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Cadence Q1 Earnings Top Estimates, 2026 Revenue Outlook Raised
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Key Takeaways
Cadence posted Q1 2026 non-GAAP EPS of $1.96 and revenues of $1.474B, beating estimates.
CDNS sees AgentStack and its two AI Super Agents called ViraStack and InnoStack, boosting EDA usage.
CDNS backlog hit a record $8B, 2026 revenue outlook raised to $6.125B-$6.225B.
Cadence Design Systems (CDNS - Free Report) delivered a strong first quarter of 2026, driven by broad-based demand for its AI-oriented portfolio amid robust design activity. Non-GAAP earnings per share (EPS) of $1.96 beat the Zacks Consensus Estimate by 4.3%, increased 24.8% year over year and topped management’s guided range of $1.89 to $1.95.
Revenues of $1.474 billion beat the Zacks Consensus Estimate by 1.7% and increased 19% year over year. The figure beat management’s guided range of $1.42-$1.46 billion.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
On the earnings call, the company emphasized its agentic AI strategy, including the launch of AgentStack and new AI Super Agents (ViraStack and InnoStack) that are designed to automate more of the chip design workflow. Cadence expects agentic tools to drive higher EDA consumption and usage across its platform as customers run more simulations, verification and implementation cycles.
A standout metric was a record backlog of $8 billion, driven by strong bookings. Strong backlog and accelerating AI demand led to a raise in its 2026 revenue outlook.
Cadence raised its full-year 2026 revenue outlook to a band of $6.125-$6.225 billion, compared with the earlier guided range of $5.9-$6 billion. The Zacks Consensus Estimate is currently $5.99 billion.
Non-GAAP EPS for 2026 is now expected to be between $7.85 and $7.95, compared with the earlier guided range of $8.05 to $8.15. The Zacks Consensus Estimate is currently pinned at $8.16 per share.
Cadence noted that the bottom-line performance would primarily be impacted by Hexagon’s Design & Engineering business acquisition, which will add about $160 million to revenues but would be dilutive to the bottom line by nearly 28 cents. The deal was funded using 70% cash and 30% stock. It expects the buyout to be accretive in 2027.
Image Source: Zacks Investment Research
CDNS stock is down marginally in the pre-market trading today. The stock has appreciated 11.3% compared with the Computer - Software industry’s 1.1% growth in the past year.
CDNS’ Segment Performance
Product & Maintenance revenues (91.5% of total revenues) of $1.349 billion rose 21.4% year over year. Services revenues (8.5%) of $125 million fell 4.6% year over year. Recurring revenues comprised 77% of total revenues, while the remaining were upfront revenues.
The Americas contributed 45% of revenues, while China accounted for 13%, Other Asia 20%, Europe, Middle East and Africa 16% and Japan 6%, pointing to diversified demand across geographies.
Product-wise, Core EDA, Intellectual Property (“IP”) and Systems Design & Analysis accounted for 71%, 14% and 15% of total revenues, respectively. The System Design & Analysis business, up 18% in the first quarter, is gaining from higher demand for 3D-IC, Sigrity and Clarity.
Core EDA business, which includes Custom IC, Digital IC and Functional Verification, experienced 18% year-over-year growth. The demand for new hardware systems continued to gain traction, driven by AI/HPC, automotive and robotics. Apart from Palladium and Protium systems, solutions such as Xcelium, Verisium SimAI and ChipStack are being explored by customers, with large evaluations underway, added Cadence. Cerebrus and AI-driven Virtuoso Studio are also seeing strong momentum.
The IP business was up 22% year over year in the first quarter, benefiting from a broadening silicon solutions portfolio and increasing demand for solutions in AI, HPC and automotive use cases. The company is witnessing higher demand for its Star IP portfolio across interface, memory and foundation IP amid higher complexity of advanced node designs and chiplet-based architectures.
CDNS’ Profitability Numbers
Non-GAAP gross margin contracted 40 basis points (bps) to 88%.
Total non-GAAP costs and expenses increased 12.6% year over year to $815 million.
However, non-GAAP operating margin expanded 300 bps on a year-over-year basis to 44.7%.
CDNS’ Balance Sheet & Cash Flow
As of March 31, 2026, CDNS had cash and cash equivalents of $1.407 billion compared with $3 billion as of Dec. 31, 2025.
Long-term debt was $2.481 billion as of March 31, 2026, compared with $2.48 billion as of Dec. 31.
Cadence generated an operating cash flow of $356 million in the reported quarter compared with the prior quarter’s $553 million. Free cash flow was $307 million compared with $512 million in the previous quarter.
The company repurchased its shares worth $200 million in the first quarter.
CDNS’ Outlook
Non-GAAP operating margin for 2026 is now forecasted to be in the band of 43.5% to 44.5%, compared with 44.75% to 45.75% range guided earlier.
Also, operating cash flow is expected to be in the range of $1.875 billion to $1.975 billion compared with $2 billion projected earlier. CDNS expects to utilize at least 50% of its free cash flow to repurchase shares in 2026.
For the second quarter of 2026, revenues are estimated to be $1.555-$1.595 billion. The company reported sales of $1.275 billion in the year-ago quarter.
Non-GAAP EPS is anticipated to be between $2.02 and $2.08. CDNS reported an EPS of $1.65 in the year-ago quarter. Non-GAAP operating margin is estimated to be between 44.5% and 45.5% in the second quarter.
Recent Performance of Other Companies in the Same Space
SAP SE (SAP - Free Report) reported first-quarter 2026 non-IFRS EPS of €1.72 ($2.01), which increased 20% from the year-ago quarter. The Zacks Consensus Estimate was $1.92 per share.
Driven by momentum in the cloud business, SAP reported total revenues on a non-IFRS basis of €9.56 billion ($11.2 billion), which increased 6% year over year (up 12% at constant currency or cc). The Zacks Consensus Estimate stood at $11.3 billion. SAP’s Business AI momentum is acting as a critical differentiator. Shares of SAP have lost 40.7% in the past year.
Simulations Plus, Inc. (SLP - Free Report) reported second-quarter fiscal 2026 adjusted earnings of 35 cents per share, surpassing the Zacks Consensus Estimate by 29%. The bottom line also compared favorably with the prior-year quarter’s 31 cents.
Simulations Plus reported quarterly revenues of $24.3 million, marking an 8% year-over-year increase. This growth reflects continued demand for its core offerings, especially in drug discovery and development. The software segment remains the backbone of the company’s business model. Growth was driven by strong adoption of discovery and development solutions — areas where AI and modeling tools are becoming increasingly indispensable in biopharma workflows. However, SLP noted a decline in clinical operations software, which appears to be a structural shift rather than a temporary dip. Shares of SLP have declined 58.3% in the past year.
Pegasystems (PEGA - Free Report) reported first-quarter fiscal 2026 revenues of $430 million, down 9.6% year over year, and missed the consensus mark by 11.7%.
Nonetheless, Pega Cloud momentum was a bright spot, with Pega Cloud annual contract value rising 29% year over year. Shares of PEGA have declined 19.4% in the past year.
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Cadence Q1 Earnings Top Estimates, 2026 Revenue Outlook Raised
Key Takeaways
Cadence Design Systems (CDNS - Free Report) delivered a strong first quarter of 2026, driven by broad-based demand for its AI-oriented portfolio amid robust design activity. Non-GAAP earnings per share (EPS) of $1.96 beat the Zacks Consensus Estimate by 4.3%, increased 24.8% year over year and topped management’s guided range of $1.89 to $1.95.
Revenues of $1.474 billion beat the Zacks Consensus Estimate by 1.7% and increased 19% year over year. The figure beat management’s guided range of $1.42-$1.46 billion.
Cadence Design Systems, Inc. Price, Consensus and EPS Surprise
Cadence Design Systems, Inc. price-consensus-eps-surprise-chart | Cadence Design Systems, Inc. Quote
On the earnings call, the company emphasized its agentic AI strategy, including the launch of AgentStack and new AI Super Agents (ViraStack and InnoStack) that are designed to automate more of the chip design workflow. Cadence expects agentic tools to drive higher EDA consumption and usage across its platform as customers run more simulations, verification and implementation cycles.
A standout metric was a record backlog of $8 billion, driven by strong bookings. Strong backlog and accelerating AI demand led to a raise in its 2026 revenue outlook.
Cadence raised its full-year 2026 revenue outlook to a band of $6.125-$6.225 billion, compared with the earlier guided range of $5.9-$6 billion. The Zacks Consensus Estimate is currently $5.99 billion.
Non-GAAP EPS for 2026 is now expected to be between $7.85 and $7.95, compared with the earlier guided range of $8.05 to $8.15. The Zacks Consensus Estimate is currently pinned at $8.16 per share.
Cadence noted that the bottom-line performance would primarily be impacted by Hexagon’s Design & Engineering business acquisition, which will add about $160 million to revenues but would be dilutive to the bottom line by nearly 28 cents. The deal was funded using 70% cash and 30% stock. It expects the buyout to be accretive in 2027.
Image Source: Zacks Investment Research
CDNS stock is down marginally in the pre-market trading today. The stock has appreciated 11.3% compared with the Computer - Software industry’s 1.1% growth in the past year.
CDNS’ Segment Performance
Product & Maintenance revenues (91.5% of total revenues) of $1.349 billion rose 21.4% year over year. Services revenues (8.5%) of $125 million fell 4.6% year over year. Recurring revenues comprised 77% of total revenues, while the remaining were upfront revenues.
The Americas contributed 45% of revenues, while China accounted for 13%, Other Asia 20%, Europe, Middle East and Africa 16% and Japan 6%, pointing to diversified demand across geographies.
Product-wise, Core EDA, Intellectual Property (“IP”) and Systems Design & Analysis accounted for 71%, 14% and 15% of total revenues, respectively. The System Design & Analysis business, up 18% in the first quarter, is gaining from higher demand for 3D-IC, Sigrity and Clarity.
Core EDA business, which includes Custom IC, Digital IC and Functional Verification, experienced 18% year-over-year growth. The demand for new hardware systems continued to gain traction, driven by AI/HPC, automotive and robotics. Apart from Palladium and Protium systems, solutions such as Xcelium, Verisium SimAI and ChipStack are being explored by customers, with large evaluations underway, added Cadence. Cerebrus and AI-driven Virtuoso Studio are also seeing strong momentum.
The IP business was up 22% year over year in the first quarter, benefiting from a broadening silicon solutions portfolio and increasing demand for solutions in AI, HPC and automotive use cases. The company is witnessing higher demand for its Star IP portfolio across interface, memory and foundation IP amid higher complexity of advanced node designs and chiplet-based architectures.
CDNS’ Profitability Numbers
Non-GAAP gross margin contracted 40 basis points (bps) to 88%.
Total non-GAAP costs and expenses increased 12.6% year over year to $815 million.
However, non-GAAP operating margin expanded 300 bps on a year-over-year basis to 44.7%.
CDNS’ Balance Sheet & Cash Flow
As of March 31, 2026, CDNS had cash and cash equivalents of $1.407 billion compared with $3 billion as of Dec. 31, 2025.
Long-term debt was $2.481 billion as of March 31, 2026, compared with $2.48 billion as of Dec. 31.
Cadence generated an operating cash flow of $356 million in the reported quarter compared with the prior quarter’s $553 million. Free cash flow was $307 million compared with $512 million in the previous quarter.
The company repurchased its shares worth $200 million in the first quarter.
CDNS’ Outlook
Non-GAAP operating margin for 2026 is now forecasted to be in the band of 43.5% to 44.5%, compared with 44.75% to 45.75% range guided earlier.
Also, operating cash flow is expected to be in the range of $1.875 billion to $1.975 billion compared with $2 billion projected earlier. CDNS expects to utilize at least 50% of its free cash flow to repurchase shares in 2026.
For the second quarter of 2026, revenues are estimated to be $1.555-$1.595 billion. The company reported sales of $1.275 billion in the year-ago quarter.
Non-GAAP EPS is anticipated to be between $2.02 and $2.08. CDNS reported an EPS of $1.65 in the year-ago quarter. Non-GAAP operating margin is estimated to be between 44.5% and 45.5% in the second quarter.
CDNS’ Zacks Rank
Cadence currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Recent Performance of Other Companies in the Same Space
SAP SE (SAP - Free Report) reported first-quarter 2026 non-IFRS EPS of €1.72 ($2.01), which increased 20% from the year-ago quarter. The Zacks Consensus Estimate was $1.92 per share.
Driven by momentum in the cloud business, SAP reported total revenues on a non-IFRS basis of €9.56 billion ($11.2 billion), which increased 6% year over year (up 12% at constant currency or cc). The Zacks Consensus Estimate stood at $11.3 billion. SAP’s Business AI momentum is acting as a critical differentiator. Shares of SAP have lost 40.7% in the past year.
Simulations Plus, Inc. (SLP - Free Report) reported second-quarter fiscal 2026 adjusted earnings of 35 cents per share, surpassing the Zacks Consensus Estimate by 29%. The bottom line also compared favorably with the prior-year quarter’s 31 cents.
Simulations Plus reported quarterly revenues of $24.3 million, marking an 8% year-over-year increase. This growth reflects continued demand for its core offerings, especially in drug discovery and development. The software segment remains the backbone of the company’s business model. Growth was driven by strong adoption of discovery and development solutions — areas where AI and modeling tools are becoming increasingly indispensable in biopharma workflows. However, SLP noted a decline in clinical operations software, which appears to be a structural shift rather than a temporary dip. Shares of SLP have declined 58.3% in the past year.
Pegasystems (PEGA - Free Report) reported first-quarter fiscal 2026 revenues of $430 million, down 9.6% year over year, and missed the consensus mark by 11.7%.
Nonetheless, Pega Cloud momentum was a bright spot, with Pega Cloud annual contract value rising 29% year over year. Shares of PEGA have declined 19.4% in the past year.