Q3 FY2026
Filed Oct 26, 2026Cadence Reports Third Quarter 2026 Financial Results Raising 2026 Revenue Growth Outlook to 21% and Non-GAAP EPS to $8.40
Q3 revenue grew 22% year-over-year, non-GAAP diluted net income per share rose to $2.11 from $1.93, recurring revenue increased 18% year-over-year, and backlog reached a record $8.2 billion. The company raised its fiscal 2026 revenue growth outlook to 21%, although both GAAP and non-GAAP operating margins were below the prior-year quarter.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Q3 2026 total revenueGAAP | $1.63B | – | 22% |
| Q3 2026 product and maintenance revenueGAAP | $1.49B | – | – |
| Q3 2026 services revenueGAAP | $146M | – | – |
| Q3 2026 GAAP operating marginGAAP | 26.2% | – | – |
| Q3 2026 non-GAAP operating marginnon-GAAP | 44.1% | – | – |
| Q3 2026 income from operationsGAAP | 428.7M | – | – |
| Q3 2026 net incomeGAAP | $289.7M | – | – |
| Q3 2026 non-GAAP net incomenon-GAAP | $582.2M | – | – |
| Q3 2026 diluted net income per shareGAAP | $ 1.05 | – | – |
| Q3 2026 non-GAAP diluted net income per sharenon-GAAP | $ 2.11 | – | – |
| Q3 2026 basic net income per shareGAAP | $ 1.06 | – | – |
| Q3 2026 weighted average common shares outstanding - dilutedGAAP | 275.3M | – | – |
| Q3 2026 cost of product and maintenanceGAAP | 173.9M | – | – |
| Q3 2026 cost of servicesGAAP | 61.75M | – | – |
| Q3 2026 marketing and sales expenseGAAP | 242.5M | – | – |
| Q3 2026 research and development expenseGAAP | 537.5M | – | – |
| Q3 2026 general and administrative expenseGAAP | 113.0M | – | – |
| Q3 2026 amortization of acquired intangiblesGAAP | 33.78M | – | – |
| Q3 2026 restructuringGAAP | 42.16M | – | – |
| Q3 2026 interest expenseGAAP | −30.38M | – | – |
| Q3 2026 other income (expense), netGAAP | 9.99M | – | – |
| Q3 2026 provision for income taxesGAAP | 118.6M | – | – |
| Nine months ended September 30, 2026 total revenueGAAP | 4.69B | – | – |
| Nine months ended September 30, 2026 product and maintenance revenueGAAP | 4.27B | – | – |
| Nine months ended September 30, 2026 services revenueGAAP | 425.1M | – | – |
| Nine months ended September 30, 2026 income from operationsGAAP | 1.31B | – | – |
| Nine months ended September 30, 2026 net incomeGAAP | $992.5M | – | – |
| Nine months ended September 30, 2026 diluted net income per shareGAAP | $ 3.61 | – | – |
| Nine months ended September 30, 2026 net cash provided by operating activitiesGAAP | 1.41B | – | – |
| Nine months ended September 30, 2026 purchases of property, plant and equipmentGAAP | −163.3M | – | – |
| Nine months ended September 30, 2026 cash paid in business combinations, net of cash acquiredGAAP | −2.14B | – | – |
| Nine months ended September 30, 2026 payments for repurchases of common stockGAAP | −800.0M | – | – |
| Nine months ended September 30, 2026 cash and cash equivalents at end of periodGAAP | $1.45B | – | – |
| Cash and cash equivalents as of September 30, 2026GAAP | $1.45B | – | – |
| Long-term debt as of September 30, 2026GAAP | 1.98B | – | – |
| Current portion of long-term debt as of September 30, 2026GAAP | 498.8M | – | – |
| Revolving credit facility as of September 30, 2026GAAP | $150M | – | – |
| Quarter-end backlogother | $8.2B | – | – |
| Revenue expected to be recognized in the next 12 months from remaining performance obligationsother | $4.2B | – | – |
| Q3 2026 recurring revenue growthother | 18% | – | 18% YoY |
| Q3 2026 Core EDA revenue growthother | 20% | – | 20% year-over-year |
| Q3 2026 IP revenue growthother | 24% | – | 24% year-over-year |
| Q3 2026 System Design and Analysis revenue growthother | 30% | – | 30% year-over-year |
Amounts quoted below without a unit are in thousands, as in the filing’s tables. Per-share figures are as printed.
Fiscal year 2026 outlook
- Revenue$6.387 billion to $6.417 billion
- NoteGAAP operating margin in the range of 28.2% to 29.2%
- NoteNon-GAAP operating margin in the range of 44.2% to 45.2%
- NoteGAAP diluted net income per share in the range of $4.84 to $4.90
- NoteNon-GAAP diluted net income per share in the range of $8.37 to $8.43
- NoteThree Months Ending December 31, 2026 GAAP operating margin forecast: 30% - 31%
- NoteThree Months Ending December 31, 2026 non-GAAP operating margin forecast: 44% - 45%
- NoteThree Months Ending December 31, 2026 GAAP diluted net income per share forecast: $1.23 to $1.29
- NoteThree Months Ending December 31, 2026 non-GAAP diluted net income per share forecast: $2.19 to $2.25
- NoteYear Ending December 31, 2026 GAAP net income forecast: $1,331 to $1,347
- NoteYear Ending December 31, 2026 non-GAAP net income forecast: $2,301 to $2,317
Capital returns
- Cadence used $400 million to repurchase Cadence shares.
- Cadence's Board of Directors has authorized an additional $2.5 billion for Cadence's share repurchase program.
- Nine months ended September 30, 2026 payments for repurchases of common stock: (800,025) (in thousands).
What drove it
- Q3 revenue grew 22% year-over-year, with strong double-digit growth across all product categories, driven by growing momentum from AI-driven designs.
- Core EDA revenue grew 20% year-over-year, driven by broad-based strength across the portfolio, including 16 new digital and signoff full-flow wins and growing adoption among memory and hyperscaler customers.
- Hardware delivered another record quarter, fueled by meaningful expansions with marquee customers and strong growth in Cadence's hardware cloud offering.
- IP revenue increased 24% year-over-year, driven by strong demand for Cadence's differentiated Star IP portfolio across interface, memory and foundation IP.
- System Design and Analysis revenue grew 30% year-over-year, driven by continued strength in Cadence’s PCB and advanced packaging solutions, strong adoption of the Millennium platform and growing momentum across Cadence's physical SDA portfolio.
- Cadence AI Super Agents had more than 100 active customer engagements.
- Maestro delivered initial workflow results of up to 30% higher quality and 5X greater token efficiency versus general-purpose foundation models.
Concerns
- Q3 2026 GAAP operating margin was 26.2%, compared to 31.8% in Q3 2025.
- Q3 2026 non-GAAP operating margin was 44.1%, compared to 47.6% in Q3 2025.
- Q3 2026 restructuring was 42,159 (in thousands), compared to 27,394 (in thousands) in Q3 2025.
- Cash and cash equivalents were $ 1,452,020 (in thousands) at September 30, 2026, compared to $ 3,001,317 (in thousands) at December 31, 2025.
- Cash paid in business combinations, net of cash acquired, was (2,143,429) (in thousands) for the nine months ended September 30, 2026.
- The company cited risks including export controls, tariffs, other trade restrictions, increased debt levels and obligations, acquisition integration, cybersecurity, and ongoing obligations under its July 2025 settlement agreements with the DOJ and BIS.
What to watch
- Execution against fiscal 2026 revenue guidance of $6.387 billion to $6.417 billion and the stated 21% year-over-year revenue growth outlook based on the midpoint of the range.
- Whether Q4 GAAP operating margin reaches the forecast range of 30% - 31% and non-GAAP operating margin reaches 44% - 45%.
- Conversion of the $8.2 billion backlog and $4.2 billion of revenue expected to be recognized in the next 12 months from remaining performance obligations.
- Continued momentum in AI-driven designs, Maestro deployments, AI Super Agent customer engagements, hardware cloud and hyperscaler adoption.
- The pace of repurchases under the additional $2.5 billion authorization and the effect of business combinations and debt on cash and liquidity.
Balance sheet and cash flow
- Cash and cash equivalents as of September 30, 2026: $ 1,452,020 (in thousands); December 31, 2025: $ 3,001,317 (in thousands).
- Total assets as of September 30, 2026: $ 12,224,774 (in thousands); December 31, 2025: $ 10,153,148 (in thousands).
- Long-term debt as of September 30, 2026: 1,984,433 (in thousands); December 31, 2025: 2,480,150 (in thousands).
- Current portion of long-term debt as of September 30, 2026: 498,809 (in thousands); December 31, 2025: —.
- Revolving credit facility as of September 30, 2026: $ 150,000 (in thousands); December 31, 2025: $ —.
- Nine months ended September 30, 2026 net cash provided by operating activities: 1,414,436 (in thousands), compared to 1,175,286 (in thousands).
- Nine months ended September 30, 2026 net cash used for investing activities: (2,245,610) (in thousands), compared to (371,714) (in thousands).
- Nine months ended September 30, 2026 net cash used for financing activities: (706,560) (in thousands), compared to (735,086) (in thousands).
Analysis
Cadence reported Q3 2026 total revenue of $ 1,633,311 (in thousands), compared with $ 1,338,838 (in thousands) in Q3 2025. The company stated that Q3 revenue grew 22% year-over-year, with strong double-digit growth across all product categories. Product and maintenance revenue was $ 1,487,311 (in thousands), while services revenue was $ 146,000 (in thousands). Recurring revenue was up 18% year-over-year, and quarter-end backlog reached a record $8.2 billion, with $4.2 billion of revenue expected to be recognized in the next 12 months from remaining performance obligations.
Demand commentary was broad based. Core EDA revenue grew 20% year-over-year, IP revenue increased 24% year-over-year, and System Design and Analysis revenue grew 30% year-over-year. Management attributed these trends to AI-driven designs, strength across the Core EDA portfolio, Star IP demand, hardware customer expansions, hardware cloud growth, and adoption of PCB, advanced packaging and Millennium platform offerings. The company also cited more than 100 active customer engagements for AI Super Agents and several Maestro customer deployments.
Profitability showed higher income but lower margins. Q3 GAAP operating margin was 26.2%, compared with 31.8%, and non-GAAP operating margin was 44.1%, compared with 47.6%. GAAP net income was $ 289,747 (in thousands), compared with $ 287,122 (in thousands), and GAAP diluted net income per share was unchanged at $ 1.05. Non-GAAP net income increased to $ 582,187 (in thousands) from $ 528,213 (in thousands), while non-GAAP diluted net income per share increased to $ 2.11 from $ 1.93. The quarter included 42,159 (in thousands) of restructuring expense, compared with 27,394 (in thousands) a year earlier, and amortization of acquired intangibles increased to 33,779 (in thousands) from 10,233 (in thousands).
For the nine months ended September 30, 2026, total revenue was 4,691,982 (in thousands), net income was $ 992,483 (in thousands), and net cash provided by operating activities was 1,414,436 (in thousands). Cash paid in business combinations, net of cash acquired, was (2,143,429) (in thousands), contributing to cash and cash equivalents of $ 1,452,020 (in thousands) at September 30, 2026, versus $ 3,001,317 (in thousands) at December 31, 2025. The company also paid (800,025) (in thousands) for share repurchases during the nine-month period and used $400 million to repurchase shares in Q3, while the board authorized an additional $2.5 billion for the program.
Cadence raised its fiscal 2026 revenue outlook to $6.387 billion to $6.417 billion and guided to GAAP operating margin of 28.2% to 29.2%, non-GAAP operating margin of 44.2% to 45.2%, GAAP diluted net income per share of $4.84 to $4.90, and non-GAAP diluted net income per share of $8.37 to $8.43. Q4 guidance calls for GAAP operating margin of 30% - 31%, non-GAAP operating margin of 44% - 45%, GAAP diluted net income per share of $1.23 to $1.29, and non-GAAP diluted net income per share of $2.19 to $2.25. The guide and record backlog frame continued growth, while the lower Q3 operating margins and cash deployment toward business combinations are key reported items for investors to monitor.
Management, verbatim
Cadence delivered an outstanding third quarter. 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.
Anirudh Devgan, president and chief executive officer
Q3 revenue grew 22% year-over-year, with strong double-digit growth across all product categories, driven by growing momentum from AI-driven designs.
John Wall, senior vice president and chief financial officer
Not in the filing
stated, not guessed- Prior-period guidance was not provided, so no comparison of actual results with prior guidance can be made.
- Gross margin was not reported.
- Quarterly operating cash flow was not reported.
- Free cash flow was not reported.
- Absolute revenue by Core EDA, Semiconductor IP, System Design and Analysis, and Hardware was not reported.
- A dividend amount or dividend policy was not reported.
- Q4 2026 revenue guidance was not reported.
- A specific fiscal 2026 tax-rate guidance figure was not reported.
- Prior-quarter figures for Q3 income-statement metrics were not reported.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.