Cadence stock jumps 10%
Cadence stock jumped in after-hours trading on Tuesday and built on that advance on Wednesday morning after posting better-than-expected Q4 earnings, a big pipeline of future business, and a solid profit outlook for 2026.
Cadance is a company that most people and investors have never heard off. It produces software to design chips. The company describes itself as “Our design solutions, based on Cadence’s Intelligent System Design™ strategy, are essential for the world’s leading semiconductor and systems companies to build their next-generation products from chips to full electromechanical systems that serve a wide range of markets, including hyperscale computing, mobile communications, automotive, aerospace, industrial, life sciences and robotics.”
It is super clever stuff for designing the bits that are used to build all sorts of smart chips. The latest Nvidia chips contain billions of transistors, and the chips designed need to layout the chip logic before the chip can be fabricated. The company is now using more AI to help with the complexity of the tools needed to produce AI.
We have always liked the pick and shovel companies helping to drive progress. Cadance and ASML are both good examples of this with huge power in the chip eco systems.
For Q4, the electronic design automation company reported:
Sales of $1.44 billion (estimate: $1.42 billion).Adjusted earnings per share of $1.99 (estimate: $1.91).
For the year
Revenue of $5.297 billion, compared to revenue of $4.641 billion in 2024
With a year-end backlog was $7.8 billion and revenue expected to be recognized in the next 12 months from remaining performance obligations was $3.8 billion
Management said that 2026 adjusted earnings per share would range between $8.05 and $8.15, above the consensus call for $8.03.
In recent weeks, investors have worried that Cadence’s software business, which is used by chip designers, could suffer competitive pressure from AI tools. At the very least, that backlog figure says there’s billions of dollars standing between Cadence and any more disrupted future.
Technical Milestone: Launch of ChipStack leading the “Agentic AI” era.
CEO Anirudh Devgan highlighted the groundbreaking product ChipStack. This is the industry’s first Agentic AI platform for chip design and verification. It can autonomously schedule underlying EDA tools, achieving automation of design convergence and significantly enhancing engineering productivity. Cadence emphasizes that its “Design for AI, AI for Design” strategy is moving from theory to large-scale commercialization
Source: Cadence IR
