[CDNS] Cadence: Q3 2026 Earnings Test Whether IP Growth Can Last

Cadence sells chip and electronic-system design and verification software, semiconductor IP and emulation hardware, and Drillr's earnings calendar lists its Cadence Q3 2026 earnings for 2026-10-26, covering the third quarter of 2026, ending September 30, 2026[1]. In the latest reported period, the second quarter of 2026, revenue was $1.5845 billion, up 24% year over year, with a GAAP operating margin of 28.4%, a non-GAAP operating margin of 45.5%, GAAP diluted EPS of $1.33 and quarter-end backlog of $8.1 billion[2]. On July 27 the company guided third-quarter revenue to $1.595 billion to $1.625 billion (19%-21% growth), a non-GAAP operating margin of 43.5%-44.5% and non-GAAP EPS of $2.01 to $2.07[3]. The consensus compiled in Drillr's earnings calendar is EPS of $2.04 and revenue of $1.612 billion; the field does not say whether the EPS figure is GAAP or non-GAAP, but $2.04 sits inside the company's non-GAAP EPS guidance range[1].

Three things matter most in this report. The first is whether semiconductor IP can hold roughly 15% of revenue: IP revenue grew more than 40% year over year in the second quarter[4], but management also cautioned that IP revenue depends on delivery timing and that strong quarterly growth should not be annualized[5], so the share will show whether this growth reflects sustained demand or the concentrated delivery of one large agreement. The second is whether China and hardware deliveries can support the revenue guidance: last year's third-quarter China catch-up deliveries pushed China to 18% of revenue, creating a high comparison base[6], while emulation hardware remains supply-constrained, so its delivery pace is not set by demand alone[7]. The third is the operating margin after the acquisition of Hexagon's design and engineering (D&E) business: third-quarter non-GAAP operating margin guidance is 3 to 4 percentage points below the 47.6% of a year earlier[8], and the actual result will show whether integration costs remain within the range the company has set.

Company Background and Business Structure

Cadence is an electronic design automation (EDA) company headquartered in San Jose, California, and listed on Nasdaq; Anirudh Devgan is chief executive officer and John Wall is chief financial officer[2]. The company is managed as a single operating segment, and the CEO evaluates performance and allocates resources on consolidated results, including net income[9]. On February 23, 2026, Cadence completed its acquisition of the design and engineering (D&E) business of Hexagon Smart Solutions for about $2.9 billion net of cash acquired, made up of $2.2 billion in cash and 3.2 million shares of Cadence stock with an acquisition-date fair value of $902.2 million[10]. In 2025 Cadence also recognized a $128.5 million loss related to a contingent liability, tied to its settlement with the U.S. Department of Justice and BIS over export violations between 2015 and 2021, which carries ongoing audit and compliance obligations[11].

Cadence groups its offerings into three tightly integrated product categories[12]. Core EDA covers digital implementation and signoff (Innovus), analog and custom design (Virtuoso), functional verification software (Xcelium, Jasper), and Palladium emulation and Protium prototyping hardware, and it contributed 70% of 2025 revenue; Semiconductor IP, the pre-verified interface, memory and chip-to-chip building blocks, contributed 14%; System Design and Analysis (SD&A), which covers PCB, advanced packaging and electromagnetic, thermal, fluid and structural simulation, contributed 16%[13]. The mix keeps shifting: in 2023 Core EDA was 76% of revenue and IP and SD&A were 12% each, and the two non-core categories have gained share since[13]. Revenue from contracts assumed with Hexagon D&E is mainly classified as product and maintenance revenue within SD&A[14].

The way Cadence recognizes revenue explains where quarterly volatility comes from. Subscriptions, maintenance, services and royalties are recognized over time and made up about 80% of 2025 revenue as recurring revenue; emulation hardware, individual IP licenses and SD&A licenses longer than one year are recognized on delivery and form the remaining roughly 20% of up-front revenue[15]. Costs are dominated by engineering staff: in 2025 salaries and related employee costs were $2.132 billion and stock-based compensation was $455 million, while hardware manufacturing costs of $377 million were the largest part of product costs[9]. Customers usually pay in installments under their contracts, prepayments build deferred revenue, and days sales outstanding (DSO) were 64 in 2025[15].

Financial History and Current Position

Cadence has grown revenue at double-digit rates for three years, but a one-time loss held down 2025 GAAP profit. Revenue rose from $4.090 billion in 2023 to $4.641 billion in 2024 and $5.297 billion in 2025, while GAAP operating income was $1.251 billion, $1.351 billion and $1.492 billion, with 2025 including the $128.5 million contingent-liability loss[11]. In 2025 revenue grew 14%, the GAAP operating margin was 28.2% and the non-GAAP operating margin 44.6%, and GAAP diluted EPS was $4.06 against non-GAAP EPS of $7.14[15]. Research and development spending that year was $1.769 billion, about 33% of revenue[11], and net income was $1.109 billion[9].

Cash generation in 2025 was clearly stronger than a year earlier, and the year-end balance sheet was comfortable. Operating cash flow was $1.729 billion in 2025, up from $1.261 billion in 2024, with capital expenditure of $142 million and acquisition spending of $430 million[16]. At the end of 2025 Cadence held $3.001 billion of cash and cash equivalents against long-term debt of $2.480 billion[17]; contracted but unsatisfied performance obligations (backlog) were $7.8 billion, including $0.6 billion of non-cancelable commitments where customers had yet to choose specific products[18].

Growth accelerated clearly in the second quarter of 2026, but acquisition amortization kept the GAAP margin below the second half of 2025. Second-quarter revenue was $1.5845 billion against $1.2754 billion a year earlier, GAAP operating income was $450.3 million and net income $367.1 million, compared with $241.8 million and $160.1 million[19]. The second-quarter GAAP operating margin of 28.4% was below the 31.8% of the third quarter of 2025 and the 32.2% of the fourth quarter, as amortization of acquired intangibles rose from 1.9%-2.1% of revenue in the second half of 2025 to 5.0%; the non-GAAP operating margin was 45.5%[8].

Acquisition payments dominated first-half cash flow, and the full-year outlook was raised with the second-quarter results. Operating cash flow in the first half of 2026 was $990.7 million, including a $170 million increase in deferred revenue and $107 million absorbed by inventory, while Cadence paid $2.10 billion in cash for acquisitions and repurchased $400 million of stock[20]. Cash fell to $1.440 billion at the end of June, inventory stood at $390.4 million and long-term debt at $2.482 billion[17]. The company raised its 2026 revenue outlook from $6.125-6.225 billion to $6.260-6.340 billion (18%-20% growth), with a non-GAAP operating margin of 43.75%-44.75%, operating cash flow of about $2.0 billion and capital expenditure of about $240 million[15].

Operating Model

Cadence's revenue splits into a recurring portion recognized over time, which backlog determines, and an up-front portion recognized on delivery, which drives quarterly swings. The recurring portion, about 80%, equals beginning backlog recognized over time, plus the in-period part of new bookings and add-ons, plus maintenance and royalties; the company says about 65% of 2026 revenue comes from beginning backlog, down from about 69% in 2025[15]. The up-front portion equals emulation hardware delivered in the quarter, individual IP licenses and multi-year SD&A licenses, and its share of revenue ranged from 18% to 23% over the past five quarters[21]. China is a second swing factor: the export license requirement cut China to 9% of revenue in the second quarter of 2025, and catch-up deliveries lifted it to 18% in the third quarter[6].

On the profit side, software and IP carry very low marginal costs, engineering staff are the largest fixed investment, and hardware and acquisitions pull margins down. In 2025 cost of product and maintenance was $519 million and cost of services $204 million, a combined $722 million that implies a gross margin of about 86%[11]; hardware costs include components, assembly and testing and run higher as a percentage of revenue than software and IP, so gross margin falls in quarters with heavy hardware deliveries[22]. On the first-quarter call, management said organic incremental margin is closer to 60%[23], while Hexagon D&E adds amortization of about 5% of revenue and integration costs of about 2%, bringing third-quarter GAAP operating margin guidance down to 27.5%-28.5% and non-GAAP guidance to 43.5%-44.5%[8]. The 10-Q states that incremental expenses from recent acquisitions, including amortization, currently exceed the incremental revenue[24], and management describes second-half integration and Intel partnership spending as setting up higher margins in 2027[5].

Operating cash flow equals net income plus depreciation, amortization and stock-based compensation, adjusted for working capital. Customers prepay in installments, which builds deferred revenue, while hardware component purchases increase inventory and absorb cash[20]. Of the $1.729 billion of operating cash flow in 2025, stock-based compensation added back $455 million and depreciation and amortization $228 million, while higher receivables absorbed $275 million[16]. Reaching the roughly $2.0 billion operating cash flow outlook for 2026 requires about $1.01 billion in the second half, or roughly $500 million a quarter[15].

Industry and Competitive Position

A handful of vendors dominate EDA, and Cadence's 10-K names Synopsys (which acquired Ansys) and Siemens EDA as key competitors, along with specialists such as Keysight and CEVA and the in-house design teams of large technology companies[25]. Cadence leads in digital place-and-route and analog custom design, where Virtuoso is the industry standard, and competes with Synopsys in functional verification hardware; in IP it faces Synopsys and CEVA, and in SD&A it competes with Ansys, Siemens, Keysight and others. Barriers to entry come from process design kits co-developed with foundries such as TSMC, Intel and Samsung, and from customers' long-established design flows.

Export controls are reshaping competition in China, while a more diverse foundry ecosystem is opening new demand for Cadence. The 10-K lists emerging Chinese competitors including Huada Empyrean, Xpeedic Technology, X-EPIC, Primarius Technologies, Univista and Giga Design Automation[25], which have gained substitution opportunities under U.S. export controls. At the same time, management said on the second-quarter call that new foundry partnerships with Intel and Samsung have widened the customer demand its IP can reach and brought competitive wins Cadence did not take part in a few years ago[26]; Cadence has historically been stronger in the TSMC ecosystem.

The available competitive comparison has clear limits that constrain any judgment about share. Cadence does not disclose revenue amounts by category, only whole-number percentages, so amounts derived from those shares carry an error of about ±0.5 percentage point, and hardware revenue is not disclosed separately, leaving the up-front share and inventory as proxies[27]. Growth rates for Core EDA, IP and SD&A come from management statements in the earnings release and on calls, not from financial statement line items[4], and Hexagon D&E's revenue and profit are not disclosed separately, so SD&A growth blends acquired and organic contributions[14]. Public materials also offer no comparable peer share data, so Cadence's relative share shift cannot be quantified.

Core Debates

Semiconductor IP grew more than 40% year over year in the second quarter. Can it hold roughly 15% of third-quarter revenue and show that the growth reflects sustained demand rather than the timing of one large agreement?

This question decides the quality of second-quarter growth. IP was only 14% of total revenue in 2025[13], yet it grew more than 40% year over year in the second quarter of 2026, making it the fastest-growing business and one source of the raised full-year revenue outlook[4]. Individual IP licenses are recognized at delivery, so one large agreement can lift a single quarter; if IP's share falls in the third quarter, the roughly 19% full-year revenue growth would lean more heavily on Core EDA and hardware.

The current evidence supports both a sustained-demand reading and a timing reading. On the sustained-demand side, management said IP growth is almost entirely organic, driven by better Star IP performance on leading process nodes, high-speed interface and memory IP needed for AI and HPC, and new customers from the Intel and Samsung foundry partnerships, with IP approaching a $1 billion annual run rate[26]. On the timing side, management warned on the same call that IP revenue varies from quarter to quarter[5], the second-quarter highlights named a significant agreement with Intel[4], and IP grew only 22% in the first quarter[28]. The baseline is IP at 15% of total revenue in the second quarter, versus 14% in the third quarter of 2025[27]; by share, second-quarter IP revenue was about $238 million and third-quarter 2025 IP revenue about $187 million[29].

Financially, more AI and HPC chip design drives customer purchases of high-speed interface IP such as HBM, PCIe and UCIe, and foundries are expanding IP partnerships; that demand reaches revenue through individual licenses recognized up front at delivery, while custom IP is booked as services revenue[7]. Because IP carries a higher gross margin than hardware, a change in IP's share also moves overall gross margin. What remains unresolved is how much of the jump in services revenue from $125 million in the first quarter to $154 million in the second[29] came from custom IP and how much from one-time projects, which public materials do not separate.

The third-quarter report needs to show three things: whether IP stays at or above 15% in the 8-K category table; the IP growth rate management gives on the call and whether it comes from multiple customers; and whether services revenue stays near $150 million. If IP falls to 13% of revenue or lower and management attributes second-quarter growth to delivery under a single agreement, the sustained-demand reading would be falsified.

China catch-up deliveries lifted China to 18% of revenue a year ago. Can China and hardware deliveries keep third-quarter revenue within the $1.595-1.625 billion guidance?

Last year's China catch-up deliveries raised the third-quarter comparison base, which makes this year's growth harder to show. On May 23, 2025, BIS told Cadence that exporting EDA software and technology to China required a license, and it rescinded the requirement on July 2, during which China revenue fell as software deliveries were reduced[30]; China therefore dropped to 9% of revenue in the second quarter of 2025 and rose to 18% in the third quarter after catch-up deliveries[6]. Hardware is recognized on delivery and is the main swing factor behind any deviation from guidance, and management said the hardware business is supply-constrained rather than demand-constrained, with Cadence building systems as fast as it can to meet backlog[7].

The evidence broadly supports meeting guidance, but delivery timing is uncertain. China was 15% of revenue in the second quarter, and the 10-Q attributes part of China's year-over-year growth to the low base caused by last year's license requirement[31]; hardware posted another record quarter and added 12 new customers[4], and inventory rose from $303.5 million at the end of 2025 to $390.4 million at the end of June to support deliveries[17]. Third-quarter guidance already assumes 19%-21% growth, below the second quarter's 24%, against revenue of $1.339 billion a year earlier[3]. Up-front revenue was 22% of the total in the second quarter, versus 18% in the third quarter of 2025[21].

The financial transmission runs along two lines. In one, Chinese customers' design activity and export licensing determine whether software and hardware deliveries are interrupted, which moves China revenue; in the other, AI and HPC verification demand and hardware assembly capacity determine emulation deliveries, which set up-front revenue and the quarter's deviation from guidance, and because hardware costs run higher than software, gross margin dips slightly in heavy-delivery quarters[22]. What remains unresolved is policy: the suspension of the BIS rule extending export restrictions to affiliates 50% or more owned by listed entities expires on November 9, 2026[32], and the 10-K warns that the U.S. could reimpose restrictions[30].

The third-quarter report needs to show four things: where revenue lands against the $1.595-1.625 billion guidance; whether China stays at or above 15% of revenue; the up-front share and inventory change, to judge whether hardware deliveries kept pace; and the company's comments on the November 9 expiry of the rule suspension. If third-quarter revenue falls below the low end of guidance and is attributed to China or hardware deliveries, the view that guidance is achievable would be falsified.

With Hexagon's design and engineering business now inside Cadence, can System Design and Analysis hold above 16% of revenue through a seasonally softer quarter while the non-GAAP operating margin stays above the 43.5% guidance floor?

This is Cadence's largest acquisition in recent years and the main reason margin guidance moved lower this year. Of the roughly $2.9 billion consideration, $2.2 billion was cash[10], which cut cash from $3.001 billion at the end of 2025 to $1.440 billion at the end of June[17]. The deal enlarged SD&A, but third-quarter non-GAAP operating margin guidance fell to 43.5%-44.5% from 47.6% a year earlier, and GAAP operating margin guidance fell to 27.5%-28.5% because of amortization of about 5% of revenue[8].

The evidence on integration cuts both ways. On the positive side, SD&A grew 37% year over year in the second quarter, the company cited strong PCB and advanced packaging demand and said integration is progressing well, and SD&A is approaching a $1 billion annual run rate[7]; the second-quarter non-GAAP operating margin of 45.5% was above the first quarter's 44.7%[8]. On the negative side, the 10-Q says incremental acquisition expenses, including amortization, exceed incremental revenue[24]; management said on the first-quarter call that D&E revenue is weighted to the first half[23], and in the second quarter it warned that second-half margins will be below first-half margins because of integration and Intel partnership spending[5]. The baseline is SD&A at 17% of revenue in the second quarter, versus 15% in the third quarter of 2025[27], and second-quarter non-GAAP and GAAP operating margins of 45.5% and 28.4%, versus 47.6% and 31.8% a year earlier[8].

Financially, rising PCB and advanced packaging design complexity, plus D&E's structural and multibody dynamics simulation, lifts SD&A revenue; D&E's margins are below the legacy business and integration spending adds operating expense; and $1.248 billion of definite-lived intangibles (weighted average amortization period of 7.8 years)[10] produce amortization of about 5% of revenue, which together with integration costs of about 2% pushes down the GAAP operating margin[8]. What remains unresolved is that D&E's revenue and profit are not disclosed separately, so outsiders cannot separate acquired from organic SD&A growth[14]. If SD&A falls back to 15% of revenue in the third quarter, part of the second quarter's strong growth came from D&E seasonality.

The third-quarter report needs to show three things: the non-GAAP operating margin against the 43.5%-44.5% guidance; whether SD&A stays at or above 16% of revenue; and whether acquisition integration costs and amortization match guidance of about 2% and about 5% of revenue. If the non-GAAP operating margin falls below 43.5% and the shortfall is attributed to integration costs, the view that integration costs are under control would be falsified.

In a light renewal year, can third-quarter backlog hold at $8.1 billion or more while the portion due within 12 months keeps rising, showing that add-ons and AI agents are lifting use of Cadence's core tools?

Core EDA provides about 70% of revenue, and backlog determines revenue visibility for the next four quarters. The company says about 65% of 2026 revenue comes from beginning backlog[15], and management explained on the first-quarter call that 2026 is a lighter renewal year with growth driven by add-on activity[23]. Analysts on the second-quarter call already asked about open-source or third-party AI agents that call EDA tools directly[26], the concern resurfaced during the sharp share-price drop in early September, and backlog is the most direct measure of customer commitment.

The evidence for expanding demand outweighs the counter-evidence, but backlog growth has slowed. Backlog rose from $7.8 billion at the end of 2025[18] to $8.1 billion at the end of June, and the portion due within 12 months rose from $4.0 billion at the end of March to $4.2 billion[2]; $0.9 billion of June backlog was non-cancelable commitments, and excluding those, 58% is due within 12 months, up from 53% at the end of 2025[33]. Core EDA grew 18% year over year in both the first and second quarters[28][4], above the company's 14% total revenue growth in 2025, and management said AI agents are priced as subscription plus consumption and call the underlying tools more often[26]. On the other side, management also said guidance does not assume a step-function in revenue from AI agents, and second-quarter backlog was only $0.1 billion above the first quarter.

Financially, rising chip design complexity and more AI chip projects lead customers to sign or add Core EDA software and AI agents, which builds backlog and the 12-month portion and turns into recurring revenue over the next four quarters, while contract payment terms and changes in deferred revenue flow into operating cash flow[20]. What remains unresolved is that new bookings are naturally smaller in a light renewal year, so flat backlog does not necessarily mean weaker demand and has to be read together with Core EDA growth.

The third-quarter report needs to show four things: quarter-end backlog and the 12-month portion; the Core EDA growth rate management discloses; whether quarterly operating cash flow reaches about $500 million; and any new disclosure on AI agent customer counts and pricing. If backlog falls quarter over quarter and Core EDA growth drops below 14%, the view that add-ons and AI agents are lifting core tool use would be falsified.

Risks and Falsifiers

Customer design-project cycles are the most basic risk because they set the volume of tool and IP purchases. Demand for Cadence's products depends on semiconductor and electronic-system companies starting new designs, and an industry downturn or a customer shift to less risky mature processes would reduce purchases[34]. About 80% of 2025's $5.297 billion of revenue was recurring and contract-protected in the short term, but renewal size and add-ons would shrink with design activity[15]. If backlog and the 12-month portion keep growing, this risk has not materialized in the current cycle.

IP revenue is recognized in lumps at delivery, so it could fall sequentially in the third quarter without a delivery of similar size. Second-quarter strength may partly reflect concentrated delivery under large agreements such as Intel's, and management itself cautioned against annualizing strong quarterly growth[5]. At the midpoint of third-quarter revenue guidance, each percentage point of lost IP share removes about $16 million of revenue, and because IP carries a higher gross margin than hardware, a lower share would also pressure gross margin[27]. If IP stays at or above 15% of third-quarter revenue and management reports growth above 25%, this risk is falsified.

Export controls could tighten again, and China revenue is highly sensitive to policy. The U.S. could again require licenses for exports of EDA software and technology to China[30], and the suspension of the BIS affiliates rule expires on November 9, 2026[32]. China accounted for 9% to 18% of revenue over the past five quarters, with each percentage point worth about $16 million of quarterly revenue; in the second quarter of 2025 the license requirement was in force for about six weeks and China fell to 9%[6]. If the company confirms an extension of the suspension or reiterates a limited impact, and China holds near 15%, this risk has not materialized for now.

Emulation hardware is capacity-constrained, and delayed deliveries would leave up-front revenue short. Hardware demand exceeds supply, and component and assembly capacity set the delivery pace[7]; inventory absorbed $107 million of cash in the first half[20], and because hardware costs run higher than software and IP, the delivery mix also affects gross margin[22]. If the up-front share stays at or above 21% and inventory stops rising, this risk is falsified.

Acquisition integration could dilute profit, because D&E's margins are below the legacy business and integration spending is concentrated in the second half. If revenue synergies lag expense growth, margins would fall short of guidance; the 10-Q already states that incremental expenses currently exceed incremental revenue[24]. Third-quarter non-GAAP operating margin guidance of 43.5%-44.5% is 3 to 4 percentage points below the 47.6% of a year earlier, and on $1.61 billion of revenue each percentage point equals about $16 million of operating income[8]. If the non-GAAP operating margin reaches 44.5% or more and SD&A stays at or above 16%, this risk is falsified.

AI agents could bring substitution and pricing pressure, directly affecting Core EDA, the largest revenue category. Customers building their own agents or adopting third-party or open-source solutions could need fewer Cadence seats or push renewal prices down, while management argues production designs still rely on its underlying engines[26]. Core EDA is about 68%-70% of total revenue[27], and excluding non-cancelable commitments, 53% of the $7.8 billion year-end 2025 backlog was due within 12 months[18]. If backlog keeps growing and Core EDA growth stays at or above 18%, this risk has not materialized.

What to Watch Next

• IP durability: watch IP's share of revenue, IP growth and services revenue against a second-quarter IP share of 15% (14% a year earlier), growth above 40% and services revenue of $154 million. A share of at least 15% with growth above 25% confirms; a drop to 13% or lower attributed to one agreement falsifies.
• China and hardware deliveries: watch third-quarter revenue, China's share, the up-front share and inventory against third-quarter 2025 revenue of $1.339 billion and an 18% China share, and second-quarter shares of 15% for China and 22% for up-front revenue. Revenue inside the $1.595-1.625 billion guidance with China near 15% confirms; revenue below the low end blamed on China or hardware falsifies. Also watch comments on the November 9 BIS rule expiry.
• Hexagon integration and margins: watch the non-GAAP operating margin, SD&A share, amortization and integration costs against a second-quarter non-GAAP margin of 45.5%, SD&A at 17% and 47.6% a year earlier. A margin of 44.5% or more with SD&A at or above 16% confirms; a margin below 43.5% blamed on integration falsifies.
• Backlog and Core EDA: watch backlog, the 12-month portion, Core EDA growth and operating cash flow against $8.1 billion, $4.2 billion, 18% and a needed pace of about $500 million a quarter. Continued backlog growth with Core EDA at or above 18% confirms; a sequential backlog decline with Core EDA below 14% falsifies. Also watch for new disclosure on AI agent customers and pricing.

Conclusion

Cadence's business rests on about 80% recurring software revenue, with quarterly swings coming from hardware, IP licenses and China deliveries. Second-quarter 2026 revenue was $1.5845 billion, up 24%, with backlog of $8.1 billion[2]; after paying about $2.1 billion in cash for Hexagon D&E, cash stood at $1.440 billion at the end of June[17]. The central unresolved relationship is whether the strong growth in IP, hardware and SD&A reflects sustained demand or delivery timing and acquisition seasonality, and whether acquired revenue can catch up with the amortization and integration costs the deal has already added.

Since the second-quarter results on July 27, 2026, no independent sell-side or professional commentary with a verifiable author, date and original text has surfaced. Public coverage in that period has mostly been share-price news, including a run of declines in early September, and those reports did not point to a company-specific trigger. On IP durability, integration costs and AI agent substitution risk, the only reference points for now are the company's own disclosures and management statements, and they should not be read as a shared market view.

The combination that would materially strengthen the current understanding is third-quarter IP at or above 15% of revenue with growth from multiple customers, revenue inside the guidance range with China near 15%, a non-GAAP operating margin of at least 43.5%, backlog still above $8.1 billion and quarterly operating cash flow near $500 million. The combination that would materially weaken it is IP falling to 13% or lower and attributed to a single agreement, revenue below the low end of guidance attributed to China or hardware deliveries, a non-GAAP operating margin below 43.5%, and a sequential backlog decline with Core EDA growth below 14%.

Sources

[1] Drillr earning_call_calendar (updated 2026-09-25) · CDNS Q3 2026 estimates · 2026-09-25 · Drillr earning_call_calendar · https://gateway.drillr.ai/mcp/private

[2] CDNS 8-K filed 2026-07-27 · Q2 2026 results release · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[3] CDNS 8-K filed 2026-07-27 · Q3 2026 outlook · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[4] CDNS 8-K filed 2026-07-27 · Q2 2026 business highlights · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[5] CDNS Q2 2026 earnings call (2026-07-27) · stated risks · 2026-07-27 · earnings_call · https://gateway.drillr.ai/mcp/private

[6] CDNS 8-K filed 2026-07-27 · revenue by geography Q2 2025-Q2 2026 · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[7] CDNS Q2 2026 earnings call (2026-07-27) · segment performance · 2026-07-27 · earnings_call · https://gateway.drillr.ai/mcp/private

[8] CDNS 8-K filed 2026-07-27 · operating margin reconciliation Q2 2025-Q3 2026E · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[9] CDNS 10-K filed 2026-02-19 · FY2025 cost structure by expense type · 2026-02-19 · 10-K · https://www.sec.gov/Archives/edgar/data/813672/000081367226000016/

[10] CDNS 10-Q filed 2026-07-29 · Hexagon D&E acquisition · 2026-07-29 · 10-Q · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=10-Q&dateb=&owner=include&count=40

[11] CDNS 10-K filed 2026-02-19 · FY2023-FY2025 income statement · 2026-02-19 · 10-K · https://www.sec.gov/Archives/edgar/data/813672/000081367226000016/

[12] CDNS 10-K filed 2026-02-19 · product categories · 2026-02-19 · 10-K · https://www.sec.gov/Archives/edgar/data/813672/000081367226000016/

[13] CDNS 10-K filed 2026-02-19 · revenue by product category FY2023-FY2025 · 2026-02-19 · 10-K · https://www.sec.gov/Archives/edgar/data/813672/000081367226000016/

[14] CDNS 10-Q filed 2026-07-29 · Hexagon D&E revenue classification · 2026-07-29 · 10-Q · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=10-Q&dateb=&owner=include&count=40

[15] CDNS 8-K filed 2026-07-27 · FY2026 outlook · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[16] CDNS 10-K filed 2026-02-19 · FY2023-FY2025 cash flows · 2026-02-19 · 10-K · https://www.sec.gov/Archives/edgar/data/813672/000081367226000016/

[17] CDNS 8-K filed 2026-07-27 · balance sheet June 30, 2026 · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[18] CDNS 10-K filed 2026-02-19 · remaining performance obligations · 2026-02-19 · 10-K · https://www.sec.gov/Archives/edgar/data/813672/000081367226000016/

[19] CDNS 10-Q filed 2026-07-29 · Q2 2026 income statement · 2026-07-29 · 10-Q · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=10-Q&dateb=&owner=include&count=40

[20] CDNS 8-K filed 2026-07-27 · six-month cash flows 2026 · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[21] CDNS 8-K filed 2026-07-27 · recurring and up-front revenue Q2 2025-Q2 2026 · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[22] CDNS 10-Q filed 2026-07-29 · hardware cost of revenue · 2026-07-29 · 10-Q · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=10-Q&dateb=&owner=include&count=40

[23] CDNS Q1 2026 earnings call (2026-04-27) · Q&A · 2026-04-27 · earnings_call · https://gateway.drillr.ai/mcp/private

[24] CDNS 10-Q filed 2026-07-29 · operating margin drivers · 2026-07-29 · 10-Q · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=10-Q&dateb=&owner=include&count=40

[25] CDNS 10-K filed 2026-02-19 · competition · 2026-02-19 · 10-K · https://www.sec.gov/Archives/edgar/data/813672/000081367226000016/

[26] CDNS Q2 2026 earnings call (2026-07-27) · Q&A on agentic AI and IP · 2026-07-27 · earnings_call · https://gateway.drillr.ai/mcp/private

[27] CDNS 8-K filed 2026-07-27 · revenue by product category Q2 2025-Q2 2026 · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[28] CDNS 8-K filed 2026-04-27 · Q1 2026 business highlights · 2026-04-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[29] CDNS 8-K filed 2026-07-27 · product and maintenance vs services revenue Q2 2025-Q2 2026 · 2026-07-27 · 8-K · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=8-K&dateb=&owner=include&count=40

[30] CDNS 10-K filed 2026-02-19 · China export license requirements · 2026-02-19 · 10-K · https://www.sec.gov/Archives/edgar/data/813672/000081367226000016/

[31] CDNS 10-Q filed 2026-07-29 · China revenue comparison with 2025 license period · 2026-07-29 · 10-Q · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=10-Q&dateb=&owner=include&count=40

[32] CDNS 10-Q filed 2026-07-29 · BIS affiliates rule suspension · 2026-07-29 · 10-Q · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=10-Q&dateb=&owner=include&count=40

[33] CDNS 10-Q filed 2026-07-29 · remaining performance obligations · 2026-07-29 · 10-Q · https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=10-Q&dateb=&owner=include&count=40

[34] CDNS 10-K filed 2026-02-19 · dependence on customer design starts · 2026-02-19 · 10-K · https://www.sec.gov/Archives/edgar/data/813672/000081367226000016/