Cadence Design Systems $CDNS ( ▲ 7.6% ) surged following a fourth quarter report that beat expectations across key metrics and delivered an upbeat outlook for 2026. The chip design software company posted revenue of $1.44 billion and adjusted earnings of $1.99 per share, both ahead of forecasts.
Perhaps more importantly, Cadence reported remaining performance obligations of $7.8 billion, a measure of contracted future work, signaling years of revenue already locked in. That backlog alone reassured investors worried about potential AI disruption to the business.
Guidance signals steady growth ahead
Management expects 2026 adjusted earnings per share between $8.05 and $8.15, slightly above Wall Street estimates. Analysts note that Cadence has a history of issuing conservative forecasts early in the year and raising them later as visibility improves.
This pattern has helped build credibility with investors, especially during periods of uncertainty in the semiconductor industry.
AI boom strengthens demand for design tools
Cadence’s software is essential for designing advanced chips, making it a direct beneficiary of the AI infrastructure buildout. The company highlighted expanding partnerships with major cloud providers and ongoing projects tied to next generation processors.
One notable development involves hyperscalers using Cadence tools to design custom chips under customer owned tooling arrangements, a trend analysts believe could become a major growth driver as tech giants seek greater control over their hardware stacks.
In short, while AI threatens many software businesses, it is currently fueling demand for the tools needed to build the hardware powering that revolution.