Gianmarco Conti

Gianmarco Conti followed up on China, asking about a sustainable growth rate beyond the Q2 recoup and any real risks from potential new bans or tariffs, given recent news flow.

Answer

President and CEO Anirudh Devgan stated that China's design activity appears back to normal, and while the initial 2025 guidance for China was prudent, he now expects China to grow this year. SVP and CFO John Wall reiterated that the Q4 and full-year outlook assumes the current export control regulations remain substantially similar, and Cadence incorporates prudence for regulatory variability, while noting that geopolitical tensions are believed to be lower than expected.

Gianmarco Conti asked for insights into a sustainable growth rate for the China region beyond the Q2 recoup, and whether there's any real risk from potential new bans or broader macro impacts.

Answer

President and CEO Anirudh Devgan stated that China's design activity appears back to normal, and while difficult to predict, he expects China to grow this year. He emphasized that Cadence's Q3 strength is broad-based, not solely reliant on China, and any stability in the geopolitical environment would be beneficial. SVP and CFO John Wall reiterated that the outlook assumes the current export regime remains similar and that Cadence incorporates prudence for regulatory variability.

Gianmarco Conti from Deutsche Bank inquired about the drivers behind the increased full-year growth outlook, despite the temporary revenue impact from China.

Answer

SVP & CFO John Wall stated that strong, broad-based demand across all geographies, particularly from AI and HPC workloads, more than compensated for any softness in China. President & CEO Anirudh Devgan added that all business lines showed strength, including a record revenue quarter for hardware, strong IP demand from new foundries, and momentum in system design.

Gianmarco Conti asked for details on hardware deliveries, demand for the Gen 3 platforms, and whether the Mexico assembly operations could face capacity issues due to tariffs.

Answer

CFO John Wall stated that hardware revenue continues to be limited by production capacity as demand outstrips supply. He and CEO Anirudh Devgan reiterated that their resilient and diversified supply chain, which includes multiple lines and building in-market for the U.S., minimizes any direct impact from tariffs on their hardware business.

Gianmarco Conti of Deutsche Bank asked about the hardware business, specifically if the new Z3 and X3 systems are being adopted faster than expected and if the strong backlog indicates future revenue acceleration.

Answer

CFO John Wall confirmed a "tremendously strong" bookings quarter for hardware in Q4 with a strong backlog entering Q1. CEO Anirudh Devgan described hardware demand as "phenomenal," attributing the success of Palladium Z3 and Protium X3 to their superior custom ASIC architecture, which provides a significant competitive advantage, especially for large AI chip designs.

Gianmarco Conti from Deutsche Bank asked about the renewal opportunity with major customers like Intel and whether R&D spending is shifting more towards EDA tools. He also requested more detail on the company's confidence in closing the ANSYS deal in the first half of the year, given that China is the only remaining regulatory hurdle.

Answer

CEO Sassine Ghazi explained that growth opportunities arise whenever customers invest in their roadmaps, such as moving to new process nodes or adopting multi-die architectures, which drives demand for new technology. Regarding the ANSYS deal, he reiterated high confidence based on the active and ongoing negotiations with China's SAMR and the deal's strong merits, which led to swift approvals in other jurisdictions.

Gianmarco Conti from Deutsche Bank asked about the opportunity and risk profile of upcoming large customer renewals and whether R&D spending is shifting more towards EDA tools. He also requested more detail on the company's confidence in closing the Ansys deal in H1 2025, given China is the only remaining hurdle.

Answer

CEO Sassine Ghazi explained that growth opportunities are driven by customers pushing their roadmaps with increased complexity, such as new process nodes or multi-die architectures. He reiterated high confidence in the Ansys deal timeline, stating it is based on the active, merit-based negotiations currently underway with China's regulatory body, SAMR.