Cadence Design Systems, Inc.
CDNS · Nasdaq
Next quarter
Expected to report Feb 16, 2027 — estimated from last year’s reporting date.
Consensus is $1.79 EPS for Dec 2026 across 6 estimates, ranging $1.75 to $1.83.
CDNS Sep 2026
- 1.24%
- +6.49%
- $1.61
- $1.59
- —
- $1.63B
Reported results
- $1.63B
- $428.72M
- 26.25%
- $289.75M
- $1.05
Highlights
- Revenue and backlog: Q3 revenue grew 22% year over year to $1.633 billion, up 3% sequentially; backlog reached a record $8.2 billion, versus $7.8 billion a year earlier.
- Full-year outlook: Cadence raised its 2026 revenue range to $6.387 billion–$6.417 billion, implying about 21% growth, and lifted its non-GAAP EPS range to $8.37–$8.43, a $0.30 increase at the midpoint.
- Broad product growth: Management reported year-over-year revenue growth of 20% in core EDA, 24% in IP and 30% in System Design and Analysis.
- Recurring revenue: Recurring revenue grew 18% year over year; it was 79% of Q3 revenue, compared with 82% in Q3 2025.
- Agentic AI: Cadence introduced Maestro, a portfolio of domain-specialized models and model-routing capabilities; it cited up to 30% higher quality and 5x greater token efficiency versus general-purpose foundation models.
- Profitability: Non-GAAP operating margin was 44.1%, down from 47.6% a year earlier and 45.5% in Q2; non-GAAP EPS was $2.11, versus $1.93 a year earlier and $2.11 in Q2.
- Capital returns: Cadence repurchased $400 million of shares in Q3, authorized an additional $2.5 billion for repurchases and expects to use more than 50% of 2026 free cash flow for buybacks.
Analysis
Cadence reported a strong demand quarter, with revenue of $1.633 billion up 22% from $1.339 billion a year earlier and 3% from $1.584 billion in Q2. Management said the company exceeded its Q3 guidance for revenue, non-GAAP operating margin and non-GAAP EPS. The supplied expectations data lists EPS of $1.59 against consensus of $1.61, a 1.24% miss; the release separately reports Q3 GAAP EPS of $1.05 and non-GAAP EPS of $2.11, so those figures are not on a clearly aligned basis. The clearest operating signal was breadth: all three product groups grew at least 20%, recurring revenue rose 18%, and backlog set a record at $8.2 billion despite a comparatively light renewal year.
The quarter’s other defining feature was the combination of AI-related product momentum and a higher full-year target. Cadence launched Maestro, extending its agentic design strategy with specialized models, routing and integration with its EDA tools; customer deployments and reported productivity gains provide early evidence of adoption, though the company did not quantify AI revenue. The 2026 revenue outlook rose to $6.387 billion–$6.417 billion from $6.260 billion–$6.340 billion, while the non-GAAP EPS range increased to $8.37–$8.43 from $8.05–$8.15. Profitability remained high, but Q3 non-GAAP margin was lower year over year and sequentially. Cadence also returned $400 million through buybacks and plans to devote more than half of annual free cash flow to repurchases.
Growth and backlog
- Revenue: Q3 revenue of $1.633 billion increased 22% year over year from $1.339 billion and 3% sequentially from $1.584 billion. Product and maintenance revenue was $1.487 billion and services revenue was $146 million.
- Product groups: Management reported year-over-year growth of 20% in core EDA, 24% in Semiconductor IP and 30% in System Design and Analysis, describing demand as broad-based.
- Backlog: The record $8.2 billion backlog compared with $7.8 billion in Q3 2025. Management said bookings were strong despite a lighter renewal period, reflecting expanded customer engagements and add-on opportunities; backlog conversion depends on arrangement structures and revenue timing.
Agentic AI and Maestro
Cadence introduced Maestro as a portfolio of domain-specialized models for chip and system design, combined with a model router and its existing design agents and tools. Management said the models can be deployed in cloud or on-premises environments and can be further trained on customer data. Initial results cited were up to 30% higher quality and up to 5x token efficiency versus general-purpose foundation models. Cadence reported more than 100 active customer engagements across its agentic AI portfolio, but did not disclose associated revenue.
- Customer examples: MediaTek deployed ChipStack in production digital verification, reporting 50%–70% higher verification coverage and 1.4x–2x lower engineering effort. Renesas reported a 34x productivity improvement with InnoStack; Nokia reported 5x acceleration in selected design and analysis workflows with AuraStack.
- Underlying tool demand: Management said agents can perform more design exploration and increase use of Cadence’s core tools. It linked recurring revenue growth to both agentic solutions and increased usage of the underlying software.
Raised 2026 outlook
- Full-year revenue: The new range of $6.387 billion–$6.417 billion compares with the prior $6.260 billion–$6.340 billion range and implies approximately 21% growth from 2025 revenue of $5.297 billion.
- Full-year earnings: Non-GAAP EPS guidance rose from $8.05–$8.15 to $8.37–$8.43; GAAP EPS guidance increased from $4.76–$4.86 to $4.84–$4.90. The company expects non-GAAP operating margin of 44.2%–45.2% and operating cash flow of about $2.0 billion.
- Q4 guidance: Cadence expects revenue of $1.695 billion–$1.725 billion, up 18%–20% year over year, non-GAAP operating margin of 44%–45% and non-GAAP EPS of $2.19–$2.25. The company’s outlook assumes current export-control regulations remain substantially similar for the rest of the year.
Margins and earnings
- Operating margins: Q3 GAAP operating margin was 26.2%, versus 31.8% a year earlier and 28.4% in Q2. Non-GAAP operating margin was 44.1%, compared with 47.6% and 45.5%, respectively.
- Per-share results: The release reported GAAP EPS of $1.05, unchanged from Q3 2025 and below Q2’s $1.33. Non-GAAP EPS was $2.11, up from $1.93 a year earlier and level with Q2.
- Reported expectation comparison: The supplied analyst data gives reported EPS of $1.59 versus consensus of $1.61, a 1.24% shortfall. That reported figure does not match the release’s stated GAAP or non-GAAP EPS, so the comparison appears to use a different measure.
Cash and repurchases
- Cash generation: Operating cash flow was $424 million and free cash flow was $362 million, compared with $311 million and $277 million, respectively, in Q3 2025. Q3 capital expenditures were $62 million.
- Capital return: Cadence repurchased $400 million of shares in Q3, twice the $200 million spent in each of the prior three reported quarters. The board authorized an additional $2.5 billion for the repurchase program; management expects to use more than 50% of 2026 free cash flow for buybacks.
- Balance sheet: Quarter-end cash and equivalents were $1.452 billion, while debt at principal value was $2.650 billion.
