Q3 2026 results
| Metric | Result | Change |
|---|---|---|
| Total Revenue | $1.633 billion | 22% year-over-year |
| Non-GAAP EPS | $2.11 | Not stated |
| Backlog | $8.2 billion | Record |
| Non-GAAP Operating Margin | 44.1% | Not stated |
| Recurring Revenue Growth | 18% | Year-over-year |
Guidance and outlook
- For 2026, revenue is expected in the range of $6.387 billion to $6.417 billion.
- For 2026, non-GAAP EPS is expected in the range of $8.37 to $8.43.
- For Q4, revenue is expected in the range of $1.695 billion to $1.725 billion.
- For Q4, non-GAAP EPS is expected in the range of $2.19 to $2.25.
How management sounded
Positive (+7 on our -10 to +10 scale). Management raised full-year revenue and EPS guidance, highlighted a record backlog, and emphasized strong momentum across all business segments driven by AI. Management sounded more upbeat than on 48% of the 190 calls we cover; most companies sound positive on their own calls, so the comparison says more than the label.
Q&A summary
Maestro AI Strategy
Asked: Jason Celino (KeyBanc) asked for clarification on the Maestro announcement and how Cadence plans to monetize it.
Answer: Anirudh Devgan explained that Maestro combines domain-specialized models, model routing for efficiency, and reinforcement learning loops with underlying tools, offering customers flexibility and better performance.
Hardware Growth Sustainability
Asked: Siti Panigrahi (Mizuho) asked about the sustainability of hardware growth heading into 2027.
Answer: John Wall noted that hardware demand remains strong due to system complexity, and Anirudh Devgan added that increasing chip sizes and 3D IC adoption will continue to drive demand.
Agentic AI Monetization
Asked: James Schneider (Goldman Sachs) asked about the monetization of Agentic AI solutions and the recurring revenue growth.
Answer: Anirudh Devgan stated that Agentic AI solutions are driving more usage of base tools, which contributes to recurring revenue growth, and John Wall confirmed strong high-teen growth in recurring revenue.
Competitive Differentiation
Asked: Charles Shi (Needham) asked how Cadence differentiates its Maestro model portfolio from competitors collaborating with frontier labs.
Answer: Anirudh Devgan emphasized that Cadence provides maximum flexibility, allowing customers to use the right model for the task while maintaining control over the three layers of the design stack and ensuring data confidentiality.
What to watch before the next call
- The integration of the Hexagon DD business and its impact on operating margins in 2027.
- The continued adoption and scaling of the Maestro AI model portfolio across customer design environments.
- The sustainability of hardware-assisted verification demand as chip design complexity continues to increase.
