Cadence (CDNS) Q2 2026: China Revenue Up 96%, RPO $8.1B
Cadence's headline operating margin jumped to 28.4% from 19.0% a year ago, but almost the entire gain is the absence of one item — the $128.5 million export-control settlement charge booked in the June 2025 quarter. Strip it out and the comparison flips: adjusted operating income rose 21.6% against revenue growth of 24.2%, meaning the margin actually slipped about 60 basis points as amortization of acquired intangibles tripled following the $3.1 billion Hexagon design-and-engineering purchase. The real story in this filing is not margin at all. It is that China revenue nearly doubled to $236.2 million after last year's trade-control disruption, contracted backlog stands at $8.1 billion, and the balance sheet has swung from roughly $521.2 million of net cash to just over $1.0 billion of net debt in six months. For an EDA franchise whose revenue is 78% recurring, that combination — accelerating demand funded by a levered acquisition — is the axis on which the next four quarters turn.
1. Balance Sheet: The Hexagon Deal Rewrote the Asset Side
1-1. Major Asset Items
| Item | Dec 31, 2025 ($M) | Jun 30, 2026 ($M) | Change % |
|---|---|---|---|
| Cash and cash equivalents | 3,001.3 | 1,440.4 | -52.0% |
| Receivables, net | 944.9 | 1,065.0 | +12.7% |
| Inventories | 303.5 | 390.4 | +28.6% |
| Property, plant and equipment, net | 517.0 | 560.2 | +8.3% |
| Goodwill | 2,749.1 | 4,914.8 | +78.8% |
| Acquired intangibles, net | 718.2 | 1,874.5 | +161.0% |
| Total assets | 10,153.1 | 12,080.3 | +19.0% |
Total assets grew $1.93 billion, and goodwill plus acquired intangibles alone account for a $3.32 billion net increase. The February 23, 2026 acquisition of Hexagon Smart Solutions AB's design and engineering business carried total purchase consideration of $3,101.0 million — $2.2 billion in cash plus 3.2 million Cadence shares valued at $902.2 million — of which $2,147.2 million landed in goodwill and $1,248.0 million in definite-lived intangibles (existing technology $723.0 million, customer agreements and relationships $507.0 million, weighted average amortization period 7.8 years). Three smaller deals added $83.5 million of cash consideration, $49.9 million of goodwill and $42.4 million of intangibles. Goodwill and intangibles now represent 56.2% of total assets, up from 34.1% at year-end — a meaningful shift in asset quality for a company that historically carried a light balance sheet.
Cash fell by $1.56 billion because $2,100.3 million left the company in business combinations during the half. Inventories rose 28.6% to $390.4 million, with raw materials up to $312.3 million from $245.5 million — a hardware build ahead of emulation and prototyping system deliveries. That stock now equals roughly 3.7 quarters of the $104.5 million of manufacturing costs Cadence reported for the June quarter, and management explicitly flags imported hardware components as a tariff exposure. Receivables grew 12.7% versus 24.2% quarterly revenue growth, so collection discipline held.
