In short: AI demand compounds. Q2 revenue +24% Y/Y to $1.6B (in line) and non-GAAP EPS $2.11 ($0.05 beat), with backlog to a record $8.1B (from $8.0B in Q1) and $4.2B set to convert within twelve months. CEO Anirudh Devgan's framing: autonomous agents call Cadence's underlying engines more often, so agentic adoption lands as higher consumption of tools customers already license. IP revenue grew 43%, which Devgan said was mostly organic rather than the acquired Hexagon design business; CFO John Wall described hardware as supply-constrained heading into another record year, and guided second-half adjusted margins to 43.75%–44.75% (below Q2's 45.5%) on deliberate integration and growth investment. FY26 revenue raised to $6.26–6.34B (vs ~$6.21B consensus), lifting the full year by $125M and implying 19% growth in what Devgan called the largest single-quarter raise the company has made. But management still hasn't modelled any "sudden step function" from agentic AI, and Cadence still can't isolate the agentic contribution as its own number. (Recap, not a stance call.)
Cadence makes the software chip designers use to design chips. The most interesting idea in this issue comes from its CEO: when customers point AI agents at their design work, the agents call Cadence's simulation engines far more often than a human would. So AI shows up not as new software licences but as heavier usage of software customers already pay for — a consumption business rather than a per-seat one, which is exactly the model investors have been penalising elsewhere. Backlog hit a record $8.1 billion and the company made the largest single-quarter forecast increase in its history. Two honest notes: margins in the second half are guided lower because Cadence is deliberately investing, and management still refuses to model any sudden jump from AI agents — it can't even separate out how much of today's growth they represent. A recap, not a call.
In short: The only name appearing in both the "Big Funds, Small Positions" list and the eight adds — i.e. several funds are building it from a small base. No comment on the business.
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