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What changed in Cadence Design Systems's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Cadence Design Systems's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+461 added−351 removedSource: 10-K (2026-02-19) vs 10-K (2025-02-21)

Top changes in Cadence Design Systems's 2025 10-K

461 paragraphs added · 351 removed · 252 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+59 added−60 removed40 unchanged
Biggest changeFurthermore, increased restrictions on China exports may lead to regulatory retaliation by the Chinese government and possibly further escalate geopolitical tensions, and any such scenarios may adversely impact our business. The prospect of future export controls that are implemented in a similar manner may continue to have an ongoing impact on our business, results of operation, or financial conditions.
Biggest changeHowever, on November 11, 2025, BIS published a one-year suspension of the new rule that is currently set to expire on November 9, 2026, absent a future extension. Furthermore, increased restrictions on China exports may lead to additional regulatory retaliation by the Chinese government and possibly further escalate geopolitical tensions, and any such scenarios may adversely impact our business.
From May 2012 to November 2017, Dr. Devgan held several positions at Cadence, most recently as Executive Vice President, Research and Development from March 2017 to November 2017 and Senior Vice President, Research and Development from November 2013 to March 2017. Prior to joining Cadence, from May 2005 to March 2012, Dr.
Devgan held several positions at Cadence, most recently as Executive Vice President, Research and Development from March 2017 to November 2017 and Senior Vice President, Research and Development from November 2013 to March 2017. Prior to joining Cadence, from May 2005 to March 2012, Dr.
Statements including, but not limited to, statements regarding the horizons of artificial intelligence (“AI"), other technological and market advancements and their impacts on our business; the extent, timing and mix of future revenues and customer demand; the deployment of our products and services; the impact of the macroeconomic and geopolitical environment, including but not limited to, expanded trade controls, tariffs, conflicts around the world, volatility in foreign currency exchange rates, inflation and changes in interest rates; the impact of government actions; future costs, expenses, tax rates and uses of cash; pending legal, administrative and tax proceedings; restructuring actions and associated charges and benefits; pending acquisitions, accounting for acquisitions and integration of acquired businesses; and other statements using words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and “would,” and words of similar import and the negatives thereof, constitute forward-looking statements.
Statements including, but not limited to, statements regarding artificial intelligence (“AI"), other technological and market advancements and their impacts on our business; the extent, timing and mix of future revenues and customer demand; the deployment of our products and services; the impact of the macroeconomic and geopolitical environment, including but not limited to, expanded trade controls, tariffs, conflicts around the world, volatility in foreign currency exchange rates, inflation and changes in interest rates; the impact of government actions; future costs, expenses, tax rates and uses of cash; pending legal, administrative and tax proceedings; restructuring actions and associated charges and benefits; pending acquisitions, accounting for acquisitions and integration of acquired businesses; and other statements using words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and “would,” and words of similar import and the negatives thereof, constitute forward-looking statements.
These restrictions and any subsequent restrictions may have an adverse effect on our business, results of operations or financial condition, either directly or by impacting our customers’ products, and restrict our ability to license or support our products to certain companies in China.
These restrictions have had, and any subsequent restrictions may have, an adverse effect on our business, results of operations or financial condition, either directly or by impacting our customers’ products, and restrict our ability to license or support our products to certain companies in China.
For additional information and analysis on our revenue, including revenue by geography, see the discussion under “Results of Operations” under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For our fiscal 2024 results of operations and our financial position as of December 31, 2024, see Part IV, Item 15, “Exhibits and Financial Statement Schedules.” Remaining Performance Obligations Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods.
For additional information and analysis on our revenue, including revenue by geography, see the discussion under “Results of Operations” under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” For our fiscal 2025 results of operations and our financial position as of December 31, 2025, see Part IV, Item 15, “Exhibits and Financial Statement Schedules.” Remaining Performance Obligations Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods.
This is accomplished through various means, including grant making and partnerships with non-profit organizations committed to addressing these issues. We also make charitable contributions consisting of Cadence technology product donations. Corporate Responsibility We believe that, in general, the best and brightest talent is inclined to build a career with a responsible organization that positively impacts society.
This is accomplished through various means, including grant making and partnerships with non-profit organizations committed to addressing these issues. We also make charitable contributions consisting of Cadence technology product donations. 9 Table of Contents Corporate Responsibility We believe that, in general, the best and brightest talent is inclined to build a career with a responsible organization that positively impacts society.
Our global workforce is highly educated, technical and specialized, with a substantial majority of employees working in engineering roles. 8 Table of Contents Compensation and Benefits To inspire and recognize our employees, we offer competitive compensation and benefits programs. Our compensation programs link employee compensation to our business and individual performance.
Our global workforce is highly educated, technical and specialized, with a substantial majority of employees working in engineering roles. Compensation and Benefits To inspire and recognize our employees, we offer competitive compensation and benefits programs. Our compensation programs link employee compensation to our business and individual performance.
Data privacy and data protection We are subject to laws and regulations in the United States and other jurisdictions governing data privacy and data protection, including the EU/UK General Data Protection Regulation, which regulate our collection, handling and use of personal information.
Data privacy and data protection We are subject to laws and regulations in the United States and other jurisdictions governing data privacy and data protection, including the California Consumer Privacy Act and the EU/UK General Data Protection Regulation, which regulate our collection, handling and use of personal information.
We have elected to exclude the potential future royalty receipts from the remaining performance obligations. Contracted but unsatisfied performance obligations were approximately $6.8 billion as of December 31, 2024, which included $0.5 billion of non-cancelable commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date.
We have elected to exclude the potential future royalty receipts from the remaining performance obligations. Contracted but unsatisfied performance obligations were $7.8 billion as of December 31, 2025, which included $0.6 billion of non-cancelable commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date.
As of December 31, 2024, we expected to recognize 54% of the contracted but unsatisfied performance obligations, excluding non-cancelable commitments, as revenue over the next 12 months, 42% over the next 13 to 36 months and the remainder thereafter. 6 Table of Contents Marketing and Sales We generally market our products and provide services to existing and prospective customers through a direct sales force consisting of salespeople and applications engineers.
As of December 31, 2025, we expected to recognize 53% of the contracted but unsatisfied performance obligations, excluding non-cancelable commitments, as revenue over the next 12 months, 43% over the next 13 to 36 months and the remainder thereafter. 6 Table of Contents Marketing and Sales We generally market our products and provide services to existing and prospective customers through a direct sales force consisting of salespeople and applications engineers.
We are focused on doing our part to contribute to the health of the planet by actively investing in initiatives to reduce our environmental footprint. Corporate Information Our headquarters is located at 2655 Seely Avenue, San Jose, California 95134. Our telephone number is (408) 943-1234.
We are focused on doing our part to contribute to the health of the planet through initiatives to reduce our environmental footprint. Corporate Information Our headquarters is located at 2655 Seely Avenue, San Jose, California 95134. Our telephone number is (408) 943-1234.
Built on the Innovus solution, Integrity allows system-level designers to plan, implement, and analyze stacked die systems for a variety of packaging styles (2.5D or 3D). Integrity 3D-IC is the industry’s first integrated system and SoC-level solution that enables system analysis, including co-design, with Virtuoso and Allegro implementation environments. We also offer molecular modeling and simulation solutions and services.
Built on the Innovus solution, Integrity allows system-level designers to plan, implement, and analyze stacked die systems for a variety of packaging styles (2.5D or 3D). Integrity 3D-IC is the industry’s first integrated system and SoC-level solution that enables system analysis, including co-design, with Virtuoso and Allegro implementation environments.
The Cadence Giving Foundation, established in 2021, is committed to providing Cadence employees and others a means through which to carry out their volunteer activities as well as making an impact on our focus areas of environmental sustainability and opportunities for all in science, technology, engineering and math (“STEM”) education.
The Cadence Giving Foundation, established in 2021, is committed to providing Cadence employees and others a means through which to carry out their volunteer activities as well as making an impact on our focus areas of AI for Good, science, technology, engineering and math (“STEM”) education and local communities.
Cadence leaders are tasked with creating and sustaining our culture and therefore, they are measured on their contributions to the attraction, development, engagement of high-caliber talent, and advancing our sustainability objectives. Employees As of December 31, 2024, we had approximately 12,700 employees.
Cadence leaders are tasked with creating and sustaining our culture and therefore, they are measured on their contributions to the attraction, development, engagement of high-caliber talent, enhancing innovation capabilities and advancing our sustainability objectives. Employees As of December 31, 2025, we had approximately 13,800 employees.
While we compete with other computational software companies in the engineering services business, our principal competitors in this area include independent engineering service businesses. Many of these companies are also customers, and therefore use our product offerings in the delivery of their services or products.
While we compete with other computational software companies in this area, our competitors include independent engineering service providers. Many of these companies are also our customers, leveraging our product offerings in the delivery of their own services or products.
It delivers additional productivity, automation, and improved system-level power, performance and area and quality of results throughout the entire analysis flow. 4 Table of Contents Our Cadence Reality Digital Twin platform brings physics-based design and analysis to the data center sector for performance-aware design and operational planning.
Optimality™ Intelligent System Explorer is the industry’s first generative AI-driven multiphysics optimization solution. It delivers additional productivity, automation, and improved system-level power, performance and area and quality of results throughout the entire analysis flow. 4 Table of Contents Our Cadence Reality Digital Twin platform brings physics-based design and analysis to the data center sector for performance-aware design and operational planning.
Trade We are subject to laws and regulations in the United States and other jurisdictions concerning the sale, shipment and transmission of our products and technology outside the United States and to foreign nationals, including tariffs, trade protection measures, import or export licensing requirements, sanctions and other trade regulations. The Bureau of Industry and Security (“BIS”) of the U.S.
Department of Commerce's Bureau of Industry and Security (“BIS”), as well as international relations, see Item 1A, “Risk Factors.” Trade We are subject to laws and regulations in the United States and other jurisdictions concerning the sale, shipment and transmission of our products and technology outside the United States and to foreign nationals, including tariffs, trade protection measures, import or export licensing requirements, sanctions and other trade regulations.
Future trade regulations may also impact our ability to transact business with certain customers and in certain countries and may restrict certain non-U.S. person employees from performing their duties at Cadence without first obtaining appropriate authorization if their duties involve an export, reexport, or transfer of export-controlled technology. 7 Table of Contents Anti-corruption and anti-bribery We are subject to laws and regulations in the United States and other jurisdictions concerning anti-corruption and anti-bribery, including the U.S.
Future trade regulations may also impact our ability to transact business with certain customers and in certain countries and may restrict certain non-U.S. person employees from performing their duties at Cadence without first obtaining appropriate authorization if their duties involve an export, reexport, or transfer of export-controlled technology.
We regularly invest in key initiatives including, but not limited to, furthering belonging, physical and mental health, and talent development. To measure engagement and collect feedback from our employees, we administer regular employee engagement surveys.
Our One Team culture is central to employees experience and enables us to attract and retain top talent in our industry. We regularly invest in key initiatives including, but not limited to, furthering belonging, physical and mental health, and talent development. To measure engagement and collect feedback from our employees, we administer regular employee engagement surveys.
These are typically designed into silicon chips that are found in high volume in multiple markets such as automotive, hyperscale, mobile computing, and many consumer products including mobile phones, and AI chips. Our IP offerings include controllers and physical interfaces, which are commonly used in computing, networking, and embedded systems.
These IP solutions are embedded in silicon chips deployed across high-volume markets, including automotive, hyperscale, mobile computing, and consumer products such as mobile phones and AI chips. Our offerings include controllers and physical interfaces widely used in computing, networking, and embedded systems.
Services We offer a number of services, including design services, services related to methodology, education and hosted design solutions. These services may be sold separately or sold and performed in conjunction with the license, sale or lease of our products. As necessary, specialized design services engineers are assigned to internal R&D projects associated with our design IP business.
Services We offer a number of services, including design services, services related to methodology, education and hosted design solutions. These services may be sold separately or sold and performed in conjunction with the license, sale or lease of our products.
CHIN-CHI TENG has served as Senior Vice President and General Manager of the Digital and Signoff Group of Cadence since September 2018. From January 2002 to September 2018, Dr.
Taxay holds a B.A. in Political Science and a J.D. from the University of Michigan. CHIN-CHI TENG has served as Senior Vice President and General Manager of the Digital and Signoff Group of Cadence since September 2018. From January 2002 to September 2018, Dr.
PAUL SCANNELL has served as Senior Vice President of Worldwide Field Operations of Cadence since May 2024. From 2005 to April 2024, Mr. Scannell held several positions at Cadence, including most recently as Corporate Vice President, Sales from June 2017 to April 2024. Prior to joining Cadence in 2005 through Cadence's acquisition of Verisity Ltd., Mr.
Scannell held several positions at Cadence, including most recently as Corporate Vice President, Sales from June 2017 to April 2024. Prior to joining Cadence in 2005 through Cadence's acquisition of Verisity Ltd., Mr. Scannell served in key positions at Axis Systems, Inc., Synopsys, Inc. and Viewlogic Systems, Inc. Mr.
For more information on risks related to competitive factors affecting our business, see the relevant discussions throughout Item 1A, “Risk Factors.” Human Capital Resource Management Our people are at the center of our success and drive the innovations that are enabling next-generation technologies.
For more information on risks related to competitive factors affecting our business, see Item 1A, “Risk Factors.” Human Capital Resource Management Our people are at the center of our success and drive the innovations that are enabling next-generation technologies. Cadence technology is highly specialized and deeply technical and our team represents some of the best and brightest in their fields.
This enables us to target and accelerate the development of new software technology and products to satisfy current and future design requirements. 5 Table of Contents We offer engineering services to collaborate with our customers in the design of complex ICs and the implementation of key design capabilities, including low power design, IC packaging and board design, functional verification, digital implementation, analog/mixed-signal design and system-level design.
We offer engineering services to collaborate with our customers in the design of complex ICs and the implementation of key design capabilities, including low power design, IC packaging and board design, functional verification, digital implementation, analog/mixed-signal design and system-level design.
The complexity of these devices and signal transmissions requires analysis and simulation throughout the product lifecycle to meet these objectives. Our Clarity ™ 3D Solver for electromagnetic and power electronics analysis and simulation, as well as our Celsius ™ Thermal Solver, provide the foundation for multiphysics analysis technology, with complete electrical-thermal co-simulation for electronic systems from ICs to physical enclosures.
Our Clarity ™ 3D Solver for electromagnetic and power electronics analysis and simulation, as well as our Celsius ™ Thermal Solver, provide the foundation for multiphysics analysis technology, with complete electrical-thermal co-simulation for electronic systems from ICs to physical enclosures. Our Fidelity™ CFD Software expands our ability to meet the growing design challenges of electronic and systems companies.
Product and Maintenance and Services Revenue Revenue, and revenue as a percentage of total revenue, from our product and maintenance and services offerings for the last three fiscal years were as follows: 2024 2023 2022 (In millions, except percentages) Product and maintenance $ 4,213 91 % $ 3,834 94 % $ 3,340 94 % Services 428 9 % 256 6 % 222 6 % Total revenue $ 4,641 $ 4,090 $ 3,562 Recurring revenue includes revenue recognized over time from our software arrangements, services, royalties, maintenance on IP licenses and hardware, and operating leases of hardware.
Product and Maintenance and Services Revenue Revenue, and revenue as a percentage of total revenue, from our product and maintenance and services offerings for the last three fiscal years were as follows: 2025 2024 2023 (In millions, except percentages) Product and maintenance $ 4,822 91 % $ 4,214 91 % $ 3,834 94 % Services 475 9 % 428 9 % 256 6 % Total revenue $ 5,297 $ 4,642 $ 4,090 Product and maintenance revenue includes revenue from licensing our software and semiconductor IP, sales and leases of emulation hardware and the related maintenance on these licenses and sales.
In the United States, the Trump administration has rescinded an executive order relating to AI Technologies that was previously implemented by the Biden administration and may continue to rescind other existing federal orders and/or administrative policies relating to AI Technologies, or may implement new executive orders and/or other rule-making relating to AI Technologies in the future.
Moreover, while these regulatory regimes continue to expand globally, in the United States, the Trump administration has rescinded an executive order relating to AI Technologies that was previously implemented by the Biden administration and may rescind or amend other existing regulations relating to AI Technologies.
The EU Artificial Intelligence Act (the “EU AI Act”) applies to companies that develop, use and/or provide AI in the EU and – depending on the AI use case - includes requirements around transparency, conformity assessments and monitoring, risk assessments, human oversight, security, accuracy, general purpose AI and foundation models, and fines for breach of up to 7% of worldwide annual turnover.
In addition, the EU Artificial Intelligence Act (the “EU AI Act”), which entered into force on August 1, 2024 and under which the majority of substantive requirements are expected to apply from August 2, 2026, applies to companies that develop, use and/or provide AI in the EU and – depending on the AI use case – includes requirements around transparency, conformity assessments and monitoring, risk assessments, human oversight, security and accuracy, training data transparency, copyright compliance and technical documentation, and fines for breach of up to 7% of worldwide annual turnover.
Governmental Regulations We are subject to a variety of federal, state, local and foreign laws and regulations relating to our business and operations. These include, but are not limited to, laws and regulations related to trade controls, anti-corruption and anti-bribery, and data privacy and data protection and AI, as well as antitrust, competition, employment, income taxes and the environment.
These include, but are not limited to, laws and regulations related to trade controls, anti-corruption and anti-bribery, and data privacy and data protection and AI, as well as antitrust, competition, employment, income taxes, national security, foreign ownership and investment and the environment. The following describes certain significant laws and regulations that may impact our business.
Our comprehensive suite of computational fluid dynamics (“CFD”) solutions enables our customers to extend their multiphysics analysis workflows to address simulation and analysis challenges for applications such as aerodynamics, hydrodynamics, propulsion, turbomachinery, heat transfer, and combustion. Optimality™ Intelligent System Explorer is the industry’s first generative AI-driven multiphysics optimization solution.
Fidelity CFD is a physics-based analysis solution for mechanical design and complements the electronic system analysis portfolio. Our comprehensive suite of CFD solutions enables our customers to extend their multiphysics analysis workflows to address simulation and analysis challenges for applications such as aerodynamics, hydrodynamics, propulsion, turbomachinery, heat transfer, and combustion.
Millennium M1 is the first release and is designed to overcome traditional CFD speed/accuracy and compute resource limitations with a combination of GPU resident CFD solvers such as Fidelity LES for large eddy simulations (“LES”) and scalable high-performance hardware. For 3D-IC and multi-chiplet designs, our customers use the Cadence ® Integrity™ 3D-IC Platform.
Our Millennium™ Multiphysics Enterprise Platform is an industry-first turnkey AI-enabled digital twin and is designed to overcome traditional CFD speed/accuracy and compute resource limitations with a combination of GPU resident CFD solvers such as Fidelity LES for large eddy simulations (“LES”) and scalable high-performance hardware. In May 2025, we announced the M2000 supercomputer.
Teng held several positions at Cadence, most recently as Corporate Vice President, Research and Development from June 2015 to September 2018, and Vice President, Research and Development from March 2009 to June 2015. Dr. Teng has a B.S. in electrical engineering from the National Taiwan University and a Ph.D. in electrical and computer engineering from the University of Illinois, Urbana-Champaign.
Teng held several positions at Cadence, most recently as Corporate Vice President, Research and Development from June 2015 to September 2018, and Vice President, Research and Development from March 2009 to June 2015. Dr.
Foreign Corrupt Practices Act and the U.K. Bribery Act, which prohibit corrupt payments to governmental officials and bribes to other persons.
Anti-corruption and anti-bribery We are subject to laws and regulations in the United States and other jurisdictions concerning anti-corruption and anti-bribery, including the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act, which prohibit corrupt payments to governmental officials and bribes to other persons.
Data center professionals can future-proof designs and assess operational decisions with this digital twin and empower designers, owners, and operators to address the need for reliability, capacity, and energy efficiency. With our acquisition of BETA CAE Systems International AG (“BETA CAE”) in fiscal 2024, we expanded our multiphysics simulation capabilities to include mechanical and structural analysis.
Data center professionals can future-proof designs and assess operational decisions with this digital twin and empower designers, owners, and operators to address the need for reliability, capacity, and energy efficiency.
Cunningham has an M.A. and Ph.D. in computer science from the University of Cambridge in the United Kingdom. KARNA NISEWANER has served as Senior Vice President, General Counsel and Corporate Secretary of Cadence since February 2024. From May 2011 to February 2024, Ms.
Cunningham has an M.A. and Ph.D. in computer science from the University of Cambridge in the United Kingdom. PAUL SCANNELL has served as Senior Vice President of Worldwide Field Operations (later renamed to Customer Success Team) of Cadence since May 2024. From 2005 to April 2024, Mr.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table provides information regarding our executive officers as of February 20, 2025: Name Age Positions and Offices Anirudh Devgan 55 President and Chief Executive Officer John M.
Fiscal Year End Cadence’s fiscal year end is December 31, and its fiscal quarters end on March 31, June 30, and September 30. INFORMATION ABOUT OUR EXECUTIVE OFFICERS The following table provides information regarding our executive officers as of February 18, 2026: Name Age Positions and Offices Anirudh Devgan 56 President and Chief Executive Officer John M.
The forward-looking statements included in this Annual Report are made only as of the date of this Annual Report. We do not intend, and undertake no obligation, to update these forward-looking statements.
The forward-looking statements included in this Annual Report are made only as of the date of this Annual Report. We do not intend, and undertake no obligation, to update these forward-looking statements. Overview Cadence® is a global technology leader that develops computational, AI-driven software, accelerated hardware, and silicon intellectual property (“IP”) products and solutions.
Wall 54 Senior Vice President and Chief Financial Officer Paul Cunningham 47 Senior Vice President and General Manager of the System Verification Group Karna Nisewaner 50 Senior Vice President, General Counsel and Corporate Secretary Chin-Chi Teng 59 Senior Vice President and General Manager of the Digital and Signoff Group Paul Scannell 59 Senior Vice President of Worldwide Field Operations Our executive officers are appointed by our Board of Directors and serve at the discretion of our Board of Directors. 9 Table of Contents ANIRUDH DEVGAN has served as Chief Executive Officer of Cadence since December 2021 and President of Cadence since November 2017.
Wall 55 Senior Vice President and Chief Financial Officer Paul Cunningham 48 Senior Vice President and General Manager of the System Verification Group Paul Scannell 60 Senior Vice President, Customer Success Team Marc Taxay 57 Senior Vice President, General Counsel and Corporate Secretary Chin-Chi Teng 60 Senior Vice President and General Manager of the Digital and Signoff Group Our executive officers are appointed by our Board of Directors and serve at the discretion of our Board of Directors.
As part of our services offerings, we design advanced ICs, develop custom IP and help customers address design challenges.
As necessary, specialized design services engineers are assigned to internal R&D projects associated with our design IP business. 5 Table of Contents As part of our services offerings, we design advanced ICs, develop custom IP and help customers address design challenges.
Devgan served as Corporate Vice President and General Manager of the Custom Design Business Unit at Magma Design Automation, Inc., an EDA company. Dr. Devgan has a B.Tech. in electrical engineering from the Indian Institute of Technology, Delhi, and an M.S. and Ph.D. in electrical and computer engineering from Carnegie Mellon University. JOHN M.
Devgan has a B.Tech. in electrical engineering from the Indian Institute of Technology, Delhi, and an M.S. and Ph.D. in electrical and computer engineering from Carnegie Mellon University. JOHN M. WALL has served as Senior Vice President and Chief Financial Officer of Cadence since October 2017. From June 1997 to October 2017, Mr.
Trade regulations limiting or banning sales into certain countries or to certain companies, including economic and financial sanctions and trade embargoes administered and enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), have impacted our ability to transact business in certain countries and with certain customers.
Department of the Treasury’s Office of Foreign Assets Control, have impacted our ability to transact business in certain countries and with certain customers.
Scannell served in key positions at Axis Systems, Inc., Synopsys, Inc. and Viewlogic Systems, Inc. Mr. Scannell has a B.S. in electrical engineering from Stevens Institute of Technology, an M.S. in electrical engineering from University of Southern California and an M.B.A. from Pepperdine University. 10 Table of Contents
Scannell has a B.S. in electrical engineering from Stevens Institute of Technology, an M.S. in electrical engineering from University of Southern California and an M.B.A. from Pepperdine University. 10 Table of Contents MARC TAXAY has served as Senior Vice President, General Counsel and Corporate Secretary of Cadence since May 2025.
For mainstream PCB customers, where individual or small team productivity is a focus, we provide the OrCAD ® family of offerings, which are primarily marketed worldwide through a network of resellers. Allegro X AI™ is our generative AI solution designed to provide significant cycle-time compression for PCB design, enhancing an engineer’s productivity.
The need for compact, high-performance mobile, consumer, and automotive design with advanced serial interconnect is driving the technological evolution of our PCB offerings. For mainstream PCB customers, where individual or small team productivity is a focus, we provide the OrCAD ® family of offerings, which are primarily marketed worldwide through a network of resellers.
The speed and proximity of signals on silicon, through packages to boards, and through connectors and cables, exposes these communications to various kinds of interference, generates heat, and emits electromagnetic radiation. Careful analysis is required for these systems to work as designed under a wide range of operating conditions, standards, and regulatory laws.
Allegro X AI™ is our generative AI solution designed to provide significant cycle-time compression for PCB design, enhancing an engineer’s productivity. The speed and proximity of signals on silicon, through packages to boards, and through connectors and cables, exposes these communications to various kinds of interference, generates heat, and emits electromagnetic radiation.
Our Semiconductor IP portfolio includes silicon subsystems, software, and services that are used in semiconductor design. The SD&A category includes our software and services used to design and verify a wide variety of physical electronic systems.
Core EDA encompasses the software, hardware, and services essential for the design and verification of a wide range of semiconductors. Our Semiconductor IP portfolio includes silicon subsystems, software, and related services that accelerate the semiconductor design process. The SD&A category provides solutions and services that enable the design and verification of complete electronic systems, from PCBs to complex system assemblies.
WALL has served as Senior Vice President and Chief Financial Officer of Cadence since October 2017. From June 1997 to October 2017, Mr.
ANIRUDH DEVGAN has served as Chief Executive Officer of Cadence since December 2021 and President of Cadence since November 2017. From May 2012 to November 2017, Dr.
This capability is essential for chips that are used in high-performance computers like microprocessors, graphics processors, and AI processor chips. Some of the functional tests for these designs are so large that they may take weeks or even months to complete.
For high-performance chips like microprocessors, graphics processing units (“GPUs”), and AI processors, hardware acceleration and software prototyping are essential to handle and reduce the time necessary for large-scale functional tests that could otherwise take weeks or months.
Already, certain existing legal regimes (e.g., relating to data privacy) regulate certain aspects of AI Technologies, and new laws regulating AI Technologies have been enacted in China, the United States and the European Union.
Already, certain existing legal regimes (e.g., relating to data privacy) regulate certain aspects of AI Technologies, and new laws regulating AI Technologies have been enacted. For example, at the U.S. state level, the California Privacy Protection Agency recently finalized regulations under the California Consumer Privacy Act regarding the use of automated decision-making, which went into effect on January 1, 2026.
Pervasive Intelligence incorporates AI training and inference algorithms in our solutions to help customers optimize performance and productivity with improved quality of results for their products. The amount of data produced in the design phase of their products has grown exponentially over the last 20 years.
Pervasive Intelligence: This pillar integrates AI training, inference, and reasoning algorithms into our products and solutions, enabling customers to optimize performance, productivity, and design quality.
We have a broad portfolio of PCI Express, Universal Accelerator Link, Compute Express Link, multiple memory interfaces including High Bandwidth Memory and Graphics Double Data Rate, and many other standards. In addition, our portfolio includes a wide variety of digital signal processor IPs.
The portfolio spans PCI Express, Universal Accelerator Link, Compute Express Link, multiple memory interfaces such as High Bandwidth Memory and Graphics Double Data Rate, and other industry standards. Additionally, our Tensilica® configurable digital signal processors (“DSPs”) provide vertically targeted subsystems for AI, audio/voice, baseband, and vision/imaging applications.
We implement generative AI agents to analyze large data sets and break through the limitations of the conventional human-intensive optimization process to achieve optimal design solutions expeditiously and without compromising accuracy. Our software and hardware products also support cloud access to address our customers' growing computational needs. Customers can access our solutions via our Cadence OnCloud Platform.
With the exponential growth of data generated during the design process, our agentic and generative AI solutions analyze vast datasets and are designed to overcome the limitations of traditional human-intensive optimization processes and to enable more accurate, efficient, and optimal design solutions that meet the demands of increasingly complex systems. 1 Table of Contents Our software and hardware solutions also support cloud access to address our customers' growing computational needs.
The capabilities in the Allegro ® System Design Platform include PCB design and implementation, IC package and system-in-package design, signal and power integrity analysis, and PCB library design management and collaboration. The need for compact, high-performance mobile, consumer, and automotive design with advanced serial interconnect is driving the technological evolution of our PCB offerings.
These solutions also leverage agentic AI-driven optimization and cloud-native scalability to accelerate design and analysis and improve designer productivity. The capabilities in the Allegro® System Design Platform include PCB design and implementation, IC package and system-in-package design, signal and power integrity analysis, and PCB library design management and collaboration.
We offer two functional verification software solutions, the Jasper Formal Verification Platform, and the Xcelium™ Parallel Logic Simulation Platform.
We offer two software solutions for functional verification: the Jasper Formal Verification Platform and the Xcelium™ Parallel Logic Simulation Platform. These tools help engineers align functional and physical views of a design, ensuring it passes all functional tests. Additionally, our Verisium™ generative AI solution enhances productivity, automation, and quality across the entire verification flow.
Our customers include semiconductor companies that design and manufacture semiconductor devices and systems companies that design and manufacture products containing many different types of semiconductors, which they either make themselves or buy from a semiconductor company. Semiconductors, also referred to as integrated circuits (“ICs”), or chips, are the heart of almost every industry.
Our customers include semiconductor companies that design and manufacture integrated circuits (“ICs”), as well as systems companies that design and manufacture electromechanical systems containing various types of semiconductor and other electronics. Our products and solutions empower our customers to design and verify and bring to life new and innovative products.
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Overview Cadence ® is a global market leader that develops computational, AI-driven software, accelerated hardware, and intellectual property (“IP”) solutions for engineers and scientists to bring new and innovative products to life. The world’s most innovative technology companies use our solutions and services to deliver transformational products to multiple industries that drive the global economy.
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Our mission is to empower the world’s most innovative companies to deliver extraordinary electronic products that drive the global economy and improve everyday life. Business Strategy Designing even the simplest electronic systems is a sophisticated process that requires highly skilled engineers with specialized expertise.
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The products these companies develop are some of the most complex systems in the world. Since our inception, we have been at the forefront of technology innovation. We work closely with our customers, helping them solve their most complex challenges in the semiconductor and electronic systems industries to unlock limitless opportunities.
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Our Intelligent System Design™ (“ISD”) strategy enables us to address our customers' most challenging product development needs while expanding our capabilities beyond traditional chip design to encompass full electromechanical systems. By leveraging our deep expertise, we develop industry-leading computational AI-driven software, accelerated hardware, and IP solutions that adapt to our customers’ evolving design requirements.
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Semiconductors are the catalyst for innovation in many industries including automotive, aerospace, biotech, hyperscale and cloud computing, data centers, telecommunications, medical technology, industrial internet of things (“IIoT”), and AI. They are found in a wide variety of consumer products such as cell phones, automobiles, computers, home appliances, home security, drones, and home entertainment systems.
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This flexibility helps our customers address critical business priorities such as reducing time-to-market and advancing sustainability goals. To address the growing complexity of modern design, we’ve integrated cutting-edge technologies including agentic and generative AI, machine learning, and digital twin algorithms, into our core products and solutions.
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Business Strategy Our Intelligent System Design™ (“ISD”) strategy allows us to deliver solutions to our customers to solve their most complex product development challenges. Our industry-leading computational software, accelerated hardware, and IP enable us to adapt to our customer's dynamic design requirements, allowing them to meet their critical business and environmental concerns including time-to-market and sustainability.
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These innovations, whether developed in-house or through strategic acquisition, empower our customers to achieve their business objectives with greater efficiency and precision. Our ISD strategy focuses on three key pillars: Design Excellence, System Innovation, and Pervasive Intelligence.
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The creation of even the most seemingly simple electronic systems and products typically includes a complex design process and requires highly trained engineers with various areas of specialized knowledge and skill sets. Our ability to deliver innovative products that keep up with increasing complexity allows our customers to be successful in meeting their business goals and objectives.
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Design Excellence: This pillar leverages our core expertise in AI-driven computational software and accelerated computing to deliver industry-leading electronic design, analysis, and verification products and solutions for semiconductors, which are embedded in many products and services that we use every day.
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Historically, the industry that provided the software tools IC engineers used was called Electronic Design Automation (“EDA”). The pace of technical innovation in EDA has been driven by a concept known as Moore’s Law, which more than 50 years ago predicted that the complexity of ICs would double approximately every 18-24 months.
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System Innovation: Building on our Design Excellence foundation, this pillar applies our AI-driven computational expertise to multiphysics-based analysis of systems containing electronic devices, such as printed circuit boards ("PCBs"), advanced packaging technologies, and 3D-ICs. This enables customers to verify that their products will function as intended under various physical conditions.
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Our strategy, illustrated in the graphic below, is focused on three primary areas: Design Excellence, System Innovation, and Pervasive Intelligence. Design Excellence focuses on our core technology and deep understanding of computational software, accelerated computing, machine learning, and AI to develop best-in-class electronic design and analysis semiconductor solutions.
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Customers can access our solutions via our Cadence OnCloud Platform. Business Drivers Our business growth and customer success are fueled by the transformative impact of AI and the increasing complexity of semiconductors and electronic system design that underpins modern society. Anchored in our ISD strategy, we view AI as a pivotal force driving new opportunities across three key horizons.
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In this area, customers are primarily developing large chips including those used in computers, laptops, cellphones, medical devices, games and entertainment systems, and many other types of consumer electronics.
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The first, Infrastructure AI, is powered by the demand for high-performance computing (“HPC”) and AI chips essential for data centers and hyperscalers. The second, Physical AI, focuses on embedding AI into physical systems like autonomous vehicles, industrial robotics, and automation. The third, Life Sciences AI, applies AI and computational science to biology, enabling breakthroughs in medical and life sciences industries.
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Design Excellence applies to all types of semiconductor electronics including CPUs, GPUs, MCUs, memory, radio frequency (“RF”), analog, and mixed-signal, in both mainstream and advanced semiconductor process nodes. 1 Table of Contents System Innovation builds on our foundation of Design Excellence and deep expertise in computational algorithms and expands that expertise to include multiphysics-based analysis of systems that contain electronic devices, including printed circuit boards (“PCBs”), devices with advanced packaging technology, and 3-dimensional IC (“3D-IC”).
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The growing complexity of chip and system designs is a fundamental driver of demand for our technology. As customers tackle the challenges of designing increasingly intricate systems, they rely on our advanced AI-driven computational software, hardware, IP, and services to manage this complexity without proportional cost increases.
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This gives customers designing full systems containing multiple electronic devices, the ability to verify that their products will work as intended under various physical conditions. Some examples of electronic systems are a computer motherboard, the electronics in a cellphone, or the electronic transmission or infotainment system in an automobile.
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Our products and solutions are critical for optimizing the performance, power, and area (“PPA”) of semiconductors and electronic systems while accelerating time-to-market. This demand is further amplified by rapid advancements in integrated circuit manufacturing technology. To ensure our customers can fully capitalize on these innovations, we remain committed to significant investments in Research and Development (“R&D”).
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Business Drivers Our products and services enable our customers to design complex and innovative semiconductor and electronic systems that are driven by key trends, including foundries creating new advanced transistor devices and processes, semiconductor companies designing electrical systems, systems companies designing semiconductors, the hyper-convergence between electrical and mechanical systems, hyperscale computing, autonomous driving, and 5G.
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Our business is also propelled by the differentiation and measurable value our products and solutions deliver to our customers and partners. As innovation accelerates, our products and solutions address critical challenges in electronic design, including power efficiency, performance, chip area, and cost. Our customers rely on our solutions to provide superior quality of results, enhanced engineering productivity, and unmatched reliability.
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These trends are accelerated by the AI super cycle. Demand for our technology and expertise is driven by increasing complexity and our customers’ need to invest in new designs and products that are highly differentiated. Generative AI is reshaping the entire semiconductor and systems industry development process.
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These capabilities have become increasingly vital as customers pursue sustainability goals by developing energy-efficient products. Beyond traditional electronics, we have expanded into new verticals such as life sciences, leveraging our expertise in simulation and algorithmic design to unlock transformative growth opportunities.
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From our perspective, the AI super cycle we are experiencing will influence our key business opportunities along three horizons, which are Infrastructure AI, Physical AI and Life Sciences AI. The first horizon, Infrastructure AI, is being driven by data centers and hyperscale computing to provide the necessary power to run AI workloads.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisk Factors Summary Business and Operational Risks • We have experienced varied operating results, and our operating results for any particular fiscal period are affected by the timing of revenue recognition, particularly for our hardware, IP and certain software products. • Uncertainty in the global economy and instability within international relations, including changes in governmental policies relating to technology, and any potential downturn in the semiconductor and electronics industries, may negatively impact our business and reduce our bookings levels and revenue. • We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in global markets as well as a variety of other laws and regulations. • As we continue to acquire and invest in companies or technologies, we may not realize the expected business or financial benefits and these acquisitions could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results and the market value of our common stock. • We could suffer serious harm to our business because of the infringement or misappropriation of our IP rights by third parties. • Our success is highly dependent upon the legal protection of our proprietary technology, as well as software and other IP rights licensed to us by third parties, and we cannot assure that the precautions taken to protect our rights will be adequate or that we will continue to be able to adequately secure such IP rights from third parties. • We may not realize opportunities presented by AI and may incur reputational and financial harm and liability as a result of issues in the development and use of AI. • Cyberattacks that compromise the confidentiality, integrity or availability of our or our third-party providers’ information technology systems or confidential information could materially harm our business, reputation and financial condition. • Risks associated with our international operations could adversely impact our financial condition. • The effect of foreign exchange rate fluctuations may adversely impact our revenue, expenses, cash flows and financial condition. • We depend upon our management team and qualified employees, and our failure to attract, train, motivate and retain them may make us less competitive and therefore harm our results of operations. • A significant portion of our cash is held and generated outside of the United States, and if our cash available in the United States is insufficient to meet our requirements in the United States, we may be required to raise cash in ways that could negatively affect our financial condition, results of operations and the market price of our common stock. • The investment of our cash is subject to risks that may cause losses and affect the liquidity of these investments. • The long sales cycle of our products and services may cause our operating results to fluctuate unexpectedly. • We have incurred, and may in the future incur, substantial costs in connection with restructuring plans, which might not result in the benefits we anticipate, possibly having a negative effect on our future operating results. • Our business is subject to the risk of natural disasters and global climate change.
Biggest changeRisk Factors Summary Business and Operational Risks • We have experienced varied operating results, and our operating results for any particular fiscal period are affected by the timing of revenue recognition, particularly for our hardware, IP and certain software products. • The growth of our business depends primarily on the semiconductor and electronics systems industries. • Uncertainty in the global economy and instability within international relations, including changes in governmental policies relating to technology, may negatively affect our business and reduce our bookings levels and revenue. • We are subject to governmental export and import controls that subject us to liability and impair our ability to compete in global markets as well as a variety of other laws and regulations. • As we continue to acquire and invest in companies or technologies, we may not realize the expected business or financial benefits and these acquisitions could prove difficult to integrate, disrupt our business, dilute stockholder value and adversely affect our operating results and the market value of our common stock. • We could suffer serious harm to our business because of the infringement or misappropriation of our IP rights by third parties. • Our success is highly dependent upon the legal protection of our proprietary technology, as well as software and other IP rights licensed to us by third parties, and we cannot assure that the precautions taken to protect our rights will be adequate or that we will continue to be able to adequately secure such IP rights from third parties. • We may not realize opportunities presented by AI and may incur reputational and financial harm and liability as a result of issues relating to the management and governance of our use of AI. • Cyberattacks that compromise the confidentiality, integrity or availability of our or our third-party providers’ information technology systems or confidential information could materially harm our reputation, business, financial condition and results of operations. • Any actual or perceived failure to comply with new or existing laws, regulations and other requirements relating to the privacy, security, processing and cross-border transfer of Personal Information (as defined below) could adversely affect our business, financial condition and results of operations. • We rely on third-party data center providers and any disruption in the operations of these third-party providers, limitations on capacity or interference with our use could adversely affect our business, financial condition and results of operations. • Doing business with the public sector and heavily-regulated entities subjects us to risks related to government procurement processes, regulations and contracting requirements. • Risks associated with our international operations could adversely impact our financial condition. • The effect of foreign exchange rate fluctuations may adversely impact our revenue, expenses, cash flows and financial condition. • We depend upon our management team and qualified employees, and our failure to attract, train, motivate and retain them may make us less competitive and therefore harm our results of operations. • A significant portion of our cash is held and generated outside of the United States, and if our cash available in the United States is insufficient to meet our requirements in the United States, we may be required to raise cash in ways that could negatively affect our financial condition, results of operations and the market price of our common stock. • The investment of our cash is subject to risks that may cause losses and affect the liquidity of these investments. • The long sales cycle of our products and services may cause our operating results to fluctuate unexpectedly. • We have incurred, and may in the future incur, substantial costs in connection with restructuring plans, which might not result in the benefits we anticipate, possibly having a negative effect on our future operating results. • Our business is subject to the risk of natural disasters, global climate change and other catastrophic events. 12 Table of Contents Risks Related to Customers, Suppliers and Industry Competition • Customer consolidation could affect our operating results. • Our failure to respond quickly to technological developments or customers’ increasing technological requirements and to continue to develop or acquire technological capabilities could make our products uncompetitive and obsolete and impede our ability to address the requirements in technology segments that are expected to contribute to our growth. • Our investment in research and development of new and existing products, technologies and services may affect our operating results, and our return on investment may be lower or develop more slowly than expected. • Our operating results and revenue could be adversely affected by customer payment delays, customer bankruptcies and defaults, modifications or non-renewals of licenses. • The competition in our industries is substantial, and we may not be able to continue to compete successfully. • Our future revenue is dependent in part upon our installed customer base continuing to license or buy products and purchase services. • We depend on a single supplier or a limited number of suppliers for certain hardware components and contract manufacturers for production of our hardware products, making us vulnerable to supply disruption and price fluctuation.
Despite the precautions we may take to protect our IP rights, from time to time third parties challenge, invalidate or circumvent these safeguards. Our patents and other IP rights may not provide us with sufficient competitive advantages.
Despite the precautions we may take to protect our IP rights, from time to time third parties may challenge, invalidate or circumvent these safeguards. Our patents and other IP rights may not provide us with sufficient competitive advantages.
We expect that rapidly changing laws, regulations, policies, interpretations and expectations related to corporate governance, environmental and social matters, as well as increased enforcement actions by various governmental and regulatory agencies, will continue to increase the cost of our compliance and internal risk management programs, which could adversely affect our business, results of operations and financial condition.
We expect that rapidly changing laws, regulations, policies, interpretations and expectations related to corporate governance, environmental and social matters, as well as increased enforcement actions by various governmental and regulatory agencies, will continue to increase the cost of our compliance and internal risk management programs, which could adversely affect our business, financial condition and results of operations.
Moreover, some stakeholders may disagree with our environmental, social and governance targets and practices and the focus of stakeholders may change and evolve over time. Stakeholders may have different views on where corporate governance, environmental and social focus should be placed. Any disagreement with our targets or strategies could adversely affect our business, reputation, results of operations and financial condition.
Moreover, some stakeholders may disagree with our environmental, social and governance targets and practices and the focus of stakeholders may change and evolve over time. Stakeholders may have different views on where corporate governance, environmental and social focus should be placed. Any disagreement with our targets or strategies could adversely affect our reputation, business, financial condition and results of operations.
Factors that could affect our ability to compete successfully include: • the development by others of competitive products or platforms and services, possibly resulting in a shift of customer preferences away from our products and services and significantly decreased revenue; 22 Table of Contents • aggressive pricing competition by our competitors, including through significant discounts, may cause us to reduce the prices of our products, offer terms that are unfavorable to us or lose our competitive position, any of which could result in lower revenue or profitability and could adversely impact our ability to realize the revenue and profitability forecasts for our products and could, over time, significantly constrain the prices that we can charge for our products; • the challenges of advanced-node design may lead some customers to work with more mature, less risky manufacturing processes that may reduce their need to upgrade or enhance their EDA solutions and design flows; • the challenges of developing (or acquiring) technology solutions that meet the rapidly evolving requirements of next-generation design challenges; • intense competition to attract acquisition targets, possibly making it more difficult for us to acquire companies or technologies at an acceptable price, or at all; • new entrants, including larger electronic systems companies, in our industry; • the combination of our competitors or collaboration among competitors and/or other companies (including through strategic alliances) to deliver more comprehensive or different offerings than they could individually; • our entry into new product categories or technology vertical sectors, including those in which success depends on absolute or relative scale; • decisions by customers to perform engineering services or IP development internally, rather than purchase these services from outside vendors due to budget constraints or excess engineering capacity; • actions by regulators to limit the contractual terms that either we or our customers can apply to product and service offerings; and • events or circumstances that damage the reputation of our company, leadership, products, services or technologies.
Factors that could affect our ability to compete successfully include: • the development by others of competitive products or platforms and services, possibly resulting in a shift of customer preferences away from our products and services and significantly decreased revenue; 26 Table of Contents • aggressive pricing competition by our competitors, including through significant discounts, may cause us to reduce the prices of our products, offer terms that are unfavorable to us or lose our competitive position, any of which could result in lower revenue or profitability and could adversely impact our ability to realize the revenue and profitability forecasts for our products and could, over time, significantly constrain the prices that we can charge for our products; • the challenges of advanced-node design may lead some customers to work with more mature, less risky manufacturing processes that may reduce their need to upgrade or enhance their EDA solutions and design flows; • the challenges of developing (or acquiring) technology solutions that meet the rapidly evolving requirements of next-generation design challenges; • intense competition to attract acquisition targets, possibly making it more difficult for us to acquire companies or technologies at an acceptable price, or at all; • new entrants, including larger electronic systems companies, in our industry; • the combination of our competitors or collaboration among competitors and/or other companies (including through strategic alliances) to deliver more comprehensive or different offerings than they could individually; • our entry into new product categories or technology vertical sectors, including those in which success depends on absolute or relative scale; • decisions by customers to perform engineering services or IP development internally, rather than purchase these services from outside vendors due to budget constraints or excess engineering capacity; • actions by regulators to limit the contractual terms that either we or our customers can apply to product and service offerings; and • events or circumstances that damage the reputation of our company, leadership, products, services or technologies.
Acquisitions and other transactions, arrangements and investments involve numerous risks and potential operating difficulties and expenditures, including the following, any of which could harm our business or negatively impact our results of operations: • the failure to complete transactions on a timely basis or at all, or to realize, or a delay in realizing, anticipated benefits or synergies, including as a result of any conditions placed upon approvals from governmental authorities; • potential identified or unknown security vulnerabilities in acquired companies, technologies or products that expose us to additional security risks or delay our ability to integrate them; • brand or reputational harm, including due to failure or perceived failure to achieve our publicly disclosed greenhouse gas emissions reduction target due to acquisitions with large greenhouse gas emissions; • the failure to understand, compete and operate effectively in markets where we have limited experience or where competitors may have stronger market positions; • the failure to integrate, combine or manage acquired products, infrastructure, technologies and businesses effectively; • difficulties in integrating and assimilating acquired employees, which may lead to retention risk with respect to both acquired and existing employees and difficulties related to acquired employees represented by labor unions; • the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries; • diversion of financial resources and management’s attention from day-to-day business; 15 Table of Contents • overlapping customers and product sets that impact our ability to maintain revenue at historical rates; • unanticipated costs or assumed liabilities, including those related to an acquired company's disclosure controls and procedures, internal control over financial reporting, cybersecurity, taxes and other compliance programs; • contingent payments in connection with acquisitions in the future; • unwillingness of customers, suppliers or other business partners of an acquired business to continue licensing or do business with us, or delays in such activities; • difficulties managing any strategic investment or collaboration that we do not control or for which we do not have sole decision-making authority; • impairment charges or other adverse accounting outcomes related to acquisitions or strategic investments; • the failure or cessation of operations by entities in which we made strategic investments or collaboration agreements; • the loss of some or all of the value of our investment; • additional stock-based compensation issued or assumed in connection with the acquisition, including the impact on stockholder dilution and our results of operations; and • the tax effects of any such acquisitions including related integration and business operation changes, and assessment of the impact on the realizability of our future tax assets or liabilities In addition, to facilitate acquisitions or investments, we have and may in the future seek additional equity or debt financing, which may not be available on terms favorable to us or at all, which may affect our ability to complete subsequent acquisitions or investments, and which may affect the risks of owning our common stock.
Acquisitions and other transactions, arrangements and investments involve numerous risks and potential operating difficulties and expenditures, including the following, any of which could harm our business or negatively impact our results of operations: • the failure to complete transactions on a timely basis or at all, or to realize, or a delay in realizing, anticipated benefits or synergies, including as a result of any conditions placed upon approvals from governmental authorities; • potential identified or unknown security vulnerabilities in acquired companies, technologies or products that expose us to additional security risks or delay our ability to integrate them; • brand or reputational harm, including due to failure or perceived failure to achieve our publicly disclosed greenhouse gas emissions reduction target due to acquisitions with large greenhouse gas emissions; 17 Table of Contents • the failure to understand, compete and operate effectively in markets where we have limited experience or where competitors may have stronger market positions; • the failure to integrate, combine or manage acquired products, infrastructure, technologies and businesses effectively; • difficulties in integrating and assimilating acquired employees, which may lead to retention risk with respect to both acquired and existing employees and difficulties related to acquired employees represented by labor unions; • the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries; • diversion of financial resources and management’s attention from day-to-day business; • overlapping customers and product sets that impact our ability to maintain revenue at historical rates; • unanticipated costs, assumed liabilities or challenges in enforcing consistent controls over the acquired business, including those related to an acquired company's disclosure controls and procedures, internal control over financial reporting, cybersecurity, taxes and other compliance programs; • contingent payments in connection with acquisitions in the future; • unwillingness of customers, suppliers or other business partners of an acquired business to continue licensing or do business with us, or delays in such activities; • difficulties managing any strategic investment or collaboration that we do not control or for which we do not have sole decision-making authority; • impairment charges or other adverse accounting outcomes related to acquisitions or strategic investments; • the failure or cessation of operations by entities in which we made strategic investments or collaboration agreements; • the loss of some or all of the value of our investment; • additional stock-based compensation issued or assumed in connection with the acquisition, including the impact on stockholder dilution and our results of operations; and • the tax effects of any such acquisitions including related integration and business operation changes, and assessment of the impact on the realizability of our future tax assets or liabilities In addition, to facilitate acquisitions or investments, we have and may in the future seek additional equity or debt financing, which may not be available on terms favorable to us or at all, which may affect our ability to complete subsequent acquisitions or investments, and which may affect the risks of owning our common stock.
Purchases of our products and services are dependent upon the commencement of new design projects by semiconductor and electronics systems companies. The IC and electronics systems industries are cyclical and are characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand.
Purchases of our products and services are dependent upon the commencement of new design projects by semiconductor and electronics systems companies. The semiconductor and electronics systems industries are cyclical and are characterized by constant and rapid technological change, product obsolescence and price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand.
We cannot predict whether or when any changes will be made that eliminate or decrease these limitations on our ability to sell products and provide services to these Entity List customers or other customers impacted by other trade restrictions.
We cannot predict whether or when any additional changes will be made that eliminate or decrease these limitations on our ability to sell products and provide services to these Entity List customers or other customers impacted by other trade restrictions.
Subject to the limits contained in the credit agreement governing our revolving credit facility and the indenture governing the $500 million aggregate principal amount of 4.200% Senior Notes due 2027 (the “2027 Notes”), $1.0 billion aggregate principal amount of 4.300% Senior Notes due 2029 (the “2029 Notes”) and $1.0 billion aggregate principal amount of 4.700% Senior Notes due 2034 (the “2034 Notes” and together with the 2027 Notes and the 2029 Notes, the “New Notes”), we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, share repurchases or for other purposes.
Subject to the limits contained in the credit agreement governing our revolving credit facility and the indenture governing the $500 million aggregate principal amount of 4.200% Senior Notes due 2027 (the “2027 Notes”), $1.0 billion aggregate principal amount of 4.300% Senior Notes due 2029 (the “2029 Notes”) and $1.0 billion aggregate principal amount of 4.700% Senior Notes due 2034 (the “2034 Notes” and together with the 2027 Notes and the 2029 Notes, the “Senior Notes”), we may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, share repurchases or for other purposes.
All or any one of these factors could limit the price that certain investors would be willing to pay for shares of our common stock and could allow our Board of Directors to resist, delay or prevent an acquisition of our company, even if a proposed transaction were favored by a majority of our independent stockholders. 26 Table of Contents Our bylaws designate the Court of Chancery of the State of Delaware as the exclusive forum for certain disputes between us and our stockholders.
All or any one of these factors could limit the price that certain investors would be willing to pay for shares of our common stock and could allow our Board of Directors to resist, delay or prevent an acquisition of our company, even if a proposed transaction were favored by a majority of our independent stockholders. 30 Table of Contents Our bylaws designate the Court of Chancery of the State of Delaware as the exclusive forum for certain disputes between us and our stockholders.
The agreements governing our revolving credit facility and our New Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to incur liens or additional indebtedness and guarantee indebtedness, enter into transactions with affiliates, alter the businesses we conduct, consolidate, merge or sell all or substantially all of our assets and to enter into sale and leaseback transactions.
The agreements governing our revolving credit facility and our Senior Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest, including restrictions on our ability to incur liens or additional indebtedness and guarantee indebtedness, enter into transactions with affiliates, alter the businesses we conduct, consolidate, merge or sell all or substantially all of our assets and to enter into sale and leaseback transactions.
Additionally, existing laws and regulations may be interpreted in ways that would affect the operation of AI Technologies, or could be rescinded or amended as new administrations take differing approaches to evolving AI Technologies.
Existing laws and regulations may be interpreted in ways that would affect the operation of AI Technologies, or could be rescinded or amended as new administrations take differing approaches to evolving AI Technologies.
As a result, from time to time, our customers or their end users discover errors or defects in our software or the systems we design, or the products or systems incorporating our design and IP may not operate as expected.
As a result, from time to time, our customers or their end users discover errors or defects in our software or the systems we design, or the products or systems incorporating our designs and IP may not operate as expected.
We may incur significant costs, resources, investments, delays and not achieve a return on investment or capitalize on opportunities presented by AI, and we could incur financial losses.
We may incur significant costs, resources, investments, delays and not achieve a return on investment or capitalize on opportunities presented by AI Technologies, and we could incur financial losses.
We are currently subject to tax audits, administrative appeals and litigation in various jurisdictions and these jurisdictions have assessed, or may assess, additional tax liabilities against us. 23 Table of Contents Our operations are subject to income and transaction taxes in the United States and in multiple foreign jurisdictions, with a significant amount of our foreign earnings generated by our subsidiaries organized in Ireland and Hungary.
We are currently subject to tax audits, administrative appeals and litigation in various jurisdictions and these jurisdictions have assessed, or may assess, additional tax liabilities against us. 27 Table of Contents Our operations are subject to income and transaction taxes in the United States and in multiple foreign jurisdictions, with a significant amount of our foreign earnings generated by our subsidiaries organized in Ireland and Hungary.
The repayment obligations under such notes may have the effect of discouraging, delaying or preventing a takeover of our company. If we were required to pay the New Notes prior to their respective maturity dates, it could have a significant negative impact on our cash and liquidity and could impact our ability to invest financial resources in other strategic initiatives.
The repayment obligations under such notes may have the effect of discouraging, delaying or preventing a takeover of our company. If we were required to pay the Senior Notes prior to their respective maturity dates, it could have a significant negative impact on our cash and liquidity and could impact our ability to invest financial resources in other strategic initiatives.
In addition, if we incur any additional indebtedness that ranks equally with the New Notes, then subject to any collateral arrangements we may enter into, the holders of that debt will be entitled to share ratably in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company.
In addition, if we incur any additional indebtedness that ranks equally with the Senior Notes, then subject to any collateral arrangements we may enter into, the holders of that debt will be entitled to share ratably in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of our company.
Antitrust authorities in the United States and a number of countries have also reviewed acquisitions and investments in the technology industry with increased scrutiny.
Further, antitrust authorities in the United States and a number of countries have also reviewed acquisitions and investments in the technology industry with increased scrutiny.
In addition, we could face scrutiny from certain stakeholders for the scope or nature of such initiatives, targets or goals, or for any revisions to these initiatives, targets or goals. 25 Table of Contents Risks Related to Our Securities and Indebtedness Our stock price has been and may continue to be subject to fluctuations.
In addition, we could face scrutiny from certain stakeholders for the scope or nature of such initiatives, targets or goals, or for any revisions to these initiatives, targets or goals. 29 Table of Contents Risks Related to Our Securities and Indebtedness Our stock price has been and may continue to be subject to fluctuations.
In addition, the New Notes currently have an investment grade credit rating, which could be lowered or withdrawn entirely by a credit rating agency based on adverse changes to circumstances relating to the basis of the credit rating. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the New Notes.
In addition, the Senior Notes currently have an investment grade credit rating, which could be lowered or withdrawn entirely by a credit rating agency based on adverse changes to circumstances relating to the basis of the credit rating. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Senior Notes.
The financial market and monetary risks associated with our investment portfolio may have a material adverse effect on our financial condition, liquidity, results of operations or cash flows. 20 Table of Contents The long sales cycle of our products and services may cause our operating results to fluctuate unexpectedly.
The financial market and monetary risks associated with our investment portfolio may have a material adverse effect on our financial condition, liquidity, results of operations or cash flows. 24 Table of Contents The long sales cycle of our products and services may cause our operating results to fluctuate unexpectedly.
We generally rely on a combination of patent, copyright and trademark law, trade secret protection and confidentiality or licenses agreements with our employers, contractors, customers, business partners and others to establish and protect our proprietary rights in technology and products.
We generally rely on a combination of patent, copyright and trademark law, trade secret protection and confidentiality or licenses agreements with our employees, contractors, customers, business partners and others to establish and protect our rights in our proprietary technology and products.
The following trends may impact the sectors we serve: 21 Table of Contents • changes in the design and manufacturing of ICs, including migration to advanced-process nodes, present major challenges to the semiconductor industry, particularly in IC design and verification, design automation, design of manufacturing equipment, and the manufacturing process itself.
The following trends may impact the sectors we serve: 25 Table of Contents • changes in the design and manufacturing of ICs, including migration to advanced-process nodes, present major challenges to the semiconductor industry, particularly in IC design and verification, design automation, design of manufacturing equipment, and the manufacturing process itself.
At the option of the holders of our outstanding notes, we may, under certain circumstances, be required to repurchase such notes. Under the terms of the New Notes, we may be required to repurchase for cash such notes prior to their respective maturity dates in connection with the occurrence of certain significant corporate events.
At the option of the holders of our outstanding notes, we may, under certain circumstances, be required to repurchase such notes. Under the terms of the Senior Notes, we may be required to repurchase for cash such notes prior to their respective maturity dates in connection with the occurrence of certain significant corporate events.
In addition, the issuance of new or expanded trade restrictions, such as the continued expansion of the military end-user and military end-use rule, the foreign-direct product rules, or any other rule that prevents a class of commodities, software or technology from export to any specific country or countries without a license, could increase our costs or expenses.
In addition, the issuance of new or expanded trade restrictions, such as the continued expansion of the military end-user and military end-use rule, the foreign-direct product rules, or any other rule that prevents or places restrictions on a class of commodities, software or technology from export or re-export to any specific country or countries without a license, could increase our costs or expenses.
The policies and procedures we have implemented to assist our compliance with these laws and regulations do not provide complete assurance that our employees, contractors, agents or partners will not violate such laws and regulations. Any violation individually or in the aggregate could have a material adverse effect on our operations, reputation and financial condition.
The policies and procedures we have implemented to assist our compliance with these laws and regulations do not provide complete assurance that our employees, contractors, agents or partners will not violate such laws and regulations. Any violation individually or in the aggregate could have a material adverse effect on our reputation, business, financial condition and results of operations.
The implementation of AI Technologies may accelerate or exacerbate potential risks related to technological developments. These risks include the possibility of AI Technologies malfunctioning, producing biased or inaccurate results or failing to meet performance expectations. The development and deployment of AI Technologies carries the risk of other unintended consequences, such as ethical concerns, privacy violations and negative public perception.
The implementation of AI Technologies may accelerate or exacerbate potential risks related to technological developments. These risks include the possibility of AI Technologies malfunctioning, producing biased, misleading or inaccurate content or failing to meet performance expectations. The development and deployment of AI Technologies carries the risk of other unintended consequences, such as ethical concerns, privacy violations and negative public perception.
IP claims or litigation has compelled and could compel us to do one or more of the following: • pay damages (including the potential for treble damages), license fees or royalties (including royalties for past periods); • stop licensing products or providing services that use the challenged IP and potentially refund customers; • obtain a license to sell or use the relevant technology, which license may not be available on reasonable terms; or • redesign the challenged technology, which could be time consuming and costly, or impossible.
IP claims and litigation have compelled and could in the future compel us to do one or more of the following: • pay damages (including the potential for treble damages), license fees or royalties (including royalties for past periods); • stop licensing products or providing services that use the challenged IP and potentially refund customers; • obtain a license to sell or use the relevant technology, which license may not be available on reasonable terms; or • redesign the challenged technology, which could be time consuming and costly, or impossible.
Although we do not control what our products are used for and our standard terms and conditions generally disclaim liability for our customers’ products, the sale and support of our products also entail the risk of product liability claims.
In addition, although we do not control what our products are used for and our standard terms and conditions generally disclaim liability for our customers’ products, the sale and support of our products also entail the risk of product liability claims.
Various factors could increase our future borrowing costs or reduce our access to capital, including a lowering or withdrawal of the ratings assigned to us and our New Notes by credit rating agencies.
Various factors could increase our future borrowing costs or reduce our access to capital, including a lowering or withdrawal of the ratings assigned to us and our Senior Notes by credit rating agencies.
Further, the introduction of AI Technologies into new or existing products may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other complications that could adversely affect our business, reputation or financial results. The regulatory framework governing the use of AI Technologies is rapidly evolving.
Further, the introduction of AI Technologies into new or existing products may result in new or enhanced governmental or regulatory scrutiny, litigation, confidentiality or security risks, ethical concerns, or other complications that could adversely affect our reputation, business, financial condition and results of operations. The regulatory framework governing the use of AI Technologies is rapidly evolving.
We are subject to governmental export and import controls that could subject us to liability or impair our ability to compete in global markets as well as a variety of other laws and regulations.
We are subject to governmental export and import controls that subject us to liability and impair our ability to compete in global markets as well as a variety of other laws and regulations.
Uncertainty caused by challenging global political and economic conditions, including inflation, interest rates, bank failures, U.S. deficit concerns, geopolitical conflicts and other adverse changes to international relationships among countries in which we or our customers operate or do business, protectionist measures or decline in corporate or consumer spending could negatively impact our customers’ businesses, reducing the number of new chip designs and their overall research and development spending, including their spending on our products and services, and as a result decrease demand for our products and services.
Uncertainty caused by challenging global political and economic conditions, including inflation, interest rates, bank failures, government deficit concerns, government shutdowns or political stalemates, geopolitical conflicts and other adverse changes to international relationships among countries in which we or our customers operate or do business, protectionist measures or decline in corporate or consumer spending could negatively impact our customers’ businesses, reducing the number of new chip designs and their overall research and development spending, including their spending on our products and services, and as a result decrease demand for our products and services.
The industries in which we do business are highly competitive and require us to identify and develop or acquire innovative and cost-competitive products, integrate them into platforms and market them in a timely manner. Failure to compete successfully could seriously harm our business, operating results and financial condition.
The industries in which we do business are highly competitive and require us to identify and develop or acquire innovative and cost-competitive products, integrate them into platforms and market them in a timely manner. Failure to compete successfully could seriously harm our business, financial condition and results of operations.
Any decreased use of our products or services or limitation on our ability to export to or sell our products or services in international markets would likely harm our business, operating results and financial condition.
Any decreased use of our products or services or limitation on our ability to export to or sell our products or services in international markets would likely harm our business, financial condition and results of operations.
As a result, restructuring plans may affect our revenue and other operating results. Our business is subject to the risk of natural disasters and global climate change.
As a result, restructuring plans may affect our revenue and other operating results. Our business is subject to the risk of natural disasters, global climate change and other catastrophic events.
For information regarding legal proceedings in which we are currently engaged, please refer to the discussion under Note 18 in the notes to consolidated financial statements. The final outcome of these legal proceedings or any other proceedings that may arise in the future could have an adverse effect on our business, reputation, operating results, financial condition and cash flows.
For information regarding legal proceedings in which we are currently engaged, please refer to the discussion under Note 18 in the notes to consolidated financial statements. The final outcome of these legal proceedings or any other proceedings that may arise in the future could have an adverse effect on our reputation, business, financial condition and results of operations.
In addition to export control laws, our global operations are subject to numerous U.S. and foreign laws and regulations, including those related to anti-corruption, anti-bribery, tax, corporate governance, financial and other disclosures, competition, antitrust, data privacy, data protection and employment.
In addition to trade control laws, our global operations are subject to numerous U.S. and foreign laws and regulations, including those related to anti-corruption, anti-bribery, tax, corporate governance, financial and other disclosures, competition, antitrust, data privacy, data protection, cybersecurity and employment.
For example, the ongoing geopolitical and economic uncertainty between the United States and China, where we have derived a substantial percentage of our revenue, the unknown impact of current and future U.S. and Chinese trade regulations, and geopolitical risks with respect to Taiwan, which serves as a central hub for the technology industry supply chain, could, directly or indirectly, materially harm our business, financial condition and results of operations.
For example, the ongoing geopolitical and economic uncertainty between the United States and China, where we conduct business and have derived a substantial percentage of our revenue, the unknown impact of current and future U.S. and Chinese trade regulations, including tariffs and other trade restrictions, and geopolitical risks with respect to Taiwan, which serves as a central hub for the technology industry supply chain, could, directly or indirectly, materially harm our business, financial condition and results of operations.
Our ability to meet that financial ratio can be affected by events beyond our control, and we may be unable to meet it. 27 Table of Contents A breach of the covenants or restrictions under the agreements governing our revolving credit facility and the New Notes could result in an event of default under the applicable indebtedness.
Our ability to meet that financial ratio can be affected by events beyond our control, and we may be unable to meet it. 31 Table of Contents A breach of the covenants or restrictions under the agreements governing our revolving credit facility and the Senior Notes could result in an event of default under the applicable indebtedness.
For more information about laws and regulations governing the use of AI Technologies, see “Governmental Regulations—Artificial intelligence” under Item 1 of Part I of this Annual Report. Cyberattacks that compromise the confidentiality, integrity or availability of our or our third-party providers' information technology systems or confidential information could materially harm our business, reputation and financial condition.
For more information about laws and regulations governing the use of AI Technologies, see “Governmental Regulations—Artificial intelligence” under Item 1 of Part I of this Annual Report. 20 Table of Contents Cyberattacks that compromise the confidentiality, integrity or availability of our or our third-party providers' information technology systems or confidential information could materially harm our reputation, business, financial condition and results of operations.
Our debt obligations expose us to risks that could adversely affect our business, operating results or financial condition, and could prevent us from fulfilling our obligations under such indebtedness. We have significant outstanding indebtedness, as well as the ability to access additional borrowings under our revolving credit facility.
Our debt obligations expose us to risks that could adversely affect our business, financial condition and results of operations, and could prevent us from fulfilling our obligations under such indebtedness. We have significant outstanding indebtedness, as well as the ability to access additional borrowings under our revolving credit facility.
Our failure to obtain third party software, other IP licenses or other IP rights that are necessary or helpful for our business on favorable terms (or at all), or our need to engage in litigation over these licenses or rights, could seriously harm our business, operating results or financial condition.
Our failure to obtain third party software, other IP licenses or other IP rights that are necessary or helpful for our business on favorable terms (or at all), or our need to engage in litigation over these licenses or rights, could seriously harm our business, financial condition and results of operations.
Because we make extensive use of third party suppliers and service providers, such as cloud services that support our internal and customer-facing operations, successful cyberattacks that disrupt or result in unauthorized access to third party providers’ IT Systems can materially impact our operations and financial results.
Because we make extensive use of third-party suppliers and service providers, such as cloud services that support our internal and customer-facing operations, successful cyberattacks that disrupt or result in unauthorized access to third party providers’ IT Systems, including those that store our Confidential Information, can materially impact our operations and financial results.
A cyberattack on our IT Systems or IT Systems of one of our third-party providers or customers could result in any or all of the following: compromise to our Cadence Cloud portfolio, which includes both our managed and customer-managed environments, and our data centers and those of our customers and end users; corruption or stealing of Confidential Information such as proprietary information related to our (or our customers') business, products, services and infrastructure or personally identifiable information; manipulation or stealing of financial data and assets; and/or disruption of our systems and services and those of our customers and others.
A cyberattack on our IT Systems or IT Systems of one of our third-party providers or customers could result in material adverse impacts due to any or all of the following: compromise to our Cadence Cloud portfolio, which includes both our managed and customer-managed environments, and our data centers and those of our customers and end users; corruption or stealing of Confidential Information such as proprietary information related to our (or our customers') business, products, services and infrastructure or Personal Information; manipulation or stealing of financial data and assets; and/or disruption of our systems and services and those of our customers and others.
Any future lowering of the credit ratings of the New Notes likely would make it more difficult or more expensive for us to obtain additional debt financing. 28 Table of Contents Item 1B. Unresolved Staff Comments None.
Any future lowering of the credit ratings of the Senior Notes likely would make it more difficult or more expensive for us to obtain additional debt financing. 32 Table of Contents Item 1B. Unresolved Staff Comments None.
Risk Factors Our operations and financial results are subject to various risks and uncertainties, including those described in the sections below, that could adversely affect our business, financial condition, results of operations, cash flows, liquidity, revenue, growth, prospects, demand for our products and services, reputation and the trading price of our common stock, and make an investment in us speculative or risky.
Item 1A. Risk Factors Our operations and financial results are subject to various risks and uncertainties, including those described in the sections below, that could adversely affect our business, financial condition, growth prospects, demand for our products and services, reputation and the trading price of our common stock, and make an investment in us speculative or risky.
Our offices, and those of our customers and suppliers, can be disrupted by droughts, extreme temperatures, fires, flooding and other climate change-related risks, as well as earthquakes, actions by utility providers and other catastrophic events such as an actual or threatened public health emergency.
Our offices, and those of our customers and suppliers, can be disrupted by droughts, extreme temperatures, fires, flooding and other climate change-related risks, as well as earthquakes, actions by utility providers, cybersecurity attacks, terrorist attacks, telecommunication failures and other catastrophic events such as an actual or threatened public health emergency.
Share repurchases could also increase the volatility of the trading price of our common stock and diminish our cash reserves. • Our certificate of incorporation and bylaws and certain provisions under Delaware law could prevent an acquisition of our company or limit the price that investors might be willing to pay for our common stock. • Our bylaws designate the Court of Chancery of the State of Delaware as the exclusive forum for certain disputes between us and our stockholders. • Our debt obligations expose us to risks that could adversely affect our business, operating results or financial condition, and could prevent us from fulfilling our obligations under such indebtedness. • At the option of the holders of our outstanding notes, we may, under certain circumstances, be required to repurchase such notes. • The terms of our debt agreements restrict our current and future operations, particularly our ability to respond to changes or to take certain actions. • We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. • Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. • Various factors could increase our future borrowing costs or reduce our access to capital, including a lowering or withdrawal of the ratings assigned to us and our New Notes by credit rating agencies.
Share repurchases could also increase the volatility of the trading price of our common stock and diminish our cash reserves. • Our certificate of incorporation and bylaws and certain provisions under Delaware law could prevent an acquisition of our company or limit the price that investors might be willing to pay for our common stock. • Our bylaws designate the Court of Chancery of the State of Delaware as the exclusive forum for certain disputes between us and our stockholders. • Our debt obligations expose us to risks that could adversely affect our business, financial condition and results of operations, and could prevent us from fulfilling our obligations under such indebtedness. • At the option of the holders of our outstanding notes, we may, under certain circumstances, be required to repurchase such notes. • The terms of our debt agreements restrict our current and future operations, particularly our ability to respond to changes or to take certain actions. • We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful. • Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. • Various factors could increase our future borrowing costs or reduce our access to capital, including a lowering or withdrawal of the ratings assigned to us and our Senior Notes by credit rating agencies. 13 Table of Contents Business and Operational Risks We have experienced varied operating results, and our operating results for any particular fiscal period are affected by the timing of revenue recognition, particularly for our hardware, IP and certain software products.
Any failure or alleged failure to comply with these laws and policies could have negative consequences, including significant legal costs, government investigations, penalties, denial of export privileges and debarment from participation in U.S. government contracts, any of which could have a material adverse effect on our operations, reputation and financial condition.
In addition to the matters described above, any further failure or alleged failure to comply with these laws and policies could have negative consequences, including significant legal costs, government investigations, penalties, denial of export privileges and debarment from participation in U.S. government contracts, any of which could have a material adverse effect on our reputation, business, financial condition and results of operations.
Moreover, hardware, software or applications we develop or procure from third parties or through open source solutions may contain defects in design or manufacture or other vulnerabilities and be susceptible to hacking or misappropriation.
Moreover, hardware, software or applications we develop or procure from third parties or through open source solutions may contain defects in design or manufacture or other vulnerabilities and are susceptible to compromise.
Adverse developments that affect financial institutions, transactional counterparties or other third parties, such as bank failures and failure by Congress to increase the U.S. federal debt ceiling on a timely basis, or concerns or speculation about any similar events or risks, have led and could lead to further credit downgrades and market-wide liquidity problems, which in turn may cause customers and other third parties to become unable to meet their obligations under various types of financial arrangements as well as general disruptions or instability in the financial markets.
Congress to increase the U.S. federal debt ceiling on a timely basis, or concerns or speculation about any similar events or risks, have led and could lead to further credit downgrades and market-wide liquidity problems, which in turn may cause customers and other third parties to become unable to meet their obligations under various types of financial arrangements as well as general disruptions or instability in the financial markets.
Anticipated or actual changes in trade restrictions could also affect customer purchasing behaviors. Entity List restrictions and other trade restrictions may also encourage customers to seek substitute products from our competitors, including a growing class of foreign competitors and open source alternatives, that are not subject to these restrictions or to develop their own solutions, thereby decreasing our long-term competitiveness.
Entity List restrictions and other trade restrictions may also encourage customers to seek substitute products from our competitors, including a growing class of foreign competitors and open source alternatives, that are not subject to these restrictions or to develop their own solutions, thereby decreasing our long-term competitiveness.
Many of our products include software or other IP licensed from third parties. We may have to seek new or renew existing licenses for such software and other IP. Our engineering services business holds licenses to certain software and other IP owned by third parties, including that of our competitors.
We may need to seek new or renew existing licenses for such software and other IP. Our engineering services business holds licenses to certain software and other IP owned by third parties, including that of our competitors.
Uncertainty in the global economy and instability within international relations, including changes in governmental policies relating to technology, and any potential downturn in the semiconductor and electronics industries, may negatively impact our business and reduce our bookings levels and revenue.
Uncertainty in the global economy and instability within international relations, including changes in governmental policies relating to technology, may negatively affect our business and reduce our bookings levels and revenue.
Such methods, estimates and judgments are subject to substantial risks, uncertainties and assumptions, and factors may arise over time that may lead us to change our methods, estimates and judgments. Changes in those methods, estimates and judgments could significantly affect our results of operations.
Such methods, estimates and judgments are subject to substantial risks, uncertainties and assumptions, and factors may arise over time that may lead us to change our methods, estimates and judgments. Changes in those methods, estimates and judgments could significantly affect our results of operations. The growth of our business depends primarily on the semiconductor and electronics systems industries.
Our ability to acquire other businesses or technologies, make strategic investments or integrate acquired businesses effectively may be impaired by trade tensions and increased global scrutiny of foreign investments and acquisitions and investments in the technology sector. The United States and several other countries have adopted, or are considering adopting, restrictions on transactions involving foreign investments.
Our ability to acquire other businesses or technologies, make strategic investments or integrate acquired businesses effectively is impacted by geopolitical conflicts, trade tensions and increased global scrutiny of foreign investments and acquisitions and investments in the technology sector. The United States has adopted, or is considering adopting, restrictions on transactions involving foreign investments.
Additionally, advances in technology, an increased level of sophistication and expertise of hackers, widespread access to generative AI, and new discoveries in the field of cryptography can result in a compromise or breach of our IT Systems or security measures implemented to protect our systems.
Additionally, advances in technology, an increased level of sophistication and expertise of hackers, widespread access to generative AI, and new discoveries in the field of cryptography increase the risk of significant compromises or breaches of our IT Systems or security measures implemented to protect our systems.
If we were compelled to take any of these actions, our business, reputation and operating results might suffer. 16 Table of Contents Our success is highly dependent upon the legal protection of our proprietary technology, as well as software and other IP rights licensed to us by third parties, and we cannot assure that the precautions taken to protect our rights will be adequate or that we will continue to be able to adequately secure such IP rights from third parties.
Our success is highly dependent upon the legal protection of our proprietary technology, as well as software and other IP rights licensed to us by third parties, and we cannot assure that the precautions taken to protect our rights will be adequate or that we will continue to be able to adequately secure such IP rights from third parties.
Our business depends upon the continued services, efforts and abilities of our senior management and other qualified employees. Competition for highly skilled executive officers and employees can be intense, particularly in geographic areas recognized as high technology centers. In addition, competition for qualified personnel, including software engineers, in the EDA, commercial electronics engineering services and IP industries has intensified.
Our business depends upon the continued services, efforts and abilities of our senior management and other qualified employees. Competition for highly skilled executive officers and employees can be intense, particularly in geographic areas recognized as high technology centers.
Long sales cycles for hardware products subject us to a number of significant risks over which we have limited control, including insufficient, excess or obsolete inventory, variations in inventory valuation and fluctuations in quarterly operating results. In addition, if our customers build elevated inventory levels, we could experience a decrease in short-term and/or long-term demand for our hardware products.
Long sales cycles for hardware products subject us to a number of significant risks over which we have limited control, including insufficient, excess or obsolete inventory, variations in inventory valuation and fluctuations in quarterly operating results.
When customers are on the Entity List or are subject to new or expanded trade restrictions, it has a negative effect on our ability to sell products and provide services to these customers.
If a customer was added to the Entity List or became subject to new or expanded trade restrictions, it could have a negative effect on our ability to sell products and provide services to these customers.
Our ability to do so also depends on how well we maintain a strong workplace culture that is attractive to employees, particularly as we transition employees back to the office generally four days a week, which may impact our ability to retain and hire employees. Additionally, hiring and training of new employees may be adversely impacted by global economic uncertainty.
Our ability to do so also depends on how well we maintain a strong workplace culture that is attractive to employees, particularly as we have transitioned employees back to the office generally four days a week, which may impact our ability to retain and hire employees.
In addition, we use open source software in our products, and due to uncertainties regarding the interpretation of open source software licenses, there is a risk that our use of open source software is inconsistent with what the copyright owners had intended, which could lead to disputes and enforcement actions, including demands that we release applicable source code, and we may be forced to re-engineer our products or incur additional costs to replace the affected open source software.
In addition, we use open source software in our products, and due to uncertainties regarding the interpretation of open source software licenses, there is a risk that our use of open source software is inconsistent with what the copyright owners had intended, which could lead to disputes and enforcement actions.
New or increased tariffs and other changes in U.S. trade policy, including new sanctions, could trigger retaliatory actions by affected countries. 14 Table of Contents Failure to obtain import, export or re-export licenses or permits when required or restrictions on trade imposed by the United States or other countries could harm our business by rendering us unable to sell or ship products and transfer our technology outside of the United States or across borders.
Failure to obtain import, export or re-export licenses or permits when required or restrictions on trade imposed by the United States or other countries could harm our business by rendering us unable to sell or ship products and transfer our technology outside of the United States or across borders.
Further, increased uncertainty regarding social, political and immigration policies in the United States and abroad may make it difficult to recruit employees with adequate experience; and governmental policies resulting in increased funding of domestic technology companies, such as China’s stated national policy to be a global leader in all segments of the semiconductor industry by 2030, has caused and may continue to cause difficulty in retaining and attracting local talent.
In addition, governmental policies resulting in increased funding of domestic technology companies, such as China’s stated national policy to be a global leader in all segments of the semiconductor industry by 2030, has caused and may continue to cause difficulty in retaining and attracting local talent.
As a result, we may be unable to promptly or effectively detect, investigate, remediate or recover from future attacks or incidents, or to avoid a material adverse impact to our IT Systems, Confidential Information or business.
As a result, we may be unable to promptly or effectively detect, investigate, remediate or recover from future attacks or incidents, or to avoid a material adverse impact to our IT Systems, Confidential Information or business. Furthermore, state-supported and geopolitical-related cyberattacks against companies such as ours may increase due to geopolitical conditions.
In the case of infringement or misappropriation caused by technology that we obtain from third parties, any indemnification or other contractual protections we obtain from such third parties, if any, may be insufficient to cover the liabilities we incur as a result of such infringement or misappropriation.
In the case of infringement or misappropriation caused by technology that we obtain from third parties, any indemnification or other contractual protections we obtain from such third parties, if any, may be insufficient to cover the liabilities we incur as a result of such infringement or misappropriation. 19 Table of Contents We may not realize opportunities presented by AI and may incur reputational and financial harm and liability as a result of issues in the development and use of AI.
Errors, defects or issues arising from interoperability with third party products, whether or not our products are the source of such problems, could result in reputational damage, failure to attract new or retain existing customers or market share and acceptance, diversion of development resources to resolve the problem, loss of or delay in revenue or payments and increased service costs and liability. 24 Table of Contents Although we generally have limitation of liability provisions in our standard terms and conditions of sale, in some circumstances, we may be required to indemnify a customer in full, without limitation, for certain liabilities.
Errors, defects or issues arising from interoperability with third party products, whether or not our products are the source of such problems, could result in reputational damage, failure to attract new or retain existing customers or market share and acceptance, diversion of development resources to resolve the problem, loss of or delay in revenue or payments and increased service costs and liability.
If a catastrophic event impacts a significant number of customers, resulting in decreased demand for their and our products, or our ability to provide services and maintenance, our business and results of operations could be adversely impacted. Risks Related to Customers, Suppliers and Industry Competition Customer consolidation could affect our operating results.
These risks may be further increased if the disaster recovery plans for us and our suppliers prove to be inadequate. If a catastrophic event impacts a significant number of customers, resulting in decreased demand for their and our products, or our ability to provide services and maintenance, our business and results of operations could be adversely impacted.
Volatility of currencies in countries where we conduct business, most notably the U.S. dollar, Chinese renminbi, Japanese yen, European Union euro, British pound, Indian rupee, Taiwan dollar and Israeli shekel, have had and may in the future have an effect on our revenue or operating results. 19 Table of Contents Fluctuations in the exchange rate between the U.S. dollar and other currencies could seriously affect our business, operating results and financial condition, including due to inflation, devaluations and currency controls.
Volatility of currencies in countries where we conduct business, most notably the U.S. 23 Table of Contents dollar, Chinese renminbi, Japanese yen, European Union euro, British pound, Indian rupee, Taiwan dollar and Israeli shekel, from time to time have an effect on our revenue or operating results.
Furthermore, we have acquired and continue to acquire companies with less sophisticated security measures, and it takes time to align their security practices to meet our information security policies, procedures and controls, which exposes us to increased cybersecurity, operational and financial risk. Furthermore, employees working from remote work environments can expose us to increased security risks and attacks.
In addition, we have acquired and continue to acquire companies with less sophisticated security measures, and it takes time to align their security practices to meet our information security policies, procedures and controls, which exposes us to increased cybersecurity and other integration risks.
As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards or market perception of their requirements may have on our business and may not always be able to anticipate how to respond to these laws or regulations. 17 Table of Contents We cannot predict how newly instituted legislation and regulation, or the interpretation and application of existing laws and regulations, will impact our ability, or our customers' ability, to develop and offer products or services that leverage AI Technologies and the costs of doing so.
As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards or market perception of their requirements may have on our business and may not always be able to anticipate how to respond to these laws or regulations.
Litigation brought to protect and enforce our IP rights could be costly, time consuming and distracting to management. Furthermore, our efforts to enforce our IP rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our IP rights, which could result in the impairment or loss of portions of our IP rights.
Furthermore, our efforts to enforce our IP rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our IP rights, which could result in the impairment or loss of portions of our IP rights. Many of our products include software or other IP licensed from third parties.
Changes in our products or services, or changes in and continued expansion of these laws and regulations, including new or increased tariffs, trade protection measures, sanctions, trade embargoes and other trade barriers, may create delays in the introduction of our products or services into international markets, prevent our customers from deploying our products or services or, in some cases, prevent the export or import of our products or services to certain countries, governments or persons altogether or result in increased costs for us, which could reduce our competitiveness, or for our customers, which could affect their purchasing behaviors.
Changes in our products or services, or changes in and continued expansion of these laws and regulations, including new or increased tariffs, trade protection measures, sanctions, trade embargoes and other trade barriers, may create delays in the introduction of our products or services into international markets and prevent our customers from deploying our products or services.
IP infringement and misappropriation claims, including contractual defense reimbursement obligations related to third-party claims against our customers, regardless of merit, could consume valuable management time, result in costly litigation or cause product shipment delays, all of which could seriously harm our business, operating results and financial condition.
As a result, from time to time, we have been and may continue to be compelled to respond to IP infringement claims to protect our rights or defend a customer’s rights consistent with the terms of our license agreements. 18 Table of Contents IP infringement and misappropriation claims, including contractual defense reimbursement obligations related to third-party claims against our customers, regardless of merit, could consume valuable management time, result in costly litigation or cause product shipment delays, all of which could seriously harm our business, financial condition and results of operations.
In addition, we and certain third-party providers collect, maintain and process data about our customers, employees, business partners and others, including personally identifiable information, as well as proprietary data such as trade secrets (collectively, "Confidential Information").
In addition, we and certain third-party providers collect, maintain and process data about our customers, employees, business partners and others, including information that relates to individuals and/or constitutes “personal data,” “personal information,” "personally identifiable information" or similar terms under applicable data privacy laws (collectively “Personal Information”), as well as proprietary data such as trade secrets (together with Personal Information, “Confidential Information”).
We have substantial cash requirements in the United States and significant operations outside the United States. As of December 31, 2024, approximately 34% of our cash and cash equivalents balance was held by subsidiaries outside the United States. We cannot accurately predict the full impact that evolving macroeconomic and geopolitical conditions may have on our cash flows.
We have substantial cash requirements in the United States and significant operations outside the United States. As of December 31, 2025, approximately 29% of our cash and cash equivalents balance was held by subsidiaries outside the United States.
Also, we cannot guarantee that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all. Risks associated with our international operations could adversely impact our financial condition.
Also, we cannot guarantee that any costs and liabilities incurred in relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at all. 21 Table of Contents Any actual or perceived failure to comply with new or existing laws, regulations and other requirements relating to the privacy, security, processing and cross-border transfer of Personal Information could adversely affect our business, financial condition and results of operations.
The semiconductor and electronics systems industries have also experienced significant downturns in connection with, or in anticipation of, maturing product cycles of both these industries’ and their customers’ products. The current outlook for the global economy is uncertain and may result in a decrease in spending on our products and services despite recent growth.
The semiconductor and electronics systems industries have also experienced significant downturns in connection with, or in anticipation of, maturing product cycles of both these industries’ and their customers’ products.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn addition, our CISO has over 30 years of broad cybersecurity and information technology risk management experience, is a Certified Information Security Manager (“CISM”) and holds a Master's Degree in computer science and information systems.
Biggest changeIn addition, our CIO has over 25 years of experience in managing enterprise information technology, with a background in software development and technologies, and holds a Bachelor of Engineering (BE) in electrical engineering, and our CISO has over 30 years of broad cybersecurity and information technology risk management experience, is a Certified Information Security Manager (“CISM”) and holds a Master's Degree in computer science and information systems.
Our cybersecurity risk management program includes: • a security incident response plan that includes procedures for responding to cybersecurity incidents; • risk assessment processes designed to help identify cybersecurity risks to our critical systems, information, products, services and our broader enterprise IT environment; • our Information Security team, principally responsible for identifying and mitigating cybersecurity risks, and managing our security controls and our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test (including penetration test) or otherwise assist with certain aspects of our security controls and processes; • global security operations center services through certain service providers; • implementation of new hire and annual data privacy and cybersecurity training of employees, including senior management, and cybersecurity governance training for our Board of Directors; • a cybersecurity insurance policy to cover certain types of costs and losses from cybersecurity incidents; and • a third-party risk management process, including risk assessment and risk rating (using common vulnerability scoring system or similar methodologies based on industry practices), for certain service providers, suppliers and vendors.
Our cybersecurity risk management program includes: • a security incident response plan that includes procedures for responding to and escalating cybersecurity incidents; • risk assessment processes designed to help identify cybersecurity risks to our critical systems, information, products, services and our broader enterprise IT environment; • our Information Security team, principally responsible for identifying and mitigating cybersecurity risks, and managing our security controls and our response to cybersecurity incidents; • the use of external service providers, where appropriate, to assess, test (including penetration test) or otherwise assist with certain aspects of our security controls and processes; • global security operations center services through certain service providers; • implementation of new hire and annual data privacy and cybersecurity training of employees, including senior management, and cybersecurity governance training for our Board of Directors; • a cybersecurity insurance policy to cover certain types of costs and losses from cybersecurity incidents; and • a third-party risk management process, including risk assessment and risk rating (using common vulnerability scoring system or similar methodologies based on industry practices), for certain service providers, suppliers and vendors.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition.
We have not identified risks from known cybersecurity threats, including as a result of any prior cybersecurity incidents, that have materially affected us, including our business strategy, results of operations, or financial condition.
Our management team supervises efforts to prevent, detect, mitigate and remediate cybersecurity risks and incidents, and is responsible for oversight and management of our cybersecurity risk management program. Our management team receives briefings from our internal Information Security team and the Disclosure Committee whenever applicable.
Our management team, led by our CIO and CISO, stays informed about and monitors efforts to prevent, detect, mitigate and remediate cybersecurity risks and incidents, and is responsible for oversight and management of our cybersecurity risk management program. Our management team receives briefings from our internal Information Security team and the Disclosure Committee whenever applicable.
In addition, the Board of Directors also directly receives reports from management on our cybersecurity risk profile and on the performance of our data privacy and cybersecurity risk management program, semi-annually in alternating quarters with the Audit Committee. 29 Table of Contents Our management team, including our Chief Information Officer (“CIO”), CISO and the General Counsel, is responsible for assessing and managing material risks from cybersecurity threats, including supervision of our internal security incident response team and our Disclosure Committee comprised of certain of our employees (including any applicable subcommittees thereof).
In addition, the Board of Directors also directly receives reports from management on our cybersecurity risk profile and on the performance of our data privacy and cybersecurity risk management program, semi-annually in alternating quarters with the Audit Committee. 33 Table of Contents Our Chief Information Officer (“CIO”) and CISO, who are members of the management team, are primarily responsible for assessing and managing material risks from cybersecurity threats, including supervision of our internal security incident response team and external cybersecurity service providers.
Our management team also provides quarterly cybersecurity risk management program updates, to the Board of Directors or to the Audit Committee, in alternating quarters.
Our CIO and CISO, as well as other management team members, also provide quarterly cybersecurity risk management program updates, to the Board of Directors or to the Audit Committee, in alternating quarters.
Added
See Item 1A, “Risk Factors,” for descriptions of certain ongoing risks from cybersecurity threats that, if realized, are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
Added
Our Disclosure Committee comprised of certain of our employees (including any applicable subcommittees thereof) participates in incident escalations and analyses.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We own land and buildings at our corporate headquarters located in San Jose, California. We also own properties in New Mexico, India, Greece and Italy. As of December 31, 2024, the total square footage of our owned buildings was approximately 1,330,000. We lease additional facilities in the United States and various other countries.
Biggest changeItem 2. Properties We own land and buildings at our corporate headquarters located in San Jose, California. We also own properties in New Mexico, India, Greece and Italy. As of December 31, 2025, the total square footage of our owned buildings was approximately 1,330,000. We lease additional facilities in the United States and various other countries.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAll rights reserved. 31 Table of Contents 12/28/2019 1/2/2021 1/1/2022 12/31/2022 12/31/2023 12/31/2024 Cadence Design Systems, Inc. $ 100.00 $ 194.10 $ 265.12 $ 228.54 $ 387.49 $ 427.46 Nasdaq Composite 100.00 144.92 177.06 119.45 172.77 223.87 S&P 500 100.00 118.40 152.39 124.79 157.59 197.02 S&P 500 Information Technology 100.00 143.89 193.58 139.00 219.40 299.72 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Biggest changeAll rights reserved. 35 Table of Contents 1/2/2021 1/1/2022 12/31/2022 12/31/2023 12/31/2024 12/31/2025 Cadence Design Systems, Inc. $ 100.00 $ 136.59 $ 117.75 $ 199.64 $ 220.23 $ 229.11 Nasdaq Composite 100.00 122.18 82.43 119.22 154.48 187.14 S&P 500 100.00 128.71 105.40 133.10 166.40 196.16 S&P 500 Information Technology 100.00 134.53 96.60 152.48 208.30 258.38 The stock price performance included in this graph is not necessarily indicative of future stock price performance.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the Nasdaq Global Select Market under the symbol CDNS. As of January 31, 2025, we had 327 registered stockholders.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is traded on the Nasdaq Global Select Market under the symbol CDNS. As of January 31, 2026, we had 294 registered stockholders.
Shares Authorized for Issuance under Equity Compensation Plans The information required by Item 201(d) of Regulation S-K under Item 5 is incorporated herein by reference from the section entitled “Equity Compensation Plan Information” in our definitive proxy statement for our 2025 Annual Meeting of Stockholders. Item 6. [Reserved] 32 Table of Contents
Shares Authorized for Issuance under Equity Compensation Plans The information required by Item 201(d) of Regulation S-K under Item 5 is incorporated herein by reference from the section entitled “Equity Compensation Plan Information” in our definitive proxy statement for our 2026 Annual Meeting of Stockholders.
(2) The weighted average price paid per share of common stock does not include the cost of commissions. (3) Our publicly announced share repurchase program was originally announced on February 1, 2017, and most recently increased by an additional $1.0 billion on August 2, 2023.
(2) The weighted average price paid per share of common stock does not include the cost of commissions. (3) Our publicly announced share repurchase program was originally announced on February 1, 2017, and most recently increased by an additional $1.5 billion on May 8, 2025.
Issuer Purchases of Equity Securities We are authorized to repurchase shares of our common stock under a publicly announced program that was most recently increased by our Board of Directors on August 2, 2023.
Issuer Purchases of Equity Securities We are authorized to repurchase shares of our common stock under a publicly announced program that was most recently increased by our Board of Directors on May 8, 2025.
The graph assumes that the value of the investment in our common stock and in each index on December 28, 2019, (including reinvestment of dividends) was $100 and tracks it each year thereafter on the last day of our fiscal year through December 31, 2024, and for each index on the last day of the calendar year. *$100 invested on 12/29/19 in stock or index, including reinvestment of dividends.
The graph assumes that the value of the investment in our common stock and in each index on January 2, 2021, (including reinvestment of dividends) was $100 and tracks it each year thereafter on the last day of our fiscal year through December 31, 2025, and for each index on the last day of the calendar year. *$100 invested on 1/2/21 in stock or index, including reinvestment of dividends.
The following table presents repurchases made under our publicly announced repurchase authorizations and shares surrendered by employees to satisfy income tax withholding obligations during the three months ended December 31, 2024 : Period Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Maximum Dollar Value of Shares Authorized for Repurchase Under Publicly Announced Plan or Program (1) (In millions) October 1, 2024 - October 31, 2024 230,867 $ 268.37 199,684 $ 923 November 1, 2024 - November 30, 2024 179,112 $ 295.39 162,073 $ 875 December 1, 2024 - December 31, 2024 164,036 $ 308.45 157,047 $ 827 Total 574,015 $ 288.25 518,804 _________________ (1) Shares purchased that were not part of our publicly announced repurchase programs represent employee surrender of shares of restricted stock to satisfy employee income tax withholding obligations due upon vesting, and do not reduce the dollar value that may yet be purchased under our publicly announced repurchase programs.
The following table presents repurchases made under our publicly announced repurchase authorizations and shares surrendered by employees to satisfy income tax withholding obligations during the three months ended December 31, 2025 : Period Total Number of Shares Purchased (1) Average Price Paid Per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (3) Maximum Dollar Value of Shares Authorized for Repurchase Under Publicly Announced Plan or Program (1) (In millions) October 1, 2025 - October 31, 2025 230,300 $ 337.18 205,794 $ 1,532 November 1, 2025 - November 30, 2025 206,963 $ 316.23 190,425 $ 1,472 December 1, 2025 - December 31, 2025 221,319 $ 322.67 216,767 $ 1,402 Total 658,582 $ 325.72 612,986 _________________ (1) Shares purchased that were not part of our publicly announced repurchase programs represent employee surrender of shares of restricted stock to satisfy employee income tax withholding obligations due upon vesting, and do not reduce the dollar value that may yet be purchased under our publicly announced repurchase programs.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeWe expect our percentage of annual up-front revenue to continue to increase in 2025 as growth in our product offerings for which revenue is recognized up-front is expected to be greater than the growth of our product offerings for which revenue is recognized over time The following table shows the percentage of recurring revenue for the twelve-month periods ended concurrently with our five most recent fiscal quarters: Trailing Twelve Months Ended December 31, 2024 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 Recurring revenue 83 % 86 % 87 % 87 % 84 % Up-front revenue 17 % 14 % 13 % 13 % 16 % Total 100 % 100 % 100 % 100 % 100 % 34 Table of Contents Revenue by Year The following table shows our revenue for fiscal 2024 and 2023 and the change in revenue between years: Change 2024 2023 2024 vs. 2023 (In millions, except percentages) Product and maintenance $ 4,213.5 $ 3,834.4 $ 379.1 10 % Services 427.8 255.6 172.2 67 % Total revenue $ 4,641.3 $ 4,090.0 $ 551.3 13 % Product and maintenance revenue increased during fiscal 2024, as compared to fiscal 2023, primarily due to growth in revenue from our software, hardware and IP offerings as a result of customers’ continued investment in complex designs for their products.
Biggest changeRevenue by Year The following table shows our revenue for fiscal 2025 and 2024 and the change in revenue between years: Change 2025 2024 2025 vs. 2024 (In millions, except percentages) Product and maintenance $ 4,821.6 $ 4,213.5 $ 608.1 14 % Services 475.2 427.8 47.4 11 % Total revenue $ 5,296.8 $ 4,641.3 $ 655.5 14 % Product and maintenance revenue increased during fiscal 2025, as compared to fiscal 2024, primarily due to growth in revenue from our software, hardware and IP product offerings as a result of existing customers' continued investment in complex designs for their products. 39 Table of Contents Services revenue increased during fiscal 2025, as compared to fiscal 2024, primarily due to increased revenue from our cloud and IP service offerings.
As of December 31, 2024, there were no borrowings outstanding under the 2024 Credit Facility, and we were in compliance with all covenants associated with such credit facility. For additional information relating to our debt arrangements, see Note 5 in the notes to consolidated financial statements.
As of December 31, 2025, there were no borrowings outstanding under the 2024 Credit Facility, and we were in compliance with all covenants associated with such credit facility. For additional information relating to our debt arrangements, see Note 5 in the notes to consolidated financial statements.
The fair value of the intangible assets acquired was determined using variations of the income approach that utilizes unobservable inputs classified as Level 3 measurements. For existing technology, the fair value was determined by applying the relief-from-royalty method.
The fair value of the intangible assets acquired was primarily determined by using variations of the income approach that utilizes unobservable inputs classified as Level 3 measurements. For existing technology, the fair value was determined primarily by applying the relief-from-royalty method.
Revenue associated with contracts assumed with our acquisition of BETA CAE is primarily classified as product and maintenance revenue in our System Design and Analysis product category. Cost of revenue associated with these contracts is primarily classified as cost of product and maintenance in our consolidated income statements.
Revenue associated with our acquisition of BETA CAE is primarily classified as product and maintenance revenue in our System Design and Analysis product category, and cost of revenue associated with these contracts is primarily classified as cost of product and maintenance in our consolidated income statements.
For additional information on the potential impact of macroeconomic conditions on our business, see Part I, Item 1A, “Risk Factors.” Results of Operations The discussion of our fiscal 2024 consolidated results of operations includes year-over-year comparisons to fiscal 2023 for revenue, cost of revenue, operating expenses, operating margin, other non-operating income and expenses, income taxes and cash flows.
For additional information on the potential impact of macroeconomic conditions on our business, see Part I, Item 1A, “Risk Factors.” Results of Operations The discussion of our fiscal 2025 consolidated results of operations includes year-over-year comparisons to fiscal 2024 for revenue, cost of revenue, operating expenses, operating margin, other non-operating income and expenses, income taxes and cash flows.
Other Factors Affecting Liquidity and Capital Resources Senior Notes In September 2024, we issued $2.5 billion aggregate principal amount of senior notes, consisting of $500.0 million aggregate principal amount of 4.200% Senior Notes due 2027 (the “2027 Notes”), $1.0 billion aggregate principal amount of 4.300% Senior Notes due 2029 (the “2029 Notes”) and $1.0 billion aggregate principal amount of 4.700% Senior Notes due 2034 (the “2034 Notes” and together with the 2027 Notes and the 2029 Notes, the “New Notes”).
Other Factors Affecting Liquidity and Capital Resources Senior Notes In September 2024, we issued $2.5 billion aggregate principal amount of senior notes, consisting of $500.0 million aggregate principal amount of 4.200% Senior Notes due 2027 (the “2027 Notes”), $1.0 billion aggregate principal amount of 4.300% Senior Notes due 2029 (the “2029 Notes”) and $1.0 billion aggregate principal amount of 4.700% Senior Notes due 2034 (the “2034 Notes” and together with the 2027 Notes and the 2029 Notes, the “Senior Notes”).
We expect that our quarterly effective tax rates will vary from our fiscal 2025 effective tax rate as a result of recognizing the income tax effects of stock-based awards in the quarterly periods that the awards vest or are settled and other items that we cannot anticipate.
We expect that our quarterly effective tax rates will vary from our fiscal 2026 effective tax rate as a result of recognizing the income tax effects of stock-based awards in the quarterly periods that the awards vest or are settled and other items that we cannot anticipate.
Other Income (Expense), Net Other income (expense), net consists primarily of interest earned on cash, cash equivalents and investments in debt securities, realized and unrealized gains and losses from our investments in equity securities of other companies, gains and losses from investments held in the Nonqualified Deferred Compensation (“NQDC”) trust and foreign exchange gains and losses.
Other Income, Net Other income, net consists primarily of interest earned on cash, cash equivalents and investments in debt securities, realized and unrealized gains and losses from our strategic investments in equity securities of other companies, gains and losses from investments held in the Nonqualified Deferred Compensation (“NQDC”) trust and foreign exchange gains and losses.
As of December 31, 2024, we did not have any significant off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our operating results or financial condition.
As of December 31, 2025, we did not have any significant off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our operating results or financial condition.
We group our products into the following categories: • Core EDA • IP; and • System Design and Analysis.
We group our products into the following categories: • Core EDA • Semiconductor IP; and • System Design and Analysis.
Our primary uses of cash and cash equivalents during fiscal 2024 were payments related to employee salaries and benefits, operating expenses, payments on debt, cash paid for acquired businesses, repurchases of our common stock, purchases of inventory, payments for income taxes, payment of employee taxes on vesting of restricted stock and purchases of property, plant and equipment.
Our primary uses of cash and cash equivalents during fiscal 2025 were payments related to employee salaries and benefits, operating expenses, repurchases of our common stock, cash paid for acquired businesses, purchases of inventory, payments for income taxes, payment of employee taxes on vesting of restricted stock and purchases of property, plant and equipment.
A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland and Hungary. Our future effective tax rates may be adversely affected if our earnings were to be lower in countries where we have lower statutory tax rates. We currently expect that our fiscal 2025 effective tax rate will be approximately 25%.
A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland and Hungary. Our future effective tax rates may be adversely affected if our earnings were to be lower in countries where we have lower statutory tax rates. We currently expect that our fiscal 2026 effective tax rate will be approximately 27%.
For a discussion of the fiscal 2023 changes compared to fiscal 2022, see the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 14, 2024.
For a discussion of the fiscal 2024 changes compared to fiscal 2023, see the discussion in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on February 20, 2025.
Factors that tend to cause our operating expenses to fluctuate include changes in the number of employees due to hiring and acquisitions, industry trends for salary and other employee benefits, stock-based compensation, foreign exchange rate movements, acquisition-related costs, and volatility in variable compensation programs that are driven by operating results.
Factors that tend to cause our operating expenses to fluctuate include changes in the number of employees due to hiring and acquisitions, industry trends for salary and other employee benefits, the timing and nature of restricted stock grants, foreign exchange rate movements, acquisition-related costs, and volatility in variable compensation programs that are driven by operating results.
Cost of Services Cost of services primarily includes employee salary, benefits and other employee-related costs to perform work on revenue-generating projects, costs to maintain the infrastructure necessary to manage a services organization, and direct costs associated with certain design services.
Cost of Services Cost of services primarily includes employee salary, benefits and other employee-related costs to perform work on revenue-generating projects, costs to maintain the infrastructure necessary to manage a services organization and provide cloud-based offerings, and direct costs associated with certain design services.
(2) Included in other long-term contractual obligations are long-term income tax liabilities of $55.8 million related to unrecognized tax benefits. The remaining portion of other long-term contractual obligations is primarily liabilities associated with defined benefit retirement plans and acquisitions.
(2) Included in other long-term contractual obligations are long-term income tax liabilities of $47.6 million related to unrecognized tax benefits. The remaining portion of other long-term contractual obligations is primarily liabilities associated with defined benefit retirement plans and acquisitions.
Restructuring and Other Charges We have initiated restructuring plans in recent years, most recently in August 2024, to better align our resources with our business strategy. Restructuring charges and related benefits are derived from management's estimates during the formulation of the restructuring plans, based on then-currently available information.
Restructuring We have initiated restructuring plans in recent years, most recently in September 2025, to better align our resources with our business strategy. Restructuring charges and related benefits are derived from management's estimates during the formulation of the restructuring plans, based on then-currently available information.
Recurring revenue includes revenue recognized over time from our software arrangements, services, royalties, maintenance on IP licenses and hardware products, and operating leases of hardware.
Recurring revenue includes revenue recognized over time from certain of our software licensing arrangements, services, royalties, maintenance on IP licenses and hardware, and operating leases of hardware.
Interest on the New Notes is payable semi-annually in arrears in March and September of each year, beginning in March 2025. As of December 31, 2024, we were in compliance with all covenants associated with the New Notes.
Interest on the Senior Notes is payable semi-annually in arrears in March and September of each year. As of December 31, 2025, we were in compliance with all covenants associated with the Senior Notes.
Cash Flows from Operating Activities Cash flows from operating activities during fiscal 2024 and 2023 were as follows: Change 2024 2023 2024 vs. 2023 (In millions) Cash provided by operating activities $ 1,260.6 $ 1,349.2 $ (88.6) Cash flows provided by operating activities include net income, adjusted for certain non-cash items, as well as changes in the balances of certain assets and liabilities.
Cash Flows from Operating Activities Cash flows from operating activities during fiscal 2025 and 2024 were as follows: Change 2025 2024 2025 vs. 2024 (In millions) Cash provided by operating activities $ 1,728.8 $ 1,260.6 $ 468.2 Cash flows provided by operating activities include net income, adjusted for certain non-cash items, as well as changes in the balances of certain assets and liabilities.
For an additional description of how changes in foreign exchange rates affect our consolidated financial statements, see the discussion under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk – Foreign Currency Risk.” Cost of Revenue Change 2024 2023 2024 vs. 2023 (In millions, except percentages) Cost of product and maintenance $ 436.6 $ 331.8 $ 104.8 32 % Cost of services 210.9 103.3 107.6 104 % Total cost of revenue $ 647.5 $ 435.1 $ 212.4 49 % The following table shows cost of revenue as a percentage of related revenue for fiscal 2024 and 2023: 2024 2023 Cost of product and maintenance 10 % 9 % Cost of services 49 % 40 % Cost of Product and Maintenance Cost of product and maintenance includes costs associated with the sale and lease of our hardware products and licensing of our software and IP products, certain employee salary and benefits and other employee-related costs, cost of our customer support services, amortization of technology-related and maintenance-related acquired intangibles, costs of technical documentation and royalties payable to third-party vendors.
For an additional description of how changes in foreign exchange rates affect our consolidated financial statements, see the discussion under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk – Foreign Currency Risk.” 40 Table of Contents Cost of Revenue Change 2025 2024 2025 vs. 2024 (In millions, except percentages) Cost of product and maintenance $ 518.7 $ 436.6 $ 82.1 19 % Cost of services 203.6 210.9 (7.3) (3) % Total cost of revenue $ 722.3 $ 647.5 $ 74.8 12 % The following table shows cost of revenue as a percentage of related revenue for fiscal 2025 and 2024: 2025 2024 Cost of product and maintenance 11 % 10 % Cost of services 43 % 49 % Cost of Product and Maintenance Cost of product and maintenance includes costs associated with the sale and lease of our hardware products and licensing of our software and IP products, certain employee salary and benefits and other employee-related costs, cost of our customer support services, amortization of technology-related acquired intangibles, costs of technical documentation and royalties payable to third-party vendors.
Revenue by Product Category The following table shows the percentage of revenue contributed by each of our product categories during fiscal 2024 and 2023: 2024 2023 Core EDA 71 % 76 % IP 13 % 12 % System Design and Analysis 16 % 12 % Total 100 % 100 % Revenue from any one product category as a percentage of total revenue may fluctuate from period to period based on the mix of products and services sold in a given period and the timing of revenue recognition, particularly for our hardware, IP and certain software products.
Revenue by Product Category The following table shows the percentage of revenue contributed by each of our product categories during fiscal 2025 and 2024: 2025 2024 Core EDA 70 % 71 % Semiconductor IP 14 % 13 % System Design and Analysis 16 % 16 % Total 100 % 100 % Revenue from any one product category as a percentage of total revenue may fluctuate from period to period based on the mix of products and services sold in a given period and the timing of revenue recognition, particularly for our hardware, IP and certain software products for which revenue is recognized up-front.
Projected income from existing customer relationships was determined using customer retention rates between 85% and 92%. The present value of operating cash flows from existing customers was determined using discount rates between 10% and 14%. We believe that our estimates and assumptions related to the fair value of our acquired intangible assets are reasonable, but significant judgment is involved.
The present value of operating cash flows from existing customers was determined using discount rates between 10% and 13%. We believe that our estimates and assumptions related to the fair value of our acquired intangible assets are reasonable, but significant judgment is involved.
To estimate royalty savings over time, we projected revenue from the acquired existing technology over the estimated remaining life of the technology, including the effect of assumed technological obsolescence, before applying an assumed royalty rate. We assumed technological obsolescence at a rate of 10% annually, before applying an assumed royalty rate of 30% and a discount rate of 10%.
To estimate royalty savings over time, we projected revenue from the acquired existing technology over the estimated remaining life of the technology, including the effect of assumed technological obsolescence, before applying an assumed royalty rate.
Income Taxes The following table presents the provision for income taxes and the effective tax rate for fiscal 2024 and 2023: 2024 2023 (In millions, except percentages) Provision for income taxes $ 340.3 $ 240.8 Effective tax rate 24.4 % 18.8 % Our provision for income taxes for fiscal 2024 was primarily attributable to federal, state and foreign income taxes on our fiscal 2024 income.
Income Taxes The following table presents the provision for income taxes and the effective tax rate for fiscal 2025 and 2024: 2025 2024 (In millions, except percentages) Provision for income taxes $ 413.2 $ 340.3 Effective tax rate 27.1 % 24.4 % Our provision for income taxes for fiscal 2025 was primarily attributable to federal, state and foreign income taxes on our fiscal 2025 income.
Approximately 34% of our cash and cash equivalents was held by our foreign subsidiaries as of December 31, 2024. Our cash and cash equivalents held by our foreign subsidiaries may vary from period to period due to the timing of collections and repatriation of foreign earnings.
Approximately 29% of our cash and cash equivalents was held by our foreign subsidiaries as of December 31, 2025. Our cash and cash equivalents held by our foreign subsidiaries may vary from period to period due to the timing of collections, cash paid for acquisitions and investments and repatriation of foreign earnings.
Macroeconomic and Geopolitical Environment Because we operate globally, our business is subject to the effects of economic downturns or recessions in the regions in which we do business, volatility in foreign currency exchange rates relative to the U.S. dollar, inflation, changing interest rates, expanded trade control laws and regulations, potential imposition of new or higher tariffs and geopolitical conflicts.
For additional information about our acquisitions, see Note 6 in the notes to consolidated financial statements. 37 Table of Contents Macroeconomic and Geopolitical Environment Because we operate globally, our business is subject to the effects of economic downturns or recessions in the regions in which we do business, volatility in foreign currency exchange rates relative to the U.S. dollar, inflation, changing interest rates, expanded trade control laws and regulations, imposition of new or higher tariffs and geopolitical conflicts.
For an additional description of how changes in foreign exchange rates affect our consolidated financial statements, see the discussion in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk – Foreign Currency Risk.” Our operating expenses for fiscal 2024 and 2023 were as follows: Change 2024 2023 2024 vs. 2023 (In millions, except percentages) Marketing and sales $ 757.5 $ 690.3 $ 67.2 10 % Research and development 1,549.1 1,441.8 107.3 7 % General and administrative 282.3 242.4 39.9 16 % Total operating expenses $ 2,588.9 $ 2,374.5 $ 214.4 9 % Our operating expenses, as a percentage of total revenue, for fiscal 2024 and 2023 were as follows: 2024 2023 Marketing and sales 16 % 17 % Research and development 34 % 35 % General and administrative 6 % 6 % Total operating expenses 56 % 58 % 37 Table of Contents Marketing and Sales The increase in marketing and sales expense were due to the following: Change 2024 vs. 2023 (In millions) Salary, benefits and other employee-related costs $ 48.2 Stock-based compensation 10.9 Facilities and other infrastructure costs 6.7 Other items 1.4 Total change in marketing and sales expense $ 67.2 Salary, benefits and other employee-related costs and stock-based compensation included in marketing and sales expense increased during fiscal 2024, as compared to fiscal 2023, primarily due to our continued investment in attracting and retaining talent dedicated to technical sales support, including additional headcount from acquisitions.
For an additional description of how changes in foreign exchange rates affect our consolidated financial statements, see the discussion in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk – Foreign Currency Risk.” Our operating expenses for fiscal 2025 and 2024 were as follows: Change 2025 2024 2025 vs. 2024 (In millions, except percentages) Marketing and sales $ 802.6 $ 757.5 $ 45.1 6 % Research and development 1,768.8 1,549.1 219.7 14 % General and administrative 313.4 274.0 39.4 14 % Total operating expenses $ 2,884.8 $ 2,580.6 $ 304.2 12 % Our operating expenses, as a percentage of total revenue, for fiscal 2025 and 2024 were as follows: 2025 2024 Marketing and sales 15 % 16 % Research and development 33 % 34 % General and administrative 6 % 6 % Total operating expenses 54 % 56 % Marketing and Sales The increase in marketing and sales expense were due to the following: Change 2025 vs. 2024 (In millions) Salary, benefits and other employee-related costs $ 28.0 Stock-based compensation 10.0 Facilities and other infrastructure costs 6.0 Other items 1.1 Total change in marketing and sales expense $ 45.1 Salary, benefits and other employee-related costs and stock-based compensation included in marketing and sales expense increased during fiscal 2025, as compared to fiscal 2024, primarily due to our continued investment in attracting and retaining talent dedicated to technical sales support, including additional headcount from acquisitions.
Business Overview Cadence ® is a global market leader that develops computational, AI-driven software, accelerated hardware, and IP solutions for engineers and scientists to bring new and innovative products to life. The world’s most innovative technology companies use our solutions and services to deliver transformational products to multiple industries that drive the global economy.
Business Overview Cadence ® is a global market leader that develops computational, AI-driven software, accelerated hardware, and silicon IP products and solutions for engineers and scientists to bring new and innovative products to life. Our mission is to empower the world’s most innovative companies to deliver extraordinary electronic products that drive the global economy and improve everyday life.
We are monitoring the imposition of these new or higher tariffs, including any pauses on the tariffs imposed, and will assess their potential impact on our business either directly, such as on our hardware business, or due to downstream effects.
We are monitoring these actions, including any pauses, escalations, exemptions or removal of exemptions, with respect to the threatened or imposed tariffs, and will continue to assess their potential impact on our business either directly, such as on our hardware business, or due to downstream effects.
Recurring revenue also includes revenue recognized at varying points in time over the term of other arrangements with non-cancelable commitments, whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of products or services.
Other recurring revenue includes revenue recognized at a point in time for certain short-term software arrangements that are typically renewed at least annually and revenue recognized at varying points in time over the term of other arrangements with non-cancelable commitments, whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of products.
These factors were partially offset by an increase in payments on debt and payments of employee taxes on vesting of restricted stock.
These factors were partially offset by a decrease in payments of employee taxes on vesting of restricted stock.
Cost of services may fluctuate from period to period based on our utilization of design services engineers on revenue-generating projects rather than internal development projects and the timing of design service projects being completed.
Cost of services may fluctuate from period to period based on our utilization of design services engineers on revenue-generating projects rather than internal development projects and the timing of design service projects being completed. 41 Table of Contents Operating Expenses Our operating expenses include marketing and sales, research and development, and general and administrative expenses.
Many of our operating expenses are transacted in various foreign currencies. We recognize lower expenses in periods when the U.S. dollar strengthens in value against other currencies, and we recognize higher expenses when the U.S. dollar weakens against other currencies.
Certain prior period balance have been reclassified to conform to the current period presentation. Many of our operating expenses are transacted in various foreign currencies. We recognize lower expenses in periods when the U.S. dollar strengthens in value against other currencies and we recognize higher expenses when the U.S. dollar weakens against other currencies.
A summary of cost of product and maintenance for fiscal 2024 and 2023 is as follows: Change 2024 2023 2024 vs. 2023 (In millions, except percentages) Product and maintenance-related costs $ 376.5 $ 288.0 $ 88.5 31 % Amortization of acquired intangibles 60.1 43.8 16.3 37 % Total cost of product and maintenance $ 436.6 $ 331.8 $ 104.8 32 % 36 Table of Contents Product and maintenance-related costs increased during fiscal 2024, when compared to fiscal 2023, due to the following: Change 2024 vs. 2023 (In millions) Hardware product costs $ 80.1 Salary, benefits and other employee-related costs 4.9 Other items 3.5 Total change in product and maintenance-related costs $ 88.5 Costs associated with our hardware products include components, assembly, testing, applicable reserves and overhead.
A summary of cost of product and maintenance for fiscal 2025 and 2024 is as follows: Change 2025 2024 2025 vs. 2024 (In millions, except percentages) Product and maintenance-related costs $ 453.3 $ 376.5 $ 76.8 20 % Amortization of acquired intangibles 65.4 60.1 5.3 9 % Total cost of product and maintenance $ 518.7 $ 436.6 $ 82.1 19 % Product and maintenance-related costs increased during fiscal 2025, when compared to fiscal 2024, due to the following: Change 2025 vs. 2024 (In millions) Hardware product costs $ 57.6 Salary, benefits and other employee-related costs 11.5 Other items 7.7 Total change in product and maintenance-related costs $ 76.8 Costs associated with our hardware products include components, assembly, testing, applicable reserves and overhead.
For our professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes.
Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes.
For agreements and relationships, the fair value was determined by using the multi-period excess earnings method. This method reflects the present value of the projected cash flows that are expected to be generated from existing customers, less charges representing the contribution of other assets to those cash flows.
This method reflects the present value of the projected cash flows that are expected to be generated from existing customers, less charges representing the contribution of other assets to those cash flows. Projected income from existing customer relationships was determined using customer retention rates between 85% and 90%.
The percentage of our recurring and up-front revenue and fluctuations in revenue within our geographies in any single fiscal period are primarily impacted by delivery of hardware and IP products to our customers.
Up-front revenue is primarily generated by our sales of hardware products, individual IP licenses and certain software licenses with a term greater than one year. The percentage of our recurring and up-front revenue and fluctuations in revenue within our geographies in any single fiscal period are primarily impacted by delivery of hardware and IP products to our customers.
We have been impacted by the continued expansion of trade control laws and regulations, including certain export control restrictions concerning advanced node IC production in China, the inclusion of additional Chinese technology companies on the Bureau of Industry and Security “Entity List” and regulations governing the sale of certain technologies.
Trade control laws and regulations have amended over the past several years, including through the imposition of certain export control restrictions concerning advanced node IC production in China and the inclusion of additional Chinese technology companies on the BIS “Entity List” regulations governing the sale of certain technologies.
Facilities and other infrastructure costs increased during fiscal 2024, as compared to fiscal 2023, primarily due to our growing workforce. We expect to continue attracting and retaining talent dedicated to research and development activities through hiring and acquisitions.
Stock-based compensation also increased due to incremental expense from market-based equity awards granted to certain members of senior management. Facilities and other infrastructure costs increased during fiscal 2025, as compared to fiscal 2024, primarily due to our growing workforce. We expect to continue attracting and retaining talent dedicated to research and development activities through hiring and acquisitions.
These costs make our cost of hardware products higher, as a percentage of revenue, than our cost of software and IP products. Hardware product costs increased during fiscal 2024, as compared to fiscal 2023, primarily due to increased installations of hardware products and increased charges for excess and obsolete inventory related to previous generations of our hardware products.
Hardware product costs increased during fiscal 2025, as compared to fiscal 2024, primarily due to increased installations of hardware, partially offset by a decrease in charges for excess and obsolete inventory related to previous generations of our hardware products.
In other arrangements, like the majority of our time-based software arrangements, the licenses and certain services are not distinct from each other. These time-based software arrangements include multiple software licenses and updates to the licensed software products, as well as technical support, and we have concluded that these promised goods and services are a single, combined performance obligation.
These time-based software arrangements include multiple software licenses and updates to the licensed software products, as well as technical support, and we have concluded that these promised goods and services are a single, combined performance obligation. 48 Table of Contents Judgment is required to determine the stand-alone selling prices (“SSPs”) for each distinct performance obligation.
Research and Development The increase in research and development expense were due to the following: Change 2024 vs. 2023 (In millions) Salary, benefits and other employee-related costs $ 49.1 Stock-based compensation 47.0 Facilities and other infrastructure costs 8.4 Professional services 5.0 Other items (2.2) Total change in research and development expense $ 107.3 Salary, benefits and other employee-related costs and stock-based compensation included in research and development expense increased during fiscal 2024, as compared to fiscal 2023, due to our continued investment in attracting and retaining talent for research and development activities, including additional headcount from acquisitions.
We expect to continue attracting and retaining talent dedicated to technical sales support through hiring and acquisitions. 42 Table of Contents Research and Development The increase in research and development expense were due to the following: Change 2025 vs. 2024 (In millions) Salary, benefits and other employee-related costs $ 153.8 Stock-based compensation 36.8 Facilities and other infrastructure costs 25.5 Other items 3.6 Total change in research and development expense $ 219.7 Salary, benefits and other employee-related costs and stock-based compensation included in research and development expense increased during fiscal 2025, as compared to fiscal 2024, primarily due to our continued investment in attracting and retaining talent for research and development activities, including additional headcount from acquisitions.
Facilities and other infrastructure costs included in marketing and sales expense increased during fiscal 2024, as compared to fiscal 2023, primarily due to our growing workforce. We expect to continue attracting and retaining talent dedicated to technical sales support through hiring and acquisitions.
Facilities and other infrastructure costs included in marketing and sales expense increased during fiscal 2025, as compared to fiscal 2024, primarily due to our growing workforce.
Cash Flows Provided by (Used for) Financing Activities Cash flows provided by (used for) financing activities during fiscal 2024 and 2023 were as follows: Change 2024 2023 2024 vs. 2023 (In millions) Cash provided by (used for) for financing activities $ 1,239.2 $ (803.6) $ 2,042.8 Cash from financing activities increased during fiscal 2024, as compared to fiscal 2023, primarily due to an increase in proceeds from debt, increased proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the period, and a decrease in repurchases of common stock.
We expect to continue our investing activities, including purchasing property, plant and equipment, purchasing intangible assets, acquiring other companies and businesses, and making investments. 46 Table of Contents Cash Flows Provided by (Used for) Financing Activities Cash flows provided by (used for) financing activities during fiscal 2025 and 2024 were as follows: Change 2025 2024 2025 vs. 2024 (In millions) Cash provided by (used for) financing activities $ (949.0) $ 1,239.2 $ (2,188.2) Cash flows from financing activities decreased during fiscal 2025, as compared to fiscal 2024, primarily due to a decrease in net proceeds from the issuance of debt, an increase in repurchases of common stock and decreased proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the period.
Change 2024 2023 2024 vs. 2023 (In millions, except percentages) Amortization of acquired intangibles $ 30.4 $ 18.2 $ 12.2 67 % Amortization of acquired intangibles increased during fiscal 2024, as compared to fiscal 2023, primarily due to amortization from intangible assets acquired with our fiscal 2024 and fiscal 2023 acquisitions, partially offset by certain intangible assets that became fully amortized.
Amortization in any given period depends primarily on the timing and extent to which we acquire intangible assets. 43 Table of Contents Change 2025 2024 2025 vs. 2024 (In millions, except percentages) Amortization of acquired intangibles $ 39.9 $ 30.4 $ 9.5 31 % Amortization of acquired intangibles increased during fiscal 2025, as compared to fiscal 2024, primarily due to amortization from intangible assets acquired with our fiscal 2025 and fiscal 2024 acquisitions, partially offset by certain intangible assets that became fully amortized.
We also recognized a tax benefit of $24.8 million due to the recognition of previously unrecognized federal tax benefits from the expiration of the applicable statute of limitations and a tax benefit of $14.0 million primarily related to a change in R&D expenses that were capitalized in fiscal 2022. 40 Table of Contents Our future effective tax rates may also be materially impacted by tax amounts associated with our foreign earnings at rates different from the United States federal statutory rate, research credits, the tax impact of stock-based compensation, accounting for uncertain tax positions, business combinations, closure of statutes of limitations or settlement of tax audits and changes in tax law.
Our future effective tax rates may also be materially impacted by tax amounts associated with our foreign earnings at rates different from the United States federal statutory rate, research credits, the tax impact of stock-based compensation, accounting for uncertain tax positions, business combinations, closure of statutes of limitations or settlement of tax audits and changes in tax law.
In addition, unanticipated events and circumstances may occur that may impact the useful life assigned to our intangible assets, which would impact our amortization of intangible assets expense and our results of operations. 44 Table of Contents During fiscal 2024, we acquired intangible assets of $366.0 million, primarily through our acquisitions of BETA CAE and Invecas.
In addition, unanticipated events and circumstances may occur that may impact the useful life assigned to our intangible assets, which would impact our amortization of intangible assets expense and our results of operations. During fiscal 2025, we acquired intangible assets of $184.4 million, primarily through our acquisitions of the Artisan foundation IP business from Arm, Secure-IC and VLAB Works.
For additional information about our products, see the discussion in Item 1, “Business,” under the heading “Product Categories.” Management uses certain performance indicators to manage our business, including revenue, certain elements of operating expenses and cash flow from operations, and we describe these items further below under the headings “Results of Operations” and “Liquidity and Capital Resources.” Recent Acquisitions Consistent with our Intelligent System Design strategy, during the first quarter of fiscal 2024, we completed our acquisition of Invecas, a leading provider of design engineering, embedded software and system-level solutions.
For additional information about our products, see the discussion in Item 1, “Business,” under the heading “Product Categories.” Management uses certain performance indicators to manage our business, including revenue, certain elements of operating expenses and cash flow from operations, and we describe these items further below under the headings “Results of Operations” and “Liquidity and Capital Resources.” Acquisitions As part of our ISD strategy, we invest in and acquire complementary businesses, joint ventures, services and technologies and IP rights.
The allocation of the purchase price requires us to make significant estimates in determining the fair values of these acquired assets and assumed liabilities, especially with respect to intangible assets and goodwill. These estimates are based on information obtained from management of the acquired companies, our assessment of this information, and historical experience.
Any residual purchase price is recorded as goodwill. The allocation of the purchase price requires us to make significant estimates in determining the fair values of these acquired assets and assumed liabilities, especially with respect to intangible assets and goodwill.
To date, these conflicts have not materially limited our ability to develop or support our products and have not had a material impact on our results of operations, financial condition, liquidity or cash flows. 33 Table of Contents While our business model provides some resilience against these factors, we will continue to monitor the direct and indirect impacts of these or similar circumstances on our business and financial results.
To date, these conflicts have not materially limited our ability to develop or support our products and have not had a material impact on our results of operations, financial condition, liquidity or cash flows.
Such a change in recognition or measurement would result in recognition of a tax benefit or an additional charge to the tax provision. For a more detailed description of our unrecognized tax benefits, see Note 8 in the notes to consolidated financial statements.
Such a change in recognition or measurement would result in recognition of a tax benefit or an additional charge to the tax provision.
See Part II, Item 5, “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” for additional information on share repurchases. 42 Table of Contents Other Liquidity Requirements A summary of other capital and liquidity requirements as of December 31, 2024, is as follows: Total Due in Less Than 1 Year (In millions) Operating lease obligations (1) $ 173.6 $ 46.2 Purchase obligations 78.3 58.9 Contractual interest payments 748.0 111.0 Income tax payable 40.4 40.4 Other long-term contractual obligations (2) 94.5 — Total $ 1,134.8 $ 256.5 _________________ (1) Includes future payments under leases that had commenced as of December 31, 2024 as well as leases that had been signed but not yet commenced as of December 31, 2024.
Other Liquidity Requirements A summary of other capital and liquidity requirements as of December 31, 2025, is as follows: Total Due in Less Than 1 Year (In millions) Operating lease obligations (1) $ 247.0 $ 58.5 Purchase obligations 162.1 99.6 Contractual interest payments 637.0 111.0 Income tax payable 70.2 70.2 Other long-term contractual obligations (2) 96.9 — Total $ 1,213.2 $ 339.3 _________________ (1) Includes future payments under leases that had commenced as of December 31, 2025 as well as leases that had been signed but not yet commenced as of December 31, 2025.
In 2021, the OECD announced Pillar Two Model Rules which call for the taxation of large multinational corporations, such as Cadence, at a global minimum tax rate of 15%.
In 2021, the OECD announced Pillar Two Model Rules which call for the taxation of large multinational corporations, such as Cadence, at a global minimum tax rate of 15%. Many non-U.S. tax jurisdictions, including Ireland and Hungary, have enacted legislation to adopt certain components of the Pillar Two Model Rules or announced their plans to enact legislation in future years.
The following table shows the percentage of our revenue that is classified as recurring or up-front for fiscal 2024 and 2023: 2024 2023 Revenue recognized over time 80 % 81 % Revenue from arrangements with non-cancelable commitments 3 % 3 % Recurring revenue 83 % 84 % Up-front revenue 17 % 16 % Total 100 % 100 % The percentage of revenue characterized as recurring compared to revenue characterized as up-front may vary between fiscal quarters.
The following table shows the percentage of our revenue that is classified as recurring or up-front for fiscal 2025 and 2024: 2025 2024 Revenue recognized over time 76 % 80 % Other recurring revenue 4 % 3 % Recurring revenue 80 % 83 % Up-front revenue 20 % 17 % Total 100 % 100 % The following table shows the percentage of recurring revenue for the twelve-month periods ended concurrently with our five most recent fiscal quarters: Trailing Twelve Months Ended December 31, 2025 September 30, 2025 June 30, 2025 March 31, 2025 December 31, 2024 Recurring revenue 80 % 80 % 80 % 82 % 83 % Up-front revenue 20 % 20 % 20 % 18 % 17 % Total 100 % 100 % 100 % 100 % 100 % The percentage of revenue characterized as recurring compared to revenue characterized as up-front may vary between fiscal quarters.
In instances where the SSP is not directly observable because we do not sell the license, product or service separately, we determine the SSP using information that may include market conditions and other observable inputs. We typically have more than one SSP for individual performance obligations due to the stratification of those items by classes of customers and circumstances.
We rarely license or sell products on a standalone basis, so we are required to estimate the SSP for each performance obligation. In instances where the SSP is not directly observable because we do not sell the license, product or service separately, we determine the SSP using information that may include market conditions and other observable inputs.
Business Combinations When we acquire businesses, we allocate the purchase price to the acquired tangible assets and assumed liabilities, including deferred revenue, liabilities associated with the fair value of contingent consideration and acquired identifiable intangible assets. Any residual purchase price is recorded as goodwill.
For a more detailed description of our unrecognized tax benefits, see Note 8 in the notes to consolidated financial statements. 49 Table of Contents Business Combinations When we acquire businesses, we allocate the purchase price to the acquired tangible assets and assumed liabilities, including deferred revenue, liabilities associated with the fair value of contingent consideration and acquired identifiable intangible assets.
General and Administrative The changes in general and administrative expense were due to the following: Change 2024 vs. 2023 (In millions) Outside legal fees $ 18.7 Salary, benefits and other employee-related costs 12.8 Estimated legal liabilities 8.3 Foreign service tax 5.0 Other professional services 3.4 Stock-based compensation 3.4 Contributions to non-profit organizations (14.7) Other items 3.0 Total change in general and administrative expense $ 39.9 38 Table of Contents Outside legal fees included in general and administrative expense increased during fiscal 2024, as compared to fiscal 2023, primarily due to increased legal services associated with acquisitions and legal proceedings.
General and Administrative The changes in general and administrative expense were due to the following: Change 2025 vs. 2024 (In millions) Contributions to non-profit organizations $ 20.1 Stock-based compensation 14.1 Professional services 10.6 Salary, benefits and other employee-related costs 9.2 Facilities and other infrastructure costs (10.1) Other items (4.5) Total change in general and administrative expense $ 39.4 Contributions to non-profit organizations increased during fiscal 2025, as compared to fiscal 2024, primarily due to the timing of our contributions supporting charitable initiatives, including the Cadence Giving Foundation.
We also recognized tax benefits of $42.9 million related to stock-based compensation that vested or was exercised during the period. During fiscal 2024, we received best judgment tax audit assessments of approximately $26.0 million from the Israel Tax Authority (“ITA”) for the tax years 2017, 2018 and 2019.
We also recognized tax benefits of $42.9 million related to stock-based compensation that vested or was exercised during the period.
Our repurchase authorization does not obligate us to acquire a minimum amount of shares, does not have an expiration date and may be modified, suspended or terminated without prior notice. As of December 31, 2024, approximately $0.8 billion of the share repurchase authorization remained available to repurchase shares of our common stock.
The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors. Our repurchase authorization does not obligate us to acquire a minimum number of shares, does not have an expiration date and may be modified, suspended or terminated without prior notice.
Revenue in the remaining geographies presented in the table above increased during fiscal 2024, as compared to fiscal 2023, primarily due to growth in revenue from software offerings. 35 Table of Contents Revenue by Geography as a Percent of Total Revenue 2024 2023 United States 47 % 41 % Other Americas 2 % 2 % China 12 % 17 % Other Asia 18 % 19 % Europe, Middle East and Africa 15 % 16 % Japan 6 % 5 % Total 100 % 100 % Most of our revenue is transacted in the U.S. dollar.
Revenue by Geography as a Percent of Total Revenue 2025 2024 United States 44 % 47 % Other Americas 3 % 2 % China 13 % 12 % Other Asia 19 % 18 % EMEA 15 % 15 % Japan 6 % 6 % Total 100 % 100 % Most of our revenue is transacted in the U.S. dollar.
For additional information about our legal proceedings, including the increase in estimated legal liabilities, see Note 18 in the notes to consolidated financial statements. Salary, benefits and other employee-related costs and stock-based compensation included in general and administrative expense increased during fiscal 2024, as compared to fiscal 2023, primarily due to additional headcount from acquisitions.
Salary, benefits and other employee-related costs and stock-based compensation included in general and administrative expense increased during fiscal 2025, as compared to fiscal 2024, primarily due to our continued investment in retaining talent for general and administrative activities.
The decrease in cash flows from operating activities during fiscal 2024, as compared to fiscal 2023, was primarily due to the timing of cash receipts from customers and the timing of cash disbursements for operating assets and liabilities. 41 Table of Contents Cash Flows Used for Investing Activities Cash flows used for investing activities during fiscal 2024 and 2023 were as follows: Change 2024 2023 2024 vs. 2023 (In millions) Cash used for investing activities $ (837.1) $ (412.2) $ (424.9) Cash used for investing activities increased during fiscal 2024, as compared to fiscal 2023, primarily due to increased payments for business combinations and purchases of property, plant and equipment, partially offset by a decrease in cash used for investments in equity and debt securities.
Cash Flows Used for Investing Activities Cash flows used for investing activities during fiscal 2025 and 2024 were as follows: Change 2025 2024 2025 vs. 2024 (In millions) Cash used for investing activities $ (460.5) $ (837.1) $ 376.6 Cash used for investing activities decreased during fiscal 2025, as compared to fiscal 2024, primarily due to decreased payments for business combinations and an increase in proceeds from the sale and maturity of investments in equity and debt securities.
Results of operations for fiscal 2024, as compared to fiscal 2023, reflect the following: • Growth in revenue from our software, services, IP and hardware offerings; • Continued investment in research and development activities and technical sales support, including headcount from acquisitions; • Incremental costs for professional services; and • Increased interest expense from our indebtedness.
Results of operations for fiscal 2025, as compared to fiscal 2024, reflect the following: • Growth in revenue from our software, hardware and IP offerings, including revenue from our recent acquisitions; • Increases in operating expenses from continued investment in research and development and technical sales support, including additional headcount from acquisitions; • A loss associated with our settlements with BIS and the DOJ that was paid during fiscal 2025; and • Increased interest expense from our outstanding indebtedness. 38 Table of Contents Revenue We primarily generate revenue from licensing our software and IP, selling or leasing our hardware products, providing maintenance for our software, hardware and IP, providing engineering and cloud services and earning royalties generated from the use of our IP.
In these instances, we may use information such as the size of the customer and geographic region of the customer in determining the SSP. 43 Table of Contents Revenue is recognized over time for our combined performance obligations that include software licenses, updates, and technical support as well as for maintenance and professional services that are separate performance obligations.
Revenue is recognized over time for our combined performance obligations that include software licenses, updates, and technical support as well as for maintenance and professional services that are separate performance obligations. For our professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress.
We expect interest expense to increase during fiscal 2025 due to the increased level of debt on our consolidated balance sheet compared to prior periods. For an additional description of our debt arrangements, see Note 5 in the notes to consolidated financial statements.
Interest expense increased during fiscal 2025, as compared to fiscal 2024, primarily due to contractual interest from the Senior Notes, partially offset by the decrease in interest related to debt that was settled in fiscal 2024. For additional information relating to our debt arrangements, see Note 5 in the notes to consolidated financial statements.
Revenue by Geography Change 2024 2023 2024 vs. 2023 (In millions, except percentages) United States $ 2,159.7 $ 1,694.5 $ 465.2 27 % Other Americas 93.1 65.3 27.8 43 % China 573.1 679.5 (106.4) (16) % Other Asia 855.9 766.4 89.5 12 % Europe, Middle East and Africa (“EMEA”) 699.3 655.1 44.2 7 % Japan 260.2 229.2 31.0 14 % Total revenue $ 4,641.3 $ 4,090.0 $ 551.3 13 % During fiscal 2024, as compared to fiscal 2023, revenue in the United States increased primarily due to growth in revenue from our hardware, software, IP and service offerings, while revenue in China decreased primarily due to a decrease in revenue from our hardware and IP offerings.
Revenue by Geography Change 2025 2024 2025 vs. 2024 (In millions, except percentages) United States $ 2,311.0 $ 2,159.7 $ 151.3 7 % Other Americas 168.3 93.1 75.2 81 % China 680.0 573.1 106.9 19 % Other Asia 1,005.2 855.9 149.3 17 % Europe, Middle East and Africa (“EMEA”) 790.6 699.3 91.3 13 % Japan 341.7 260.2 81.5 31 % Total revenue $ 5,296.8 $ 4,641.3 $ 655.5 14 % Revenue in any one of Cadence’s six geographies may fluctuate from period to period based on the mix of products and services sold in a given period and the timing of revenue recognition, particularly for our hardware, IP and certain software products.
Operating margin Operating margin represents income from operations as a percentage of total revenue. Our operating margin for fiscal 2024 and 2023 was as follows: 2024 2023 Operating margin 29 % 31 % Operating margin decreased during fiscal 2024, as compared to fiscal 2023, primarily due to the mix of products and services sold during each respective period.
Our operating margin for fiscal 2025 and 2024 was as follows: 2025 2024 Operating margin 28 % 29 % Our operating margin may fluctuate from period to period depending on the mix of products and services sold during each period, the timing and magnitude of restructuring plans and other significant, infrequent expenses.
Services revenue increased during fiscal 2024, as compared to fiscal 2023, primarily due to growth in revenue from our design service offerings, which were supplemented by our acquisition of Invecas. Services revenue may fluctuate from period to period based on the timing of fulfillment of our services and IP performance obligations.
Services revenue may fluctuate from period to period based on the timing of fulfillment of our services and IP performance obligations. No one customer accounted for 10% or more of total revenue during fiscal 2025 or 2024.
Revenue and cost of revenue associated with contracts assumed with our acquisition of Invecas is primarily classified as services revenue and cost of services in our consolidated income statements. During the second quarter of fiscal 2024, we completed our acquisition of BETA CAE, a system analysis platform provider of multi-domain, engineering simulation solutions.
The size and timing of these investments and acquisitions may affect comparability of revenue, expenses and cash flows between fiscal periods. During the second quarter of fiscal 2024, we completed our acquisition of BETA CAE Systems International AG (“BETA CAE”), a system analysis platform provider of multi-domain, engineering simulation solutions.
In addition, our acquisitions during fiscal 2024 resulted in incremental expenses, including amortization of acquired intangibles, that exceeded incremental revenue. 39 Table of Contents Interest Expense Interest expense for fiscal 2024 and 2023 was comprised of the following: 2024 2023 (In millions) Contractual cash interest expense: Senior Notes $ 46.0 $ 15.3 Term Loans 25.9 17.7 Revolving Credit Facility 0.7 2.0 Amortization of debt discount and debt issuance costs: Senior Notes 1.9 0.9 Term Loans 1.2 0.2 Revolving Credit Facility 0.4 — Other (0.1) 0.1 Total interest expense $ 76.0 $ 36.2 Interest expense increased during fiscal 2024, as compared to fiscal 2023, primarily due to the interest expense related to new debt issued during fiscal 2024.
Interest Expense Interest expense for fiscal 2025 and 2024 was comprised of the following: 2025 2024 (In millions) Contractual cash interest expense: Senior Notes $ 111.0 $ 46.0 Term Loans — 25.9 Revolving Credit Facility 1.0 0.7 Amortization of debt discount and debt issuance costs: Senior Notes 4.0 1.9 Term Loans — 1.2 Revolving Credit Facility 0.3 0.4 Other 0.2 (0.1) Total interest expense $ 116.5 $ 76.0 In September 2024, we issued $2.5 billion aggregate principal amount of senior notes, consisting of $500.0 million aggregate principal amount of senior notes due 2027 (the “2027 Notes”), $1.0 billion aggregate principal amount of senior notes due 2029 (the “2029 Notes”) and $1.0 billion aggregate principal amount of senior notes due 2034 (the “2034 Notes” and together with the 2027 Notes and the 2029 Notes, the “Senior Notes”). 44 Table of Contents In fiscal 2024, we used a portion of the net proceeds from the Senior Notes to fully extinguish the outstanding principal and accrued interest of other debt instruments that were outstanding at that time.
Other income (expense), net increased during fiscal 2024, as compared to fiscal 2023, primarily due to increased interest earned from deposits and net gains from our investments in equity securities of publicly held companies. For additional information about other income (expense), net, see Note 12 in the notes to consolidated financial statements.
For additional information about other income, net, see Note 12 in the notes to consolidated financial statements.
Our provision for income taxes for fiscal 2023 was primarily attributable to federal, state and foreign income taxes on our fiscal 2023 income, partially offset by the tax benefit of $54.0 million related to stock-based compensation that vested or was exercised during the period.
We also recognized tax benefits of $37.5 million related to stock-based compensation that vested or was exercised during the period partially offset by $33.4 million of tax expense for a non-deductible loss associated with our settlements with BIS and the DOJ that was paid during fiscal 2025.
The remainder of our revenue is recognized at a point in time and is characterized as up-front revenue. Up-front revenue is primarily generated by our sales of hardware products, individual IP licenses and certain software licenses.
Each separate selection form under the arrangement is treated as an individual contract and accounted for based on the respective performance obligations. The remainder of our revenue is recognized at a point in time and is characterized as up-front revenue.
Many non-U.S. tax jurisdictions, including Ireland and Hungary, have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in fiscal 2024 or announced their plans to enact legislation in future years. The currently enacted Pillar Two Model Rules did not have a material impact to our provision for income taxes for fiscal 2024.
The currently enacted Pillar Two Model Rules did not have a material impact to our provision for income taxes for fiscal 2025 and 2024. Our provision for income taxes for fiscal 2024 was primarily attributable to federal, state and foreign income taxes on our fiscal 2024 income.
For additional discussion about how our effective tax rate could be affected by various risks, see Part I, Item 1A, “Risk Factors.” For further discussion regarding our income taxes, see Note 8 in the notes to consolidated financial statements.
For additional discussion about how our effective tax rate could be affected by various risks, see Part I, Item 1A, “Risk Factors.” For further discussion regarding our income taxes, see Note 8 in the notes to consolidated financial statements. 45 Table of Contents Liquidity and Capital Resources As of Change December 31, 2025 December 31, 2024 2025 vs. 2024 (In millions) Cash and cash equivalents $ 3,001.3 $ 2,644.0 $ 357.3 Net working capital 3,034.4 2,646.0 388.4 Cash and Cash Equivalents Our primary sources of cash and cash equivalents during fiscal 2025 were cash generated from operations, proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the year and proceeds from the sale and maturity of investments.
Stock Repurchase Program We are authorized to repurchase shares of our common stock under a publicly announced program that was most recently increased by our Board of Directors in August 2023. The actual timing and amount of repurchases are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.
Stock Repurchase Program We are authorized to repurchase shares of our common stock under a publicly announced program. In May 2025, our Board of Directors increased the prior authorization to repurchase shares of our common stock by authorizing an additional $1.5 billion.
Contributions to non-profit organizations decreased during fiscal 2024, as compared to fiscal 2023, primarily due to the timing of our periodic contributions to support charitable initiatives, including the Cadence Giving Foundation. Amortization of Acquired Intangibles Amortization of acquired intangibles consists primarily of amortization of customer relationships, acquired backlog, trade names, trademarks and patents.
Amortization of Acquired Intangibles Amortization of acquired intangibles consists primarily of amortization of customer relationships, acquired backlog, trade names, trademarks and patents.
Based on our current assessments, we expect the impact of these expanded trade control laws and regulations on our business to be limited. In addition, President Trump has announced the imposition of broad-based tariffs on imports from many countries, including China and Mexico.
These settlement agreements include ongoing audit, compliance and other obligations. In addition, U.S. President Trump has made a series of announcements regarding the imposition of new and higher U.S. tariffs on imports from many countries, including China and Mexico.
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The products these companies develop are some of the most complex systems in the world. Since our inception, we have been at the forefront of technology innovation. We work closely with our customers, helping them solve their most complex challenges in the semiconductor and electronic systems industries to unlock limitless opportunities.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAll of these forward contracts mature during February 2025. 45 Table of Contents Notional Principal Weighted Average Contract Rate (In millions) Forward Contracts: British pound $ 205.3 0.79 European union euro 165.1 0.94 Chinese renminbi 124.3 7.25 Swiss franc 106.2 0.89 Japanese yen 101.7 154.4 Israeli shekel 74.9 3.69 Swedish krona 52.4 10.93 Indian rupee 49.1 84.99 Canadian dollar 28.2 1.4 Taiwan dollar 14.9 32.54 South Korean Won 3.4 1,399.26 Singapore dollar 2.1 1.34 Total $ 927.6 Estimated fair value $ (7.5) As of December 31, 2023, our foreign currency exchange contracts had an aggregate principal amount of $697.9 million, and an estimated fair value of $9.3 million.
Biggest changeNotional Principal Weighted Average Contract Rate (In millions) Forward Contracts: European Union euro $ 2,454.6 0.84 Canadian dollar 174.1 1.39 Japanese yen 146.1 154.47 Chinese renminbi 107.9 7.04 British pound 105.6 0.76 Israeli shekel 101.3 3.21 Swedish krona 66.8 9.33 Indian rupee 61.2 89.4 Taiwan dollar 22.0 31.32 Swiss franc 7.7 0.79 South Korean won 4.2 1,460.89 Singapore dollar 4.1 1.29 Brazilian real 2.0 5.52 Total $ 3,257.6 Estimated fair value $ (26.0) As of December 31, 2024, our foreign currency exchange contracts had an aggregate principal amount of $927.6 million, and an estimated fair value of $(7.5) million.
Interest rates under our 2024 Credit Facility are variable, so interest expense could be adversely affected by increases in interest rates, particularly for periods when we maintain an outstanding balance. As of December 31, 2024, there were no borrowings outstanding under our 2024 Credit Facility.
Interest rates under our 2024 Credit Facility are variable, so interest expense could be adversely affected by increases in interest rates, particularly for periods when we maintain an outstanding balance. As of December 31, 2025, there were no borrowings outstanding under our 2024 Credit Facility.
We have performed sensitivity analyses as of December 31, 2024, and December 31, 2023, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% change in the value of the U.S. dollar relative to applicable foreign currency exchange rates, with all other variables held constant.
We have performed sensitivity analyses as of December 31, 2025, and December 31, 2024, using a modeling technique that measures the change in the fair values arising from a hypothetical 10% change in the value of the U.S. dollar relative to applicable foreign currency exchange rates, with all other variables held constant.
Recognized gains and losses with respect to our current hedging activities will ultimately depend on how accurately we are able to match the amount of foreign currency forward exchange contracts with actual underlying asset and liability exposures. The following table provides information about our foreign currency forward exchange contracts as of December 31, 2024.
Recognized gains and losses with respect to our current hedging activities will ultimately depend on how accurately we are able to match the amount of foreign currency forward exchange contracts with actual underlying asset and liability exposures. The following table provides information about our foreign currency forward exchange contracts as of December 31, 2025.
Under our strategic investment program, from time to time, we make cash investments in companies with technologies that are potentially strategically important to us. See Note 14 in the notes to consolidated financial statements for an additional description of these investments.
Under our strategic investment program, from time to time, we make cash investments in companies with technologies that are potentially strategically important to us. See Note 14 in the notes to consolidated financial statements for an additional description of these investments. Item 8.
For an additional description of the 2024 Credit Facility, see Note 5 in the notes to consolidated financial statements. 46 Table of Contents Equity Price Risk Equity Investments We have a portfolio of equity investments that includes marketable equity securities and non-marketable investments. Our equity investments are made primarily in connection with our strategic investment program.
For an additional description of the 2024 Credit Facility, see Note 5 in the notes to consolidated financial statements. Equity Price Risk Equity Investments We have a portfolio of equity investments that includes marketable equity securities and non-marketable investments. Our equity investments are made primarily in connection with our strategic investment program.
As of December 31, 2024 and December 31, 2023, an increase in the market rates of interest of 1% would result in a decrease in the fair values of our marketable debt securities by approximately $2.0 million and $2.6 million, respectively.
As of December 31, 2025 and December 31, 2024, an increase in the market rates of interest of 1% would result in a decrease in the fair values of our marketable debt securities by approximately $2.8 million and $2.0 million, respectively.
The carrying value of our interest-bearing instruments approximated fair value as of December 31, 2024. Our investments in debt securities had a fair value of approximately $50.3 million and $49.8 million as of December 31, 2024 and December 31, 2023, respectively, that may decline in value if market interest rates rise.
The carrying value of our interest-bearing instruments approximated fair value as of December 31, 2025. Our investments in debt securities had a fair value of approximately $71.0 million and $50.3 million as of December 31, 2025 and December 31, 2024, respectively, that may decline in value if market interest rates rise.
Our 2025 Term Loan and 2026 Term Loan, which had variable interest rates, were prepaid in full in September 2024. Interest rates for our 2024 Credit Facility can fluctuate based on changes in market interest rates and in interest rate margins that vary based on the credit ratings of our unsecured debt.
Interest rates for our 2024 Credit Facility can fluctuate based on changes in market interest rates and in interest rate margins that vary based on the credit ratings of our unsecured debt.
The sensitivity analyses indicated that a hypothetical 10% decrease in the value of the U.S. dollar would result in an increase to the fair value of our foreign currency forward exchange contracts of $18.3 million and a decrease of $18.4 million as of December 31, 2024 and December 31, 2023, respectively, while a hypothetical 10% increase in the value of the U.S. dollar would result in a decrease to the fair value of our foreign currency forward exchange contracts of $12.7 million and an increase of $20.4 million as of December 31, 2024 and December 31, 2023, respectively.
The sensitivity analyses indicated that a hypothetical 10% decrease in the value of the U.S. dollar would result in a decrease to the fair value of our foreign currency forward exchange contracts of $213.1 million and $18.3 million as of December 31, 2025 and December 31, 2024, respectively, while a hypothetical 10% increase in the value of the U.S. dollar would result in an increase to the fair value of our foreign currency forward exchange contracts of $219.4 million and $12.7 million as of December 31, 2025 and December 31, 2024, respectively. 51 Table of Contents We actively monitor our foreign currency risks, but our foreign currency hedging activities may not substantially offset the impact of fluctuations in currency exchange rates on our results of operations, cash flows and financial position.
In those cases, our costs and expenses benefit from a stronger dollar and are adversely affected by a weaker dollar. The fluctuations in our operating expenses outside the United States resulting from volatility in foreign exchange rates are not generally moderated by corresponding fluctuations in revenue from existing contracts.
In those cases, our costs and expenses benefit from a stronger dollar and are adversely affected by a weaker dollar.
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We actively monitor our foreign currency risks, but our foreign currency hedging activities may not substantially offset the impact of fluctuations in currency exchange rates on our results of operations, cash flows and financial position.
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The fluctuations in our operating expenses outside the United States resulting from volatility in foreign exchange rates are not generally moderated by corresponding fluctuations in revenue from existing contracts. 50 Table of Contents We enter into foreign currency forward exchange contracts to protect against currency exchange risks associated with existing assets, liabilities and other commitments.
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In connection with our pending acquisition of Hexagon’s D&E business, we entered into foreign currency forward exchange contracts to mitigate the impact of currency price fluctuations of the European Union euro relative to the U.S. dollar on the contractual cash consideration payable to Hexagon at close.
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All of these forward contracts mature during June 2026.
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Financial Statements and Supplementary Data The financial statements required by Item 8 are submitted as a separate section of this Annual Report. See Part IV, Item 15, “Exhibits and Financial Statement Schedules.” Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.