Cadence Design Systems CDNS delivered a strong second-quarter 2026 results, driven by broad-based demand for its AI-oriented portfolio amid robust design activity and new system architectures across hyperscaler infrastructure and physical AI. Non-GAAP earnings per share (EPS) of $2.11 beat the Zacks Consensus Estimate by 2.9%, increased 27.9% year over year and topped management’s guided range of $2.02 to $2.08.
Revenues of $1.584 billion beat the Zacks Consensus Estimate by 0.5% and increased 24.2% year over year. The figure was within the management’s guided range of $1.555-$1.595 billion. All the product groups witnessed double-digit growth.
On the earnings call, the company cited agentic AI as a durable tailwind. Cadence expects agentic tools to drive higher EDA consumption and usage across its platform as customers run more simulations, verification and implementation cycles, thereby expanding the addressable market. Management highlighted “strong early traction” for its AI Super-Agent portfolio.
A standout metric was a record backlog of $8.1 billion, driven by strong bookings.
Price Performance
Image Source: Zacks Investment Research
Strong quarterly performance and accelerating AI demand led to a raise in its 2026 revenue outlook.
Cadence raised its full-year 2026 revenue outlook to a band of $6.26-$6.34 billion, compared with the earlier guided range of $6.125-$6.225 billion. The Zacks Consensus Estimate is currently $6.2 billion.
Non-GAAP EPS for 2026 is now expected to be between $8.05 and $8.15, compared with the earlier guided range of $7.85 to $7.95. The Zacks Consensus Estimate is currently pinned at $7.94 per share.
CDNS stock was up 2.9% in the post-market trading yesterday and is up 3.4% in the pre-market trading today. The stock has lost 7.5% compared with the Computer - Software industry’s 30.6% decline in the past year.
CDNS’ Segment Performance
Product & Maintenance revenues (90.3% of total revenues) of $1.431 billion rose 22.3% year over year. Services revenues (9.7%) of $154 million jumped 46.7% year over year.
Recurring revenues comprised 78% of total revenues, while the remainder was upfront revenues.
The Americas contributed 43% of revenues, while China accounted for 15%, Other Asia 20%, Europe, Middle East and Africa 15% and Japan 7%, pointing to diversified demand across geographies.
Product-wise, Core EDA, Intellectual Property (“IP”) and Systems Design & Analysis accounted for 68%, 15% and 17% of total revenues, respectively.
The System Design & Analysis business, up 37% in the second quarter, is gaining from higher demand for Allegro X AI, 3D-IC and BETA CAE solutions. Management noted that the integration of Hexagon's D&E business was “progressing well” with some deals closed with key clients in the quarter.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. price-consensus-eps-surprise-chart | Cadence Design Systems, Inc. Quote
Core EDA business, which includes Custom IC, Digital IC and Functional Verification, experienced 18% year-over-year growth.
The demand for new hardware systems continued to gain traction, driven by AI/HPC customers. Apart from hardware, demand for digital full-flow solutions was steady, with expanded adoption of the Tempus and Certus sign-off tools. It added 12 new logos in the reported quarter as well as expanded business with several AI clients.
The IP business was up 40% year over year in the second quarter. The company is witnessing higher demand for its Star IP portfolio across AI and HPC applications, including HBM, PCIe, UCIe and LPDDR6.
CDNS’ Profitability Numbers
Non-GAAP gross margin expanded 100 basis points (bps) to 88.2%.
Total non-GAAP costs and expenses increased 18.4% year over year to $863 million.
However, non-GAAP operating margin expanded 270 bps on a year-over-year basis to 45.5%.
CDNS’ Balance Sheet & Cash Flow
As of June 30, 2026, CDNS had cash and cash equivalents of $1.44 billion compared with $1.407 billion as of March 31, 2026.
Long-term debt was $2.482 billion, compared with $2.481 billion as of March 31, 2026.
Cadence generated an operating cash flow of $635 million in the reported quarter compared with the prior quarter’s $356 million. Free cash flow was $582 million compared with $307 million in the previous quarter.
The company repurchased its shares worth $200 million in the second quarter.
CDNS’ Outlook
Non-GAAP operating margin for 2026 is now forecasted to be in the band of 43.75% to 44.75%, compared with the range of 43.5% to 44.5% guided earlier.
Also, operating cash flow is expected to be $2 billion compared with $1.875 billion to $1.975 billion projected earlier. CDNS expects to utilize at least 50% of its free cash flow to repurchase shares in 2026.
For the third quarter of 2026, revenues are estimated to be $1.595-$1.625 billion. The company reported sales of $1.55 billion in the year-ago quarter.
Non-GAAP EPS is anticipated to be between $2.01 and $2.07. CDNS reported an EPS of $1.92 in the year-ago quarter.
Non-GAAP operating margin is estimated to be between 43.5% and 44.5% in the third quarter.
CDNS’ Zacks Rank
Cadence currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Performance of Other Companies in the Same Space
SAP SE SAP reported second-quarter 2026 non-IFRS EPS of €1.59 ($1.85), which increased 6% from the year-ago quarter. The Zacks Consensus Estimate was $2. Despite macroeconomic uncertainty, SAP reported total revenues on a non-IFRS basis of €9.9 billion ($11.5 billion), which increased 9% year over year (up 11% at constant currency or cc). The Zacks Consensus Estimate was pinned at $11.4 billion.
Shares of SAP have declined 40.5% in the past year.
Pegasystems PEGA reported second-quarter fiscal 2026 revenues of $420.7 million, up 9.4% year over year, but missed the consensus mark by 1.8%. Pega Cloud momentum was a bright spot, with Pega Cloud annual contract value rising 22% year over year. Pega Cloud revenues jumped 28% year over year to $213.9 million and accounted for 51% of quarterly revenues.
Shares of PEGA have declined 52.7% in the past year.
Progress Software Corporation PRGS reported second-quarter fiscal 2026 results wherein revenues came in at $253 million, up 7% year over year and 6% on a constant currency (cc) basis. ARR of $868 million inched up 2% year over year on a cc basis. PRGS reported a 16% year-over-year increase in non-GAAP earnings per share, which stood at $1.62.
Shares of PRGS have lost 21.9% in the past year.
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