Cadence raises annual outlook after AI demand powers strong Q2 growth

Investing.com -- Cadence Design Systems raised its annual financial guidance on Monday after posting robust second-quarter results, driven by strong demand for its artificial intelligence-powered chip design software and electronic systems products.

The electronic design automation software maker now expects fiscal 2026 revenue of $6.26 billion to $6.34 billion, implying about 19% year-over-year growth, while raising its non-GAAP earnings per share forecast to around $8.10 and increasing its operating cash flow target to roughly $2 billion.

Cadence joined a growing list of semiconductor software companies benefiting from the AI investment boom, as strong demand from hyperscalers, chipmakers and enterprise customers lifted its earnings. Management also pointed to a record backlog, signaling continued visibility into future growth. The company reported a record backlog of $8.1 billion, with $4.2 billion of remaining performance obligations expected to be recognized as revenue over the next 12 months, reflecting continued momentum in customer spending.

The upbeat outlook followed a strong second quarter in which revenue climbed to $1.58 billion from $1.28 billion a year earlier, while non-GAAP diluted earnings per share rose to $2.11 from $1.65. The company said broad-based strength across its businesses helped lift profitability, with non-GAAP operating margin expanding to 45.5% from 42.8% a year earlier.

Cadence said demand continued to accelerate for its AI-driven design tools, benefiting both customers developing AI chips and those using AI to improve semiconductor design workflows. The company said it is seeing strong traction for its AI Super Agents portfolio and recently launched the AuraStack AI Super Agent platform for advanced packaging and printed circuit board design.

Among business segments, semiconductor IP revenue grew more than 40% year over year, core EDA revenue increased 18%, while System Design and Analysis revenue jumped 37%, supported by demand for advanced packaging solutions and the integration of the Hexagon D&E business. Hardware also delivered another record quarter, adding 12 new customers and expanding deployments with hyperscalers and AI-focused companies.

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