Cadence Design Systems, Inc. (NASDAQ:CDNS) stock rose in Tuesday’s premarket session after the electronic design automation software company reported stronger-than-expected second-quarter results, raised its full-year guidance and ended the quarter with a record backlog.
Cadence Design Systems Beats Q2 Estimates
Revenue increased 24% year over year to $1.584 billion, topping analyst estimates of $1.577 billion. Adjusted earnings came in at $2.11 per share, ahead of expectations of $2.06 per share, according to Benzinga Pro.
The company said artificial intelligence remained a key growth driver as demand accelerated across both “design for AI” and “AI for design.” Investments in AI, high-performance computing, hyperscaler infrastructure and physical AI continue to increase chip and system complexity, supporting demand for Cadence’s software and IP portfolio.
Record Backlog Reflects Strong Demand
Cadence ended the quarter with a record backlog of $8.1 billion, highlighting strong customer demand and continued business momentum.
GAAP operating margin was 28.4%, while non-GAAP operating margin reached 45.5%. Operating cash flow totaled $635 million during the quarter. The company ended the quarter with $1.44 billion in cash and $2.5 billion in debt outstanding.
Cadence also repurchased $200 million of stock during the quarter and said it expects to allocate about 50% of its 2026 free cash flow to share repurchases.
AI Drives Growth Across Business Segments
All major product groups posted double-digit year-over-year growth.
The IP business grew more than 40%, driven by strong demand for AI and high-performance computing technologies, including PCIe, UCIe, HBM and LPDDR6. Cadence also secured its first Tensilica DSP design win with STMicroelectronics, expanding its presence in the automotive and audio markets.
Core EDA revenue increased 18% from a year earlier as adoption of AI-powered design tools and digital full-flow solutions continued to expand. The company reported broader use of its Tempus and Certus signoff platforms among hyperscalers, semiconductor companies, startups and AI chip developers. It also reported multiple customer wins for its Spectre and Spectre FX analog simulation platforms.
System Design and Analysis revenue climbed 37% year over year, supported by rising demand for advanced packaging and printed circuit board solutions as AI systems become more complex.
Cadence said Allegro X AI continued to gain traction by reducing layout design time. It also highlighted its collaboration with Taiwan Semiconductor Manufacturing Company Ltd. (NYSE:TSM) on 3D Fabric technologies for next-generation AI chips, along with progress integrating the acquired Hexagon D&E business.
The company also expanded strategic partnerships across the semiconductor ecosystem. Cadence announced a multi-year collaboration with Intel to support its 14A process technology using Cadence IP and agentic AI-based EDA tools. It also strengthened its partnership with Samsung Foundry to support 2-nanometer and 3D IC technologies for AI, high-performance computing and mobile applications.
Cadence Raises Full-Year Guidance
For the third quarter, Cadence expects adjusted earnings of $2.01 to $2.07 per share, above analyst estimates of $1.94 per share.
The company also raised its full-year 2026 outlook. It now expects revenue of $6.26 billion to $6.34 billion, up from its previous guidance of $6.13 billion to $6.23 billion and above analyst estimates of $6.21 billion.
Cadence increased its adjusted earnings forecast to a range of $8.05 to $8.15 per share from its prior outlook of $7.85 to $7.95 per share. Analysts were expecting adjusted earnings of $7.96 per share.
CDNS Price Action: Cadence Design Systems shares were up 3.25% at $349.60 during premarket trading on Tuesday, according to Benzinga Pro data.
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