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10-K – 2026-02-19 – cdns-20251231.htm

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Omsättning
  • We generally license our design IP under nonexclusive license agreements that provide usage rights for specific designs. Some customers enter into 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. In addition, for certain IP license agreements, we collect royalties as our customers ship their product that includes our IP to their customers. | For a further description of our license agreements, our hardware sale or lease agreements, revenue recognition policies and results of operations, please refer to the discussion under “Critical Accounting Estimates” under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” | Technical Support and Maintenance
  • In addition to our products, many customers use design tools that are provided by other companies, as well as design IP available from alternative suppliers. We support the use of third-party design products and design IP through our Cadence Connections ® program and through our participation in industry groups such as the Silicon Integration Initiative and Accellera System Initiative. We actively contribute to the development and deployment of industry standards. | 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:
  • 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:
  • 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. | Services revenue includes revenue received for performing engineering services (which are generally not related to the functionality of other licensed products), customized IP on a fixed fee basis, and sales from cloud-based solutions that provide customers with software, hardware and services over a period of time.
  • 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. | Services revenue includes revenue received for performing engineering services (which are generally not related to the functionality of other licensed products), customized IP on a fixed fee basis, and sales from cloud-based solutions that provide customers with software, hardware and services over a period of time. | 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.”
  • Services revenue includes revenue received for performing engineering services (which are generally not related to the functionality of other licensed products), customized IP on a fixed fee basis, and sales from cloud-based solutions that provide customers with software, hardware and services over a period of time. | 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
  • 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. 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 inc | We estimate our remaining performance obligations at a point in time. Actual amounts and timing of revenue recognition may differ from these estimates largely due to changes in actual installation and delivery dates, as well as contract renewals, modifications and terminations. 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
Återkommande intäkter
  • 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. The timing of our revenue is significantly affected by the mix of software, hardware and IP products generating revenue in any given period and whether the revenue is recognized over time or at a point in time, upon completion of delivery | 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. 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 cust | 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 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.
  • Revenue recognized over time 76 % 80 % | Other recurring revenue | 4 % 3 %
  • 4 % 3 % | Recurring revenue 80 % 83 % | Up-front revenue 20 % 17 %
  • The following table shows the percentage of recurring revenue for the twelve-month periods ended concurrently with our five most recent fiscal quarters:
  • 2024 | Recurring revenue 80 % 80 % 80 % 82 % 83 % | Up-front revenue 20 % 20 % 20 % 18 % 17 %
  • Cadence generates revenue from contracts with customers and applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. Certain of Cadence’s licensing arrangements allow customers the ability to remix among software products. Cadence also has arrangements with customers that include a combination of products, with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, Caden | Recurring revenue includes revenue recognized over time from certain of Cadence’s software licensing arrangements, services, royalties, maintenance on IP licenses and hardware, and operating leases of hardware. 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 th | The remainder of Cadence’s revenue is recognized at a point in time and is characterized as up-front revenue. Up-front revenue is primarily generated by sales of hardware, individual IP licenses and certain software licenses with a term greater than one year. The percentage of Cadence’s recurring and up-front revenue in any single fiscal period is primarily impacted by delivery of hardware and IP products to its customers.
  • Revenue recognized over time 76 % 80 % 81 % | Other recurring revenue | 4 % 3 % 3 %
  • 4 % 3 % 3 % | Recurring revenue 80 % 83 % 84 % | Up-front revenue 20 % 17 % 16 %
EBITDA
  • Interest accrues on borrowings under the 2024 Credit Facility at a rate equal to, at Cadence’s option, either (1) secured overnight financing rate (“SOFR”) plus a margin between 0.625 % and 1.125 % per annum, determined by reference to the credit rating of Cadence’s unsecured debt, plus a SOFR adjustment of 0.10 % or (2) the base rate plus a margin between 0.000 % and 0.125 % per annum, determined by reference to the credit rating of Cadence’s unsecured debt. Interest is payable quarterly. A com | The 2024 Credit Facility contains customary negative covenants that, among other things, restrict Cadence’s ability to incur additional indebtedness, grant liens and make certain asset dispositions. In addition, the 2024 Credit Facility contains financial covenants that require Cadence to maintain a funded debt to EBITDA ratio not greater than 3.5 to 1, with a step up to 4 to 1 for one year following an acquisition by Cadence of at least $ 250.0 million that results in a pro forma leverage ratio
Rörelseresultat
  • 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. 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 e
  • Critical Accounting Estimates | In preparing our consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income and net income, as well as on the value of certain assets and liabilities on our consolidated balance sheets. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under d | We believe that the assumptions, judgments and estimates involved in revenue recognition, the accounting for income taxes and business combinations have the greatest potential impact on our consolidated financial statements; therefore, we consider these to be our critical accounting estimates. For information on our significant accounting policies, see Note 2 in the notes to consolidated financial statements.
  • 1 0.12* | F o rm of Performance-Based Restricted Stock Unit (PSU) Agreement for Executives with Operating Income Metrics under the Registrant's Omnibus Equity Incentive Plan. | 10-Q
Periodens resultat
  • Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly. | Borrowings under our revolving credit facility are at variable rates of interest and expose us to interest rate risk. When interest rates increase, our debt service obligations increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, could correspondingly decrease. We may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to reduce interest rat | In addition, the applicable margin is based on the credit rating of our unsecured debt. Accordingly, a credit rating downgrade would increase the applicable interest rate. Assuming our revolving credit facility was fully drawn and we were to fully exercise our right to increase borrowing capacity under our revolving credit facility, each quarter point change in the interest rate would result in a $4.4 million change in annual interest expense.
  • 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. Our cash flows from operating activities are significantly influenced by business levels and the payment terms set forth in our customer agreements. The increase in cash flows from operating activities during fiscal 2025, as compared to fiscal 2024, was primarily due to increased business levels, the timing of cash receipts fro | The increase in cash provided by operating activities was partially offset by settlement payments to BIS and the DOJ during fiscal 2025. For information relating to our settlements with BIS and the DOJ, see Note 18 in the notes to consolidated financial statements.
  • Critical Accounting Estimates | In preparing our consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, operating income and net income, as well as on the value of certain assets and liabilities on our consolidated balance sheets. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under d | We believe that the assumptions, judgments and estimates involved in revenue recognition, the accounting for income taxes and business combinations have the greatest potential impact on our consolidated financial statements; therefore, we consider these to be our critical accounting estimates. For information on our significant accounting policies, see Note 2 in the notes to consolidated financial statements.
  • Provision for income taxes 413,155 340,335 240,782 | Net income $ 1,108,888 $ 1,055,484 $ 1,041,144 | Net income per share – basic $ 4.09 $ 3.89 $ 3.86
  • Net income $ 1,108,888 $ 1,055,484 $ 1,041,144 | Net income per share – basic $ 4.09 $ 3.89 $ 3.86 | Net income per share – diluted $ 4.06 $ 3.85 $ 3.82
  • Net income per share – basic $ 4.09 $ 3.89 $ 3.86 | Net income per share – diluted $ 4.06 $ 3.85 $ 3.82 | Weighted average common shares outstanding – basic 271,333 271,212 269,381
  • 2025 2024 2023 | Net income $ 1,108,888 $ 1,055,484 $ 1,041,144 | Other comprehensive income (loss), net of tax effects:
  • Balance, December 31, 2022 272,675 $ 2,765,673 $ ( 3,824,163 ) $ 3,895,240 $ ( 91,637 ) $ 2,745,113 | Net income | — — — 1,041,144 — $ 1,041,144
Resultat per aktie
  • During fiscal 2023, Cadence repurchased approximately 2.3 million shares on the open market for an aggregate purchase price of $ 500.0 million. In June 2023, Cadence also entered into an accelerated share repurchase (“ASR”) agreement with HSBC Bank USA, National Association (“HSBC”) to repurchase an aggregate of $ 200.0 million of Cadence common stock. The ASR agreement was accounted for as two separate transactions (1) a repurchase of common stock and (2) an equity-linked contract on Cadence’s | The shares repurchased under Cadence’s repurchase authorizations and the total cost of repurchased shares, including commissions, during fiscal 2025, 2024 and 2023 were as follows:
Kassaflöde
  • Our operating results and revenue could be adversely affected by customer payment delays, customer bankruptcies and defaults, modifications or non-renewals of licenses. | Our customers have and may continue to face challenging financial or operating conditions, including due to macroeconomic conditions or catastrophic events, and delay or default on their payment commitments to us, request to modify contract terms, or modify or cancel plans to license our products. Our customers’ inability to fulfill payment commitments, in turn, could adversely affect our revenue, operating expenses and cash flow. Additionally, from time to time our customers seek to renegotiate | The competition in our industries is substantial, and we may not be able to continue to compete successfully.
  • If our cash flows and capital resources are insufficient to satisfy our debt obligations, we could face substantial liquidity problems and be forced to reduce or delay investments and capital expenditures or dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allo | In addition, we conduct a substantial portion of our operations through our subsidiaries. Accordingly, repayment of our indebtedness is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us. Our subsidiaries do not have any obligation to pay amounts due on our indebtedness or to make funds available for that purpose. Our subsidiaries may not be able to, or may not be permitted to, make distributions to us. Each subsidiary is a distinct l | If we cannot make scheduled payments on our debt, we will be in default and holders of our debt could declare all outstanding principal and interest to be due and payable, the lenders could terminate their commitments to loan money, and we could be forced into bankruptcy or liquidation. In addition, a material default on our indebtedness could suspend our eligibility to register securities using short form, automatically effective registration statements, potentially hindering our ability to rai
  • 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
  • Supplemental cash flow information: | Cash paid for interest $ 111,951 $ 43,219 $ 34,934
Likvida medel
  • 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. | 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. We cannot accurately predict the full impact that evolving macroeconomic and geopolitical conditions may have on our cash flows and there are administrative processes associated with repatriation of foreign earnings that could affect the timing of ret | The investment of our cash is subject to risks that may cause losses and affect the liquidity of these investments.
  • (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.
  • 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. | 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.
  • 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. | 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. | 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. We expect that current cash and cash equivalent balances and cash flows that are generated from operations and financing activities will be sufficient to meet the needs of our do
  • 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. | 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. We expect that current cash and cash equivalent balances and cash flows that are generated from operations and financing activities will be sufficient to meet the needs of our do | Net Working Capital
  • Interest Rate Risk | Our exposure to market risk for changes in interest rates relates primarily to our portfolio of cash, cash equivalents, investments in debt securities and any balances outstanding on our 2024 Credit Facility. We are exposed to interest rate fluctuations in many of the world’s leading industrialized countries, but our interest income and expense is most sensitive to fluctuations in the general level of United States interest rates. In this regard, changes in United States interest rates affect th | 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. 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.
  • Current assets: | Cash and cash equivalents $ 3,001,317 $ 2,644,030 | Receivables, net 944,939 680,460
Nettoskuld
  • Net income 1,108,888 1,055,484 1,041,144 | Adjustments to reconcile net income to net cash provided by operating activities: | Depreciation and amortization 227,828 196,935 145,292
  • Other long-term liabilities 13,551 23,592 1,802 | Net cash provided by operating activities 1,728,781 1,260,551 1,349,176 | Cash flows from investing activities:
  • Cash paid in business combinations, net of cash acquired ( 429,538 ) ( 737,574 ) ( 198,351 ) | Net cash used for investing activities ( 460,523 ) ( 837,118 ) ( 412,249 ) | Cash flows from financing activities:
  • Payments for repurchases of common stock ( 925,034 ) ( 550,026 ) ( 700,134 ) | Net cash provided by (used for) financing activities | ( 948,975 ) 1,239,241 ( 803,573 )
Eget kapital
  • Consolidated Statements of Stockholders’ Equity for the three fiscal years ended December 31, 2025 | 61
  • Opinions on the Financial Statements and Internal Control over Financial Reporting | We have audited the accompanying consolidated balance sheets of Cadence Design Systems, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control | In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
  • Total assets $ 10,153,148 $ 8,974,482 | LIABILITIES AND STOCKHOLDERS’ EQUITY | Current liabilities:
  • Stockholders’ equity: | Preferred stock – $ 0.01 par value; authorized 400 shares, none issued or outstanding
  • Accumulated other comprehensive loss ( 1,805 ) ( 190,448 ) | Total stockholders’ equity 5,474,181 4,673,578 | Total liabilities and stockholders’ equity $ 10,153,148 $ 8,974,482
  • Total stockholders’ equity 5,474,181 4,673,578 | Total liabilities and stockholders’ equity $ 10,153,148 $ 8,974,482
  • CADENCE DESIGN SYSTEMS, INC. | CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY | For the three fiscal years ended December 31, 2025
  • Cadence transacts business in various foreign currencies. The United States dollar is the functional currency of Cadence’s consolidated entities operating in the United States and certain of its consolidated subsidiaries operating outside the United States. The functional currency for Cadence’s other consolidated entities operating outside of the United States is generally the country’s local currency. | Cadence translates the financial statements of consolidated entities whose functional currency is not the United States dollar into United States dollars. Cadence translates assets and liabilities at the exchange rate in effect as of the financial statement date and translates income statement accounts using an average exchange rate for the period. Cadence includes adjustments from translating assets and liabilities into United States dollars, and the effect of exchange rate changes on intercomp | Concentrations of Credit Risk
Antal aktier
  • 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. 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 | Cash Payments for Income Taxes
  • Net income per share – diluted $ 4.06 $ 3.85 $ 3.82 | Weighted average common shares outstanding – basic 271,333 271,212 269,381 | Weighted average common shares outstanding – diluted 273,312 273,833 272,748
  • Weighted average common shares outstanding – basic 271,333 271,212 269,381 | Weighted average common shares outstanding – diluted 273,312 273,833 272,748
  • On September 4, 2025, Cadence entered into a definitive agreement (the “purchase agreement”) with Hexagon Smart Solutions AB (“Hexagon”) to fully acquire Hexagon’s design and engineering business. This acquisition is expected to accelerate Cadence’s Intelligent System Design™ strategy by expanding its System Design & Analysis portfolio, building upon Cadence’s acquisition of BETA CAE in fiscal 2024. | Under the terms of the purchase agreement, Cadence will pay Hexagon aggregate consideration of approximately € 2.70 billion. Approximately € 1.89 billion of the aggregate consideration will be paid in the form of cash, subject to customary purchase price adjustments in accordance with the purchase agreement. Cadence intends to fund the cash consideration through a combination of cash on hand and borrowings under existing debt facilities. Approximately € 810 million of the aggregate consideration | The purchase agreement contains representations and warranties, covenants, closing conditions and indemnities customary for acquisitions of this nature. The acquisition includes substantially all of the subsidiaries and related assets comprising Hexagon's design and engineering business. Among other conditions, closing is conditioned on the expiration or termination of the applicable waiting period under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended, and receipt of other r
  • Equity Incentive Plans | Cadence’s Omnibus Plan provides for the issuance of both incentive and non-qualified options, restricted stock awards, restricted stock units, stock bonuses and the rights to acquire restricted stock to both executive and non-executive employees. During fiscal 2023, Cadence’s stockholders approved an amendment to the Omnibus Plan to increase the number of shares of common stock authorized for issuance by 6.5 million. As of December 31, 2025, the total number of shares available for future issuan | Cadence’s 1995 Directors Stock Incentive Plan (the “Directors Plan”) provides for the issuance of non-qualified options, restricted stock awards and restricted stock units to its non-employee directors. Options granted under the Directors Plan have an exercise price not less than the fair market value of the stock on the date of grant. As of December 31, 2025, the total number of shares available for future issuance under the Directors Plan was 0.4 million. Options granted under the Directors Pl
  • Cadence’s Omnibus Plan provides for the issuance of both incentive and non-qualified options, restricted stock awards, restricted stock units, stock bonuses and the rights to acquire restricted stock to both executive and non-executive employees. During fiscal 2023, Cadence’s stockholders approved an amendment to the Omnibus Plan to increase the number of shares of common stock authorized for issuance by 6.5 million. As of December 31, 2025, the total number of shares available for future issuan | Cadence’s 1995 Directors Stock Incentive Plan (the “Directors Plan”) provides for the issuance of non-qualified options, restricted stock awards and restricted stock units to its non-employee directors. Options granted under the Directors Plan have an exercise price not less than the fair market value of the stock on the date of grant. As of December 31, 2025, the total number of shares available for future issuance under the Directors Plan was 0.4 million. Options granted under the Directors Pl | Stock-Based Compensation
  • Employee Stock Purchase Plan | Cadence provides an ESPP that enables eligible employees to purchase shares of its common stock. Offering periods under the plan last a duration of six months beginning on either February 1 or August 1, with the purchase dates falling on the last day of the six-month offering period. For the offering periods commencing after February 1, 2022, eligible employees may purchase Cadence’s common stock at a price equal to 85 % of the lower of the fair market value at the beginning or the end of the ap | Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes option pricing model. The weighted average grant date fair value of purchase rights granted under the ESPP and the weighted average assumptions used in the model for fiscal 2025, 2024 and 2023 were as follows:
  • During fiscal 2023, Cadence repurchased approximately 2.3 million shares on the open market for an aggregate purchase price of $ 500.0 million. In June 2023, Cadence also entered into an accelerated share repurchase (“ASR”) agreement with HSBC Bank USA, National Association (“HSBC”) to repurchase an aggregate of $ 200.0 million of Cadence common stock. The ASR agreement was accounted for as two separate transactions (1) a repurchase of common stock and (2) an equity-linked contract on Cadence’s | The shares repurchased under Cadence’s repurchase authorizations and the total cost of repurchased shares, including commissions, during fiscal 2025, 2024 and 2023 were as follows:
Antal anställda
  • In addition, as previously disclosed, on May 23, 2025, BIS informed us that a license was required for the export, re-export or in-country transfer of EDA software and technology classified under Export Control Classification Numbers (ECCNs) 3D991 and 3E991 on the Commerce Control List (“EDA Software and Technology”) when a party to the transaction is located in China or is a Chinese "military end user" on the "Military End-User List," wherever located. On July 2, 2025, BIS informed us that the | 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, have impacted our ability to transact business in certain countries and with certain customers. Future trade regulations may also impact our ability to transact business with certain customers and in certain countries and may restrict certain n | Anti-corruption and anti-bribery
  • 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. 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 tal | 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.
  • 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. Our global workforce is highly educated, technical and specialized, with a substantial majority of employees working in engineering roles.
  • Employees | As of December 31, 2025, we had approximately 13,800 employees. Our global workforce is highly educated, technical and specialized, with a substantial majority of employees working in engineering roles. | Compensation and Benefits
  • 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. We also offer a semi-annual bonus program, 401(k) match, Employee Stock Purchase Plan and equity compensation. In addition, our employees are eligible to receive monetary awards from their colleagues through our peer-to-peer recognition program. | Talent Development
  • Talent Development | To help employees succeed in their current roles, pursue their passions and develop the skills necessary for advancement, we provide formal training programs and curriculums in addition to on-the-job training. Our high performance culture platform provides our employees with valuable resources such as a comprehensive online Learning Management program with training and development tools on a broad range of topics and skills. We also offer tuition reimbursement opportunities to employees to furth | Social Impact and Community Outreach
  • Social Impact and Community Outreach | We believe it is important to create meaningful opportunities for employees to connect and contribute to their communities. We provide paid volunteer time off, charitable contribution matching, company-wide volunteer campaigns, international service immersion projects and grants to employees who are giving back to their communities. | 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. This is accomplished through various means, including grant making and partnerships with non-profit organizations committed to addressing these issues. We also make charitable contribu
  • We believe it is important to create meaningful opportunities for employees to connect and contribute to their communities. We provide paid volunteer time off, charitable contribution matching, company-wide volunteer campaigns, international service immersion projects and grants to employees who are giving back to their communities. | 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. This is accomplished through various means, including grant making and partnerships with non-profit organizations committed to addressing these issues. We also make charitable contribu | 9
Bruttomarginal
  • Deferred Sales Commissions | Cadence records an asset for the incremental costs of obtaining a contract with a customer, including direct sales commissions that are earned upon execution of the contract. Cadence uses the portfolio method to recognize the amortization expense related to these capitalized costs related to initial contracts and renewals and such expense is recognized over a period associated with the revenue of the related portfolio, which is generally two to three years for Cadence’s software arrangements and | Goodwill

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________ 
FORM 10-K
_____________________________________  
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31 , 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to_________.

Commission file number 000-15867
_____________________________________  

CADENCE DESIGN SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
____________________________________ 
Delaware   00-0000000
(State or Other Jurisdiction of
Incorporation or Organization)   (I.R.S. Employer
Identification No.)

2655 Seely Avenue, Building 5, San Jose, California   95134
(Address of Principal Executive Offices)   (Zip Code)

(408) 943-1234
(Registrant’s Telephone Number, including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Trading Symbol(s) Name of Each Exchange on which Registered

Common Stock, $0.01 par value per share CDNS Nasdaq Global Select Market

Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes    ☒      No    ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes   ☐ No    ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes    ☒      No    ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes    ☒      No    ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ☒ Accelerated Filer ☐
Non-accelerated Filer ☐ Smaller Reporting Company ☐
Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).   Yes   ☐ No    ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second fiscal quarter ended June 30, 2025 was approximately $ 83,968,000,000 .
On January 31, 2026, approximately 272,651,000 shares of the registrant’s common stock, $0.01 par value, were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for Cadence Design Systems, Inc.’s 2025 Annual Meeting of Stockholders are incorporated by reference into Parts II and III hereof. Such definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended December 31, 2025.

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CADENCE DESIGN SYSTEMS, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2025
Table of Contents
    
 
    Page
PART I.

Item 1. Business
1

Item 1A. Risk Factors
12

Item 1B. Unresolved Staff Comments
33

Item 1C.
Cybersecurity
33

Item 2. Properties
34

Item 3. Legal Proceedings
34

Item 4. Mine Safety Disclosures
34

PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
35

Item 6. [Reserved]
36

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
37

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
50

Item 8. Financial Statements and Supplementary Data
52

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
52

Item 9A. Controls and Procedures
52

Item 9B. Other Information
53

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
53

PART III.

Item 10. Directors, Executive Officers and Corporate Governance
54

Item 11. Executive Compensation
54

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
54

Item 13. Certain Relationships and Related Transactions and Director Independence
54

Item 14. Principal Accountant Fees and Services
54

PART IV.

Item 15. Exhibits and Financial Statement Schedules
55

Item 16. Form 10-K Summary
105

Signatures
106

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PART I.

Item 1. Business

This Annual Report and the documents incorporated by reference in this Annual Report contain statements that are not historical in nature, are predictive, or that depend upon or refer to future events or conditions or contain other 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 statements are predictions based upon our current expectations about future events. Actual results could vary materially as a result of certain factors, including but not limited to those expressed in these statements. Important risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements include, but are not limited to, those identified in the “Proprietary Technology,” “Governmental Regulations,” “Competition,” “Risk Factors,” “Critical Accounting Estimates,” “Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk” and “Liquidity and Capital Resources” sections contained in this Annual Report and the risks discussed in our other Securities and Exchange Commission (“SEC”) filings.
We urge you to consider these factors carefully in evaluating the forward-looking statements contained in this Annual Report. All subsequent written or oral forward-looking statements attributable to our company or persons acting on our behalf are expressly qualified in their entirety by these cautionary 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. 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. 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. 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. 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. 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.
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.
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.
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. 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.
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Our software and hardware solutions also support cloud access to address our customers' growing computational needs. 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. 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.
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. 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”).
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. 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.
Product Categories
Engineers depend on our solutions to navigate every stage of the electronic product design process, from initial concept to implementation and verification. Advanced AI technologies are integrated into our design platforms to empower users to create highly accurate digital twins—virtual models that replicate functionality, manufacturability, and compliance with industry standards. By leveraging sophisticated simulations, engineers can predict real-world performance, identify potential issues early, and optimize designs before transitioning to physical prototyping. This simulation-first approach delivers significant time and cost efficiencies, reduces the need for costly design iterations, and ensures customers have confidence that their products will perform safely, reliably, and as intended.
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Aligned with our ISD strategy, we organize our offerings into three tightly integrated product categories: Core EDA, Semiconductor IP, and System Design and Analysis (“SD&A”). 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.
Core EDA
Our Core EDA products and solutions are essential in the design and verification of semiconductor chips, including analog, digital, mixed-signal, memory, radio-frequency (“RF”), and silicon photonics, and are widely used across multiple industries including automotive, aerospace and defense, consumer electronics, data centers, industrial, medical, and mobile. We work closely with leading semiconductor ecosystem partners to develop foundry process design kits (“PDKs”) to ensure our core EDA products and solutions meet manufacturing sign-off requirements. To address increasing design and manufacturing complexity, we integrate machine learning, generative AI and native cloud scalability in our solutions, enhancing design quality and engineering productivity.
Custom IC Design and Simulation
Virtuoso is our flagship platform used by engineers to design and verify analog, custom, RF, mixed-signal IC, memory, and photonics devices. It is considered the industry standard for custom and analog IC design, enabling high-performance, low-power, and differentiated silicon development. Its integrated simulation and analysis capabilities ensure circuit functionality, performance, and reliability under varying conditions, while comprehensive physical verification and signoff flows, including design rule checking (“DRC”) and layout-versus-schematic (“LVS”) verification, ensure manufacturing compliance.
Digital IC Design and Signoff
The Innovus™ platform is used by engineers to design and verify large digital ICs. Innovus is critical for customers to optimize their designs to achieve the best PPA. Its integrated physical verification and signoff capabilities, including DRC, LVS, static timing analysis (“STA”), and power analysis are necessary to ensure correct circuit functionality, while optimizing for PPA.
Functional Verification
Functional verification is a critical part of the design process, ensuring a chip's functional description matches its physical implementation. This process is repeated throughout the design cycle to identify potential issues early, reducing the risk of costly errors post-manufacturing. 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.
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. Our Palladium® Enterprise Emulation Platform and Protium™ field programmable gate arrays (“FPGA”)-Based Prototyping Platforms significantly reduce simulation times, enabling comprehensive chip verification, early bug detection, and hardware/software co-verification. The Palladium platform delivers high throughput, capacity, and reliability for global design teams, while the Protium platform accelerates the transition from emulation to prototyping, allowing earlier software development.
In fiscal 2025, we acquired industry‑leading technology that expands our AI‑driven design and verification capabilities to include advanced agentic AI technology purpose‑built for semiconductor development. This technology leverages deep design understanding, intelligent test planning, automated test generation, and AI‑assisted debugging to accelerate functional verification workflows. This technology, deployed at leading chip companies and hyperscalers, is integrated with our Xcelium Logic Simulator, Jasper Formal Verification Platform, and other front-end verification technologies, reducing verification cycles from weeks to days and enabling customers to scale productivity.
With our acquisition of VLAB Works in fiscal 2025, we expanded our automotive electronic software and hardware development capabilities to include advanced virtual prototyping technology. VLAB Works’ industry-leading solutions include a high-performance virtual development environment (“VDE”) and an extensive catalog of virtual model components and integrated platforms. These solutions, along with the rest of VLAB Works’ portfolio, address embedded software development challenges across several markets, including automotive OEMs, Tier 1 suppliers, and semiconductor companies, supporting trends like software-defined vehicles (“SDVs”) and software-defined systems (“SDx”).
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Semiconductor IP
Our Semiconductor IP portfolio features strategic, mission-critical design architectures that customers integrate into their differentiated design blocks, system-on-chip (“SoC”) subsystems, and chiplets. 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. 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. Our design IP portfolio also includes high-speed serializer/deserializer (“SerDes”), peripheral component interconnect (“PCI”), USB, and other standard protocols. Complementing these offerings, our Verification IP (“VIP”) portfolio enables system-level validation and integrates seamlessly with our Xcelium™ simulator and Palladium® Enterprise Emulation solutions.
In fiscal 2025, we expanded our design IP portfolio with the acquisition of the Arm Artisan foundation IP business, adding standard cell libraries, memory compilers, and general-purpose I/Os (“GPIOs”) optimized for advanced process nodes at leading foundries. This acquisition complements our existing protocol and interface IP, memory interface IP, and SerDes IP at advanced nodes, enhancing our ability to address SoC design challenges across markets such as automotive, data center, mobile, internet of things (“IoT”), and consumer electronics. These solutions reinforce our commitment to improving customers’ time to market while optimizing cost, power, and performance.
Also in fiscal 2025, we strengthened our embedded security capabilities with the acquisition of Secure-IC, a leader in embedded security IP, solutions, and evaluation tools. By combining Secure-IC’s expertise in cybersecurity with Cadence’s decades of experience in IP and subsystem design, we are able to deliver comprehensive system solutions that accelerate customers’ time to market and are designed to meet stringent security and regulatory requirements. These solutions address critical challenges in key markets, including automotive, data center, aerospace and defense, mobile, IoT, and consumer electronics.
System Design and Analysis
Our SD&A platform is a comprehensive solution that enables critical end-to-end system-level design and verification across chips, packages, PCBs, and complete electronic systems. The SD&A platform integrates advanced multiphysics simulation—including thermal, electromagnetic, and signal/power integrity—along with computational fluid dynamics to address growing complexity in heterogeneous integration and 3D-IC designs.
The core SD&A products include the Allegro X and OrCAD X platforms for PCB and advanced packaging, Sigrity X for signal and power integrity, AWR for RF design, Fidelity™ for computational fluid dynamics (“CFD”) and Celsius for thermal and airflow analysis, Clarity™ 3D Solver for electromagnetic and power electronics analysis and simulation, and Integrity™ 3D-IC solution for advanced 3D-IC and multi-chiplet designs. The Optimality™ Intelligent System Explorer, Reality™ Digital Twin, and Millennium Enterprise Multiphysics platform provide enhanced optimization, performance, and productivity with agentic AI-driven and high-performance digital-twin analysis capabilities. By embedding analysis earlier and at multiple stages during the design process, our SD&A solution helps customers reduce risk, ensure performance and reliability, and bring innovative products to market faster. 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. 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. 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. Careful analysis is required for these systems to work as designed under a wide range of operating conditions, standards, and regulations. 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 Fidelity™ CFD Software expands our ability to meet the growing design challenges of electronic and systems companies. 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. 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.
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Our Cadence Reality Digital Twin platform brings physics-based design and analysis to the data center sector for performance-aware design and operational planning. 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.
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. The M2000 is a specialized, AI-accelerated platform co-developed with NVIDIA to dramatically speed up complex simulations in fields like semiconductor design, aerospace and defense, and drug discovery.
For 3D-IC and multi-chiplet designs, our customers use the Cadence ® Integrity™ 3D-IC Platform. 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.
In fiscal 2025, we announced our intent to acquire the Design & Engineering (“D&E”) business of Hexagon Smart Solutions AB (“Hexagon”), including its MSC Software division, which is expected to accelerate our ISD strategy. Hexagon’s D&E business is recognized for its industry-leading technologies, including MSC Nastran for structural analysis and Adams for multibody dynamics simulation, that are widely used in aerospace and defense, automotive, robotics, and emerging fields like physical AI. With this addition, we will serve a broader customer base, including leading aerospace and defense and automotive OEMs and Tier 1 suppliers, while addressing critical design challenges in electric vehicles, autonomous systems, and advanced materials. Once complete, our acquisition of these solutions is expected to complement our 2024 acquisition of BETA CAE Systems, further strengthening our presence in the multi-billion-dollar structural analysis market.
We also offer molecular modeling and simulation solutions and services. These solutions and services are used by a wide range of organizations in the pharmaceutical and biotechnology sectors to accelerate the drug discovery process and make more informed decisions in developing new therapeutics.
Product Arrangements
We primarily license our software using time-based licenses. Our time-based license arrangements offer customers the right to access and use all of the products delivered at the outset of an arrangement and updates throughout the entire term of the arrangement, which is generally two to three years, with no rights to return. In addition, certain time-based license arrangements include the right for the customer to remix among the products delivered at the outset of the arrangement and use unspecified additional products that become commercially available during the term of the arrangement.
A small portion of our software is licensed under perpetual licenses, which does not include the right to use new technology. Payment terms for time-based licenses generally provide for payments to be made over the license period, and payment terms for perpetual licenses generally are net 30 days.
Our hardware products are either sold or leased to our customers. Our emulation hardware can also be accessed remotely via a Cadence-managed cloud arrangement.
We generally license our design IP under nonexclusive license agreements that provide usage rights for specific designs. Some customers enter into 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. In addition, for certain IP license agreements, we collect royalties as our customers ship their product that includes our IP to their customers.
For a further description of our license agreements, our hardware sale or lease agreements, revenue recognition policies and results of operations, please refer to the discussion under “Critical Accounting Estimates” under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Technical Support and Maintenance
Customer service and support is critical to the adoption and successful use of our products. We provide our customers with technical support and maintenance to facilitate their use of our software, hardware and IP solutions.
Our education services offerings can be customized and include training programs that are delivered online, through an app, or in a classroom setting. The content of these offerings ranges from the latest design techniques to methodologies for using the most recent features of our products. The primary focus of education services is to accelerate our customers’ path to productivity in the use of our products.
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.
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As part of our services offerings, we design advanced ICs, develop custom IP and help customers address design challenges. This enables us to target and accelerate the development of new software technology and products to satisfy current and future design requirements.
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 customers for these services primarily consist of semiconductor and systems companies developing products for the consumer, hyperscale computing, 5G communications, mobile, automotive, aerospace and defense, industrial and life science vertical sectors. These ICs range from digital SoCs and analog and RF designs to complex mixed-signal ICs.
The Cadence Cloud portfolio, which consists of Cadence-managed and customer-managed cloud environments, continues to expand, with additional cloud-based and software as a service (“SaaS”) products, including cloud-based solutions for SD&A and functional verification. Contractual arrangements with customers for both environments are generally time-based, similar to the on-premises software license arrangements described above, and may include usage-based terms.
In delivering methodology services, we leverage our experience and knowledge of design techniques, our products, leading practices and different design environments to enable improved productivity of our customers’ engineering teams. Depending on the customers’ projects and needs, we work with customers using outsourced, consultative and collaborative offerings.
Third-Party Programs and Initiatives
In addition to our products, many customers use design tools that are provided by other companies, as well as design IP available from alternative suppliers. We support the use of third-party design products and design IP through our Cadence Connections ® program and through our participation in industry groups such as the Silicon Integration Initiative and Accellera System Initiative. We actively contribute to the development and deployment of industry standards.
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.
Services revenue includes revenue received for performing engineering services (which are generally not related to the functionality of other licensed products), customized IP on a fixed fee basis, and sales from cloud-based solutions that provide customers with software, hardware and services over a period of time.
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. 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.
We estimate our remaining performance obligations at a point in time. Actual amounts and timing of revenue recognition may differ from these estimates largely due to changes in actual installation and delivery dates, as well as contract renewals, modifications and terminations. 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.
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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. Applications engineers provide technical pre-sales and post-sales support for our products. Due to the complexity of many of our products and the system design process, the sales cycle is generally long, requiring up to six months or longer. During the sales cycle, our direct sales force generally provides technical presentations, product demonstrations and support for on-site customer evaluation of our solutions. We also promote our products and services through advertising, marketing automation, trade shows, public relations and the internet. We selectively utilize value-added resellers to broaden our reach and reduce cost of sales. Our OrCAD products and certain Allegro products are primarily marketed through these channels. With respect to international sales, we generally market and support our products and services through our subsidiaries. We also use a third-party distributor to license our products and services to certain customers in Japan.
Research and Development    
Our future performance depends on our ability to innovate, commercialize newly developed solutions and enhance and maintain our current products. The primary areas of our R&D align with our product categories discussed above. We must continuously adapt our products to solve new or increased physics challenges that arise with each successive process node and address the increase in complexity that is introduced by the resulting much larger designs. We must also keep pace with our customers’ technical developments, satisfy industry standards and meet our customers’ increasingly demanding performance, productivity, quality and predictability requirements. Therefore, we expect to continue to make significant investments in R&D.
Hardware Manufacturing and Software Distribution
Our hardware, including all individual PCBs, custom ICs and FPGA-based prototyping components, is manufactured, assembled and tested by subcontractors before delivery to our customers. Software and documentation are primarily distributed to customers by secure electronic delivery.
Proprietary Technology
Our success depends, in part, upon our proprietary technology. We generally rely on patents, copyrights, trademarks and trade secret laws, licenses and restrictive agreements to establish and protect our proprietary rights in technology and products. Many of our products include software or other IP licensed from third parties. We may have to seek new licenses or renew existing licenses for third-party software and other IP in the future. As part of performing engineering services for customers, our engineering services business uses certain software and other IP licensed from third parties, including that of our competitors.
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, national security, foreign ownership and investment and the environment. The following describes certain significant laws and regulations that may impact our business. For additional information regarding risks related to these and other laws and regulations that may impact us, including existing restrictions imposed by 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. In particular, the U.S. trade control laws and regulations have been amended over the past several years, including through the imposition of certain export control restrictions concerning advanced node IC production in China, the inclusion of additional Chinese technology companies on the “Entity List” maintained by BIS, and regulations governing the sale and export of certain technologies.
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In addition, as previously disclosed, on May 23, 2025, BIS informed us that a license was required for the export, re-export or in-country transfer of EDA software and technology classified under Export Control Classification Numbers (ECCNs) 3D991 and 3E991 on the Commerce Control List (“EDA Software and Technology”) when a party to the transaction is located in China or is a Chinese "military end user" on the "Military End-User List," wherever located. On July 2, 2025, BIS informed us that the license requirements set forth in the May 23, 2025 letter from BIS were rescinded effective immediately. 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. Moreover, we cannot predict whether or when any additional changes will be made that eliminate or decrease these restrictions, or change the duration of such restrictions, or impose new restrictions. For example, effective September 29, 2025, BIS issued an interim final rule that extended the export restrictions imposed on entities identified on the Entity List or the Military End-User List and certain other sanctioned parties, to entities that are 50% or more owned by one or more of such entities. However, 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. 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.
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, have impacted our ability to transact business in certain countries and with certain customers. 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.
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 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.
The laws and regulations to which we are subject are complex and may change or develop over time, sometimes with limited or no advance notice. Developments or other changes in laws or regulations or how they are interpreted or enforced have had, and may continue to have, a negative impact on our business and increase our compliance-related expenditures.
Artificial intelligence
The regulatory framework governing the use of AI, machine learning and automated decision-making technologies (“AI Technologies”) is rapidly evolving. Many federal, state and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations.
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. At the federal level, the Federal Trade Commission has required other companies to disgorge valuable insights of trainings generated through the use of AI Technologies in certain cases where the company is alleged to have violated privacy and consumer protection laws. 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. Such additional regulations may impact our ability to develop, use and commercialize 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. In addition, the Trump administration has implemented an executive order that limits state-level regulation of AI Technologies, and may continue to implement new executive orders and/or other rules or administrative policies relating to AI Technologies in the future.
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Competition
We operate in a highly competitive market, facing both domestic and international competition. Competition in our market is driven by several critical factors, including the ability to deliver continuous technological innovation, the quality and differentiation of product and service offerings, the strength and stability of customer relationships, the ability to attract and retain top engineering talent, and potential geopolitical trade restrictions. Our success hinges on providing comprehensive, integrated solutions that address the growing complexity of semiconductor and systems design.
Our competitors range from large, established providers to smaller, specialized firms, emerging companies, and internal design teams within major technology corporations. Key competitors include Synopsys, Inc., Ansys, Inc. (acquired by Synopsys), Siemens EDA, and a variety of other tool providers, electronics device manufacturers with in-house EDA capabilities, technical and computational software companies, electronics design and consulting firms, and IP companies. U.S.-based competitors include Keysight Technologies, Inc., Schrödinger, Inc., and CEVA, Inc., while international competitors include Altium Limited (acquired by Renesas Electronics Corporation) and Zuken, Inc. (Japan) and emerging players in China such as Huada Empyrean, Xpeedic Technology, X-EPIC, Primarius Technologies, Univista, and Giga Design Automation. Additionally, some competitors have pursued acquisitions, partnerships, or strategic alliances, potentially enhancing their competitive positioning.
In the engineering services business, competitive dynamics differ from those in the product business. 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.
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. 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.
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. 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. We also offer a semi-annual bonus program, 401(k) match, Employee Stock Purchase Plan and equity compensation. In addition, our employees are eligible to receive monetary awards from their colleagues through our peer-to-peer recognition program.
Talent Development
To help employees succeed in their current roles, pursue their passions and develop the skills necessary for advancement, we provide formal training programs and curriculums in addition to on-the-job training. Our high performance culture platform provides our employees with valuable resources such as a comprehensive online Learning Management program with training and development tools on a broad range of topics and skills. We also offer tuition reimbursement opportunities to employees to further hone their skills.
Social Impact and Community Outreach
We believe it is important to create meaningful opportunities for employees to connect and contribute to their communities. We provide paid volunteer time off, charitable contribution matching, company-wide volunteer campaigns, international service immersion projects and grants to employees who are giving back to their communities.
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. 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.
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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. 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. We use our website at www.cadence.com to communicate important information about our company, including news releases and financial information. Our website permits investors to subscribe to email notification alerts when we post new material information on our website. We also make available on our investor relations webpage, free of charge, copies of our SEC filings and submissions, which can be found at the SEC’s website, www.sec.gov, as soon as reasonably practicable after electronically filing or furnishing such documents with the SEC. Stockholders may also request copies of these documents by writing to our Corporate Secretary at the address above. Website references are provided throughout this document for convenience only. The contents of these websites do not constitute a part of this Annual Report and shall not be deemed incorporated by reference into this Annual Report unless expressly noted.
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. 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.
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. 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 served as Corporate Vice President and General Manager of the Custom Design Business Unit at Magma Design Automation, Inc., an EDA company. Dr. Devgan also serves as a director of Lam Research Corporation. 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. WALL has served as Senior Vice President and Chief Financial Officer of Cadence since October 2017. From June 1997 to October 2017, Mr. Wall held several positions at Cadence, most recently as Corporate Vice President and Corporate Controller from April 2016 to October 2017, Vice President, Finance and Operations, Worldwide Revenue Accounting and Sales Finance from 2015 to 2016 and Vice President, Finance and Operations, EMEA and Worldwide Revenue Accounting from 2005 to 2015. Mr. Wall has an NCBS from the Institute of Technology, Tralee and is a Fellow of the Association of Chartered Certified Accountants.
PAUL CUNNINGHAM has served as Senior Vice President and General Manager of the System Verification Group of Cadence since March 2021. From August 2011 to March 2021, Dr. Cunningham held several positions at Cadence, most recently as Corporate Vice President of the System Verification Group beginning January 2018. Prior to joining Cadence, Dr. Cunningham was co-founder and Chief Executive Officer of Azuro, Inc., a clock concurrent optimization company, that Cadence acquired in July 2011. Dr. 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. 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. 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.
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MARC TAXAY has served as Senior Vice President, General Counsel and Corporate Secretary of Cadence since May 2025. In this role, he is responsible for Cadence's global legal operations, including corporate governance, commercial transactions, employment law, export compliance, government affairs, intellectual property, litigation, mergers and acquisitions, and stock administration. Prior to Cadence, from March 2016 to May 2025, Mr. Taxay served as Senior Vice President and General Counsel at Arista Networks Inc., a cloud networking solutions company, overseeing legal affairs including commercial transactions, intellectual property, corporate governance, securities and compliance. Prior to Arista Networks Inc., Mr. Taxay served as General Counsel at MedeAnalytics, Inc., Assistant General Counsel at Coremetrics, and was a partner at Cohen & Grigsby. Mr. 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. 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.
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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. The following does not summarize all of the risks that we face, and there may be additional risks or uncertainties that are currently unknown or not believed to be material that occur or become material.
Risk 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.
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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.
Tax, Regulatory and Litigation Risks
• Our results could be adversely affected by an increase in our effective tax rate as a result of U.S. and foreign tax law changes, outcomes of current or future tax examinations, or by material differences between our forecasted and actual effective tax rates.
• Litigation, government investigations or regulatory proceedings could adversely affect our financial condition and operations.
• Errors, defects or other issues with our products and services could expose us to liability and harm our business.
• Our reported financial results may be adversely affected by changes in United States generally accepted accounting principles, and we may incur significant costs to adjust our accounting systems and processes to comply with significant changes.
• If we become subject to unfair hiring claims, we could be prevented from hiring needed employees, incur liability for damages and incur substantial costs in defending ourselves.
• We are subject to evolving corporate governance, environmental and social practices and public disclosure expectations and regulations that impact compliance costs and risks of noncompliance.
Risks Related to Our Securities and Indebtedness
• Our stock price has been and may continue to be subject to fluctuations.
• The amount and frequency of our share repurchases may fluctuate, and we cannot guarantee that we will fully consummate our share repurchase authorization, or that it will enhance long-term stockholder value. 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.
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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.
Historical results of operations should not be viewed as reliable indicators of our future performance. Various factors affect our operating results, and some of them are not within our control. Our operating results for any period are affected by 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 at a point in time rather than over time. In addition, we have recorded net losses in the past and may record net losses in the future. Also, our cash flows from operating activities have and will continue to fluctuate due to a number of factors, including the timing of our billings, collections, disbursements and tax payments.
A substantial portion of our software licenses yield revenue recognized over time, which may make it difficult for us to rapidly increase our revenue in future fiscal periods and means that a decrease in orders in a given period would negatively affect our revenue in future periods.
A substantial portion of the product revenue related to our hardware and IP, and to a lesser extent certain software, is recognized upon delivery, and our forecasted revenue results are based, in part, on our expectations of these products to be delivered in a particular quarter. Therefore, changes in bookings or deliveries for these products, relative to expectations, will have a more immediate impact on our revenue than changes in the majority of our time-based software or services bookings, for which revenue is generally recognized over time.
Revenue related to our hardware and IP products is inherently difficult to predict because sales of our hardware and IP products depend on the commencement of new projects for the design and development of complex ICs and systems by our customers, our customers’ willingness to expend capital to deploy our new and existing hardware or IP products in those projects and the availability of our new and existing hardware or IP products for delivery. Therefore, our hardware or IP sales may be delayed or may decrease if our customers delay or cancel projects because their spending is constrained or if there are problems or delays with the supply, delivery or installation of our hardware or IP products or our hardware suppliers. Moreover, the market environment for hardware and IP is highly competitive, and our customers may choose to purchase a competitor’s hardware or IP product based on cost, performance or other factors. These factors may result in lower revenue, which would have an adverse effect on our business, results of operations and cash flows.
As we continue to expand our IP offerings, a portion of the revenue related to our IP bookings will be deferred until we complete and deliver the licensed IP to our customers. As a result, costs related to the research and development of IP may be incurred prior to the recognition of the related revenue.
We plan our operating expenses based on forecasted revenue, expected business needs and other factors such as inflation. These expenses and the effect of long-term commitments are relatively fixed in the short term. Bookings and the related revenue are harder to forecast in a difficult economic environment. If we experience a shortfall in bookings, our operating results could differ from our expectations because we may not be able to quickly reduce our expenses in response to short-term business changes. Our operating expenses are also impacted by economic conditions, such as inflation. Unexpected increases in inflation could cause our expenses to increase at a rate faster than our product pricing to recover such increases.
The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results of operations (see “Critical Accounting Estimates” under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and 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.
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. 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 increasing complexity of designs of semiconductors and electronic systems and customers’ concerns about managing costs have previously led to, and in the future could lead to, a decrease in design starts and design activity in general. For example, in response to this increasing complexity, some customers have chosen to focus on one discrete phase of the design process or opt for less advanced, but less risky, manufacturing processes that may not require the most advanced EDA products. If growth in the semiconductor and electronics systems industries slows or stalls, then demand for our products and services could decrease and our business, financial condition and results of operations could be adversely affected. Additionally, as the EDA industry has matured, stronger competition has emerged from companies better able to compete as sole source vendors. This increased competition could cause our revenue growth rate to decline and exert downward pressure on our operating margins, which would have an adverse effect on our business, financial condition and results of operations.
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Furthermore, the semiconductor and electronics systems industries have become increasingly complex and interconnected ecosystems. Many of our customers outsource the manufacturing of their semiconductor designs to foundries. Our customers also frequently incorporate third-party IP, whether provided by us or other vendors, into their designs to improve the efficiency of their design process. We work closely with major foundries to help ensure that our products are compatible with their manufacturing processes. Similarly, we work closely with other major providers of semiconductor IP, particularly microprocessor IP, to optimize our EDA products for use with their IP designs and to help ensure that their IP and our own IP products work effectively together, as we may each provide for the design of separate components on the same chip. If we fail to optimize our products for use with major foundries’ manufacturing processes or major IP providers’ products, or if our access to such foundry processes or third-party IP products is hampered, then our products and services may become less desirable to our customers, resulting in an adverse effect on our business, financial condition and results of operations.
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.
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. Adverse developments that affect financial institutions, transactional counterparties or other third parties, such as bank failures and failure by the U.S. 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. Public health emergencies and reactionary measures by governments and businesses have also had, and could in the future have, the effect of curtailing economic activity and causing substantial volatility and disruption in global markets. Decreased bookings for our products and services, customer bankruptcies, consolidation among our customers, or problems or delays with our hardware suppliers or with the supply or delivery of our hardware products could also adversely affect our ability to grow our business or adversely affect our future revenue and financial results.
There is inherent risk, based on the complex relationships between certain countries and within regions, that political, diplomatic or military events could result in trade disruptions and other disruptions in the markets and industries we serve and our supply chain. A significant disruption in any area where we or our customers operate or do business could reduce customer demand, make our products and services more expensive or unavailable for customers, increase the cost of our products and services, have a negative impact on customer spending, make our products less competitive, or otherwise have a materially adverse impact on our future revenue and profits, our customers’ and suppliers’ businesses, and our results of operations. In addition, there is currently significant uncertainty in the global economy and the future relationship among the United States and various other countries, caused by increased geopolitical instabilities and changes in global trade policies. 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. Similarly, many of our suppliers, vendors and other entities with whom we do business have strong ties to doing business in China and other countries impacted by recent tariffs and other trade restrictions. Their ability to supply materials to us, buy products or services from us, or otherwise work with us is affected by their ability to do business in impacted countries. Moreover, these tariffs and any other trade restrictions imposed on our suppliers could adversely affect our business, financial condition and results of operations through reduced demand for our products and services, cancelled orders, supply chain disruptions, increased transaction costs and increased expenses.
Our future business and financial results, including demand for our products and services, are subject to considerable uncertainties that could impact our stock price. Further, political or economic conflicts between various global actors, and responsive measures that have been or could be taken, have created and can further create significant global economic uncertainty that could prolong or expand such conflicts, which could have a lasting impact on regional and global economies and harm our business and operating results.
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.
We must comply with the import and export restrictions and regulations and economic sanctions laws of the United States and of certain other countries in selling, providing or shipping our products and transferring our technology outside the United States, to foreign nationals (including foreign nationals within the United States) or across borders. 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. In some cases, such changes have prevented and may further prevent the export or import of our products or services to certain countries, governments or persons altogether, or may result in increased costs for us, which could reduce our competitiveness, or for our
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customers, which could affect their purchasing behaviors. 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.
For example, U.S. trade control laws and regulations have been amended over the past several years, including through the imposition of certain export control restrictions concerning advanced node IC production in China, the inclusion of additional Chinese technology companies on BIS “Entity List” and regulations governing the sale and export of certain technologies. 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. 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.
In addition, as previously disclosed, on May 23, 2025, BIS informed us that a license was required for the export, re-export or in-country transfer of EDA Software and Technology when a party to the transaction is located in China or is a Chinese "military end user" on the "Military End-User List," wherever located. On July 2, 2025, BIS informed us that the license requirements set forth in the May 23, 2025 letter from BIS were rescinded effective immediately. While we have since restored access to EDA Software and Technology for affected customers in accordance with these updated U.S. export regulations, the temporary license requirements negatively impacted our revenue in China during this period. However, in light of continued negotiations between the United States and China, the United States may consider reimposing these or additional restrictions on the export, re-export or in-country transfer of EDA Software and Technology or our other products and services in China in the future.
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. In particular, China’s stated national policy to be a global leader in all segments of the semiconductor industry by 2030 has resulted in and may continue to cause increased competitive capability in China. In addition, although customers on the Entity List are not prohibited from paying (and we are not restricted from collecting) for products we previously delivered to them (in compliance with applicable law), the credit risks associated with outstanding receivables from customers on the Entity List – including receivables from anti-piracy enforcement efforts and litigation settlements – and other trade restrictions could increase.
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. We are unable to predict the duration of the export restrictions imposed with respect to any particular customer, technology, country or region or the long-term effects on our business or our customers’ businesses. For example, effective September 29, 2025, BIS issued an interim final rule that extended the export restrictions imposed on entities identified on the Entity List or the Military End-User List and certain other sanctioned parties, to entities that are 50% or more owned by one or more of such entities. However, 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. In addition, there may be indirect impacts to our business which we cannot reasonably quantify, including that certain restrictions, even if not directly applicable to us, may impact our customers' products which may have an adverse effect on demand for our products, or that a country-specific export control may limit or prevent our employees who are nationals of the restricted country from performing their duties unless a license can be obtained. Additionally, our business may also be impacted by other trade restrictions that may be imposed by the United States, China or other countries. For example, the United States and other global actors have imposed economic sanctions on Russia and other entities and individuals as a result of the Russian invasion of Ukraine and conflicts in the Middle East. New or increased tariffs and other changes in U.S. trade policy, including new sanctions, have triggered and could continue to trigger retaliatory actions by affected countries. For instance, the United States has increased use of Section 232 trade authorities to impose tariffs on certain commodities, including certain articles of steel, aluminum and copper. In response to these and other U.S. measures, China and other countries have taken a range of retaliatory measures. These include the imposition of retaliatory tariffs on certain U.S.-origin goods; the implementation of new export controls by China on various critical minerals, including rare earths metals; the scheduling of further retaliatory tariff measures; and other actions that may affect us directly or indirectly. The Chinese government has also responded to U.S. actions by adding U.S. companies to an “unreliable entity list,” which limits the ability of listed companies to engage in business with Chinese customers.
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. Delays, uncertainty or an inability to obtain required export licenses in a timely manner, including as a result of government processing backlogs or policy changes, could cause delays in scheduled shipments and may impact our business and customer relationships. In addition, if our customers fail to obtain appropriate import, export or re-export licenses or permits for re-sale of our products, we may also be adversely affected through reputational harm and penalties and may not be able to provide support related to those items. Although we have implemented risk-based policies and procedures that are reasonably designed to comply with all applicable trade restrictions, from time to time we and governmental authorities inquire into particular transactions.
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Specifically, as previously disclosed, on July 27, 2025, we reached a settlement with each of BIS and the U.S. Department of Justice ("DOJ") that resolved matters relating to export control violations that occurred between 2015 and 2021 primarily involving sales initiated by a Cadence subsidiary of products and services valued at $45.3 million in total over that period to a customer in China, as well as the subsequent transfer of technology involved in those sales to a third party in China, without the requisite authorization from BIS. As part of the settlements, we entered into a plea agreement with the DOJ pursuant to which we agreed to plead guilty to one count of conspiracy to commit export controls violations. The plea agreement has a three-year probationary term and includes obligations to implement additional export compliance programs and policies, including ongoing reporting and certification requirements and risk assessments, as well as obligations to cooperate in any ongoing or future investigations. In addition, we have entered into an administrative settlement agreement with BIS. Obligations under the administrative settlement agreement include two internal annual audits of our export compliance programs. Compliance with the administrative settlement agreement is a condition to our continued ability to export products. Under the agreements, we paid BIS and the DOJ aggregate net penalties and forfeitures of $140.6 million during the three months ended September 30, 2025.
Failure to comply with the terms of the plea agreement, the administrative settlement agreement or our probation could result in further criminal, civil, or administrative proceedings or denial of export privileges. Such failure or any resulting further government action could materially and adversely affect our reputation, business, financial condition and results of operations. Further, our ongoing obligations under these agreements will generally apply to any new business entities we acquire, which could limit our ability to acquire new businesses that may be strategically important to us, and our continued acquisition and integration of other businesses could increase our risk of a violation. Our ongoing obligations under these agreements will also generally apply to any purchaser of our company or our material business operations, which could deter a potential acquisition of our company. In addition, political, media or other scrutiny surrounding these matters or their outcome could cause significant expense and reputational harm and distract senior executives from managing normal day-to-day operations. Entry into the settlements, including the plea agreement and the administrative settlement agreement, exposes us and our directors, officers and employees to further inquiries or other actions by other governmental authorities, including in China, which could materially and adversely affect our ability to operate and do business in China. We could also face challenges in our future business dealings with government agencies, including the potential for debarment from U.S. government contracts. Any of the foregoing could further materially and adversely affect our reputation, business, financial condition and results of operations.
The laws and policies of the United States and other countries in this area are evolving and changing, and we have experienced and may continue to experience challenges in complying with new rules as they become effective. The application and interpretation of these laws and policies can also be uncertain and change over time, and we may need to adjust our policies and procedures accordingly. 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.
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. These laws and regulations are complex and may have differing or conflicting legal standards, making compliance difficult and costly, and changes to these laws, or their interpretations, may require us to make significant changes to our business operations that may adversely affect our business overall. 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. For more information about the import and export restrictions and regulations that we may be subject to, see “Governmental Regulations—Trade” under Item 1 of Part I of this Annual Report.
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.
As part of our business strategy, we invest in, and acquire complementary businesses, joint ventures, services and technologies and IP rights, some of which may be material to our financial condition and operating results. We continue to engage in investments and acquisitions and evaluate such opportunities and expect to continue to make such investments and acquisitions in the future. There can be no guarantee that we will be able to find and identify desirable investment or acquisition targets, and we may not be successful in entering into an agreement with any particular target.
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;
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•    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. For example, we have and may in the future finance acquisitions or investments by issuing equity or convertible securities, or use such securities as consideration, which have and may in the future cause our existing stockholders to be diluted. We also have and may in the future finance acquisitions or investments through debt financing. Acquisitions or investments may also require the expenditure of substantial cash resources. Acquisitions are also often dilutive to margins and earnings, at least initially. In addition, in certain cases we may be required to consolidate one or more of our strategic investee’s financial results into ours. Fluctuations in any such investee’s financial results, due to general market conditions, bank failures or otherwise, could negatively affect our consolidated financial condition, results of operations, cash flows or the price of our common stock.
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. For example, the U.S. government implemented an outbound investment review mechanism, effective January 2, 2025, which could limit our ability to pursue investment opportunities outside the United States. These restrictions, which impose certain notification requirements and prohibitions on investments by U.S. persons in sensitive sectors in China, such as semiconductors, quantum information technologies and artificial intelligence systems, may prevent us from capitalizing on opportunities that could otherwise benefit our business and stockholders. In addition, several other countries have also adopted, or are considering adopting, similar restrictions. 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. Governments may continue to adopt or tighten restrictions of this nature, some of which may apply to acquisitions, investments or integrations of businesses by us, and such restrictions or government actions could negatively impact our business and financial results.
We could suffer serious harm to our business because of the infringement or misappropriation of our IP rights by third parties.
There are numerous patents relating to our business and ecosystem. New patents are being issued at a rapid rate and are owned by computational software companies as well as entities and individuals outside the computational software field, including parties whose income is primarily derived from infringement-related licensing and litigation. It is not always practicable or possible to determine in advance whether a product or any of its components infringes the patent rights of others. 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.
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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.
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.
If we were compelled to take any of these actions, our reputation, business, financial condition and results of operations might suffer.
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 depends, in part, upon our proprietary technology and our ability to secure, protect and enforce our IP rights in our proprietary technology. 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. 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. Patents may not be issued on any of our pending applications and our issued patents may not be sufficiently broad to protect every feature of our technology. In addition, we believe that the protection of our trademark rights is an important factor in product recognition, protecting our brand and maintaining goodwill, and if we do not adequately protect our rights in our trademarks from infringement, any goodwill that we have developed in those trademarks could be lost or impaired, which could harm our brand and our business. Furthermore, the laws of foreign countries may not protect our proprietary rights in those countries to the same extent as applicable law protects these rights in the United States, and we may encounter difficulties in our attempts to protect our IP in foreign jurisdictions, particularly with respect to trade secret rights and including as a result of impacts from changes in international trade relationships. The protection of our IP may require the expenditure of significant financial and managerial resources. Moreover, the steps we take to protect our IP may not adequately protect our rights, or deter or prevent third parties from infringing or misappropriating our proprietary rights. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that such personnel have divulged proprietary or other confidential information to us. 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.
Many of our products include software or other IP licensed from third parties. 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. 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. From time to time, there have been claims against companies that distribute or use open source software in their products, asserting that open source software infringes the claimants’ IP rights. We could be subject to suits by parties claiming infringement of IP rights in what we believe to be licensed open source software. If we are held to have breached the terms of an open source software license, we could be required to seek licenses from third parties to continue offering our products on terms that are not economically feasible, to re-engineer our products or incur additional costs to remove and/or replace the affected open source software, to discontinue the sale of our products if re-engineering could not be accomplished on a timely basis or to make generally available, in source code form, our proprietary code, any of which could adversely affect our business, financial condition and results of operations.
In addition to risks related to license requirements, use of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or assurances of title or controls on origin of the software. Moreover, many of the risks associated with use of open source software, such as the lack of warranties or assurances of title, cannot be eliminated, and could, if not properly addressed, negatively affect our business. While we have established processes designed to help alleviate these risks, including a review process for screening requests from our development organizations for the use of open source software, we cannot guarantee that our processes for controlling our use of open source software in our products and services will be effective.
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. 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.
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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.
We use AI Technologies throughout our business and are making significant investments in AI initiatives, including expanding our generative AI platform and applications, to enable our customers to optimize their products’ performance, increase the productivity of their design teams and workflows and develop AI solutions themselves. AI Technologies are complex and rapidly evolving, and we face significant competition from other companies. Such other companies may develop AI Technologies that are similar or superior to ours and/or are more cost-effective and/or quicker to develop, deploy and maintain. Any inability to develop, offer or deploy new AI Technologies as effectively, as quickly and/or as cost-efficiently as our competitors could have a materially adverse impact on our operating results, customer relationships and growth. We expect that increased investment will be required in the future to continuously improve our development and use of AI Technologies. Such investments ultimately may not be commercially viable or may not result in an adequate return of capital, and we may incur unanticipated liabilities. Moreover, the long-term trajectory of this technological trend is unknown, and we may not be successful in our ongoing development and maintenance of AI Technologies in the face of novel and evolving technical, reputational and market factors. 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.
While AI Technologies may drive future growth in the semiconductor and electronics systems industries as well as our business, worldwide markets for AI-enabled products may not develop in the manner or time periods we anticipate, or at all. If domestic or global economies worsen, overall spending on the development of AI-related products may decrease, which would adversely impact demand for our products in these markets. Even if the demand for AI-enabled products develops in the manner or in the time periods we anticipate, if we do not have timely, competitively priced, market-accepted products available to meet our customers’ needs, we may miss a significant opportunity and our business, financial condition and results of operations may be adversely affected. In addition, because the markets for AI-related products are still emerging, demand for these products may be unpredictable and may vary significantly from one period to another.
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. Existing laws and regulations, such as data privacy and antitrust regimes, may apply to us or our customers in new ways, and many U.S. federal, state and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations. For example, the EU Artificial Intelligence Act (the "EU AI Act") establishes a comprehensive, risk-based governance framework for AI in the EU market. The EU AI Act applies to companies that develop, use and/or provide AI in the EU and includes fines for breach of up to 7% of worldwide annual turnover. In addition, the Federal Trade Commission has required other companies to disgorge valuable insights or trainings generated through the use of AI or machine learning technologies where they allege the company has violated privacy and consumer protection laws. 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, 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.
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. We may need to expend resources to adjust our products or services in certain jurisdictions if the laws, regulations or decisions are not consistent across jurisdictions. Further, the cost to comply with such laws, regulations, decisions and/or guidance interpreting existing laws, could be significant and would increase our operating expenses (such as by imposing additional reporting obligations regarding our use of AI Technologies). Such an increase in operating expenses, as well as any actual or perceived failure to comply with such laws and regulations, could adversely affect our business, financial condition and results of operations. Further, the IP ownership and license rights, including copyright, surrounding AI Technologies have not been fully addressed by U.S. courts or other federal or state laws or regulations, and the use or adoption of AI Technologies into our products and services may result in exposure to claims of copyright infringement or other IP misappropriation.
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. The rapid evolution of AI Technologies requires the application of resources to help ensure that AI is implemented responsibly in order to minimize unintended, harmful impact. If the development or use of AI Technologies by us or our customers draws controversy due to perceived or actual impact on human rights, IP, privacy, security, employment or the environment or in other social contexts, we may experience brand or reputational harm, competitive harm or legal liability. 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.
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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.
We rely on hardware, software, digital infrastructure and computing networks for both internal and customer-facing operations that are critical to our business (collectively, “IT Systems”). We own and manage certain IT Systems but also rely on third parties for IT Systems and related products and services, including cloud computing. 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 face numerous, evolving cybersecurity risks that threaten the confidentiality, integrity and availability of our IT Systems, Confidential Information, products and services, including from diverse threat actors, such as state-sponsored organizations, opportunistic hackers and malicious insiders, as well as through diverse attack vectors, such as social engineering (including phishing), malware (including ransomware) and denial-of-service attacks, and due to human or technological error, such as misconfigurations, “bugs” or other vulnerabilities in software or hardware. 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. We and certain of our third-party service providers have experienced cyberattacks and other security incidents in the past and will continue to experience varying degrees of attacks and incidents in the future. Any such incidents could compromise our or our providers' IT Systems, which could cause system disruptions or slowdowns and lead to the Confidential Information stored on our or third-party systems being accessed, publicly disclosed, lost or stolen. Any actual or perceived unauthorized access or disclosure to our Confidential Information poses significant risk to our business as it could result in reputational and financial harm and further subject us to liability to our customers, suppliers, business partners and others. While to date no incidents have had a material impact to our operations or financial results, we cannot guarantee that material incidents will not occur in the future.
Cyberattacks are expected to accelerate on a global basis in frequency and magnitude as threat actors are becoming increasingly sophisticated in using techniques and tools – including AI – that circumvent security controls, evade detection and remove forensic evidence. Techniques used to obtain unauthorized access or to sabotage information systems change frequently and include zero-day software vulnerabilities that are unknown until exploited by threat actors. 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. 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. As a result, we could be exposed to a risk of loss or misuse of Confidential Information, loss of financial assets, business interruption, regulatory investigations, litigation and other liabilities and costs.
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. 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. 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. There can be no assurance that our cybersecurity risk management strategy, program, policies, processes and controls will be fully implemented, complied with or effective in protecting any systems or information.
An actual or perceived breach of IT Systems or Confidential Information managed by us or a vendor could significantly impact our business through diminished market perception of the effectiveness of our security measures, legal or regulatory actions, substantial fines, penalties and required changes to our business practices, damage to our reputation or our business, loss of existing customers and our ability to obtain new customers (including government customers), significant restoration, remediation and compliance costs, and cause harm to our financial condition. Any or all of the foregoing could materially adversely affect our business, financial condition and results of operations. 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.
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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.
In connection with running our business, we receive, store, use and otherwise process Personal Information, including from and about actual and prospective customers and users, as well as our employees and business contacts. We are therefore subject to a variety of federal, state and foreign laws, regulations and other requirements relating to the privacy, security and handling of Personal Information. For example, the EU/UK General Data Protection Regulation, the California Consumer Privacy Act and related laws in other jurisdictions require us to adhere to certain disclosure restrictions and deletion obligations with respect to the Personal Information of their residents, and allow for penalties for violations and, in some cases, a private right of action. These laws also impose transparency and other obligations with respect to Personal Information of their respective residents and provide residents with similar rights with respect to their Personal Information. We have invested, and continue to invest, human and technology resources in our efforts to comply with such requirements that may be time-intensive and costly.
The application and interpretation of such requirements are constantly evolving and are subject to change, creating a complex compliance environment. In some cases, these requirements may be either unclear in their interpretation and application, or they may have inconsistent or conflicting requirements with each other. Further, there has been a substantial increase in legislative activity and regulatory focus on data privacy and security in the United States and elsewhere, including in relation to cybersecurity incidents. In addition, some such requirements place restrictions on our ability to process Personal Information across our business or across country borders.
It is possible that new laws, regulations and other requirements, or amendments to or changes in interpretations of existing laws, regulations and other requirements, may require us to incur significant costs, implement new processes or change our handling of information and business operations, which could ultimately hinder our ability to grow our business by extracting value from our data assets. In addition, any failure or perceived failure by us to comply with laws, regulations and other requirements relating to privacy, security and handling of information could result in legal claims or proceedings (including class actions), regulatory investigations or enforcement actions. We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business. These proceedings and any subsequent adverse outcomes may subject us to significant negative publicity and an erosion of trust. If any of these events were to occur, our reputation, business, financial condition and results of operations could be materially adversely affected.
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.
We outsource substantially all of the infrastructure relating to our cloud solutions to third-party hosting services. Customers of our cloud-based products need to be able to access our platform at any time, without interruption or degradation of performance, and we provide them with service-level commitments with respect to uptime. Our cloud-based products depend on protecting the virtual cloud infrastructure hosted by third-party hosting services by maintaining its configuration, architecture, features and interconnection specifications, as well as the information stored in these virtual data centers, which is transmitted by third-party internet service providers. In addition, we rely on third-party providers to operate certain data centers that support our customers and users’ access to our applications and services. Any limitation on the capacity of our third-party hosting services could impede our ability to onboard new customers or expand the usage of our existing customers, which could adversely affect our business, financial condition and results of operations. In addition, any incident affecting our third-party hosting services’ infrastructure that may be caused by cyberattacks, natural disasters, fires, floods, severe storms, earthquakes, power loss, telecommunications failures, outbreaks of contagious diseases, terrorist or other attacks and other similar events beyond our control could negatively affect our cloud-based products and applications. A prolonged service disruption affecting our cloud-based solutions or our customers’ and other users’ access to our applications would negatively impact our ability to serve our customers and could damage our reputation with current and potential customers, expose us to liability, cause us to lose customers or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the third-party hosting services we use.
In the event that our service agreements with our third-party hosting services are terminated, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our cloud-based solutions for deployment on a different cloud infrastructure service provider, which 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.
We provide products and services to governmental and heavily-regulated entities, directly and through our business partners. The procurement process is highly competitive and time-consuming, may be subject to political influence and may involve different rules and conditions on the offering or pricing of products and services. We incur significant up-front time and expense without any assurance that we or our business partner will win a contract. Beyond this, demand for our products and services may be adversely impacted by public sector budgetary cycles and funding availability. Further, even if we or our business partners are successful in receiving a contract award, that award could be challenged during a bid protest process,
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which may result in an increase in expenses, an unfavorable modification, delay in the startup and funding of the work or loss of an award.
Our public sector customers may have contractual, statutory or regulatory rights to terminate contracts with us or our business partners for convenience, in which case we may not be able to collect fees for products or services delivered, or due to a default, in which case we may be liable for replacement costs incurred by the customer. Further, we are required to comply with a variety of complex laws, regulations and contractual provisions that give public sector customers substantial rights and remedies, many of which are atypical in commercial contracts. Failure by us and/or our business partners to comply with these obligations could create legal, contractual and customer satisfaction issues.
Governments routinely investigate and audit compliance with contractual or regulatory requirements. If we or our business partners fail to comply with applicable requirements, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, cost associated with the triggering of price reduction clauses, fines and suspensions or debarment from future government business, all of which may adversely affect our business.
Further, we are increasingly doing business in heavily-regulated industries, such as automotive, consumer, mobile, aerospace and defense, data centers, hyperscale computing, industrial automation, life sciences and biotech. Current and prospective customers in those industries may be required to comply with more stringent regulations to use our products and services. In addition, regulatory agencies may impose requirements that we may not meet. Customers in these heavily-regulated industries often have a right to conduct audits of our systems, products and practices, and in some cases the regulators of customers in heavily-regulated industries may directly examine vendors that provide outsourced services to such customers. If one or more customers and/or regulators determine that some aspect of our business does not meet regulatory requirements, our ability to continue or expand our business with those customers may be restricted.
Risks associated with our international operations could adversely impact our financial condition.
A significant amount of our revenue is derived from our international operations, a substantial majority of our employees are located outside of the United States, and we have offices throughout the world, including key research and development facilities outside of the United States. Our international operations are subject to a number of risks, including:
• trade restrictions, sanctions or other trade barriers, which may lengthen sales cycles, restrict or prohibit the sale or licensing of certain products, or prevent foreign nationals employed by us from performing their roles;
• limitations on repatriation of earnings and on the conversion of foreign currencies;
• reduced protection of IP rights and heightened exposure to IP theft;
• longer collection periods for receivables and greater difficulty in collecting accounts receivable;
• difficulties in managing foreign operations;
• political and economic conditions, such as economic downturns in the regions in which we do business, as well as macroeconomic policy and operational impacts of political instability and armed conflicts, including military service by our international employees;
• changes in legal and regulatory requirements;
• differing employment practices and labor issues or inability to continue to offer competitive compensation;
• variations in costs or expenses associated with our international operations, including as a result of changes in foreign tax laws or changes in valuation of the U.S. dollar relative to other currencies; and
• public health emergencies and related public health measures, including restrictions on travel between jurisdictions in which we and our customers and suppliers operate.
Some of our research and development and other facilities are in parts of the world where there is a greater risk of business interruption as a result of political instability, terrorist acts or military conflicts than businesses located domestically. Damage to or disruptions at our research and development facilities could have a significant adverse effect on our ability to develop and improve products. We are not insured for losses or interruptions caused by acts of war, among other exclusions. Furthermore, our operations are dependent upon the connectivity of our operations throughout the world. Activities that interfere with our international connectivity or operations, such as cyber hacking, computer system viruses, natural disasters, public health emergencies, civil unrest or terrorism, could significantly harm our business operations.
In addition, internal controls, policies and procedures and employee training and compliance programs that we have implemented to deter prohibited practices may not prevent our employees, contractors or agents from violating or circumventing our policies and the laws and regulations applicable to our worldwide operations.
The effect of foreign exchange rate fluctuations may adversely impact our revenue, expenses, cash flows and financial condition.
Approximately one third of our total costs and expenses has historically been transacted in foreign currencies and more than a half of our revenue has historically come from our international operations, while the majority of our revenue contracts worldwide are denominated in U.S. dollars. Volatility of currencies in countries where we conduct business, most notably the U.S.
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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.
Fluctuations in the exchange rate between the U.S. dollar and other currencies could seriously affect our business, financial condition and results of operations, including due to inflation, devaluations and currency controls. If we price our products and services in a non-U.S. market in the local currency, we receive fewer U.S. dollars when the local currency declines in value relative to the U.S. dollar. If we price our products and services in a non-U.S. market in U.S. dollars, a decrease in value of the local currency relative to the U.S. dollar could result in our prices being uncompetitive in that market. On the other hand, when a foreign currency increases in value relative to the U.S. dollar, it takes more U.S. dollars to purchase the same amount of the foreign currency, which increases our operating expenses in that region. Our attempts to reduce the effect of foreign currency fluctuations may be unsuccessful, and exchange rate movements may adversely impact our results of operations as expressed in U.S. dollars. For more information, see Item 7A, “Quantitative and Qualitative Disclosures About Market Risk—Foreign Currency Risk.”
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.
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, IP industries and AI industries has intensified. Further, increased uncertainty regarding social, political and immigration policies, including changes to the rules regarding H1-B visas, in the United States and abroad may make it difficult to recruit employees with adequate experience. Current and future restrictions on the availability of visas or increased costs of visas could impair our ability to employ skilled professionals. We have experienced delays in the issuance and processing of visas, and may continue to experience such delays. 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. We may also experience increased compensation costs that are not offset by either improved productivity or higher sales. We may not be successful in recruiting new personnel and in training, retaining and motivating existing personnel. 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. Further, some of our employees are represented by unions or work councils, and unionization of significant employee populations could cause slowdowns or work stoppages, decrease our operating flexibility or result in increased costs and other changes necessary to respond to changing conditions and to establish new relationships with the relevant representatives. Additionally, hiring and training of new employees may be adversely impacted by global economic uncertainty. From time to time, there may be changes in our management team resulting from the hiring and departure of executive officers, and as a result, we may experience disruption to our business that may harm our operating results and our relationships with our employees, customers and suppliers may be adversely affected.
To attract, retain and motivate individuals with the requisite expertise, we may be required to grant large numbers of stock options or other stock-based incentive awards, which may be dilutive to existing stockholders and increase compensation expense, and pay significant base salaries and cash bonuses, which could harm our operating results. The high cost of training new employees, not fully utilizing these employees, or losing trained employees to competing employers could also reduce our operating margins and harm our business or operating results.
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.
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. We cannot accurately predict the full impact that evolving macroeconomic and geopolitical conditions may have on our cash flows and there are administrative processes associated with repatriation of foreign earnings that could affect the timing of returning cash to the U.S. from non-U.S. jurisdictions. Accordingly, if our U.S. cash is insufficient to meet our future funding obligations in the United States, we could be required to seek funding sources on less attractive terms, which could negatively impact our results of operations, financial position 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.
Our marketable investments include various money market funds and shares of publicly held companies, and may include other investments as well. Weakened financial markets have at times adversely impacted the general credit, liquidity, market prices and interest rates for these and other types of investments. Additionally, changes in monetary policy by the Federal Open Market Committee or other relevant regulators and concerns about the rising U.S. government debt level may cause a decrease in the purchasing power of the U.S. dollar and adversely affect our investment portfolio. We also invest cash in non-marketable equity securities, including shares of privately held entities. 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.
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