CDNS earnings analysis
What we found in CDNS's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
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.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- 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.
- 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%.
- 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.
- 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.
- 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.
- 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.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- 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.
- 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.
- 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.
- 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.
What they reported.
What the company itself reported, taken out of the document.
- Gross margin
- 84.9%
- Operating margin
- 28.0%
- 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 they said about what is next.
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%.
The filing reads better than the one before it.
What came before.
- 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…
- 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. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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