Strong demand for AI chip design! Cadence Design Systems (CDNS.US) Q3 revenue up 22% year-on-year, full-year guidance raised

According to Zhihu Finance APP, after the US stock market closed on Monday, Cadence Design Systems (CDNS.US) announced its third quarter 2026 financial results. The data showed that the company’s revenue for the quarter reached $1.633 billion, an increase of 22% year-on-year, surpassing last year's $1.339 billion; GAAP diluted earnings per share was $1.05, unchanged from the same period last year; non-GAAP adjusted earnings per share was $2.11, about 9% higher than last year’s $1.93. Cadence Design’s share price rose more than 2% after hours.

In terms of profitability, Cadence Design’s third quarter GAAP operating margin was 26.2%, lower than last year's 31.8%; non-GAAP adjusted operating margin was 44.1%, also lower than last year’s 47.6%. Despite the year-on-year decline in operating margins, driven by AI-powered chip design demand, all major product categories achieved double-digit revenue growth.

Specifically, the core Electronic Design Automation (EDA) business revenue grew 20% year-on-year, mainly due to broad product portfolio expansion and increased adoption by memory chip and hyperscale data center customers. The company also secured 16 new digital design and signoff full-flow projects during the quarter.

The Intellectual Property (IP) business saw revenue increase by 24% year-on-year, benefiting from robust demand for interface, memory, and foundational IP products, as well as ongoing collaboration with large cloud computing enterprises, semiconductor companies, and wafer foundries. The system design and analysis business stood out, with revenue up 30% year-on-year, primarily driven by growth in printed circuit boards (PCB), advanced packaging solutions, and Millennium platform demand. The hardware business also set a new quarterly revenue record, mainly due to increased purchases from major customers and continued growth in hardware cloud service revenue.

For AI products, Cadence Design has launched its Maestro series of artificial intelligence models tailored for chip and system design. According to the company's preliminary tests, compared to general foundation models, Maestro can achieve up to 30% improvement in quality in some design workflows while increasing token usage efficiency by up to 5 times. Several clients have already started deploying these products.

In addition, the company’s AI Super Agents business continues to progress, with over 100 active customer collaboration projects currently underway, covering workflows such as digital design, analog and custom design, and system design.

On orders, as of the end of the third quarter, Cadence Design’s backlog reached a record $8.2 billion, with $4.2 billion expected to be recognized as revenue over the next 12 months. The company’s recurring revenue grew by 18% year-on-year in the third quarter, further enhancing the predictability of future income.

Looking ahead to the full year 2026, Cadence Design raised its performance outlook, expecting annual revenue to be between $6.387 billion and $6.417 billion, with guidance midpoint about $6.402 billion, representing a year-on-year growth of approximately 21%. The company also expects a full-year GAAP operating margin of 28.2% to 29.2%, and non-GAAP adjusted operating margin of 44.2% to 45.2%; GAAP diluted earnings per share of $4.84 to $4.90, and non-GAAP adjusted earnings per share of $8.37 to $8.43, with a guidance midpoint of $8.40.

For shareholder returns, Cadence Design spent $400 million on share repurchases in the third quarter. In addition, the board of directors approved an additional $2.5 billion share repurchase authorization.

Cadence Design CEO Anirudh Devgan stated that thanks to broad business growth, continually strengthened technological advantages, and a record backlog, the company has decided to raise its full-year 2026 revenue growth forecast. He noted that with the launch of the Maestro AI model and the accelerated deployment of AI Super Agents, Cadence Design is well positioned to further seize opportunities brought by agent AI in the chip and system design sectors.