Cadence Design Systems, Inc.

Ladies and gentlemen, good afternoon. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence second quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star and then the number one on your telephone keypad. Thank you. and I will now turn the call over to Richard Gu, Vice President of Investor Relations for Cadence. Please go ahead.

Thank you, operator. I would like to welcome everyone to our second quarter of 2026 earnings conference call. I'm joined today by Anirudh Devgan, President and Chief Executive Officer, and John Wall, Senior Vice President and Chief Financial Officer. The webcast of this call and a copy of today's prepared remarks will be available on our website, Cadence.com. Today's discussion will contain forward-looking statements, including our outlook on future business and operating results. Due to risks and uncertainties, actual results may differ materially from those projected or implied in today's discussion. For information on factors that could cause actual results to differ, please refer to our SEC filings, including our most recent Forms 10-K and 10-Q. CFO Commentary, and today's earnings release. All forward-looking statements during this call are based on estimates and information available to us as of today, and we disclaim any obligation to update them. In addition, all financial measures discussed on this call are non-GAAP unless otherwise specified. The non-GAAP measures should not be considered in isolation from or as a substitute for GAAP results. Reconciliations of GAAP to non-GAAP measures are included in today's earnings release. For the Q&A session today, we would ask that you observe a limit of one question only. If time permits, you can re-queue with additional questions. Now, I'll turn the call over to Anirudh.

Anirudh Devgan Thank you, Richard. Good afternoon, everyone, and thank you for joining us today. I'm very pleased to report that Cadence delivered outstanding financial results for the second quarter of 2026. with all key metrics exceeding our guidance. We exited the quarter with record backlog that was above our expectations. We are seeing growing demand for AI-driven solutions across our expanding customer base. The AI transformation is driving strong broad-based performance across both design for AI and AI for design fronts. Given the growing business momentum and accelerating demand, we are raising our guidance for the year to 19% revenue growth and with higher profitability as we become more central to our customers as a strategic and trusted partner. John will provide more details on both our Q2 results and the updated financial outlook. Let me start with the overall environment. Design activity is growing as AI drives exponential design complexity and a new generation of system architectures spanning hyperscaler infrastructure and physical AI. Customers are investing aggressively in these opportunities led by AI and HPC. And we are also seeing continued signs of improvement across the more traditional analog and consumer verticals. Chip and system design present demanding engineering challenges that require deterministic physics-based engines, proprietary silicon correlated data, and deep design knowledge. Our three-layer CAKE framework uniquely brings these capabilities together with accelerated compute and data at the bottom layer physically accurate simulation and optimization solvers in the middle layer and AI agents and orchestration at the top layer. Agentic AI is a demand accelerator for Cadence as autonomous agents expand the design exploration space and call our underlying physically accurate engines more often, creating a durable tailwind that represents a significant long-term DAM expansion opportunity. We extended our leadership in agentic AI with AuraStack AI Super Agent, delivering up to 15x higher productivity and 2x faster time to market for PCB and advanced packaging design. Cadence is now the only provider with agentic solutions spanning the full electronic system design flow from digital analog design and verification to advance packaging and PCB. We see strong early traction across our AI superagent portfolio with initial customer results demonstrating meaningful productivity improvement and better design outcomes. A chip stack AI superagent enabling higher verification productivity and faster design cycles has more than 20 customer engagements and is already deployed in production across multiple chip designs. At Computex 2026, together with Nvidia, we introduced the industry's first fully autonomous virtual AI design engineer, extending chip stack to even higher levels of autonomy. Early customer results include more than 40X faster RTL validation, reducing a typical five-week verification cycle to less than a day on a state-of-the-art advanced node design. In analog and custom design, Virastack is seeing strong customer interest with more than 25 customer engagement, achieving 2x to 10x productivity improvements compared to traditional design flows. InnoStack is also building momentum as customers adopt agentic AI for Advanced Node SoC Design. During the quarter, Rapid has announced a collaboration to integrate the Cadence InnoStack AI superagent into its AI agent design solution, targeting up to a 2x faster design turnaround. We continue to deepen our strategic partnerships across the ecosystem. We expanded our collaboration with Intel through a multi-year engagement focused on enabling its 14-year process, leveraging our design IP and agentic AI-based EDA to co-optimize tool flows and methodologies for next-generation HPC and mobile design. This agreement is expected to be a meaningful driver of growth over the next few years. We also deepen our collaboration with Samsung Foundry, on two-nanometer and 3D IC technologies, combining our AI-driven flows and design IP to enable next-generation AI, HPC, and mobile systems. Now turning to our businesses, we are pleased that all product groups delivered double-digit year-over-year growth. Our IP business had an outstanding quarter growing over 40% year-over-year. AI performance is increasingly constrained by data movement, memory bandwidth, and advanced packaging. And our differentiated IP portfolio continued to see strong adoption. This was reflected in the strong demand for our star IP portfolio in AI and HPC applications, including PCIe, UCIe, HBM, and LP DDR6. We also expanded engagement with leading memory, semiconductor and aerospace customers. We secured our first-ever Tensilica DSP design win with ST Microelectronics, reinforcing our strength in automotive and audio applications. Core EDA grew 18% year-over-year, driven by growing adoption of our AI solutions. Proliferation of our digital full-flow solutions continued, and we saw expanded adoption of Tempus and Certus sign-off tools on leading edge designs, with wins across hyperscalers, top semiconductor companies, and startups. We also expanded our implementation and sign-off footprint at frontier AI companies as well as at a marquee ASIC silicon vendor, underscoring their differentiated value in enabling the industry's most advanced design. In analog, we had a significant competitive win with Spectre at a leading semiconductor supplier, and our fast-buy simulator SpectreFX notched several production wins at leading customers. Our hardware business delivered another record quarter driven by continuous strength in Palladium Z3 and Protium X3. At design approach unprecedented scale, hardware-assisted design and verification is becoming a strategic capacity layer for our customers' AI roadmap. These customers are designing some of the most complex chips and systems in the world. and they critically depend on our scalable, high-performance hardware platforms to realize their designs. Demand remains especially strong from AI and HPC customers, including hyperscalers and leading semiconductor companies. We added 12 new logos and saw meaningful expansion with several marquee AI customers, as well as a notable competitive win with a major AI infrastructure provider. System design and analysis revenue grew 37% year over year. As AI system complexity increases, customers are increasingly turning to our advanced packaging and PCB solutions. Allegro XAI was adopted by several customers driven by significant layout design time reduction. With our 3D IC technology and collaboration with TSMC's 3D Fabric Advanced Packaging Solutions, we are enabling customers to confidently design cutting-edge silicon for increasingly demanding AI workloads. In structural simulation, our beta CAE business had several competitive displacements. While the integration of recently acquired Hexagon's DNE business is progressing well with key deals closed with top customers. There is strong customer interest in our integrated full flow that combines our multi-physics products across the electrical, PFD, and structural domains to best address next generation system design needs, including in the emerging field of physical AI. In summary, Q2 was a great quarter for Cadence, and I'm delighted with the continued momentum of our business. With accelerating design activity, we continue to execute strongly, and our competitive position has never been better as we lead the transformation to agentic AI in chip and system design. With that, I will turn it over to John to provide more details on our Q2 results and our updated 2026 outlook.