Five years ago, Cadence Design Systems was a line item fund managers skipped past on the way to the semiconductor names everyone actually talked about. Not anymore. The company reports its third quarter results today with a record $8.1 billion order backlog and revenue growing 24% a year, and the stock is still down for 2026 heading into tonight's print. That gap, between what the business is doing and what the market is paying for it, is exactly what Winvesta Crisps exists to find. That's why we built Winvesta Crisps, to decode what's actually driving the companies you own, in plain language, before the consensus catches up. 60,000+ investors from all over India are already in. What about you?
🔔 Don't miss out!
Add winvestacrisps@substack.com to your email list so our updates never land in spam.
Most investors who have even heard of Cadence Design Systems think of it as back office software that chip engineers use and nobody else needs to care about. The reality is sharper than that: no modern chip, not Nvidia's latest GPU, not AMD's newest accelerator, not Apple's next silicon, reaches a fab without first running through Cadence's or Synopsys's design and verification software. Between them, Cadence and Synopsys sit across the vast majority of the global electronic design automation market, and almost every dollar being poured into AI data centres eventually passes through one of their licences. Cadence reports its third quarter results today after the US market closes, coming off a quarter in which revenue grew roughly 24% year on year to $1.58 billion and its order backlog hit a record $8.1 billion, yet the stock was still trading lower for the year heading into tonight's numbers. When the business keeps improving and the share price does not follow, that gap is worth understanding properly.
🔥 Top movers
Cadence shares head into today's print still underwater for 2026, even after management raised full year guidance in July on the back of record bookings, a pattern some analysts have attributed to multiple compression across AI-adjacent software names rather than anything specific going wrong at the company. The print lands in a week stacked with Big Tech earnings, with Microsoft, Alphabet, Meta and Amazon all due to report over the coming days, so broader sentiment on AI capital spending could move Cadence's stock just as much as its own numbers do. Verizon, Nucor and several other large names also report today, keeping Monday's tape busy on both sides of the AI trade.
🧩 Business model: the toll booth before the chip exists
Cadence sells the software that semiconductor companies use to turn an idea for a chip into a design that a factory can actually manufacture. Its core electronic design automation business covers digital and custom integrated circuit design, verification tools under the Verisium brand, and implementation tools under the Cerebrus brand. Alongside that sits an intellectual property licensing business, where Cadence licenses pre-built circuit blocks that chipmakers plug into their own designs rather than build from scratch, and a newer System Design and Analysis business that has grown rapidly since Cadence pushed beyond pure chip design into simulating how chips behave physically once assembled into a system.
The economics are built on multi-year licence agreements and subscriptions rather than one-off sales, which is why Cadence talks about backlog the way a hotel chain talks about advance bookings. At the end of its second quarter this year, that backlog stood at a record $8.1 billion, with roughly $4.2 billion of it expected to convert into recognised revenue over the following twelve months, per the company's own second quarter disclosures. That gives Cadence a degree of revenue visibility that most software companies would envy, because customers are not buying a licence for this quarter's chip. They are buying the tool they will use for the next several years of chip designs, win or lose in the market.
The reason this matters so much right now is structural, not cyclical. Designing an advanced chip today, something with billions of transistors arranged in three dimensional stacks and chiplet architectures rather than a single flat die, cannot be done by hand or with generic software. It requires specialised tools from a small number of vendors who have spent decades building the mathematics and the customer relationships to do it. Cadence and Synopsys are estimated to hold the large majority of that global market between them, with Siemens EDA, formerly known as Mentor Graphics, a distant third, though exact market share figures vary meaningfully depending on which analyst you ask and how the simulation and IP businesses are counted. Whoever wins the AI chip race, whether that is Nvidia, AMD, Broadcom's custom silicon customers or someone not yet on investors' radar, that winner almost certainly used Cadence or Synopsys tools to get there. Cadence gets paid either way.