Cadence raises 2026 outlook to 21% growth and adds $2.5bn to its buyback

Cadence Design Systems raised its full-year 2026 outlook for a third consecutive quarter on 26 October 2026 and now expects revenue of $6.387bn-$6.417bn, according to its third-quarter results release. The company, which bases its growth outlook on the midpoint of the range, now puts 2026 revenue growth at 21%, after guiding to about 17% in its 27 April release and 19% in its 27 July release. By Polstob's calculation, the midpoint rose about $102m, to $6.402bn from $6.30bn. Revenue for the three months to 30 September 2026 was $1.633bn, against $1.339bn a year earlier, which the company put at 22% growth.

Diluted EPS on a GAAP basis was $1.05 in the third quarter, the same as a year earlier, and GAAP net income edged up to $289.7m from $287.1m. Non-GAAP diluted EPS, which strips out stock-based compensation, amortization of acquired intangibles, acquisition and restructuring costs and some other items, rose to $2.11 from $1.93 a year earlier. The GAAP operating margin fell to 26.2% from 31.8% a year earlier and the non-GAAP margin to 44.1% from 47.6%. In the company's reconciliation, amortization of acquired intangibles equalled 4.9% of revenue, against 1.9% a year earlier, and restructuring 2.6%, against 2.0%.

Cadence now guides 2026 non-GAAP diluted EPS of $8.37-$8.43, against $8.05-$8.15 in July, and GAAP diluted EPS of $4.84-$4.90, against $4.76-$4.86. It expects a GAAP operating margin of 28.2%-29.2% and a non-GAAP margin of 44.2%-45.2%, up from 27.75%-28.75% and 43.75%-44.75% in the July outlook. For the fourth quarter of 2026 it forecasts non-GAAP diluted EPS of $2.19-$2.25 and GAAP diluted EPS of $1.23-$1.29.

Backlog was $8.2bn at the end of September, which the company called a record, against $8.1bn at the end of June, and it expects $4.2bn of remaining performance obligations to become revenue over the next 12 months. Cadence said core EDA revenue grew 20% year on year in the quarter, IP revenue 24% and System Design and Analysis revenue 30%. Chief financial officer John Wall linked the growth to "growing momentum from AI-driven designs", according to the release. China accounted for 16% of third-quarter revenue, against 18% a year earlier.

Cadence spent $400m buying back its own shares in the quarter and $800.0m over the first nine months of 2026. Its board approved up to $2.5bn more for the existing repurchase program on 23 October 2026, according to the company's Form 8-K, which says the program has no end date and can be changed, suspended or ended without notice. Cash and cash equivalents were $1.45bn on 30 September 2026, down from $3.00bn on 31 December 2025; in the nine months, the company paid $2.14bn, net of cash acquired, for business combinations.