Japan contributed $77.54 million in revenue, making up 5.72% of the total revenue. When compared to the consensus estimate of $74.56 million, this meant a surprise of +3.99%. Looking back, Japan contributed $67.66 million, or 5.57%, in the previous quarter, and $58.83 million, or 5.51%, in the same quarter of the previous year.

Europe, Middle East and Africa generated $203.06 million in revenues for the company in the last quarter, constituting 14.97% of the total. This represented a surprise of -2.57% compared to the $208.41 million projected by Wall Street analysts. Comparatively, in the previous quarter, Europe, Middle East and Africa accounted for $174.61 million (14.36%), and in the year-ago quarter, it contributed $175.81 million (16.45%) to the total revenue.

Revenue Projections for Overseas Markets

The current fiscal quarter's total revenue for Cadence, as projected by Wall Street analysts, is expected to reach $1.23 billion, reflecting an increase of 21.6% from the same quarter last year. The breakdown of this revenue by foreign region is as follows: Total Asia is anticipated to contribute 30.7% or $376.3 million, Japan 5.4% or $66.78 million and Europe, Middle East and Africa 15% or $183.48 million.

For the full year, a total revenue of $5.19 billion is expected for the company, reflecting an increase of 11.7% from the year before. The revenues from Total Asia, Japan and Europe, Middle East and Africa are expected to make up 31%, 5.6% and 15% of this total, corresponding to $1.61 billion, $288.66 million and $777.5 million respectively.

Final Thoughts

Cadence's reliance on international markets for revenues offers both opportunities and risks. Hence, keeping an eye on its international revenue trends could significantly help forecast the company's prospects.

In an era of growing international interdependencies and escalating geopolitical disputes, Wall Street analysts are vigilant in tracking these trends for businesses with a global reach, in order to refine their predictions of earnings. It should be noted, however, that a multitude of other elements, such as a company's domestic position, also play a significant role in shaping the earnings forecasts.

Emphasizing a company's shifting earnings prospects is a key aspect of our approach at Zacks, especially since research has proven its substantial influence on a stock's price in the short run. This correlation is positively aligned, meaning that improved earnings projections tend to boost the stock's price.

The Zacks Rank, our proprietary stock rating mechanism, demonstrates a notable performance history confirmed through external audits. It effectively utilizes the power of earnings estimate revisions to act as a predictor of a stock's price performance in the near term.

At the moment, Cadence has a Zacks Rank #3 (Hold), signifying that its performance may align with the overall market trend in the upcoming period. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Reviewing Cadence's Recent Stock Price Trends

Over the past month, the stock has lost 16.8% versus the Zacks S&P 500 composite's 2.3% decrease. The Zacks Computer and Technology sector, of which Cadence is a part, has declined 5.5% over the same period. The company's shares have declined 20.5% over the past three months compared to the S&P 500's 0.2% decline. Over the same period, the sector has risen 0.4%.

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This article originally published on Zacks Investment Research (zacks.com).

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