Anirudh Devgan
President and Chief Executive Officer at Cadence Design Systems
Thank you, Richard. Good afternoon, everyone, and thank you for joining us today. Cadence delivered outstanding financial results for the second quarter, with accelerating broad-based demand for our innovative solutions driving double-digit growth across all our business groups. We beat our guidance on all key metrics and are significantly raising our financial outlook for the year, resulting in 17% year-over-year revenue growth as well as exceeding the Rule of 55. John will provide the details in a moment on both our Q2 results and the updated outlook for the year.
Generational trends such as 5G, hyperscale computing and autonomous vehicles underpinned by AI/ML and data analytics are accelerating the digital transformation across multiple industries. Notwithstanding the macroeconomic uncertainties, our customers continue relentlessly investing in their next-generation innovation, with semiconductor companies benefiting from increasing silicon content and system companies investing in building custom silicon. These exciting trends are fueling robust design activity and driving a strong secular tailwind for end-to-end core EDA, IP and expanding systems portfolio.
In Q2, we significantly accelerated our Intelligent System Design growth strategy through the introduction of five new innovative products as well as through the transformative OpenEye Scientific and Future Facilities acquisitions that expand our TAM and position us well for future growth.
This morning, we announced our intent to acquire OpenEye Scientific, a leader in computational molecular design space. Over the past few years, we have successfully extended our multi-decade chip level simulation expertise to the system level, first to finite element analysis and, more recently to computational fluid dynamics. With OpenEye, we are now expanding into molecular modeling and simulation, an emerging area of growing interest as pharmaceutical and biotechnology companies accelerate their emphasis on software solutions for drug discovery.
The acquisition will allow us to leverage our solver and AI/ML leadership, along with large data management infrastructure, to significantly enhance the speed and accuracy of biosimulation. This will drive disruptive innovation in the life science market through increasing the efficiency and success rate of traditionally long and complex drug discovery process. Additionally, OpenEye market-leading cloud-native SaaS platform can capitalize on our cloud expertise, thereby benefiting highly computationally intensive biosimulations.
OpenEye's scientifically proven innovative solutions are used by 19 of the top 20 pharma companies, including Pfizer and AstraZeneca as well as leading biotech firms, and we excitedly look forward to Dr. Anthony Nichols and the OpenEye team with their deep science expertise and rich domain knowledge joining Cadence.
During the quarter, we also acquired Future Facilities, a pioneer in the datacenter digital twin space that expands our CFD portfolio and extends it to datacenters. In addition to electronics cooling analysis, Future Facilities' innovative solutions enable customers such as HP Enterprise, Digital Realty and Equinix to optimize thermal and power efficiencies in the datacenter using physics-based 3D digital twins, thereby helping reduce their carbon footprint. We are excited to welcome Hassan Moezzi and his talented team to Cadence.
Now, moving on to Q2 product and customer highlights. A key element of our approach has been to partner closely with market-shaping customers and win their confidence by providing leadership platform solution based on best-in-class engine. In Q2, we deepened our long-standing partnership with Samsung to a wide-ranging expansion of our core EDA system software and hardware solutions. And we are excited to have extended our collaboration with AMD to a far-reaching commitment to our innovative core EDA, hardware, design IP and system software solutions.
Demand for our core EDA software remains strong and broad-based. Our digital business had another strong quarter, with 14% year-over-year growth fueled by key competitive displacements as well as significant expansions at several market-shaping customers.
Adoption of our digital full flow, delivering industry's leading quality of results at the most advanced nodes, continued to accelerate with close to 25 new wins in the first half of the year. Our innovative, automated and scalable Cadence Cerebrus solution with this unique self-learning capabilities allow users to explore the entire design space and intelligently optimize the digital full flow to meet their aggressive PPA, schedule and productivity goals.
Cadence Cerebrus continues to see accelerating proliferation, especially with market-shaping customers as they realized transformative results across a broad range of complex production designs and getting as much as 30% reduction in leakage power and up to 30 times productivity improvement for design tasks ranging from Design Technology Co-Optimization, automated floor plan implementation and final PPA push.
At our recent CadenceLIVE Silicon Valley User Conference, level fee customers, including Intel, Nvidia, Broadcom, Samsung and Renesas, presented their remarkable successes using Cadence Cerebrus.
Functional verification is becoming a key differentiator as we enable our customers to improve system quality and speed up their time to market. In Q2, our business grew 13% year-over-year led by strong growth in hardware and Jasper.
Strong secular demand for our industry-leading Palladium Z2 and Protium X2 platforms, especially from hyperscale, AI/ML and server customers, led to our best Q2 ever for hardware. With 10 new customers and nearly 50 repeat orders, more than two-thirds of the orders during the quarter included both the platforms.
Our IP business had a very strong quarter, growing 30% year-over-year as the continuing IP outsourcing trend drove strong design and foundry activity for our star IP, especially at the most advanced nodes.
Our leading DDR IP solution continues to proliferate strongly, especially at hyperscaler and memory customers, while our PCIe portfolio had significant wins with compute and automotive companies.
Tensilica continued to expand its footprint in true wireless, stereo and Bluetooth headsets and had notable wins in automotive, mobile and AR/VR end markets.
Our System Design and Analysis business that is driving expansion beyond EDA continued its strong momentum in Q2, delivering 29% year-over-year growth as we increased our footprint in several verticals, including high-tech electronics, hyperscalers, aerospace and defense and 5G communications.
In Q2, Ciena, a leader in intelligent networking, adopted our advanced node custom design, photonics, multiphysics analysis and 2.5D/3D packaging solutions for their next-generation coherent optical solutions. Exploring design complexity, coupled with rising product development time and cost, is driving the need for innovative packaging solutions that can handle heterogeneous integration in a modular manner. We are seeing accelerating growth for our integrity 3D-IC solution, which is the industry's only comprehensive platform with all in-house technology that provides a truly tightly integrated optimized solution across system-level floor planning, implementation, packaging and system analysis.
Our System Analysis portfolio, delivering disruptive performance and capacity, benefits without compromising accuracy, is proliferating nicely with both semiconductor and system companies. For example, in addition to multiple repeat orders, Clarity 3 Solver was adopted by leading companies, including a marquee U.S. semiconductor company, a market-leading U.S. company providing RF and mobile communication chips and a global marquee hyperscaler.
We also announced a new multiyear partnership with McLaren Racing who will use our Fidelity CFD software to investigate airflow.
We are also very excited to have introduced Optimality Explorer, which brings the revolutionary AI technology implemented in Cadence Cerebrus to the system space for the very first time. This solution enables the delivery of optimized designs about 10 times faster on average than traditional manual methods with up to 100 times speed up having been seen on some designs. Optimality is quickly ramping up with early adopter customers as they realize these compelling results, with Microsoft, MediaTek, Baidu and Ambarella having provided strong endorsement for the product.
As we innovate on our systems technologies, we are also enhancing our go-to-market strategy. In Q2, we launched our transformational on-cloud SaaS and e-commerce platform, a scalable solution offering, instant access, flexible use models for companies adopting a cloud-first approach. This new e-commerce platform is the industry's first and offers a consumption-based use model that's built upon the well-established Cadence CloudBurst SaaS platform. Several customers, including Bombardier, Cisco and Amazon Web Services, have endorsed the significance of this game-changing platform.
To summarize, semiconductor and system companies are relentlessly investing to accelerate their innovation, and this continues to drive secular tailwinds for our business. Q2 was an outstanding quarter as we raised the financial outlook for the year while advancing our Intelligent System Design strategy and setting us up well for future growth by expanding into new end markets with our OpenEye and Future Facilities acquisitions.
Now, I will turn it over to John to provide more details on the Q2 results and our updated 2022 outlook.