Cadence raises 2026 revenue growth outlook to 21% as third-quarter revenue rises 22%

Cadence Design Systems (Nasdaq: CDNS), which sells software used to design chips and electronic systems, reported third-quarter revenue of $1.633 billion and raised its 2026 revenue growth outlook to 21%, according to its earnings release of October 26.

What happened

Third-quarter revenue was $1.633 billion, compared with $1.339 billion in the third quarter of 2025. The company's chief financial officer, John Wall, said revenue grew 22% from a year earlier, with "strong double-digit growth across all product categories, driven by growing momentum from AI-driven designs."

On a GAAP basis, operating margin was 26.2%, down from 31.8% a year earlier, and diluted earnings per share were $1.05, unchanged from the third quarter of 2025. On a non-GAAP basis, operating margin was 44.1%, against 47.6%, and diluted earnings per share were $2.11, against $1.93.

Quarter-end backlog was $8.2 billion, and the revenue expected to be recognized over the next 12 months from remaining performance obligations was $4.2 billion. The release's headline said recurring revenue rose 18% from a year earlier.

Cadence used $400 million to repurchase its shares in the quarter. Its board authorized an additional $2.5 billion for the repurchase program.

What to watch

For fiscal 2026, Cadence now expects revenue of $6.387 billion to $6.417 billion, GAAP diluted earnings per share of $4.84 to $4.90 and non-GAAP diluted earnings per share of $8.37 to $8.43. It expects a GAAP operating margin of 28.2% to 29.2% and a non-GAAP operating margin of 44.2% to 45.2%.

The company held an audio webcast on October 26 at 2 p.m. Pacific time (5 p.m. ET) to discuss the results. Its outlook is a company forecast and can change.