10-Q · May 1, 2026
Cadence reported robust Q1 2026 results, with revenue reaching $1.474 billion, exceeding estimates of $1.452 billion by approximately $21.3 million, reflecting a 19% year-over-year growth. Non-GAAP EPS was reported at…
Earnings analysis · 10-Q
CDNS earnings analysis
Filed July 28, 2026 · Our reading of the company's report
The latest report
Cadence's Q2 filing confirms strong reported growth: revenue increased 24% year over year to $1.585 billion and GAAP operating margin expanded 9 percentage points to 28%, driven by software, hardware, IP and acquisition…
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Cadence's Q2 filing confirms strong reported growth: revenue increased 24% year over year to $1.585 billion and GAAP operating margin expanded 9 percentage points to 28%, driven by software, hardware, IP and acquisition contributions. Cash generation improved, with six-month operating cash flow of $990.7 million, but acquisition activity reduced cash by $1.561 billion since year-end and drove $2.086 billion of investing outflows. The filing does not repeat numeric revenue or EPS outlook, though management expects a roughly 26% fiscal-2026 tax rate and higher operating expenses for the rest of the year.
Gross and operating margin
How much of each revenue dollar the business keeps.
One point per quarterly or annual filing. Both margins are shares of that report's revenue.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
How we read each report
Our analysis across the last few reports.
Our model's reading of each filing, not the share price or the market's reaction. Annual and quarterly reports each occupy one position.
Reported figures
- Segment
- Core EDA: 68% of Q2 2026 revenue, versus 71% in Q2 2025 and 71% in Q1 2026.
- Segment
- Semiconductor IP: 15% of Q2 2026 revenue, versus 13% in Q2 2025 and 14% in Q1 2026.
- Segment
- System Design and Analysis: 17% of Q2 2026 revenue, versus 16% in Q2 2025 and 15% in Q1 2026.
What stood out
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Revenue grew 24% year over year
Q2 revenue was $1.585 billion, up $309.1 million, or 24%, from $1.275 billion in Q2 2025. It also rose $110.3 million, or 7.5%, from implied Q1 2026 revenue of $1.474 billion.
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Operating-margin expansion offsets gross pressure
Gross margin was 84.9% in Q2 2026, calculated from $1.585 billion of revenue and $239.3 million of cost of revenue, versus 85.6% a year earlier. GAAP operating margin nevertheless expanded to 28% from 19%, while the six-month margin increased to 29% from 24%.
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Both revenue streams accelerated
Product and maintenance revenue increased $260.2 million, or 22%, to $1.431 billion, while services revenue increased $48.9 million, or 47%, to $153.8 million. Management attributed growth to software, hardware and IP demand, including acquisitions.
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China and Asia drove geographic growth
China revenue nearly doubled, rising $115.5 million, or 96%, to $236.2 million; Other Asia grew $83.6 million, or 35%, to $321.8 million. China represented 15% of revenue versus 9% a year ago.
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Operating cash generation improved
Six-month operating cash flow rose $126.1 million to $990.7 million from $864.6 million, supported by improved operating results and the timing of customer receipts and operating disbursements. The filing does not disclose capital expenditures separately, so free cash flow cannot be calculated.
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Investment remains elevated
Management expects operating expenses to increase through the remainder of fiscal 2026 versus 2025 because of recent acquisitions. Q2 R&D spending rose $89.2 million, or 20%, to $531.3 million, reflecting continued investment and acquired headcount.
What to watch
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Acquisition spending reduced liquidity
Cash and cash equivalents fell $1.561 billion to $1.440 billion at June 30, 2026 from $3.001 billion at December 31, 2025, principally amid business-combination payments; net working capital declined $1.661 billion to $1.373 billion.
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Acquisitions and debt elevate funding burden
Cash used for investing activities rose to $2.086 billion in the first six months of 2026 from $197.4 million a year earlier, primarily because of higher business-combination payments. Cadence also has $2.5 billion of senior notes outstanding, while Q2 interest expense increased to $35.1 million from $28.9 million.
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Trade and China exposure remains material
One of the two updated risk factors flags global economic, geopolitical and trade-policy uncertainty. China produced $236.2 million, or 15%, of Q2 revenue, and management notes the BIS rule suspension is currently set to expire on November 9, 2026, creating exposure to renewed restrictions or tariffs.
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Cybersecurity risk factor updated
The second updated risk factor addresses cyberattacks. The company disclosed in its Q1 2026 10-Q that a threat actor obtained a limited amount of confidential information; while it says the event was contained with no operational disruption, foreign-currency forward contracts totaled $1.052 billion at June 30, 2026, underscoring the scale of globally distributed operations and systems exposure.
Management's outlook
The 10-Q does not provide numeric revenue or EPS guidance; management states it currently expects a fiscal 2026 effective tax rate of approximately 26%.
Earlier filings 4
10-K · February 19, 2026
Cadence frames a growth strategy around its Intelligent System Design (ISD) strategy — integrating agentic/generative AI, accelerated hardware, and expanded system-level simulation — and expanded through multiple fiscal…
10-K · February 21, 2025
Cadence positions itself around an "Intelligent System Design™ (ISD)" strategy combining Design Excellence, System Innovation and Pervasive Intelligence to capture AI-driven semiconductor and systems design demand. The…
10-Q · July 24, 2024
Cadence reported Q2 revenue of $1,060,681 and GAAP diluted EPS of $0.84. Revenue increased versus the year-ago quarter while gross and operating margins compressed; the company completed a material acquisition (cash…
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.