Cadence Design Systems (NASDAQ:CDNS) posted fourth-quarter results that exceeded Wall Street expectations and delivered an upbeat 2026 outlook, driven by sustained demand for its AI-enabled design software. The stock advanced more than 5% in premarket trading on Wednesday.
For the quarter, the company reported non-GAAP earnings of $1.99 per share, surpassing analyst forecasts of $1.91.
Revenue increased to $1.44 billion, up from $1.356 billion a year earlier, and ahead of the $1.42 billion consensus estimate.
GAAP operating margin came in at 32.2%, compared with 33.7% in the prior year period, while non-GAAP operating margin was 45.8%, slightly below last year’s 46.0%. GAAP diluted earnings per share rose to $1.42 from $1.24.
Looking to 2026, Cadence projected first-quarter earnings of $1.89 to $1.95 per share, topping expectations of $1.81. For the full year, it forecast earnings of $8.05 to $8.15 per share, compared with consensus estimates of $8.03. Revenue is expected to range between $5.9 billion and $6.0 billion, broadly in line with analyst projections of $5.94 billion.
The company said it wrapped up 2025 with revenue growth exceeding 14% and a non-GAAP operating margin of roughly 45%, reflecting steady customer demand. Backlog reached a record $7.8 billion.
“Cadence delivered excellent results for the fourth quarter, closing an outstanding 2025 with over 14% revenue growth and 20% non-GAAP EPS growth,” said Anirudh Devgan, president and chief executive officer, highlighting strong traction across its expanding AI-driven portfolio.
Chief Financial Officer John Wall added, “We delivered a 44.6% non-GAAP operating margin, reflecting continued productivity-driven profitability improvement,” noting that the record backlog enhances visibility into future performance.
Wolfe Research analyst Joshua Tilton described the quarter as Cadence’s “largest quarterly beat, with record backlog and an FY26 outlook ahead of expectations.”
“We think results should ease near-term concerns on China demand and the resiliency of the hardware refresh cycle, and increase conviction in CDNS seeing durable double-digit growth and 50%+ incremental margins,” he added.
Separately, Bank of America reaffirmed its Buy rating on the shares, citing a “strong demand outlook protected against AI disruption,” although it lowered its price target to $375 from $400.