CDNS US S&P 500NASDAQ-100Russell 1000 Earnings call · transcribed from the recording
Cadence Design Systems (CDNS) · Q3 2026 results and valuation
Share price: $329.26 · 2026-11-11
Cadence Design Systems develops computational software, accelerated hardware, and silicon intellectual property products. The company serves semiconductor companies and systems companies that design and manufacture integrated circuits and electromechanical systems. It operates globally, providing tools for the design, verification, and analysis of electronic systems. Source: 10-K annual report (2026-02-19)
Results Q3 2026 vs Q2 2026 · previous quarter · published 26 Oct 2026 and 27 Jul 2026
Net income down 21.1% on the previous quarter. Management sounded very upbeat, though noticeably less so answering analysts.
1 · Numbers
−21.1%
Net income vs Q2 2026
Outlook given
Net income 289.7M vs 367.1M
Revenue +3.1%
Against the same quarter last year (Q3 2025) it is +0.9%, so the move on last quarter looks seasonal or timing-related rather than a trend.
Why Against the same quarter last year (+0.9%), revenue rose 22.0% due to broad-based strength across the portfolio and robust demand for AI-driven designs, while net income grew 0.9% as the company managed incremental margins on the upside of revenue.
2 · How management spoke
Very upbeat
Among the most upbeat of all company calls
Answers to analysts: upbeat, but clearly less so than the script.
Last call it was different: script and answers matched.
3 · What stood out
The Cadence Design Systems board authorized an additional $2.5 billion for the share repurchase program.
Valuation
Is Cadence Design Systems undervalued?
Reverse DCF. Free cash flow from the last full fiscal year (2025-12-31), grown for 10 years, discounted back, plus a terminal value. “Implied growth” is the rate the current price assumes.
At 14.1% growth a year (3-year revenue growth), the model's fair value is $180.29 a share — the stock trades 83% above it. Today's price assumes 22.3% growth a year.
Current price
$329.26
close of 2026-11-11
Market implies growth of iThe yearly free-cash-flow growth, for the next 10 years, that today’s share price already assumes. If you believe the company grows faster than this, the stock is cheap under this model; slower, and it is expensive.
+22.3% for 10 yrs
Fair value / share
$180.29
Buy below
$135.22
Price vs fair value
Overvalued 83%
Price vs buy-below price
Overvalued 144%
Management expects
Revenue +21% · from the Q3 2026 report: “The company raised its annual revenue outlook to 21% growth and its EPS outlook by $0.30 to $8.40.”
A guidance figure for revenue, usually one year ahead, not a 10-year free-cash-flow rate.
Read between the lines
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Guidance
The company raised its annual revenue outlook to 21% growth and its EPS outlook by $0.30 to $8.40.
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Figure
Recurring revenue grew 18% year over year, sustaining momentum during the third quarter.
Source quote
“We are pleased that recurring revenue sustained its strong momentum, growing 18% year over year.”
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Figure
Initial results are very compelling, demonstrating up to 30% higher quality and up to 5x greater token efficiency versus general purpose foundation models.
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Figure
Underscoring that commitment, Cadence Design Systems' board has authorized an additional $2.5 billion for its share repurchase program.
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Key theme
The company expects another record year for hardware due to a strong pipeline entering Q4.
Source quote
“We have a strong pipeline entering Q4, and we continue to expect another record year for hardware.”
2 more
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Key theme
Demand for palladium and proteum emulation platforms drove a record quarter for the company.
Source quote
“This is driving sustained, unprecedented demand for our palladium and proteum emulation platforms, which delivered yet another record quarter.”
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Figure
AI could provide an additional five to 10X growth, making processes 1000 times easier than they were 20 to 25 years ago.
Source quote
“And with AI, we can have an add another five to 10 X. So it'll be like 1000 times easier than probably 20, 25 years ago.”
Tone
How upbeat the language was, compared with other companiesiTone counts positive minus negative finance words, adjusted for length. Executives mostly speak positively, so the labels compare each call with every company's latest call: “typical” is the middle third, “very upbeat” the top tenth, “cautious” the bottom tenth.. Dot: Q3 2026. Ring: Q2 2026.
Management sounded noticeably less positive answering analysts than in its prepared script — a bigger drop than in 96% of calls. Scripts are polished in advance; a drop under questioning often marks the topics analysts pressed on, so the answers deserve a closer read than the script.
Sentences that drove the tone
“Given our strong business momentum, expanding technology leadership, and compelling AI growth opportunities.”
“Cadence delivered strong third quarter results driven by robust demand across our businesses and growing momentum from AI-driven designs.”
“Our hardware cloud offering showed strong growth, with a leading semiconductor company adopting more hardware cloud services to accelerate new product development.”
Full figures
USD · SEC EDGAR XBRL (10-Q, period end 2026-09-30)
| Metric | Q3 2026period end 2026-09-30 | Q2 2026period end 2026-06-30 | Change | Q3 2025 | YoY |
|---|---|---|---|---|---|
| Revenue | 1.63B | 1.58B | +3.1% | 1.34B | +22.0% |
| Operating income | 428.7M | 450.3M | −4.8% | 425.4M | +0.8% |
| Net income | 289.7M | 367.1M | −21.1% | 287.1M | +0.9% |
| EPS | 1.05 | 1.33 | −21.1% | 1.05 | ±0% |
| P/E today 63.6 | 65.6 | 74.6 | −9.0 | 90.5 | −24.9 |
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Latest announcements
Official filings, newest first. Summaries are generated from each filing and its attachment; every figure is checked against the source.
- Results of operations; Other events · SEC 8-K
- Results of operations · SEC 8-K
- Director or officer change; Shareholder vote results · SEC 8-K
Cadence stockholders approved an amendment to the Omnibus Equity Incentive Plan, which includes increasing the number of authorized shares by 5,000,000 and removing the fixed expiration date of April 30, 2030.
- Results of operations · SEC 8-K
- Unregistered share sale · SEC 8-K
Cadence Design Systems, Inc. issued 3,224,473 shares of common stock to Hexagon Smart Solutions AB as partial consideration for the acquisition of the seller's design and engineering business on February 23, 2026.
- Results of operations · SEC 8-K
Cadence reported fiscal year 2025 revenue of $5.297 billion, up from $4.641 billion in 2024, with a year-end backlog of $7.8 billion.
- Director or officer change · SEC 8-K
Cadence appointed Dr. Luc Van den hove to its board of directors effective January 1, 2026, with an equity award of $82,849.
- Results of operations · SEC 8-K
Cadence reported revenue of $1.339 billion in the third quarter of 2025, compared to $1.215 billion in the third quarter of 2024.
Catalyst calendar
management-stated targets — from the latest earnings call; plans, not promises.
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2026
revenue in the range of $6,387,000,000 to $6,417,000,000
Source quote
“For our updated outlook for 2026, we now expect revenue in the range of $6,387,000,000 to $6,417,000,000.”
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2026
Gap operating margin in the range of 28.2% to 29.2%
Source quote
“Gap operating margin in the range of 28.2% to 29.2%.”
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2026
Non-Gap operating margin in the range of 44.2% to 45.2%
Source quote
“Non-Gap operating margin in the range of 44.2% to 45.2%.”
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2026
Now on GAAP EPS, in the range of $8.37 to $8.43
Source quote
“Now on GAAP EPS, in the range of $8.37 to $8.43.”
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2026
Operating cash flow of approximately $2 billion
Source quote
“Operating cash flow of approximately $2 billion, and we expect to use more than 50% of our free cash flow to repurchase Caden shares in 2026.”