Amazing. Welcome back everyone to Deutsche Bank's 20th annual tech conference. My name is Gianmarco Conti, and I'm head of the Hardware Equity Research division here. Today we have the pleasure of having Richard Gu, head of investor relations at Cadence. Before we start, quick safe harbor. Today's discussion will contain forward-looking statements, including Cadence's outlook on future business and operating results. Due to risks and uncertainties, actual results may differ materially from those projected or implied in today's discussion. Richard, now that we got that out of the way, let's frame the time for the room. EDA for the past 30 years has been growing a few percentage points faster than R&D spend years. Then suddenly, well, not so suddenly, I guess, in the past three to five years, we've had a lot of companies start to do custom ASICs and custom designs, from hyperscalers to large system companies. I guess, what has structurally changed with who designs chips, and what role does Cadence have within it today? 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. Yeah, it's clearly showing. Maybe we'll just unpack a little bit of that AI development of agentic. You acquired ChipStack last November. Within three months, you shipped the ChipStack AI Super Agent, which is the industry's first agentic workflow for front-end design verification. For those in the room that have not tracked EDA closely, what does it actually mean for an AI agent to design and verify part of the chip? What parts of the chip design process can tackle the next agentic race? 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 five, six years. It's a tune of even 30x, 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 two months ago, that ChipStack, they are seeing 40x productivity benefit. The opportunity is massive. I think importantly, Gianni, 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. Yeah. There are some clear productivity advantages here. Maybe speaking a little bit about that. If, say, you have 10x productivity, how does Cadence capture, commercially speaking, how do you capture a fair share of that value? How do we think about what agentic AI does to a business model that has historically been built around a mix of seats and project-based R&D? Could agent stack open the door to those companies that do not have a team of chip designers like hyperscalers, but still wish to do custom design? 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. So what it means is it is going to be a lot more pay-as-to-usage, which has come through in our typical traditional EDA model, EDA monetization model. To the second point of your question on what does it do for newer entrants. Yeah. I think it definitely it levels the playing field, right? Because now, with a smaller team, you could do amazing things, right? By leveraging these tools, as long as you have a clear mind in terms of what kind of chip you want to have, what kind of system you want to have, and then you can leverage the tools. I think there are different business models existing in place already. Andrew talked about the four-story building, like going from merchant dies to ASIC to hybrid COT to COT. That typically is going good on that path. I think the more companies, more customers get straddled around that four-story building, the better opportunity would be for Cadence. That makes sense. So, okay, the bottleneck in AI systems has a bit been moved from the transistor to the system. Data movement, memory bandwidth, packaging, and thermals, right? So your fastest growing segment in recent quarters have been SDA, which is the simulation piece, and IP, rather than the classic EDA. So I guess my question is it fair to say that Cadence's growth is now tied to system complexity rather than chip unit growth? And what does it mean for how investors should size the market? Sure. The business actually was seeing broad-based strength, right? If you look at the most recent quarter, the revenue is growing like 24%. The core EDA is growing 18% to 19%, and SDA growing at about like 35%, north of 35%, IP growing north of 40%. These are fantastic numbers to see. I mean, using the analogy of the chariot pulled by multiple, like three or four horses, I'd say all the horses are only at top speed, which is great to see. The core EDA is always a great linchpin in terms of like, 70% of business is in core EDA, right? It's great to have that kind of growth. I think in general, if you look at our businesses, workload is important. The driver of the revenue, workload is always important. One unique aspect to our business is our workload is not static. It is growing exponentially. If you think about the complexity of the chip design, the most complex chip these days is, call it Blackwell or whatever. Yeah It's like 10 trillion transistors. But we fully expect that to grow. This is going to grow to like a trillion in a matter of five to six years. If you weave in the complexity, it's about 30x-40x kind of workload increase in the foreseeable future. So that'll be the ultimate driver for our business, and it'll be coming through in both the workload growth and the pricing opportunities, which is still an opportunity for us to flex further. I think agentic AI just gives us so much more in terms of growth levers. But the business is so well-positioned that we have multiple irons in the fire and it's kind of a four or five-cylinder engine. All the engines are running well. It's almost like it's additive, right? Like any layer that you're able to capture onto that agentic layer, it's kind of like net new for you guys, right? Absolutely. Because the middle layer, I mean, we use the analogy of three-layer cake. Yeah. The middle layer for the core principle software, hardware, IP, these are unassailable. Irreplaceable, unassailable. AI is a great overlay on top of that. It's going to orchestrate and help customers reap massive productivity benefits. What it does is not only gives us the opportunity to tap into that greenfield opportunity, but also it's going to provide a lot of tool usage in the middle layer. Yeah. Now we can customize that with data and the chips and the systems. I think it's a beautiful three-layered kind of stack that we can continue to leverage and grow. One can kind of also put the comparison with how Cerebras was pulling from the back end, the multiple licenses of Innovus. Yeah. It's almost like same parallelism when you think about how a new product can pull legacy tools that are required as like the engine behind. That sounds like a great opportunity, yeah. Yeah. That's apt. It's got definitely an apt kind of parallel. Yeah. Because Cerebras, you're familiar with that. One copy of Cerebras can drive 10 copies of a full flow. Yeah. From a digital standpoint. Yeah. There's lots of pull-throughs. I think agentic AI is another big opportunity for us to drive and abstract even further up. That's fair. Okay, maybe we should unwrap some of the IP developments. You recently displayed wins in the IP business with SerDes, LPDDR6, PCIe, UCI. For the investors in the room, how should they think about the IP developments, the key areas of the portfolio where you're seeing substantial market demand, and how do you juggle basically a higher IP mix but also wanting to keep a pretty steady margin progression? Because IP is not as strong as EDA margins. IP for us is a great business, right? It's certainly situated and positioned in a place where we're seeing great secular trend and growth trend drivers. But for IP, for us, it's always a balancing act. It's a conversation between the revenue growth and the margin accretion also. Okay? Early on, we devised an IP strategy that we're not going to be everything for everyone. We chose very deliberately to focus on the advanced nodes IP designs. IP titles. Be it HBM, UCI, PCI, all these connectivity kind of important icon IP. That is very much exposed to the AI super cycle. That is bearing fruits. You have certainly seen IP growing at a very fast clip. Like in share in the market, we're going to be at a $1 billion clip by the end of the year. At scale and growing much faster than market, which is great to see, right? And also I'd say the foundry ecosystem is helpful. Yeah. Now it is not just TSMC, it is Intel, it is Samsung, it is Rapidus. We are working with them all, okay? That gives us a great opportunity to continue tapping to that growth engine. But in the meantime, we do not want to be everything to everyone. We want to make sure if it is done right and managed right, we have the opportunity to strike that Goldilocks in terms of tapping to that high IP growth but not sacrificing the overarching company margin, okay? Because the margin growth and the EPS growth is always a north star for us. Yeah. I think a billion is a great place to be, and we will continue to work with the customers and make sure that they are delighted with our products. The products is getting a lot better too. I think now we are at a good place that we can really grow well in general. But at the same time, continue to maintain and have achieving that 50% of incremental margin in general for the company. Yeah. So maybe just following on that question on the IP. I am curious about what are your thoughts on. Obviously, we have seen OpenAI coming out with Jalapeño and the whole debate about whether you can possibly expedite substantially the tape-out process and the design process of the chips. So I guess my question is, on the IP side, could you see a future into which pockets of the IP portfolio get a little bit more commoditized, and so you have a bit more of a software layer allowing customers to just churn out faster and better IP? So maybe I guess that will be reflected into the TAM of the IP market. Thoughts? I do not know. Yeah. The IP is a great business, but EDA is a. IP is a good business, but EDA is a great business. Yeah. Because for IP, the conversation is always the build versus buy. Yeah. I think the market is so conducive now. It's almost like on every customer's mind, the main objective is they want to win the race, right? They want to go to market a lot faster with a great product that can go to production, okay? Hence, I think IP is going very well. EDA is a fantastic business. Because EDA, you can only buy, you cannot build, okay? That's why I think IP will give us good growth if we do it right. I do feel like an IP ultimately, you have to make sure you have the product excellence, right? Because the measurement of successful IP is you have to deliver the PPA benefit to the customers. As long as you can do that, I think you can continue to have great growth. Over time, that's why, like I said, we need all the horses, all the engines to run well for the business. EDA is a great business we can never lose sight and take eyes off that. I think overall, we're managing the business in totality as a portfolio. I think IP has a lot of growth to be had in the coming years, given what I talked about, AI, super trend, given I talked about the foundry ecosystem build house, and also with Intel, we're doing a lot more, right? 14A, I think you probably noted that we signed a meaningful kind of deal with Intel to help them design their 14A on the foundry side. So it's not just IP, but also it helps with our EDA tools also and agent AI products. I think ultimately, I think we're and the company is just the final cylinders. We're sitting in a great place. Is it safe to say that maybe, because EDA is a greater business and perhaps that portion is a bit more shielded by any developments of in-housing software to basically replicate- Yeah -the motions of EDA, right? Because as we know, some of the biggest challenges in chip design is verification, right? Yeah. It is a problem of which today still requires enormous amounts of efforts to really reduce all the errors prior to tape-out. Would it be still fair to say that visibility in the next two to three years, as far as EDA comes, is still like a safe software business and sort of shielded from the fast populace in a way? Good question. I think that EDA is unassailable, okay? The position of EDA is unassailable and impregnable. The reason being that EDA is all deterministic, right? It's a physics-based kind of app. It has to be physically accurate, okay? You don't want to take any chances with any of the probabilistic stuff in there at all, okay? I think EDA is a great place to be, and we can see that the reliance from our customers on EDA to help them deliver against their innovation roadmap is going to become a lot more acute and then a lot more pronounced in the coming years. Just given all that what we try to do and given the shortages on the labor side, I think it's a fantastic opportunity in tailwind for our business in the long term. Very well said. I think also, Gianni, I think I would want to highlight from innovation standpoint, we want to innovate on all three layers, right? Core EDA unassailable position, agentic AI, if we can do things right by embedding that and co-optimize that with the core tools, and then you build it on top of that proprietary good data set, data moat, and then great systems to build on top of that, I think it's a fantastic three-layer cake supporting the long-term growth of the story. Yeah. I'd say fair. Okay, maybe we'll shift a little bit onto geography side then. China used to be a big point of contention, right, in the past. Now we're seeing healthy growth again as a mix of competitive displacements and [inaudible] helping capture back some of that lost growth. Knowing what you know and given how much China is pouring into the development of new fabs to startups challenging incumbent architectures, what is your view on how will China fit into Cadence's growth equation, say, three years from now? Is it a constant race towards wanting better emulators or perhaps IP taking more off? Yeah Walk us through the motions there. China is a good market, I'd say. But I think when you look at our business, the rest of the world is growing very nicely too. So it's fairly balanced. I'd say the broad-based strength does not just apply to the product set portfolio, but also apply for all the geos and regions. I think we're also pretty confident that China is going to grow at least at a company average this year. If you look at the dynamics in the China market, it actually mirrors a lot of what's happening in the U.S. They have great LLM model companies. They have good hyperscalers, a lot of EV kind of autonomous driving vehicle companies. We work with a lot of those. I think the strength is across the board. Not only do we sell a lot of emulation system to the Chinese market, but EDA is a big part of that too. So I think it's a reflection of the excellence for the product set and the tight relationship with the customers. So we do feel like China, I think the strength in Q2 really is a reflection of a lot of the bookings and add-on deals we had for the past couple of quarters now. So it's just come through. But I think it's a good market. We'll keep a close eye on it. But I think overall, the company is growing in a very balanced fashion. What about competition locally? We used to have a debate maybe like three, four years ago about the UniVista, the Empyrean of the world. How has that shaped up recently? Firstly, and then secondly, I guess with your closest competitor, how are market share shifts happening in what product segments? Are you seeing those bookings push more on the harder side, or I'm just curious to see the market share dynamics happening in the region. Sure. Just by sheer growth rate, you can tell we are gaining share in the market. Yeah. I think part of that is really driven by the product excellence across the board. I think from a local competition standpoint, it is not our concern at this point, because I think a lot of the local competition, they are still a lot smaller. They have some point tools, a lot more, just not up to our standard, and they do not have full flow. A very important consideration is also they do not have the foundry ecosystem or certification from TSMC. I think we will keep an eye on those, but it is not a near-term or medium-term threat for us, okay? I think versus a peer company, we feel very confident. I think our growth rate speaks volume in terms of our market position in China. Again, it is not just emulation systems. It is EDA tools, IP. We still have a lot of room to grow in there, too. I think overall, it is a great business. We keep an eye on China, but again, overall, all the geos are doing well, yeah. That is fair. Okay, maybe we should unwrap a little bit of that $8.1 billion backlog. Can you walk us through what visibility do you have today in what areas of your three businesses, and where do you think there is still an opportunity to add more? Is it Physical AI, simulation, more integration with multi-physics flow with EDA, or are you eyeing up maybe bolt-ons in other areas? Anirudh used to say robotics was like a physically, I was like a very big opportunity for you guys in the distant future. I am curious to see, out of the backlog, the mix between visibility and perhaps long-term targets. Yeah. We are very pleased with the $8.1 billion record backlog exiting Q2. That was accomplished sequentially in two seasonally down quarters from a booking standpoint. What it means is it is a reflection of how strong the underlying business is, especially those add-on, like AMCD business for us. Again, it is a reflection of how strong and broad and deep these relationships are with our top customers, which is the Hyperscalers of the world. The quality, Gianni, the backlog is amazing too. If you look at the $8.1 billion backlog, we look at the CRPO coverage ratio as a percentage of RPO. Our ratio in Q2 is about 58%. It is much higher than the peer set. It is a great thing to have because it gives you clear visibility in terms of how much of that is going to translate into revenue in the next 12 months, right? It is a great thing to have. I would say from a visibility standpoint, EDA business, we have a great visibility. Our contract cycle typically runs for 2.5 - 3 years. Software is all ratably recognized. We have great visibility in there. Hardware is more like a pattern business. It is six months. We look at six months out. That is why we will update the guide every six months when we look into that. In system design and simulation, like you asked, is a great business. We are now a quarter past the acquisition, the closing of the Hexagon business. Now we brought it under one roof with Cadence. About two years ago, we acquired that business. We try to create a one full flow when it comes to physical or structural designs, which is going to tap into the next leg of growth for Physical AI, what Anirudh has been talking about. We feel very good. I think if you look at the SDA business, we are squarely entrenched and focused on two bookends. Which is high growth, high margin, but also very much attuned to the Moore's law. One is closer to the silicon side of the equation, just like the packaging, 3DIC. Another one is the physical agent, like we just touched on. I think overall, $8.1 billion backlog is a great thing to have. We will continue to drive the business forward with our customers in the next coming quarters or coming years. Just piggy-backing on that, on the Hexagon acquisition, are you guys on track with what was planned in terms of both integration of human capital and the tools? Or how far are we between a full, this is exactly where we want to be when it comes to the technologies merging together? Yeah, we feel very good. It is tracking well against our expectations. Again, we are focused on creating that full flow when it comes to physical AI and structural kind of designs. Everything is tracking there. Good. Okay. On multi-physics, I want to just double down. You built the portfolio organically and then bolted on some acquisitions. Your largest competitor spent roughly $55 billion buying its way to the same conclusion. My question is for you, Richard, what does the integrated electrical, thermal, fluid, and structural flow unlock that a single physics tool never could? A follow-up on that is perhaps any updates on Millennium platform. What are the defining buyers? How is Millennium progressing relative to, say, your emulators or your [inaudible] Right. Okay, Gianni. I look at it that way, right? If you want a great set of suits, like what you are wearing right now, you do not need to buy the entire department store to get it, right? No. That tends to be our philosophy when it comes to doing the business. Anirudh saw this opportunity about 10 years ago, in terms of the merging, convergence between system design and the chip designs. Okay. It would be like building a business step by step, starting more organically from the finite element analysis to CFD to electromagnetic, towards the end to the structural. Right? I think the businesses have been going well. Like I said, we are focused on the two capstone areas in the SDA, right? A lot of the kind of system design analysis, if you want a simulation software to design the swimming pool is not where our interest is. Okay. We want to be in the areas which is most compute-intensive and which can tap into our computational software kind of capabilities. Okay, so that is our focus areas. On Millennium, it has gone quite well. We launched the tool early on, it was like about a year and a half, two years ago, together with NVIDIA. Right. Because what it does is, again, it's that three-layered cake kind of being applied in different areas, right? In a sense, it's like now it's a three-layered cake, right? In the bottom layer is the GPU from NVIDIA, right? In the middle layer is all these principled software in simulation. We started with CFD, right? Now, I think, we're applying that to different areas, even for EDA, for Clarity and Celsius when it comes to electromagnetic and thermal simulation. So it is working well with customers. We continue to engage with customers, but that's a beautiful business model. I think the Cadence bakery will continue to come up with all kinds of different flavors of those cakes. Are you seeing customers come back to you and say, "We've actually improved the workflow by using Millennium?" I guess how I'm thinking about it is, at the end of the day, it is a computer. It is a very powerful computer that allows you to do some deep level maths and deep level simulation, right? I'm curious to see if there's any customers which actually came back and said, "Yeah, we've actually seen real improvements into our flows. Yes. We talk about, obviously, we have deep symbiotic relationship with big customers, right? Including NVIDIA, right? NVIDIA kind of publicly endorsed Millennium early on, right? I think we talked about the productivity of 50x - 60x. Yeah. Because when it comes to these systems, you have to have big leap forward in order to justify the systems, right? Yeah, we're seeing those, and we're now extending that further. Like I said, applying the different kind of algorithms and solvers by coupling that tightly with a GPU and underlying kind of infrastructure, accelerated compute platforms to do things. That area, that product could be widely applied also in other sectors like aerospace and defense, automotive. So the opportunities certainly galore there, yeah. Interesting. I would like to go back on the R&D split that you mentioned before. We have known that for many years, the R&D budget of a semi company was 90% people and 10% tools. I believe it was, I think it was John a few years ago, that sort of gave us some trajectory for the path forward potentially going to 15%, 20% software. Obviously we also know that the supply of soft and hard engineers combined together, it is getting fewer, and AI is pushing that even further. I guess my question to you is how do you see the trajectory of R&D go from people to software? When are we going to get to the point where we are going to reach 20% or 25% of the split being in software, if at all? Yeah. I am curious. When we talk to customers, all the customers, their main focus these days is they try to deliver against their roadmaps. The arms race in AI is intense. It is unremitting, it is intense. They have a lot of designs they want to accomplish, a lot of different flavors of designs, and the designs are getting increasingly more complex. The complexity is our friend. It is compounding. What it means is, I talked about the mismatch between what they try to get to, the workload increase of 30x, 40x versus what they have in terms of bottleneck, in terms of engineering resources. The gap in between needs to be filled with automation, EDA, and AI, which is happening right now as we speak. There are customers of ours telling us they are willing to spend more than 50% of what we spend on a human being, human designer, on automation tokens and chip designs. What it means is, if you do the math, it is almost like 33% of the R&D budget. Wow. I think, again, it gives you a flavor in terms of where things are headed. But I think if you draw a long line, look at the arc of where things are headed in terms of design intensity going unremittingly continue to advance in a lot more designs. Now, it is not just the traditional semi companies, right? It is hyperscalers, car companies, and other model companies doing their own designs. The opportunity is massive. I think, if you put all these things together, taken all together, it is a phenomenal kind of long-term tailwind for the business in the long term. That makes sense. Maybe let us talk about the long view. I believe Anirudh said that the company's competitive position has never been better. Obviously, we have spoken about the three layers, the agents on top, the tools in the middle, the hardware underneath, and they are all reinforcing each other. The long view is it is 2031. Agentic design has matured. Physical AI is real. System companies design most of the world's leading silicon. So what does Cadence look like? What is the one thing you would tell this room to watch, perhaps over the 12- 18 months that we can track to see that we are on track to get there? Yeah, it is a hard question. It is a very long question, and I feel like today in AI's world, a year feels like forever. But it is good to get that sense. Yeah, sure, Gianni. I think it is kind of all the above, but I think one thing worth closely watching is the recurring revenue growth. I think because recurring, if you think about our model, Cadence has always been a great compounder. Regardless of where the market is, the volume-driven business up and down, going through cycles and things, the Cadence business model is always a very smooth upward trend, growing at a very steady pace with great margin and great cash flow, hence share buy prep kind of program in there, too. I think a lot of our business, even the AI business, is because of flow through the subscription plus consumption is going to flow through our business through the recurring kind of metric. So I will probably keep a close eye on that. But there is one thing that is undoubtedly on my mind that will be true is the reliance and dependency on EDA companies like Cadence will be a lot more pronounced in the next 5- 10 years. It will be increasingly more. Just because if you look at what these companies try to accomplish versus what they have, we are there to support them. Cadence is a great player. We are in the midst of everything, and our customers is the marquee most is who is who of the world. We want to make sure we have a clear vision in terms of where we want to be, supporting them on their journey, and then we can either execute well. I think with our CEO, Anirudh, at the helm, I think we are fully confident we can support them on their journey, be it AI or next chapter. I think it's a fantastic business, and we feel good about where things are. Yeah. So that EDA stickiness is basically what gives you certainty, or not certainty, but a good amount of visibility to be able to keep up that profitable growth strategy, right? Because right now you're tracking, as we've mentioned, more than 50% margins and incremental margins. Yeah. The strategy is to keep on track to that. I guess many investors will always come to you and ask about what happens in a world where you have a substantial slowdown in R&D budgets and what happens when typically, when you think about the AI infrastructure world right now, CapEx is driving everything. R&D is not really a big point of focus. But then, of course, EDA tracks R&D. So would it be fair to say that because of how sticky EDA is to the customers, A, and because of how less volatile the R&D budget is for each of these semi companies, if there is a down cycle, which I'm not saying there is, but if there is a down cycle, there is a level of bottom almost that Cadence can have with regards to revenue? Yeah. It's a good question. You just need to look at history, right? Yeah. Semis and our customers will go through cycles. Yeah. Cyclicality is kind of the nature of the beast in a way. AI could be different. But one thing's for sure, I think even when companies and our customer goes go through this up cycle, down cycle, our business, if you draw a line for the past 10, 15, 20 years, the Cadence growth is a very smooth kind of growth as far as revenue. Margin continuing to expand. EPS will outpace the revenue growth. I think we are much more insulated from the volume side of the equation, because R&D typically is the most sacred, most insulated piece of the spend for the customers, regardless where they are. Because even in a down cycle, they want to make sure they spend and invest in the right places so they can emerge stronger. I think time and again, it's been proven, and I don't think this time is any different. Hence, I think this is a phenomenal, great business to be having there. That's very fair. Maybe just concluding, because I think we only have a couple of minutes left. What is the market getting wrong about this whole EDA debate and perhaps the fear about AI CapEx eventually climaxing and stopping and then basically spend ceasing and potentially coming into lower chip starts, which would then trickle down into lower EDA spend. I'm curious to hear your view about what is the market getting wrong across the board about AI specifically? No, I think the market is the market. Yeah. For us, the most important thing is we know we have a very crisp, strong strategy. Then we have strong leadership, great team around that, and we're going to execute. The market will determine where things are headed. I think one thing is for sure, I think Cadence will be an AI beneficiary and winner regardless of where the ecosystem that the customers will end up being. Because ultimately, our business is not driven by volume. It's driven by design starts and design complexities. Those two things will grow and advance unremittingly in the force of the future, 5, 10, 15 years. That's ultimately our North Star. Again, our business, I think if you look at margin, revenue, EPS, cash flow, we're in a great, fantastic place. I guess people forget that you are investing a substantial amount every year into R&D, right? Yeah. I think it's close to 30%. If anything, if there's any development in AI, Cadence would be probably at least ahead of the curve or on par with the latest startups trying to do the frontier development. So I guess we can make an argument that Cadence would know what is happening ahead of most people because you're sitting in the room with the leaders of the semi companies. Absolutely. Because all the relationships and the partnerships with all the top customers, key customers, are all expanding, broadening, and deepening. You look at the financials and numbers, it is all trending in the right direction. Absolutely. We feel very good about where the business is headed. I think we are out of time. Thank you so much, Richard. Thank you, Gianni, for having me.