Cadence Design Systems posted quarterly results that topped Wall Street expectations, with revenue and adjusted earnings benefiting from robust demand for tools used to design increasingly complex artificial intelligence chips. The San Jose, California-based software firm saw its shares rise by nearly 4% in extended trading following the results.
For the fourth quarter, Cadence reported revenue of $1.44 billion, a 6.2% increase from a year earlier, compared with analysts' average forecast of $1.42 billion, based on data compiled by LSEG. Adjusted profit for the quarter was $1.99 per share, exceeding the $1.91 per-share estimate.
Company products play a specialized role in semiconductor development - mapping intricate circuit layouts and designing common elements such as memory connectors - and include verification tools to detect overheating and electrical defects. Those capabilities have become more in demand as chipmakers seek to build processors capable of handling complex AI workloads.
Cadence's chief financial officer, John Wall, said strong contract bookings in the fourth quarter have produced a record $7.8 billion of work under contract to be delivered in future periods. Wall characterized that backlog as providing significant momentum as the company moves into 2026.
The company also recently introduced a virtual AI "agent" intended to help customers, including Nvidia, expedite the process of designing complex chips. Cadence counts Apple and Amazon among its customers.
Looking further ahead, Cadence provided a 2026 revenue outlook between $5.9 billion and $6.0 billion, which the company said is largely in line with analysts' expectations. The company reported full-year 2025 revenue of $5.30 billion. Management set a 2026 adjusted earnings-per-share forecast in the range of $8.05 to $8.15, roughly matching consensus estimates at $8.05.
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Investors and market participants will likely watch how Cadence converts its record backlog into revenue and whether demand for AI-capable chips remains elevated as the company executes on its product roadmap and guidance into 2026.