Agentic AI presents a "real potential" for that 11% to increase further.
Mgmt stance: Bullish — CEOs are willing and want to invest more in automation and compute, so EDA share of R&D is expected to rise.
Q7 — Ruben Roy
Topic: Operating margin structure and Rule of 60 target
Key points:
Organic incremental margin is now closer to 60% than 50%.
Hexagon integration will follow a similar pattern to BETA: dilutive in '26, then margins improve in '27 (12–18 months to reach profitability expectations).
Agentic AI customer engagement provides "even more opportunities" to stretch incremental operating margin.
Mgmt stance: Bullish — expects operating margin to improve post-Hexagon integration, with incremental margins trending higher.
Q8 — Harlan Sur
Topic: Second-half revenue guidance and Hexagon lumpiness
Key points:
First half is "very strong"; second half contains "appropriate prudence."
Hexagon's D&E business is first-half weighted (Q3 and Q4 were their worst quarters last year).
Q1 guide was one of the highest raises at this time of year; company prefers to wait until July to update second-half outlook.
Mgmt stance: Neutral — acknowledges lumpiness but attributes guidance prudence to normal cadence and strong Q1 bookings.
Q9 — Lee Simpson
Topic: Physical AI momentum and value capture
Key points:
Physical AI is described as a "3-layer cake"; second slice (physical AI) is expected to be "bigger than data center AI by a long chart."
Hexagon acquisition, combined with Millennium, Cascade, and BETA, provides a "complete solution" for physical AI simulation and optimization.
Physical AI also drives silicon design demand (e.g., Tesla citing insufficient silicon), benefiting EDA and IP.
Mgmt stance: Bullish — physical AI is in Cadence's sweet spot (analog + digital), and will turbocharge both the SD&A and silicon businesses.
Q10 — Gianmarco Conti
Topic: Hardware refresh cycle (Palladium/Protium) and internal AI tooling
Key points:
Current Z3 system can design 1 trillion transistor systems; biggest current systems are 100–200 billion transistors.
Industry is expected to reach 1 trillion transistors by 2030; Z4 will be available before 2030.
Cadence designs its own chip, giving a "10-year lead" in Palladium over FPGA-based systems; lead will increase with new products.
Internal agentic AI tooling is used to make engineering teams more productive without disproportionate headcount growth.
Mgmt stance: Bullish — competitive position is "amazing," and the hardware road map is strong; no urgency to refresh given current capacity.