Cadence Raises 2026 Revenue Growth Forecast to 21% After Revenue Reaches $1.633 Billion
Key Facts
Cadence raised its revenue growth forecast for fiscal 2026 to 21%, setting an annual revenue range of $6.387 billion to $6.417 billion after reporting third-quarter revenue of $1.633 billion. The company said revenue rose from $1.339 billion in the same quarter of 2025, while Chief Financial Officer John Wall described quarterly year-over-year growth as 22%. The higher forecast came as the company recorded a record backlog, signaling an expansion in contracts awaiting execution. The new guidance marks another upward revision after the company raised its forecast in July to growth of 19%. Results also topped analyst estimates cited by The Associated Press, combining strong quarterly revenue growth with an increase in adjusted earnings per share.
Backlog stood at $8.2 billion at the end of the quarter, compared with $8.1 billion at the end of the second quarter of 2026. Cadence said it expects to recognize $4.2 billion in revenue over the next twelve months from remaining performance obligations. That figure places part of the reported business volume in a nearer time frame, as it reflects revenue the company expects to record during the year following quarter-end. In the second quarter, revenue was $1.584 billion, compared with $1.275 billion in the same period of 2025, while backlog then reached $8.1 billion. The increase in backlog came alongside year-over-year growth in quarterly revenue and provides context for the higher annual forecast announced by the company.
Wall said recurring revenue rose 18% year over year in the third quarter and that the company delivered strong double-digit growth across all product categories. The CFO attributed the performance to increasing momentum in AI-driven designs, a trend also reflected in the results of the company's business units. Core electronic design automation revenue grew 20%, intellectual property revenue rose 24%, and systems design and analysis revenue increased 30%, all year over year. The company said it recorded 16 new digital design and full signoff contract wins during the quarter. It also reported more than 100 active customer engagements involving agentic AI, offering an indication of the breadth of customer activity in this product category.
In the third quarter, Cadence launched Maestro, a suite of specialized AI models for chip and systems design. The company said early workflow results showed gains of up to 30% in output quality compared with general-purpose foundation models. It added that token efficiency was 5 times higher in the same comparison. The company places these figures within products aimed at chip and systems design work, alongside its report of active customer engagements involving AI agents. The CFO had linked quarterly growth to momentum in AI-driven designs, while the systems design and analysis and intellectual property businesses recorded year-over-year growth of 30% and 24%, respectively.
On profitability, adjusted diluted earnings per share were $2.11 in the third quarter, compared with $1.93 a year earlier, while GAAP diluted earnings per share remained at $1.05 in both periods. Adjusted earnings per share topped the average estimate of $2.04 from seven analysts surveyed by Zacks, while revenue also exceeded the $1.61 billion estimate from six analysts. By contrast, operating margins declined year over year: the GAAP margin was about 26.2%, compared with 31.8%, and the non-GAAP margin fell to 44.1% from 47.6%. That trend differed from the second quarter, when the adjusted operating margin rose to 45.5% from 42.8% in the second quarter of 2025. The figures highlight a divergence between growth in revenue and adjusted earnings per share on one hand, and margin pressure compared with last year on the other.
Cadence used $400 million to repurchase shares during the third quarter, and its board authorized an additional $2.5 billion for the buyback program on October 26. Before the results were announced, the company's shares, trading under the ticker CDNS, closed at $316.49 on October 23. After the results were released, the stock rose 2.28% in extended trading on Monday, October 26, to $329.50 at the time Benzinga published its report. The earnings call was scheduled for the same day at 5 p.m. Eastern time and took place after the company announced its quarterly results and new forecast. Fourth-quarter guidance includes revenue of $1.695 billion to $1.725 billion and non-GAAP diluted earnings per share of $2.19 to $2.25.