# Cadence Design Systems (CDNS) Sector: Chip design software | Field | Value | |---|---| | Price | $336.53 | | Market cap | $92B | | Intrinsic value source | Analysts | | Data as of | 2026-11-10 | | Next earnings | 2027-02-16 (estimate) | Analysts: Very bullish Picks: Research only Discount category: Close to intrinsic value ## In short The market doubts that Cadence can keep its growth and margins as AI changes chip design, and steady growth with a rising margin and paid AI products through 2027 can close the gap. ## Themes and gap - Themes: AI disruption risk (ai-disruption), AI supplier (ai-supplier), China and geopolitics (china-geopolitics) - Gap type: Can close (closable) - Why: The Q4 2026 report with the 2027 guidance, expected in mid-February 2027, shows whether growth stays in the mid-teens and the margin rises after the Hexagon purchase. ## About Cadence sells software, hardware and intellectual property (IP) that engineers use to design chips and electronic systems. Core electronic design automation (EDA) software and hardware for chip emulation gave 69% of revenue in Q3 2026, semiconductor IP 15% and System Design and Analysis 16%. System Design and Analysis includes software for circuit boards, chip packages and simulation of physical systems. Most revenue comes from multi-year software licenses, so revenue is mostly recurring. In Q3 2026, revenue was $1.633 billion and the backlog was $8.2 billion. In February 2026, Cadence bought the design and engineering business of Hexagon. Its head office is in San Jose, California, and Anirudh Devgan is its president and chief executive officer. ## Thesis The market doubts that Cadence can keep its growth and high margins for many years. Investors fear two things. First, AI design tools from new companies, or from chip makers themselves, can lower the value of EDA software. Second, spending on chip design can slow after the AI build-out. The stock moved little in the year to November 2026, while non-GAAP EPS guidance for 2026 rose to $8.40 from $7.14 in 2025. The Hexagon purchase also lowered the non-GAAP operating margin to 44.1% in Q3 2026 from 47.6%. For the gap to close, three things must be true. Revenue must keep growing in the mid-teens or more, with a backlog that stays above $8 billion. The non-GAAP operating margin must rise again as the Hexagon business is integrated. Cadence must sell its own AI products, such as its AI Super Agents and Maestro models, as paid add-ons, so that AI adds revenue. The Q4 2026 report, expected in mid-February 2027, with the 2027 guidance, is the next test. If growth and margins hold, the gap can close over the next four to six quarters. ## Checkpoints - Oct 26, 2026: Q3 2026 results: growth and backlog. Status: Passed. Watch: Revenue growth near 20% with a backlog that stays above $8 billion passes; slower growth or a smaller backlog fails. Outcome: Revenue rose 22%, the backlog reached a record $8.2 billion and Cadence raised its 2026 guidance. - Feb 16, 2027 (estimate): Q4 2026 results and 2027 guidance. Status: Pending. Watch: 2027 guidance for revenue growth in the mid-teens or more with a higher non-GAAP operating margin passes; guidance for slower growth or a lower margin fails. ## Balance sheet - Cash: $1.5B - Debt: $2.7B - Net debt: $1.2B - Interest cover: 13× - Undrawn credit line: $1.1B, to August 2029 - Debt due within 12 months: $650M - Last debt due: 2034 Cadence has $2.5 billion of senior notes: $500 million of 4.200% notes due September 2027, $1.0 billion of 4.300% notes due 2029 and $1.0 billion of 4.700% notes due 2034. The 2027 notes are now shown as due within one year. It also had $150 million of borrowings under its $1.25 billion revolving credit facility, which runs to August 14, 2029, at September 30, 2026. Cash was $1.45 billion at September 30, 2026, down from $3.00 billion at December 31, 2025, because Cadence paid $2.14 billion of cash for acquisitions, mainly the Hexagon business. Interest cover is operating income divided by interest expense for the first nine months of 2026 ($1.31 billion against $97 million). Cash from operations was $1.41 billion in the first nine months of 2026, and Cadence paid $800 million for buybacks. The Board added $2.5 billion of buyback authority in October 2026. There were about 274,379,000 shares outstanding on September 30, 2026. As of 2026-09-30. Sources: - https://www.sec.gov/Archives/edgar/data/813672/000081367226000121/cdns-20260930.htm - https://www.sec.gov/Archives/edgar/data/813672/000081367226000116/cdns10262026ex9901.htm ## Dividends Cadence Design Systems does not pay a dividend. Source: company filings and market data, read on 2026-11-09. ## Recent events - 2026-10-26: Cadence reported Q3 2026 results. Revenue rose 22% to $1.633 billion, and the backlog was a record $8.2 billion. The non-GAAP operating margin was 44.1%, down from 47.6% a year earlier. Non-GAAP EPS rose to $2.11 from $1.93, and GAAP EPS was $1.05, the same as a year earlier. Cadence raised its 2026 guidance to revenue of $6.387 billion to $6.417 billion and non-GAAP EPS of $8.37 to $8.43. The Board added $2.5 billion to the buyback program. Cadence also launched Maestro, a set of AI models for chip and system design. - 2026-07-27: Cadence reported Q2 2026 results. Revenue rose 24% to $1.584 billion, and non-GAAP EPS rose to $2.11 from $1.65. The backlog was a record $8.1 billion. Cadence raised its 2026 revenue guidance to $6.26 billion to $6.34 billion. - 2026-05-07: Cadence shareholders approved an amendment of the equity incentive plan that adds 5,000,000 shares for awards. - 2026-04-27: Cadence reported Q1 2026 results. Revenue rose 19% to $1.474 billion, and non-GAAP EPS rose to $1.96 from $1.57. The backlog was $8.0 billion. Cadence raised its 2026 revenue outlook to about 17% growth. - 2026-02-23: Cadence completed the purchase of the design and engineering business of Hexagon for about $3.0 billion, net of cash. It paid $2.2 billion in cash and 3.2 million Cadence shares. - 2026-02-17: Cadence reported Q4 and full-year 2025 results. For 2025, revenue rose 14% to $5.297 billion, and non-GAAP EPS rose 20% to $7.14. The backlog was a record $7.8 billion. Its first 2026 guidance, without Hexagon, was revenue of $5.9 billion to $6.0 billion. ## Latest news and filings - Last earnings: 2026-10-26 (8-K: https://www.sec.gov/Archives/edgar/data/813672/000081367226000116/) - Next earnings: 2027-02-16 (expected; the company has not confirmed it) | Filed | Form | Headline | Period end | XBRL document | Link | | --- | --- | --- | --- | --- | --- | | 2026-10-28 | 10-Q | Quarterly report for the period ended Sep 30, 2026 | 2026-09-30 | cdns-20260930 | https://www.sec.gov/Archives/edgar/data/813672/000081367226000121/cdns-20260930.htm | | 2026-10-26 | 8-K | Earnings release and Other company news | | cdns-20261023 | https://www.sec.gov/Archives/edgar/data/813672/000081367226000116/cdns-20261023.htm | | 2026-07-29 | 10-Q | Quarterly report for the period ended Jun 30, 2026 | 2026-06-30 | cdns-20260630 | https://www.sec.gov/Archives/edgar/data/813672/000081367226000092/cdns-20260630.htm | | 2026-07-27 | 8-K | Earnings release | | cdns-20260727 | https://www.sec.gov/Archives/edgar/data/813672/000081367226000089/cdns-20260727.htm | | 2026-05-12 | 8-K | Change of directors or officers and Shareholder vote results | | cdns-20260507 | https://www.sec.gov/Archives/edgar/data/813672/000081367226000067/cdns-20260507.htm | | 2026-05-01 | 10-Q | Quarterly report for the period ended Mar 31, 2026 | 2026-03-31 | cdns-20260331 | https://www.sec.gov/Archives/edgar/data/813672/000081367226000047/cdns-20260331.htm | | 2026-04-27 | 8-K | Earnings release | | cdns-20260427 | https://www.sec.gov/Archives/edgar/data/813672/000081367226000044/cdns-20260427.htm | | 2026-02-23 | 8-K | Current report | | cdns-20260223 | https://www.sec.gov/Archives/edgar/data/813672/000081367226000019/cdns-20260223.htm | | 2026-02-19 | 10-K | Annual report for the period ended Dec 31, 2025 | 2025-12-31 | cdns-20251231 | https://www.sec.gov/Archives/edgar/data/813672/000081367226000016/cdns-20251231.htm | | 2026-02-17 | 8-K | Earnings release | | cdns-20260217 | https://www.sec.gov/Archives/edgar/data/813672/000081367226000013/cdns-20260217.htm | Every filing on SEC EDGAR (CIK 813672): https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0000813672&type=&dateb=&owner=include&count=40 ## Risks - Medium: AI tools can change chip design. If new companies or customers build AI design tools that need fewer EDA licenses, Cadence can lose pricing power or market share. - Medium: China gave 16% of revenue in Q3 2026. U.S. export controls can limit sales to Chinese customers. In July 2025, Cadence settled export control charges with the U.S. Department of Justice and the Bureau of Industry and Security, and it must meet obligations under these settlements. - Medium: Chip design spending depends on the AI and semiconductor cycle. If AI spending slows, customers can delay new designs, hardware purchases and IP licenses. - Low: The Hexagon purchase lowered margins and raised amortization costs. If the integration is slow, the non-GAAP operating margin may not return to its 2025 level of 44.6%. - Low: Stock-based compensation is large: Cadence expects $2.07 per share in 2026. Non-GAAP EPS leaves this cost out, so GAAP EPS is much lower. ## Links - Page: https://picks.utilarium.app/company/CDNS/ - History of changes: https://picks.utilarium.app/company/CDNS/history/ - JSON with full history: https://picks.utilarium.app/data/company/CDNS.json > Picks is a personal record of stock picks. It gives general opinions about stocks, including a "Top pick" label. They are not tailored to your needs, goals or risk tolerance. Kevin is not a registered adviser and relies on the general-advice exemption in Canadian securities law (NI 31-103 s.8.25). Do your own research, or ask a registered adviser. Kevin may hold any stock on this site. Prices, intrinsic values and ratings can be delayed or wrong; check the original source. Full disclaimer: /disclaimer/.