Nay Soe Naing

Nay Soe Naing inquired about how Cadence's internal leverage of AI should be factored into financial models, the implications for incremental margin going forward (comparing the 2026 guide to past trends), and the longer-term margin outlook in the age of AI.

Answer

SVP and CFO John Wall highlighted Cadence's 59% incremental margin in 2025, indicating no near-term ceiling on operating leverage. He noted that the 2026 guide's implied 51% incremental margin is a prudent starting point, comparable to prior year-start guides, and one of the strongest ever. Wall confirmed internal AI usage, learning from emulating engineering flows, which helps extract more value from R&D investments. He expects AI to lead to more R&D and more people, not fewer, as engineering capabilities expand.

Nay Soe Naing inquired about Cadence's internal leverage of AI, its impact on incremental margin, the 2026 margin guidance (implying 51% incremental margin, slightly below recent trends), and the longer-term margin outlook in the age of AI.

Answer

Senior Vice President and CFO John Wall highlighted that Cadence achieved a 59% incremental margin in 2025, indicating no near-term ceiling on operating leverage. He explained that the 2026 guidance is prudent at the start of the year. Wall confirmed that Cadence learns significantly from internal AI usage, which helps get more value from R&D investments. He expects that with access to more engineering capability and AI leverage, Cadence will likely do more R&D, implying more people and AI rather than fewer.

Nay Soe Naing asked about the drivers behind the impressive growth in the System Design & Analysis (SDA) segment and whether its strong past performance creates difficult comparisons for the future.

Answer

CFO John Wall noted that Q1 2024 was an easy comparison and credited the strong Q1 2025 results to the BETA CAE acquisition and the significant pull-through business it generates for other Cadence products. CEO Anirudh Devgan added that BETA's established relationships, particularly in automotive, are increasing the market reach for Cadence's broader portfolio.

Nay Soe Naing asked about the specific areas of Trimble's software portfolio, particularly within AECO and T&L, that will be prioritized for Agentic AI rollouts in 2026. He also inquired about Trimble's technology infrastructure readiness for these AI features, comparing it to past investments in cloud readiness.

Answer

President and CEO Rob Painter stated that Agentic AI applications would be 'across the board' in AECO and Transportation & Logistics, acting as a 'force multiplier' for existing work, and also mentioned internal AI use for R&D, customer service, and marketing. Regarding infrastructure readiness, Rob Painter indicated that Trimble is 'already on a path,' having invested in infrastructure, wiring, and an agentic platform over the last couple of years, especially in 2025, which positions them to accelerate releases in 2026.

Nay Soe Naing asked about the specific areas of Trimble's software portfolio that will be prioritized for Agentic AI rollout, particularly within AECO and Transportation & Logistics, and which stages of the construction lifecycle will be focused on. He also inquired about Trimble's technology infrastructure readiness for these AI features, asking if similar levels of investment as seen with cloud-readiness would be required.

Answer

Rob Painter (President and CEO, Trimble) indicated that Agentic AI applications would be broad-based across AECO and Transportation & Logistics, not concentrated in any single part of the business or construction lifecycle stage, viewing AI as a force multiplier for customer outcomes and internal operations. Regarding infrastructure readiness, Painter stated that Trimble is already on a path, having invested in infrastructure, wiring, plumbing, and an agentic platform over the last couple of years, particularly in 2025. This foundational work positions them to accelerate releases in 2026 without needing a similar level of new, large-scale infrastructure investment as seen with cloud transitions.

Nay Soe Naing asked about the duration of transition growth headwinds in the Field Systems business, which saw a deceleration to 1.5 percentage points this quarter, and how this would impact the qualitative 2026 growth guide. He also sought clarification on whether the 2026 growth uplift would stem from particular segments or slower subscription transition headwinds. Additionally, Mr. Naing inquired about operating leverage, the margin expansion drop-through from gross margins to EBIT, and future expectations given the increasing mix of higher gross margin software businesses.

Answer

CFO Phil Sawarynski stated that Field Systems transitions are expected to continue through 2027. He clarified that the 2026 mid to high single-digit revenue growth outlook was not an uplift compared to the approximately 9% adjusted revenue growth for 2025. President and CEO Rob Painter reiterated the 30-40% operating leverage framework from Investor Day, acknowledging that while current performance was ahead, the company aims to maintain investments in areas like AI to ensure long-term attractive growth, despite the significant 1,200 basis point increase in gross margins over the last five years.

Nay Soe Naing asked about the duration of transition growth headwinds in the Field Systems business and their impact on the 2026 growth outlook, the company's leverage ratio and capital allocation strategy (including buybacks and M&A), expectations for operating margin improvement in 2026, the company's moat against AI disintermediation in SaaS and potential vulnerabilities, and the macro outlook and internal drivers for optimism in the Transportation and Logistics business going into 2026.

Answer

Phil Sawarynski (CFO) stated that Field Systems transition headwinds are expected to continue through 2027, clarifying that the mid to high single-digit 2026 revenue guidance is not higher than 2025's adjusted 9% growth. He outlined capital allocation priorities: investing in the business, tuck-in M&A in construction software, and committing over one-third of free cash flow to share buybacks, but declined to provide specific 2026 EPS/margin guidance. Rob Painter (President and CEO) emphasized Trimble's strong moat from connecting hardware and software across physical and digital worlds, acknowledging the need for continuous investment in AI to avoid disruption while staying within the 3430 model. For Transportation and Logistics, Rob Painter noted no meaningful macro green shoots for 2026, focusing instead on internal execution, such as a 400 basis point margin improvement in the second half of the year, outperforming the end market, and leveraging product offerings like Freight Marketplace.

Nay Soe Naing asked about PTC's visibility and control over customer implementation timelines for deferred ARR, inquiring about potential risks of longer or shorter implementation processes affecting the Q4 conversion.

Answer

CEO Neil Barua clarified that deferred ARR represents contractual commitments, ensuring its recognition regardless of customer implementation timelines. He emphasized that deals are structured to align with customer implementation cycles and market conditions, minimizing the risk of delays and potentially offering upside if implementations are completed faster than anticipated.

Nay Soe Naing asked about the visibility and control PTC has over customer implementation timelines for deferred ARR, and any potential risks of timelines being longer or shorter than Q4.

Answer

Neil Barua (CEO, PTC) clarified that deferred ARR represents contractual commitments, and customers have an incentive to adhere to implementation timelines. He emphasized that deals are structured on proper commercial conditions, aligning with implementation cycles, which reduces the risk of delays and potentially offers upside.

Nay Soe Naing asked what factors, beyond the go-to-market improvements, were contributing to management's confidence for Q4, particularly given the more positive commentary on the macro outlook.

Answer

President and CEO Neil Barua attributed his confidence to several factors. He highlighted a more disciplined pipeline review process, noting that Q4 has the highest number of deals over $5 million in the company's history. He also emphasized a significant increase in strategic engagement with C-level executives at customer accounts, which provides better visibility and elevates the conversation, citing the relationship with NVIDIA as a prime example.

Nay Soe Naing asked if cautious customer conversations were concentrated in specific verticals or regions, and what assumptions underpin the 9% high-end of the ARR guidance.

Answer

CEO Neil Barua responded that the cautious conversations are idiosyncratic and not concentrated in any single vertical or geography, citing examples of some customers accelerating deals while others consider delays. Regarding the 9% guidance ceiling, he explained that even if macro and trade issues resolve quickly, some selling time has already been lost in the current fiscal year, which has only five months remaining. Therefore, the 7% to 9% range is considered the most appropriate at this time.

Nay Soe Naing asked if the go-to-market changes were on schedule without disruption, and whether upcoming AI launches would extend beyond ServiceMax and Codebeamer.

Answer

CEO Neil Barua confirmed the go-to-market transformation is on track and that the annual guidance was set to account for any potential impacts. Regarding AI, he stated that while ServiceMax and Codebeamer are leading, AI initiatives are underway across the portfolio, including for Windchill and Onshape, with a focus on delivering practical value.

Nay Soe Naing from Berenberg questioned the change in the full-year outlook for China revenue, from growth to decline, and asked about the softer recurring revenue percentage in Q2. He also inquired about the company's current pricing power.

Answer

CEO Sassine Ghazi attributed the revised China outlook to the cumulative impact of macro headwinds and restrictions, noting the full-year guidance is reiterated due to strength in other regions. CFO Shelagh Glaser explained that the recurring revenue mix fluctuates based on the timing of strong upfront IP revenue, which was up 21% in the quarter. Sassine Ghazi affirmed that pricing is consistently based on the value and impact delivered to customers.

Nay Soe Naing from Berenberg questioned the change in Synopsys's full-year outlook for China, from growth to a decline. He also asked for color on the recurring revenue percentage, which was softer in Q2, and inquired about the company's current pricing power.

Answer

CEO Sassine Ghazi attributed the revised China outlook to the cumulative impact of macro headwinds and restrictions, emphasizing that the full-year guidance is reiterated due to strength in other regions. He noted pricing is based on value delivered. CFO Shelagh Glaser added that the recurring revenue percentage fluctuates based on business mix, particularly with strong upfront IP revenue, which grew 21% in the quarter.

Nay Soe Naing asked about the company's cost control, highlighting the low expense growth in Q1 compared to the higher growth guided for Q2, and requested an outlook for costs in the second half of the year.

Answer

CFO Shelagh Glaser explained that Q1 costs were lower than anticipated due to the timing of hiring and certain large expenses. She confirmed there is no change to the full-year expense plan. The guided step-up in Q2 costs is a normal structural change driven by the annual merit and performance-based compensation cycle.