Key Takeaways
- Cadence Design Systems shares rose 6% after third-quarter revenue grew 22% to $1.63 billion and its backlog hit a record $8.2 billion.
- Cadence has raised its 2026 revenue growth outlook three times this year, to about 21% from 14% growth in 2025, a sign that AI-driven chip design spending is still speeding up.
- The main risk is margins: non-GAAP operating margin slipped to 44.1% from 47.6% a year earlier as costs grew faster than revenue.
- Analysts expect EPS to keep climbing, to $9.73 in 2027 from this year’s $8.40 guidance midpoint, and the fourth-quarter report is the next test.
Cadence Design Systems (CDNS) stock is up 6% today after the company reported third-quarter results after Monday’s close.
Revenue beat Cadence’s own guidance, and CFO John Wall’s commentary says the company is raising its 2026 revenue growth outlook “for the third time this year.” It now expects about 21% growth, up from 14% in 2025.
That’s a serious acceleration.
What exactly happened
In the quarter ended Sept. 30:
- Revenue grew 22% to $1.63 billion.
- Non-GAAP EPS rose to $2.11 from $1.93.
- Backlog hit a record $8.2 billion, up from $7.8 billion at the end of 2025.
- The board added $2.5 billion to the buyback, after Cadence spent $400 million on its shares.
Every product group grew by double digits: core EDA 20%, IP 24%, and system design and analysis 30%. Wall credited “growing momentum from AI-driven designs.”
For the full year, Cadence now expects revenue of $6.39 billion to $6.42 billion, up from $6.26 billion to $6.34 billion. It also expects non-GAAP EPS of $8.40 at the midpoint, up from $8.10.
Why the backlog matters
Cadence expects $4.2 billion of that backlog to turn into revenue over the next 12 months. And analysts see revenue climbing to $7.26 billion in 2027 and $8.21 billion in 2028.
That’s about 13% growth a year, slower than 2026’s pace. With a record backlog and a third raise in hand, I’d expect those estimates to move up.
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The catch: margins
Non-GAAP operating margin slipped to 44.1% from 47.6% a year earlier, as non-GAAP costs rose 30% and headcount grew 15%.
Cadence is betting that Maestro, its new AI models built for chip design, and its AI Super Agents, now in more than 100 active customer engagements, will earn that spending back. Analysts are on board so far: consensus has EPS rising to $9.73 in 2027 from this year’s $8.40 midpoint.
Still below its usual multiple
At Monday’s close, Cadence traded at 35x forward earnings, well under its five-year average of 43x.
After today’s move, it’s closer to 37x.
My take: a third raise and a record backlog suggest AI-driven chip design spending is still speeding up, and the stock still trades below its usual multiple. That looks like room to run.
Of course, if margins keep slipping, that discount could stick around. The next test is the fourth-quarter report: Cadence guides to revenue of $1.70 billion to $1.73 billion and a non-GAAP operating margin of 44% to 45%.
So what is Cadence stock actually worth?
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