(Reuters) – Cadence Design Systems raised the midpoint of its annual profit forecast on Monday, betting on the boom in generative AI to drive demand for its software used to design complex chips that power those systems, sending its shares soaring shares up 6.4% in extended trading. .

The company, which supplies both software and specialized computer servers to major AI chip designers Nvidia and Apple, among others, raised the midpoint of its adjusted annual profit forecast to $5.90 per share, from 5 $.87 per share previously for 2024.

Cadence’s software helps automate parts of the chip design process, while allowing companies to map the locations of billions of transistors as they seek to develop the fastest, most powerful semiconductors that act as the brain of AI systems.

The company reported a nearly 20% increase in revenue for the September quarter, to $1.22 billion, its biggest increase in at least six quarters. That compares to estimates of $1.18 billion, according to data compiled by LSEG.

Cadence’s revenues could also benefit from the next generation of its Palladium supercomputer, which Nimish Modi, senior vice president of strategy and new businesses, announced in April would go on sale in the third quarter, with a acceleration in sales in the fourth quarter.

The company’s revenue growth is closely tied to semiconductor companies’ research and development spending, which has remained resilient in the face of macroeconomic pressures and is also on the rise, Berenberg analysts said earlier in October.

Cadence expects full-year adjusted earnings of between $5.87 and $5.93 per share, compared to a previous forecast of between $5.77 and $5.97.

Cadence also narrowed the range of its annual revenue forecast for 2024. It now expects revenue between $4.61 billion and $4.65 billion, compared to its previous forecast of $4.60 billion to $4.66 billion.

(Reporting by Arsheeya Bajwa in Bangalore; Editing by Shailesh Kuber)