Cadence Design Systems (Cadence (CDNS)) is riding the AI wave like a pro surfer. The electronic design automation software company reported second-quarter results Tuesday that beat expectations, raised its full-year guidance, and revealed a record backlog that suggests the good times are just getting started. Shares rose more than 3% in premarket trading as investors digested the news.

Beat and Raise, AI Style

Revenue jumped 24% year over year to $1.584 billion, edging past the $1.577 billion analysts were looking for. Adjusted earnings came in at $2.11 per share, ahead of the $2.06 consensus estimate. The company credited artificial intelligence as a key growth driver, with demand accelerating across both "design for AI" and "AI for design." In plain English: Cadence's software helps engineers design the chips that power AI, and AI is also making those design tools smarter.

The numbers tell a story of a company in the right place at the right time. Investments in AI, high-performance computing, hyperscaler infrastructure, and physical AI are making chips and systems more complex, which is exactly the kind of problem Cadence's software and IP are built to solve.

Record Backlog: $8.1 Billion and Counting

Cadence ended the quarter with a record backlog of $8.1 billion. That's a big number, and it reflects strong customer demand and continued business momentum. Think of it as a pipeline of future revenue that's already locked in.

The company's financial health looks solid. GAAP operating margin was 28.4%, while non-GAAP operating margin hit 45.5%. Operating cash flow totaled $635 million during the quarter. Cadence ended the period with $1.44 billion in cash and $2.5 billion in debt. It also bought back $200 million of its own stock and plans to allocate about 50% of its 2026 free cash flow to share repurchases.

All Segments Growing, IP on Fire

Every major product group posted double-digit year-over-year growth. The IP business was the standout, growing more than 40%, driven by demand for AI and high-performance computing technologies like PCIe, UCIe, HBM, and LPDDR6. Cadence also scored its first Tensilica DSP design win with STMicroelectronics, expanding its footprint in automotive and audio markets.

Core EDA revenue rose 18% from a year earlier, as adoption of AI-powered design tools and digital full-flow solutions expanded. The company reported broader use of its Tempus and Certus signoff platforms among hyperscalers, semiconductor companies, startups, and AI chip developers. It also notched multiple customer wins for its Spectre and Spectre FX analog simulation platforms.

System Design and Analysis revenue climbed 37% year over year, supported by rising demand for advanced packaging and printed circuit board solutions as AI systems become more complex. Cadence said Allegro X AI continued to gain traction by reducing layout design time.

Partnerships Galore: Intel, Samsung, TSMC

Cadence highlighted its collaboration with Taiwan Semiconductor Manufacturing Company (TSM) on 3D Fabric technologies for next-generation AI chips, along with progress integrating the acquired Hexagon D&E business. The company also announced a multi-year collaboration with Intel to support its 14A process technology using Cadence IP and agentic AI-based EDA tools. And it strengthened its partnership with Samsung Foundry to support 2-nanometer and 3D IC technologies for AI, high-performance computing, and mobile applications.

These partnerships are a big deal. They show that Cadence is deeply embedded in the semiconductor ecosystem, working with the biggest players on the most advanced technologies. That's a competitive moat that's hard to replicate.

Guidance: Up, Up, and Away

For the third quarter, Cadence expects adjusted earnings of $2.01 to $2.07 per share, above analyst estimates of $1.94 per share. For the full year, the company raised its revenue outlook to $6.26 billion to $6.34 billion, up from its previous guidance of $6.13 billion to $6.23 billion and above the $6.21 billion analysts were expecting. Adjusted earnings are now expected to be $8.05 to $8.15 per share, up from $7.85 to $7.95, and above the $7.96 consensus.

Cadence Design Systems shares were up 3.25% at $349.60 during premarket trading on Tuesday. The message from the company is clear: AI isn't just a buzzword—it's a powerful tailwind that's driving real growth. And Cadence is positioned to benefit from it for the foreseeable future.