Cadence Design Systems (CDNS) Q1 2026 Earnings Call — April 27, 2026

Source: Motley Fool transcript (published Apr 27, 2026) + Cadence Q1 2026 press release.

Anirudh Devgan (CEO): Good afternoon, everyone, and thank you for joining us today. I'm pleased to report that Cadence had a strong start to 2026 with accelerating AI demand and disciplined execution, delivering one of the best Q1s in company history. Our record backlog of $8 billion was ahead of plan, reflecting strong customer confidence in our AI-driven portfolio. Given the accelerating momentum of our business, we are raising our 2026 revenue growth outlook to 17% and expect to achieve the Rule of 60 for the first time.

The agentic AI era is here, and Cadence is leading the transformation of semiconductor and system design. At CadenceLIVE Silicon Valley 2026, we took a major step towards fully autonomous chip design, introducing AgentStack, the head agent framework for our AI Super Agent, which enables knowledge sharing across the design flow and extends autonomous designs from chips to 3D-IC to systems. Building on our revolutionary ChipStack AI Super Agent for RTL design and verification, we introduced two new breakthrough AI Super Agents: ViraStack for analog and custom design, and InnoStack for digital implementation and signoff.

We announced a strategic collaboration with Google to optimize the ChipStack AI Super Agent with Gemini on Google Cloud. In Q1, we furthered our longstanding partnership with MediaTek through a wide-ranging expansion across our new agentic AI offerings and core EDA, 3D-IC and system analysis solutions. At CadenceLIVE, we also announced an expanded partnership on AI and robotics with NVIDIA.

Our IP business continued its strong momentum, with 22% year-over-year revenue growth, driven by accelerating demand for AI, HPC and automotive workloads. We closed a record deal with a leading global foundry, marking our largest IP engagement with this customer to date. Our core EDA business delivered another strong quarter, with revenue growing 18% year-over-year. Demand for our hardware accelerated in Q1, resulting in our best quarter ever, led by AI HPC customers. Our System Design and Analysis business delivered 18% year-over-year revenue growth.

John Wall (CFO): Cadence delivered excellent results for the first quarter of 2026, with accelerating momentum and broad-based strength across all our businesses. Robust design activity, coupled with our solid execution, drove 19% year-over-year revenue growth and 45% operating margin for Q1. First-quarter bookings were ahead of expectations, resulting in a record backlog of $8 billion.

Total revenue was $1.474 billion. GAAP operating margin was 29.3%. Non-GAAP operating margin was 44.7%. GAAP EPS was $1.23, and non-GAAP EPS was $1.96. Our cash balance was $1.407 billion, while the principal value of debt outstanding was $2.925 billion. Operating cash flow was $356 million. DSOs were 67 days, and we used $200 million to repurchase Cadence shares.

For our updated outlook for 2026, we expect revenue in the range of $6.125 billion to $6.225 billion; GAAP operating margin in the range of 27.5% to 28.5%; non-GAAP operating margin in the range of 43.5% to 44.5%; GAAP EPS in the range of $4.39 to $4.49; non-GAAP EPS in the range of $7.85 to $7.95; operating cash flow in the range of $1.875 billion to $1.975 billion; and we expect to use approximately 50% of our free cash flow to repurchase Cadence shares in 2026.

The 2026 outlook includes the impact of the Hexagon Design and Engineering acquisition: approximately $160 million of revenue this year, dilutive to the tune of about $0.28, with the margin impact on the $160 million in the 5% to 10% range. We expect it to be accretive in 2027.

Q&A Highlights (condensed from full transcript)

• Q (Charles Shi, Needham): Is AI's ability to write software a threat to the base-tool business? A: We're very confident in our base-tool position (~10,000 in R&D, 1,000+ PhDs). Agentic AI expands TAM (new products like RTL generation, verification plan generation) on a subscription-plus-consumption model and drives more base-tool usage.
• Q (Jason Celino, KeyBanc): Why is the operating margin guide coming down? A: Primarily Hexagon D&E — $160M revenue, ~$0.28 dilution, ~5-10% margin; financing impact from 70% cash/30% stock; accretive in 2027.
• Q (Jim Schneider, Goldman): How are agentic solutions priced? A: New subscription-plus-consumption products for work that was previously manual (analog, RTL); agents run far more base-tool simulations than humans, increasing base-tool usage.
• Q (Siti Panigrahi, Mizuho): IP growth drivers? A: Better PPA/performance, expanding portfolio (HBM, UCIe), and new foundries (Samsung, Intel, Rapidus); organic + acquired; record IP deal with a leading global foundry (not Intel).
• Q (Joe Quatrochi, Wells Fargo): EDA as % of R&D? A: EDA has gone from ~7% to ~11% of R&D; agentic AI is a real opportunity for that percentage to rise.
• Q (Harlan Sur, JPM): H2 implied below Q2? A: H2 contains appropriate prudence; Hexagon is first-half weighted; Q1 guide represents one of the largest raises we've had at this time of year.
• Q (Gary Mobley, Loop): Renewal environment? A: 2026 is lighter on renewals but those are often strong growth years via add-ons; Q1 bookings strength was across all lines of business.
• Q (Joshua Tilton, Wolfe): What drove the strong China quarter and the organic raise? A: China was 13% of Q1 revenue (in line, easy YoY comps); ex-Hexagon, we raised revenue by $65M and EPS by $0.08; adjusted OCF outlook ~$2.1B, ~$100M above original guide.