Cadence raises annual forecasts as demand booms for AI chip design software

Cadence Design Systems has boosted its annual revenue and profit projections, citing robust demand for its artificial intelligence-powered software used in chip and system design. The company's shares saw a more than 5% increase in extended trading following the announcement.

The company's electronic design automation (EDA) tools are critical for designing and validating semiconductors and complex electronic systems. Demand for Cadence's software has surged as chipmakers and technology companies increasingly develop sophisticated systems-on-chip (SoCs) and AI accelerators.

Key industry players, including AI chip leader Nvidia and Apple, rely on Cadence's technology. The company now anticipates 2026 revenue to range between $6.26 billion and $6.34 billion, an upward revision from its previous forecast. Analysts, on average, had expected annual revenue of $6.21 billion.

Furthermore, Cadence expects its annual adjusted profit to be between $8.05 and $8.15 per share, exceeding its prior forecast and analyst estimates. This optimism is partly fueled by recent innovations, such as the launch of AuraStack, an AI "super agent" designed to help engineers describe their goals in plain language, enabling the software to plan and execute complex design and testing tasks.

In the second quarter, Cadence reported revenue growth of 24.2% to $1.584 billion, largely meeting expectations. Adjusted profit stood at $2.11 per share, surpassing estimates. The company's quarter-end backlog reached $8.1 billion, with a significant portion expected to be recognized as revenue within the next year.