Cadence Design Systems (CDNS) Q1 2026 earnings summary

Executive summary

• Achieved one of the strongest Q1 performances in company history, with revenue up 19% year-over-year to $1.474 billion, driven by accelerating AI demand, disciplined execution, and contributions from recent acquisitions.

• Record $8 billion backlog, reflecting robust customer confidence in AI-driven solutions and strong recurring revenue mix.

• Net income increased 23% year-over-year to $335.7 million, with diluted EPS rising to $1.23.

• Raised 2026 revenue growth outlook to 17% at the midpoint, expecting to achieve the Rule of 60 for the first time.

• Strategic collaborations with Google and Nvidia to advance agentic AI and physical AI initiatives.

Financial highlights

• Q1 2026 revenue grew 19% year-over-year to $1.474 billion, with product and maintenance revenue up 21% and services revenue down 5%.

• GAAP operating margin was 29.3%; non-GAAP operating margin was 44.7%.

• GAAP EPS was $1.23; non-GAAP EPS was $1.96.

• Operating cash flow was $356 million; cash balance at $1.41 billion, down from $3.0 billion due to acquisition payments.

• Gross margin remained strong at 85.4% GAAP and 88.0% non-GAAP.

Outlook and guidance

• 2026 revenue expected between $6.125 billion and $6.225 billion; GAAP EPS guidance: $4.39–$4.49; non-GAAP EPS: $7.85–$7.95.

• Q2 2026 revenue guidance: $1.555–$1.595 billion; Q2 GAAP EPS: $1.07–$1.13; non-GAAP EPS: $2.02–$2.08.

• Operating cash flow for 2026 expected at $1.875–$1.975 billion; plan to use ~50% of free cash flow for share repurchases.

• Effective tax rate for fiscal 2026 projected at approximately 26%.

• Sufficient liquidity anticipated to meet operational and strategic needs for at least the next 12 months.