Cadence Design Systems Deutsche Bank 2026 Technology Conference

Thank you for having me, Gianni. First off, I want to take a step back and just introduce Cadence real quick for the ones newer to our stories. Cadence is a pivotal foundational player in the semi ecosystem. We provide the semiconductor design tools to all the chip companies, semi companies, and systems companies. It's an indispensable kind of role that we play in there. If you look at what happened in the past, I'd say 10, 15 years, there are two major trends, Gianni, to your question, that's shaping the industry. One is the convergence and a merge between semi and the systems. Because all of these semi companies are becoming systems companies and vice versa. Be it hyperscalers or autonomous driving vehicle companies or even frontier other model companies that design their own ASIC chips now.

Which is a great thing to see. Because what it means for us is not only the aperture is expanded dramatically in terms of the newer entrants, the new customers, and design starts, which is always a great tailwind for our business, but it also means increasing compounding complexity for those designs. If you put together these two dimensions, it's a fantastic tailwind for the company for the next, I'd say, 10, 15 years unabated. First. But the second trend I'd say is the AI obviously is a turbocharger for the entire semi ecosystem, and Cadence is a structural winner throughout this entire process.

Not only are we supporting and supplying the EDA, IP, hardware systems, and system simulation software to all the key players to design their AI accelerators, but also we're applying AI to our own tools to make sure our customers can reap the benefits of the massive boost in productivities, and they can design better chips too. I think with those two together, we're seeing a very strong tailwind for the business. Our most recent Q2 results is a reflection of that, right? You see clearly all the semi companies and systems companies are doubling down in terms of innovation roadmaps. R&D spend continue to grow, which is a great leading indicator for our business. In the meantime, I'd say our business is accelerating. We're growing this year at a clip of 19%, with 44.25% of kind of non-GAAP op margin.

When we talk about the rule of 40, we're going to surpass the rule of 60 this year. It's a great business there, and Cadence is well-positioned to tap into a long-term growth.

Great question. We're very excited about ChipStack and also the other three super agents we launched, ready fire over the past couple months, which literally straddles the entire spectrum of the chip design in the back end also, including Veristack, which is the analog design full-flow orchestrator, and also Innostack, which runs the digital flow, and Aurastack, which runs the packaging. Okay. With those super agents, what we can help our customer achieve accomplishes the dramatic improvement in productivity. Because when you think about the design challenges for our customers, everybody's faced with a big mismatch in terms of what they try to accomplish in their innovation roadmap and the supply side of the equation in terms of how many designers they can have. Okay. The workload is increasing unabatedly for the next 5, 6 years. It's a tune of even 30, 40x.

It is absolutely impossible for any company to hire that many engineers. Hence, the automation EDA AI needs to do the heavy lifting and bridge the gap. That is a massive opportunity. What it means is these super agents, they will be endowed and trained with a certain human designer scale, be it front-end design. Take ChipStack as an example. It will be doing the RTL code generation, translating the design spec to the machine code and also create test benches. What it does is they also invoke and call a lot of the underlying EDA tools, including simulation, verification, which is a constant kind of iteration and looping process. What it does is it is going to free up the human designers to a higher level, and it allows them to do a lot more designs, to be a lot more productive.

Even Jensen talked about during the Computex about 2 months ago, that ChipStack, they are seeing 40X productivity benefit. The opportunity is massive. I think importantly, Johnny, to keep in mind, is also when it comes to the R&D spend in the design realm. The EDA spend right now in some broadish year, it is still like low teens, call it 10%, 11%. The massive 90% of the spend is still in human designers. We definitely see this irrevocable trend in terms of that what is sure will continue to shift more and more towards tools and automation, which bodes well for our business in the long term.

Great question. From a monetization standpoint, the way we are going to monetize the super agents is through three vectors. First off, those agents, they are human designer surrogation. We are tapping into the green field. The complete green field for us. What we are going to do is we are creating separate price books for these four super agents, and in terms of the pricing, it is all going to be commensurate to what a human designer's skills could be. It will be worth tens of thousands of dollars. Once the customer exceeds or surpass the prescribed workload within that super agent, obviously, we want to charge them additional consumption in terms of tokens and extra usage. Another great avenue, the third avenue for the monetization is the calling and invoking of the underlying tools.

And if you imagine these agents, they are not humans, right? They do not need like 80 hours sleep like you and me.

Yeah. They will be able to kind of explore in a much thorough and bigger fashion than a human designer could possibly do.