Cadence Design Systems Inc. (NASDAQ:CDNS) stock rose in premarket trading Tuesday after the company reported better-than-expected third-quarter earnings and raised its full-year guidance.
Third-Quarter Earnings Highlights
Cadence reported third-quarter revenue of $1.63 billion, exceeding analysts’ expectations of $1.61 billion. Adjusted earnings per share were $2.11, beating estimates of $2.04.
Revenue increased 22% from a year earlier, while the company’s backlog reached a record $8.2 billion.
Recurring revenue rose 18%, core electronic design automation revenue increased 20%, intellectual property revenue grew 24%, and system design and analysis revenue climbed 30%.
Cadence ended the quarter with $1.45 billion in cash and $2.65 billion in outstanding debt principal.
Operating cash flow totaled $424 million during the quarter, and the company repurchased $400 million in shares.
The board also authorized an additional $2.5 billion in share repurchases. Cadence expects to allocate more than 50% of its 2026 free cash flow to buybacks.
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AI Adoption and Customer Wins Drive Growth
Cadence reported more than 100 active customer engagements involving its artificial intelligence super agents during the quarter.
Cadence said its ChipStack RTL-generation agent achieved an average 24% reduction in chip area and an 18% reduction in power consumption compared with code generated solely by foundation models.
MediaTek reported a 50% to 70% improvement in verification coverage and a 1.4x to 2x reduction in engineering effort, while ViraStack customer engagements increased fourfold.
Engagement with ViraStack quadrupled, while Renesas achieved a 34-fold productivity improvement using InnoStack.
Socionext expects productivity gains of up to fivefold, and Nokia Corporation (NYSE:NOK) reported a fivefold acceleration in key workflows using AuraStack.
Cadence secured 16 new full-flow electronic design automation wins. Its Palladium and Protium verification platforms posted another record quarter, while Tensilica generated record revenue.
Spectre FX also secured a major competitive displacement, alongside multiple projects involving 2-nanometer technology.
Customer adoption expanded across several industries. Allegro secured business with a leading electric vehicle customer, while Switch selected Cadence’s Millennium and Reality Digital Twin solutions for AI factory design.
Honda is using Cadence’s RTL-generation agent, and Samsung Electronics Co., Ltd. (OTC:SSNLF) foundry adopted InnoStack to improve engineering efficiency and accelerate power, performance and area exploration.
Cadence also expanded partnerships involving AI, electronic design automation software, hardware and system design solutions.
Separately, Cadence introduced Maestro, a portfolio of domain-specialized AI models for chip and system design. The company said initial workflow results demonstrated up to 30% higher quality and up to five times greater token efficiency compared with general-purpose foundation models.
Cadence Raises 2026 Outlook
Cadence raised its full-year 2026 revenue forecast to $6.39 billion to $6.42 billion, up from its previous outlook of $6.26 billion to $6.34 billion. The revised forecast exceeds analysts’ consensus estimate of $6.32 billion.
The company also increased its adjusted earnings per share forecast to $8.37 to $8.43, compared with its earlier projection of $8.05 to $8.15. Analysts had expected $8.16 per share.
Cadence expects approximately $2 billion in operating cash flow for the full year.
For the fourth quarter, the company projected revenue of $1.695 billion to $1.725 billion, above analysts’ consensus estimate of $1.649 billion.
Adjusted earnings per share are expected to range from $2.19 to $2.25, compared with analysts’ expectations of $2.03.
CDNS Stock Price Action
CDNS Price Action: Cadence Design Systems shares were up 3.05% at $331.99 during premarket trading on Tuesday, according to Benzinga Pro data.
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