Cadence Design Systems beat Wall Street expectations for its third quarter on Monday, reporting revenue of $1.633 billion, up 22% from a year earlier, and raising its full-year outlook on the strength of AI-driven chip design demand.
The electronic design automation company earned an adjusted $2.11 per share in the September quarter, ahead of the $2.05 analysts had expected and up from $1.93 a year ago. Revenue of $1.633 billion also topped the $1.61 billion consensus estimate, compared with $1.339 billion in the same period of 2025.
A beat-and-raise quarter
On a GAAP basis, diluted earnings per share were $1.05, unchanged from the third quarter of 2025. Profitability showed some pressure even as sales surged: the GAAP operating margin fell to 26.2% from 31.8% a year earlier, while the non-GAAP operating margin declined to 44.1% from 47.6%.
Underneath the headline numbers, the business showed broad momentum. Recurring revenue rose 18% year over year, and the company said it saw double-digit growth across all of its product categories. Cadence also used $400 million to repurchase its own shares during the quarter.
Record $8.2 billion backlog
The backlog reached a record $8.2 billion at the end of the quarter, with remaining performance obligations expected to be recognised as revenue over the next twelve months totalling $4.2 billion. That pipeline gives Cadence unusual visibility into future sales at a time when much of the chip industry is still working through demand uncertainty.
"With broad-based business momentum, expanding technology leadership and a record backlog, we are raising our 2026 revenue outlook to 21% year-over-year growth," chief executive Anirudh Devgan said in a news release.
Cadence's tools are used by semiconductor and systems companies to design products ranging from chips to full electromechanical systems, serving markets including data centre computing, mobile communications, automotive, aerospace and robotics. Earlier on Monday, the company had also launched Maestro, a portfolio of domain-specialised AI models built for agentic chip and system design.
Raised outlook, muted market reaction
For the full year, Cadence now expects to earn an adjusted $8.40 per share on sales of $6.4 billion, based on the midpoint of its guidance. Three months ago it had predicted adjusted earnings of $8.10 per share on sales of $6.3 billion. Last year, Cadence earned an adjusted $7.14 per share on sales of $5.3 billion.
The market reaction was measured. Shares climbed 1.8% in the regular session on Monday to close at $322.17, then rose only a fraction in after-hours trading following the results.
The report still matters beyond one company. As a bellwether for electronic design automation, Cadence's numbers offer an early read on AI chip demand ahead of earnings later this week from Microsoft, Alphabet and Amazon, when investors will be looking for hard evidence that the AI infrastructure boom is turning into durable profits.
