Cadence raises 2026 revenue growth forecast to 21% after 22% quarterly growth
Key Facts
Cadence raised its revenue growth forecast for 2026 to 21%, after third-quarter revenue reached $1.633 billion, up 22% year on year from $1.339 billion in the same period of 2025. The company said quarterly growth benefited from increasing momentum in AI-driven designs and double-digit growth across all product categories. GAAP diluted earnings per share were $1.05, unchanged from the third quarter of 2025, while non-GAAP earnings per share rose to $2.11 from $1.93. The results topped Zacks estimates cited by The Associated Press: average earnings per share were estimated at $2.04 based on seven analysts, while six analysts forecast revenue of $1.61 billion. Cadence reported results on October 26, alongside an increase to its annual forecast, citing business momentum, broader technology leadership and a record backlog.
The forecast increase reflects an acceleration from the company’s previous guidance. In its second-quarter results announcement in July, Cadence had forecast annual revenue growth of 19%, within a revenue range of $6.26 billion to $6.34 billion. The new guidance puts 2026 revenue between $6.387 billion and $6.417 billion, with non-GAAP diluted earnings per share expected between $8.37 and $8.43. The CEO said the decision came amid “broad-based business momentum, expanding technology leadership and a record backlog.” The company linked quarterly performance to its full-year outlook as its backlog rose to a record level. Cadence also forecast fourth-quarter non-GAAP diluted earnings per share of $2.19 to $2.25.
Alongside revenue growth, profitability indicators showed lower operating margins than a year earlier. GAAP operating margin fell to 26.2% in the third quarter from 31.8% in the same period of 2025. On a non-GAAP basis, the margin declined to 44.1% from 47.6%. Meanwhile, GAAP earnings per share remained at $1.05, while non-GAAP earnings per share rose from $1.93 to $2.11. The figures place revenue growth and adjusted earnings per share in the same quarter alongside operating margins below last year’s levels.
Cadence said recurring revenue increased 18% year on year and its backlog reached $8.2 billion at the end of the quarter. It added that revenue expected to be recognized over the next twelve months from remaining performance obligations totaled $4.2 billion. By business, core electronic design automation revenue grew 20%, and the company recorded 16 new wins for digital design and full-flow signoff contracts. Intellectual property revenue also rose 24%, supported by demand for the Star IP portfolio, while system design and analysis revenue increased 30%. The company said momentum in AI-driven designs supported growth, with increases varying across its business categories.
As it expanded its AI tools for chip and system design, Cadence launched its Maestro portfolio of specialized models. The company said initial results showed up to 30% higher quality and five times greater token efficiency compared with general-purpose models. During the quarter, the company used $400 million to repurchase shares, then its board authorized additional buybacks worth up to $2.5 billion in October. CDNS shares closed at $316.49 on October 23, before the results announcement. After reporting results and raising its forecast, the stock rose 2.6% in after-hours trading to $330.55, according to Investing.com.