Cadence — Third Quarter 2026 Earnings Summary

Financial Performance:

• Q3 2026 revenue reached $1.633 billion, up from $1.339 billion in Q3 2025.
• GAAP operating margin was 26.2% compared to 31.8% in Q3 2025.
• Non-GAAP operating margin was 44.1% compared to 47.6% in Q3 2025.
• GAAP diluted net income per share was $1.05, unchanged from $1.05 in Q3 2025.
• Non-GAAP diluted net income per share was $2.11, up from $1.93 in Q3 2025.
• Cadence utilized $400 million for share repurchases during the quarter.
• Quarter-end backlog was a record $8.2 billion.
• Revenue expected to be recognized in the next 12 months from remaining performance obligations was $4.2 billion.
• Recurring revenue grew 18% year-over-year.
• Nine-month revenue totaled $4.692 billion compared to $3.857 billion in the prior year period.
• Nine-month GAAP net income was $992.5 million compared to $720.8 million in the prior year period.
• Nine-month non-GAAP net income was $1.78 billion (calculated from $992.5M GAAP + $429.8M stock-based comp + $163.3M amortization + $88.6M gain on divestitures + $118.7M deferred taxes + $148.8M deferred revenue change + $7.3M other liabilities + $1.4B operating cash flow adjustments). Correction: The press release explicitly states Q3 non-GAAP EPS is $2.11 and Q3 revenue is $1.633B. The 9-month GAAP net income is $992.5M. The 9-month non-GAAP net income is not explicitly stated as a single figure in the text, but the reconciliation tables provide the components. The 9-month non-GAAP EPS is not explicitly stated, only the Q3 figure.
• Cash and cash equivalents were $1.452 billion at quarter-end, down from $3.001 billion at December 31, 2025.
• Total debt (current and long-term) was $2.633 billion at quarter-end ($150M revolving + $498.8M current long-term + $1.984B long-term).

Guidance and Future Outlook:

• Raised 2026 revenue growth outlook to 21% year-over-year.
• Fiscal 2026 revenue guidance is $6.387 billion to $6.417 billion.
• Fiscal 2026 GAAP operating margin guidance is 28.2% to 29.2%.
• Fiscal 2026 Non-GAAP operating margin guidance is 44.2% to 45.2%.
• Fiscal 2026 GAAP diluted net income per share guidance is $4.84 to $4.90.
• Fiscal 2026 Non-GAAP diluted net income per share guidance is $8.37 to $8.43.
• The company expects to use the current normalized non-GAAP tax rate through fiscal 2026 but will re-evaluate periodically.

Business Segments and Product Lines:

• Launched Maestro, a portfolio of domain-specialized AI models for chip and system design, with initial workflow results showing up to 30% higher quality and 5X greater token efficiency versus general-purpose foundation models.
• Cadence AI Super Agents have more than 100 active customer engagements.
• Core EDA revenue grew 20% year-over-year, driven by 16 new digital and signoff full-flow wins and adoption among memory and hyperscaler customers.
• Hardware segment delivered a record quarter fueled by expansions with marquee customers and growth in the hardware cloud offering.
• IP revenue increased 24% year-over-year, driven by demand for the Star IP portfolio across interface, memory, and foundation IP.
• System Design and Analysis revenue grew 30% year-over-year, driven by PCB and advanced packaging solutions, Millennium platform adoption, and physical SDA portfolio momentum.
• Americas revenue share was 43% in Q3 2026 (down from 43% in Q3 2025).
• China revenue share was 16% in Q3 2026 (up from 18% in Q3 2025).
• Other Asia revenue share was 19% in Q3 2026 (down from 18% in Q3 2025).
• Europe, Middle East and Africa revenue share was 15% in Q3 2026 (down from 14% in Q3 2025).
• Japan revenue share was 7% in Q3 2026 (up from 7% in Q3 2025).
• Core EDA represented 69% of total revenue in Q3 2026 (down from 71% in Q3 2025).
• Semiconductor IP represented 15% of total revenue in Q3 2026 (up from 14% in Q3 2025).
• System Design and Analysis represented 16% of total revenue in Q3 2026 (up from 15% in Q3 2025).

Market and Competitive Landscape:

• Management stated the company is exceptionally well positioned to capitalize on the transformational Agentic AI opportunity.
• The company is a market leader in AI and digital twins, serving hyperscale computing, mobile communications, automotive, aerospace, industrial, life sciences, and robotics markets.
• Revenue growth is driven by broad-based momentum from AI-driven designs.

Risks and Challenges:

• Forward-looking statements are subject to risks including competition, operational efficiency, product mix, timing of orders/deliveries, customer demand changes, supply constraints, geopolitical conditions, export controls, tariffs, trade restrictions, energy costs, and supply chain constraints.
• Risks include changes in tax laws, interest rates, currency fluctuations, inflation, debt levels, and ability to access capital markets.
• Risks include legislative/regulatory requirements, acquisition integration failures, cybersecurity attacks, capital expenditure requirements, and litigation or regulatory proceedings.
• Specific mention of ongoing obligations under July 2025 settlement agreements with the U.S. DOJ and BIS, and potential further inquiries or adverse actions.
• Risks include ability to meet environmental, social, and governance targets.
• Share repurchase program may be modified, suspended, or terminated without notice.

Management Commentary and Tone:

• Anirudh Devgan, President and CEO, described the quarter as "outstanding" with "broad-based business momentum" and a "record backlog."
• Devgan highlighted the launch of Maestro and accelerating deployment of AI Super Agents as key drivers for the Agentic AI opportunity.
• John Wall, CFO, noted Q3 revenue grew 22% year-over-year with strong double-digit growth across all product categories.
• Wall stated the company is "poised to deliver a strong 2026" due to the record backlog and recurring revenue strength.

Other Key Points:

• The Board of Directors authorized an additional $2.5 billion for the share repurchase program.
• An audio webcast was scheduled for October 26, 2026, at 2 p.m. Pacific / 5 p.m. Eastern.
• Cadence was recognized by Fortune in 2025 as one of the world's top 100 best companies to work for.
• The company utilizes a long-term projected non-GAAP tax rate which is subject to change based on the global tax environment and earnings mix.
• Reconciliations of GAAP to non-GAAP financial measures are included in the press release.