Cadence earnings for the third quarter of 2026 showed revenue rising 22% year over year to $1.633 billion, prompting the chip-design software company to raise its full-year revenue and adjusted earnings outlook. The October 26 announcement also revealed a contrast: adjusted earnings per share increased, but GAAP earnings per share were flat and operating margins declined.
Key Takeaways
- Third-quarter adjusted diluted EPS rose to $2.11 from $1.93 a year earlier.
- Cadence raised its 2026 outlook to approximately 21% revenue growth at the midpoint.
- Record backlog reached $8.2 billion, while both GAAP and adjusted operating margins narrowed.
Cadence earnings show growth alongside margin pressure
Cadence’s third-quarter financial results put revenue at $1.633 billion, compared with $1.339 billion in the same quarter of 2025. Non-GAAP, or adjusted, diluted earnings per share increased to $2.11 from $1.93, while GAAP diluted EPS remained at $1.05.
The stronger sales did not translate into higher operating margins. GAAP operating margin fell to 26.2% from 31.8%, and adjusted operating margin declined to 44.1% from 47.6%. The distinction matters: Cadence expanded revenue and adjusted per-share profit, but retained a smaller share of sales as operating profit.
Cadence’s adjusted measures exclude items including stock-based compensation, amortization of acquired intangible assets and certain acquisition-related costs. They supplement rather than replace GAAP results.
| Item | Details |
|---|---|
| Fiscal 2026 revenue guidance | $6.387 billion–$6.417 billion |
| Fiscal 2026 adjusted diluted EPS guidance | $8.37–$8.43 |
| Fiscal 2026 GAAP diluted EPS guidance | $4.84–$4.90 |
| Fiscal 2026 adjusted operating margin guidance | 44.2%–45.2% |
Full-year guidance moves higher
Management raised its fiscal 2026 adjusted diluted EPS forecast to $8.37–$8.43, from the previous $8.05–$8.15 range. Its updated revenue forecast implies approximately 21% year-over-year growth at the midpoint.
The outlook below represents management’s expectations for the full year, not completed results.
AI-related demand supports a record backlog
Chief Financial Officer John Wall attributed the quarter’s growth to momentum from AI-driven designs, with strong double-digit growth across all product categories. Core electronic design automation revenue rose 20%, intellectual property revenue increased 24%, and System Design and Analysis revenue grew 30% year over year.
Recurring revenue increased 18%. Quarter-end backlog reached a record $8.2 billion, and Cadence expected to recognize $4.2 billion of revenue over the following 12 months from remaining performance obligations. Those amounts describe future business rather than revenue already recorded.
Cadence also repurchased $400 million of shares during the quarter. Its board authorized an additional $2.5 billion for the repurchase program, although an authorization does not mean those purchases have been completed.
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