Cadence (CDNS) Q2 FY26 earnings call: guidance and Q&A

Can Cadence quantify the long-term TAM expansion opportunity from Agentic AI and how it might increase EDA's share of R&D spend?

Anirudh highlighted Agentic AI as a new TAM opportunity at the top layer while reinforcing the middle layer (physically accurate tools). He noted strong customer interest and early add-on business, contributing to the broad-based strength and raised guidance. John clarified that while the opportunity is developing well, current guidance doesn't assume a sudden step function in monetization.

“The opportunity is continuing to develop well though.”

asked by Joseph Quatrochi · answered by John Wall

What are the implications for Cadence if agents can access EDA tools, driving higher usage? Where does Cadence's differentiation lie against customers building their own mental models?

Anirudh reiterated the Three-Layer Cake framework, stating that even open-source efforts require EDA tools for real designs. He emphasized Cadence's differentiation across all three layers: knowledge graph/mental models, physically accurate tools via deep API access, and specialized hardware. He believes the framework will prevail, and customers will increasingly depend on Cadence for mission-critical tasks.

“But to really do real designs, people use Cadence to do that.”

asked by Joseph Vruwink · answered by Anirudh Devgan

What's driving the over 40% growth in the IP business (organic vs. inorganic, sustainable rate)? What is Hexagon's contribution and EPS dilution?

John stated Hexagon is delivering as expected, contributing to SD&A growth, but SD&A strength is broader. He noted IP growth is driven by AI/HPC and advanced nodes, mostly organic, but timing can be variable. Anirudh added that IP and SD&A are approaching $1 billion run rates, and IP benefits from improved quality, focused strategy on star IP/AI/HPC, and a more diverse foundry ecosystem (Intel, Samsung, Rapidus).

“most of it is, just to clarify, is organic growth.”

asked by Vivek Arya · answered by Anirudh Devgan

Can Cadence discuss add-on engagements for Agentic AI tools, their prevalence beyond noted customers, and quantify their impact on guidance or core EDA revenue?

Anirudh highlighted the improved overall environment, Cadence's strong competitive position, and the new TAM expansion from Agentic AI as key drivers for results and guidance. He noted the Q2 raise is the highest ever for annual revenue, and while some Agentic AI benefit is already present, the company remains prudent about future projections. John emphasized the raise reflects broad-based strength, not just one product or customer.

“this is the highest we have raised annual revenue in a single quarter, okay, and to about 19% revenue growth with improved profitability.”

asked by James Schneider · answered by Anirudh Devgan

Where is Cadence seeing the most competitive pressure, and is it winning or losing share in digital implementation and verification at the leading edge, especially given rivals' Agentic AI push?

Anirudh expressed pride in the new Intel collaboration, normalizing Cadence's relationship with Intel to match other leading companies, similar to recent progress with Samsung. He noted improved positioning at Intel and Samsung, especially in digital and verification, and strengthened digital engagement across all customers, including sign-off. He emphasized focusing on team, technology, and customer needs to stay ahead.

“I've said for a while, we were weak at Intel and Samsung, and that definitely has changed.”

asked by Lee Simpson · answered by Anirudh Devgan