CDNSCadence Design Systems, Inc.

“Our core EDA business delivered another strong quarter, with revenue growing 18% year-over-year, driven by increasing proliferation of our solutions at market-shaping customers. Our AI-driven solutions, and increasingly, our agentic offerings are becoming an important part of customer renewals and expansions.”

“Our System Design and Analysis business delivered 18% year-over-year revenue growth as AI-driven multiphysics simulation and 3D-IC become essential to addressing growing system challenges.”

“Our IP business continued its strong momentum, with 22% year-over-year revenue growth driven by accelerating demand of AI, HPC and automotive workloads.”

“I think it will be roughly $1 billion of run rate. And what is more exciting to me is that it is focused in the 2 important areas of SDA.”

“historically, we have said EDA used to be 7% of R&D and now it's more like 11% of R&D. So it has gone up and R&D spend itself will go up significantly. But I think there is a real potential, especially with agentic AI for that 11% to go up. And all the big CEOs I talked to, they are not only willing, they want to see that happen. They want to invest in more automation and compute to make it happen.”

“Our subscription model remains the anchor arrangement with our customers. The add-on monetization then comes incrementally through agentic workflow products that are kind of usage-based or consumption-based for capacity and through our token and card models. What's different about agentic AI is that it doesn't replace the core EDA engines. It calls them more often and it calls them intelligently. So the monetization opportunity is twofold really. So you've got like the new agentic workflow products and then you've got the increased usage of the underlying base tools through more exploration, more verification, more optimization and more compute. Now that said, we're obviously being disciplined in our 2026 outlook. We're not assuming a sudden step function in AI monetization in the guide, but we do believe agentic AI expands the long-term growth opportunity for Cadence.”

“the customers will always write their own agents as well, if I understand the first part of your question. Even in our pre-agentic flow, we would have given a lot of flexibilities to our customers. We had a Tcl/Tk or a Python interface to our tools, and they would always have their own flows. I mean this is natural for big customers. I mean these are who's who of tech companies. So they always want to have some differentiation from one flow to the other. So -- and that will happen in the agent word itself. So I think most of our customers are writing some of their own agents. But the key thing is that the critical agents, okay, like these big super agents we talked about, like RTL design and verification, analog design and physical design, these are like super categories.”

“first of all, like I said, this kind of automation was not possible before. So all this work used to be done by the customers themselves, right? And in that case also, I talked to one big customer. Like, for example, they said for analog or even for digital, every new design, they require 2x more engineers. And anyway, it's not -- it's like unrealizable headcount growth because they can't hire 2x more engineers every time. So the way we plan to monetize and the early signs are positive is that, first of all, we'll sell new tools that we never sold, which is more like this was manually done by customers like doing analog design or doing RTL. So that will be priced as a subscription plus consumption model, very similar to other kind of leading AI tools.”

“this year, like I mentioned in CadenceLIVE, we have all kinds of EDA application now on Millennium, which is super exciting. And the most exciting part of EDA application in Millennium is 3D-IC signoff because right now, the biggest issue is the complexity of these 3D-IC systems, not just to design them, which we can do in Integrity and Innovus, but to sign them off. So there's this huge system that need to do thermal simulation, electromagnetic simulation, power delivery simulation. And they are more naturally like a matrix without getting too technical, they are closer to a matrix multiply numerical solver, which is great for GPU acceleration.”

“what I'm super excited that we launched in CadenceLIVE is the agentic part and the interplay of the agentic tools with the base tools, the AI orchestration combined with physical accurate base tool. And that creates new opportunities for us, both in terms of TAM expansion. Because what agentic AI allows us is to sell products in spaces we didn't have products before, like RTL generation, verification plan generation. And those products, I think will be consumed more on a subscription plus consumption model. So this is an entirely new category for Cadence.”

“I'm very confident in our position in the base tool and our competitive advantage, okay? And just to remind everyone, I mean, we have about 15,000 people now in Cadence and about 10,000 are in R&D. We have more than -- half of them have advanced degrees. I think more than 1,000 of them have PhDs from the top universities. So we will, anyway, deploy AI internally like we are to write our software better. But I'm not worried that some other party will be able to write any better base tools.”

“Agentic AI era is here, and Cadence is leading the transformation of semiconductor and system design. At CadenceLIVE Silicon Valley 2026, we took a major step towards fully autonomous chip design, pioneering the industry's most advanced and comprehensive agentic full-flow platform. We introduced AgentStack, the head agent framework for our AI Super Agent, which enables knowledge sharing across the design flow and extend autonomous designs from chips to 3D-IC to systems.”

“Building on our revolutionary ChipStack AI Super Agent for RTL design and verification, we introduced two new breakthrough AI Super Agents, ViraStack for analog and custom design and InnoStack for digital implementation and signoff. Together, these solutions span the entire chip design flow, creating a connected continuous learning platform that brings the industry closer to comprehensive automation.”

“Led by AI-driven Cadence Cerebrus solution, our digital platform continues to gain share, especially at the most advanced nodes. A global semiconductor design leader significantly increased their Innovus usage and adopted our digital signoff solutions, and a marquee AI infrastructure company expanded their usage of our signoff solutions in their leading-edge ASIC designs.”

“when the agent runs those blocks, they may try 10 or 100 variations of those things. And anyway, AI does a lot more exploration than a human would do. So not only agent can give more productivity, it by nature runs more of the base tools. So that's why if you look at -- our usage of base tool is going up pretty significantly in this kind of environment.”

“We announced a strategic collaboration with Google to optimize the ChipStack AI Super Agent with Gemini on Google Cloud. By combining LLM reasoning with GCP scalable compute, this collaboration delivers a cloud-native platform for next-generation chip development.”

“In Q1, we furthered our long standard partnership with MediaTek through a wide-ranging expansion across our new agentic AI offerings and core EDA, 3D-IC and system analysis solutions.”

“Momentum on verification software grew, particularly in Xcelium and Verisium SimAI, And ChipStack generated tremendous customer interest, with a large number of evaluations underway.”

“Demand for our hardware accelerated in Q1, resulting in our best quarter ever, led by AI HPC customers and increasing demand in automotive and robotics.”

“we have most of our headcount is engineering, right, whether it's R&D or customer support. So we always want to use our own products in both our hardware groups, which is a significant design team. We do both software, hardware and all the system design in Palladium and Protium. And also, just to remind you in our IP team. It's a great -- we are working very well together, our IP team and EDA team because IP, we have so much demand. And instead of, again, increasing headcount, we are always sensitive about how much headcount. We'll increase, and we are increasing headcount in all areas, including IP, but we can make them a lot more productive with agentic AI.”

“We continue to view our platform as a 3-layer cake, with accelerated compute and data as the base layer, principal simulation and optimization as the critical middle layer and agentic AI as the top layer. As I've said before, we believe the greatest value comes from the tight coupling of these layers, reinforcing each other to deliver much better results. As these super agents invoke our simulation, verification and implementation engines at scale, we expect them to materially expand EDA consumption and drive higher usage across our platforms.”

“Physical AI is emerging as the next big wave of intelligence as AI moves into autonomous systems, autos, drones and robotics, and Cadence is uniquely positioned to lead this transition. The addition of Hexagon's D&E leading structural and multi-body dynamics technologies transforms our system analysis portfolio to a leadership position in physical AI, enabling customers to build and train fundamentally new AI word models by narrowing the critical sim-to-real gap.”

“what we saw from Q1 is -- I mean, the overall pricing environment has improved. Pricing obviously remains value-based with us. We provide tremendous value to our customers, especially with our agentic flow, and we stand to benefit from our customers' success in that area. Also, any shift that you see from customers' labor spend to automation, that's likely to be irreversible and likely to accelerate over time.”

“Millennium is doing great. I don't know if you saw Jensen was there at CadenceLIVE and did a nice autograph on Millennium box. So we are pleased with the partnership with NVIDIA there. And I mean, there are 2 ways to -- 2 kind of high-level applications. We are working on this kind of CFD or SDA application for a while, and that's going well, especially in auto and also in drones, okay?”

“I've said this for 5 years now, where I believe physical AI will be bigger than data center AI by a long chart because you're talking about like trillions of dollars of product opportunity. And it will reconfirm the data center layer -- data center slice because to deploy, for example, an AI model in the car, you need to train it on the data center anyway.”

“I think because of this new category of TAM expansion, which is more labor productivity related along with the base tools, I think there is a potential that the monetization of agentic AI could happen sooner than 2 contract cycles, okay? I don't want to predict too much. And like John said, we are not putting it in our guide.”

“At CadenceLIVE Silicon Valley, we announced an expanded partnership on AI and robotics with NVIDIA. By combining our agentic AI-driven solutions with NVIDIA's advanced technologies, we are accelerating engineering workflows and boosting productivity across chip design, physical AI systems and hyperscale AI factories.”

“you will see from us an agentic flow to do system design. And that part of the market has not seen that much -- it's even worse automation than chip design that had a lot of automation. But there will be agentic flow, which will integrate all these things in a better way.”

“In custom and analog, our AI-driven Virtuoso Studio continued its strong momentum in design migration and layer automation as it gets increasingly deployed by analog and mixed signal leaders seeking greater productivity.”

“with the benefits that we're seeing in terms of customer engagement accelerating on the agentic AI front, I think there's even more opportunities to stretch that incremental operating margin going forward.”