Verdict: Justified
Key finding: The third raise of the year:
- 2026 revenue guide $6.387-6.417B (~21% growth); non-GAAP EPS $8.37-8.43.
- Record backlog $8.2B (about $4.2B converts within 12 months) and a new $2.5B buyback.The stock rose +6.5% to $343.08 and held for two days, then fell -4.3% on 10/30 to $327.89. The 10/30 low of $322.25 touched the $322.17 pre-report close almost to the cent.
Scorecard
| Ticker | Rev last Q ($M) | Rev YoY last Q | Rev YoY prior Q | Gross margin (last Q, trend) | Op margin | EPS last Q vs yr ago | P/S | Mkt cap | 1-mo price % |
|---|---|---|---|---|---|---|---|---|---|
| CDNS | 1,633.3 | +22.0% | +24.2% | 85.6% (from 86.4%) | 26.2% | 1.05 vs 1.05 | 14.61 | $89.6B | -0.7% |
| SNPS | 2,476.8 | +42.4% | +41.9% | 72.6% (from 78.1%) | 14.4% | 2.84 vs 1.50 | 8.03 | $75.6B | +7.5% |
| PTC | 600.0 | -6.8% | +21.7% | 81.7% (from 82.9%) | 27.8% | 1.03 vs 1.17 | 7.99 | $23.6B | +39.4% |
| ADSK | 2,046.0 | +16.1% | +18.4% | 91.4% (from 91.0%) | 29.3% | 2.33 vs 1.46 | 6.89 | $53.7B | +19.4% |
EPS = GAAP from our data (non-GAAP $2.11 vs $1.93). Peer rows are their June / July quarter. SNPS growth includes the Ansys acquisition (not organic).
CDNS has the best margins of the two chip-design (EDA) leaders, but they are slipping: gross margin 85.6% vs SNPS 72.6%.
- GAAP op margin is 26.2%, down from 31.8% a year ago (company release).
- Growth is steady (+22.0% after +24.2%).
- It is the most expensive of the group at 14.6x sales.
Move
- 52-week high $416.69 (6/2); the 10/30 close is -21.3% from it.
- 10/26 (report day, before the after-close release): $322.17 (+1.8%), range $315.35-$331.65.
- 10/27: opened $325.96 (+1.2%), low $323.68, high $348.80, close $343.08 (+6.5%) on 4.65M shares (~1.9x average).
- 10/28-10/29: a tight $333.30-$348.80 range; closes $342.46 and $342.75.
- 10/30: -4.3% to $327.89, low $322.25.
- Price sits on the 50-day ($320.53) and 200-day ($327.54), below the 20-day ($335.15).
Catalyst
Q3 2026, released after the close on 10/26 (company 8-K + CFO commentary):
- Revenue $1.633B (vs $1.339B, +22%). Non-GAAP EPS $2.11 vs $1.93 (FMP estimate $2.05).
- 2026 guide: revenue $6.387-6.417B; non-GAAP EPS $8.37-8.43. Q4: revenue $1.695-1.725B; EPS $2.19-2.25.
- Backlog: record $8.2B (end of 2025: $7.8B); about $4.2B current.
- Buybacks: $400M in Q3 plus a new $2.5B authorization; more than half of 2026 free cash flow goes to buybacks.
- Analysts: Needham raised its target to $430 from $400 (Buy).
- Soft spots: GAAP op margin 26.2% vs 31.8%; non-GAAP 44.1% vs 47.6%; operating cash flow $424M (vs $635M in Q2). Earnings Whispers flagged cooling segment growth.
Sector
- Design software in October (9/30 to 10/30): SNPS +7.5%, PTC +39.4%, ADSK +19.4%; CDNS -0.7%.
- 10/30: IGV -3.4%, SMH -7.0%. Inference: Cadence sells to chip designers, so it partly trades with semis.
Risks
- Margin compression: op margin down 4-6 points YoY (GAAP and non-GAAP).
- Cash-flow dip: $424M of operating cash flow vs $635M in Q2.
- Valuation: 14.6x sales, ~39x the 2026 non-GAAP EPS midpoint at $327.89 (my calculation: 327.89 / 8.40).
- Semis link: customers are chip designers, so a long semis downturn would reach bookings later.
- Insider sales: 14 sales from 8/17 to 10/1 ($3.67M).
- Next binary: Q4 report, about mid-Feb 2027 (inference from the 2026 pattern).
Judgement
Justified.
- A quality beat-and-raise with record backlog and a large buyback; the margin dip is the honest knock.
- The reaction was modest (+6.5%) and has nearly fully retraced to the pre-report close in the 10/30 selloff.