Cadence Design Systems raised its full-year revenue growth outlook after reporting a 22% year-over-year increase in third-quarter sales and a record backlog. The electronic design automation company posted revenue of $1.633 billion for the quarter, up from $1.339 billion a year earlier.
The stronger top line came with mixed profitability measures. Cadence reported a GAAP operating margin of 26.2%, down from 31.8% in the third quarter of 2025. GAAP diluted earnings per share were unchanged at $1.05. On the company’s non-GAAP basis, operating margin was 44.1%, compared with 47.6% a year ago, while diluted earnings per share rose to $2.11 from $1.93.
Backlog and outlook rise
Cadence said recurring revenue increased 18% from a year earlier and quarter-end backlog reached $8.2 billion. Of its remaining performance obligations, the company expects to recognize $4.2 billion as revenue during the next 12 months. Backlog is an indicator of contracted demand, but timing, customer acceptance and other factors can affect when those orders become reported revenue.
For fiscal 2026, Cadence now expects revenue between $6.387 billion and $6.417 billion. The midpoint implies roughly 21% annual growth, according to the company. It forecast a GAAP operating margin of 28.2% to 29.2% and GAAP diluted earnings per share of $4.84 to $4.90. Its non-GAAP outlook calls for a 44.2% to 45.2% operating margin and diluted earnings per share of $8.37 to $8.43.
The company also spent $400 million repurchasing shares during the quarter. Its board authorized another $2.5 billion for the repurchase program. Buyback authorizations permit purchases but do not require the company to complete the full amount.
AI design demand shapes the quarter
Cadence attributed the revenue expansion to broad demand for tools used to design chips and systems, including work tied to AI infrastructure. It said core electronic design automation revenue grew 20%, intellectual-property revenue rose 24%, and system design and analysis revenue increased 30%. Those segment growth figures and descriptions come from management’s earnings release.
Management also highlighted Maestro, a group of domain-specific AI models for chip and system design, and said its AI “Super Agents” had more than 100 active customer engagements. Cadence claimed early Maestro workflows delivered up to 30% higher quality and five times greater token efficiency than general-purpose foundation models. Those results are company-reported and may vary by workflow or customer.
What investors will watch
The quarter points to continued spending on semiconductor design capacity even as margins came in below the prior-year period. The record backlog gives Cadence visibility into future business, while the raised outlook sets a higher benchmark for execution through year-end. Investors will also be watching whether demand from hyperscalers and semiconductor customers converts into revenue at the pace management expects, and whether growth can offset the year-over-year pressure visible in operating margins.
Source
Cadence: Cadence Reports Third Quarter 2026 Financial Results.
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