10-K – 2026-02-19 – cdns-20251231.htm

Cadence’s non-marketable investments include its investments in privately held companies. These investments are initially recorded at cost and are included in other assets in the consolidated balance sheets. Cadence accounts for these investments using the measurement alternative when the fair value of the investment is not readily determinable, and Cadence does not have the ability to exercise significant influence, or the equity method of accounting when it is determined that Cadence has the ability to exercise significant influence. For investments accounted for using the equity method of accounting, Cadence records its proportionate share of the investee’s income or loss, net of the effects of any basis differences, to other income (expense), net on a one-quarter lag in Cadence’s consolidated income statements.
Cadence reviews its non-marketable investments for impairment on a regular basis by considering investee financial performance and other information received from the investee companies that indicates a decline in value has occurred. For non-marketable equity investments accounted for using the measurement alternative, the carrying amount may also be adjusted based on observable price changes from orderly transactions for identical or similar investments of the same issuer. Adjustments to the carrying amounts of non-marketable investments are recorded in other income (expense), net in the consolidated income statements. There were no material events or circumstances impacting the carrying amount of our non-marketable investments during the periods presented.
Investments in Debt Securities
Cadence’s investments in debt securities are comprised of investments in mortgage-backed and asset backed-securities and are carried at fair value as a component of prepaid expenses and other in the consolidated balance sheets. Cadence classifies its investment in debt securities as available-for-sale, and gross unrealized gains and losses are recorded as a component of accumulated other comprehensive loss on its consolidated balance sheets.
Cadence assesses its portfolio of debt securities for impairment at least quarterly. Cadence records an allowance for credit losses on debt securities when the fair value of a debt security is below its amortized cost, and it is more likely than not that Cadence will either sell the impaired security before recovery of its amortized basis or has the intention to sell the security. Provisions for credit losses on impaired debt securities are recorded as a component of other income (expense), net in the consolidated income statements.
Derivative Financial Instruments
Cadence enters into foreign currency forward exchange contracts with financial institutions to protect against currency exchange risks associated with existing assets and liabilities. A foreign currency forward exchange contract acts as a hedge by increasing in value when underlying assets decrease in value or underlying liabilities increase in value due to changes in foreign exchange rates. Conversely, a foreign currency forward exchange contract decreases in value when underlying assets increase in value or underlying liabilities decrease in value due to changes in foreign exchange rates. The forward contracts are not designated as accounting hedges and, therefore, the unrealized gains and losses are recognized in other income (expense), net, in advance of the actual foreign currency cash flows. The fair value of these forward contracts is recorded in accrued liabilities or in other current assets. These forward contracts generally have maturities of 90 days or less.
Nonqualified Deferred Compensation Trust
Executive officers, senior management and members of Cadence’s Board of Directors may elect to defer compensation payable to them under Cadence’s Nonqualified Deferred Compensation Plan (“NQDC”). Deferred compensation payments are held in investment accounts and the values of the accounts are adjusted each quarter based on the fair value of the investments held in the NQDC.
The selected investments held in the NQDC accounts are carried at fair value, with the unrealized gains and losses recognized in the consolidated income statements as other income (expense), net. These securities are classified in other assets in the consolidated balance sheets because they are not available for Cadence’s use in its operations.
Cadence’s obligation with respect to the NQDC trust is recorded in other long-term liabilities on the consolidated balance sheets. Increases and decreases in the NQDC trust liability are recorded as compensation expense in the consolidated income statements.
Treasury Stock
Cadence generally issues shares related to its stock-based compensation plans from shares held in treasury. When treasury stock is reissued at an amount higher than its cost, the difference is recorded as a component of capital in excess of par in the consolidated statements of stockholders’ equity. When treasury stock is reissued at an amount lower than its cost, the difference is recorded as a component of capital in excess of par to the extent that gains exist to offset the losses. If there are no accumulated treasury stock gains in capital in excess of par, the losses upon reissuance of treasury stock are recorded as a component of retained earnings in the consolidated statements of stockholders’ equity. There were no losses recorded as a component of retained earnings by Cadence on the reissuance of treasury stock during fiscal 2025, 2024 or 2023.
The Inflation Reduction Act of 2022, which was enacted into law on August 16, 2022, imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022. During fiscal 2025 and 2023, Cadence recorded excise tax of $ 3.1  million and $ 0.9  million, respectively, as a component of treasury stock to account for the incremental cost of the shares repurchased. Cadence did not incur any excise tax on the net value of stock repurchases during fiscal 2024.
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Revenue Recognition
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration to which Cadence expects to be entitled in exchange for promised goods or services. Cadence’s performance obligations are satisfied either over time or at a point in time.
Product and maintenance revenue includes Cadence’s licenses of software and IP, sales 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.
Cadence enters into contracts that can include various combinations of licenses, products and services, some of which are distinct and are accounted for as separate performance obligations. For contracts with multiple performance obligations, Cadence allocates the transaction price of the contract to each performance obligation, generally on a relative basis using its SSP. 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. Revenue is recognized net of any taxes collected from customers that are subsequently remitted to governmental authorities.
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. These arrangements do not meet the definition of a revenue contract until the customer executes a separate selection form to identify the products and services that they are purchasing. Each separate selection form under the arrangement is treated as an individual contract and accounted for based on the respective performance obligations. Cadence records a customer deposit liability for amounts received from customers prior to the arrangement meeting the definition of a revenue contract.
Software Revenue Recognition
Cadence’s time-based license arrangements grant customers the right to access and use all of the licensed products at the outset of an arrangement and updates are generally made available throughout the entire term of the arrangement, which is generally two to three years. Cadence’s updates provide continued access to evolving technology as customers’ designs migrate to more advanced nodes and as its customers’ technological requirements evolve. In addition, certain time-based license arrangements include remix rights and unspecified additional products that become commercially available during the term of the agreement. Payments are generally received in equal or near equal installments over the term of the agreement.
Multiple software licenses, related updates, and technical support in these time-based arrangements constitute a single, combined performance obligation and revenue is recognized over the term of the license, commencing upon the later of the effective date of the arrangement or transfer of the software license. Remix rights are not an additional promised good or service in the contract, and where unspecified additional software product rights are part of the contract with the customer, such rights are accounted for as part of the single performance obligation that includes the licenses, updates, and technical support because such rights are provided for the same period of time and have the same time-based pattern of transfer to the customer.
For certain software arrangements where the updates are not critical to maintaining the utility of the software, Cadence considers the license, related updates and technical support as separate performance obligations. In these instances, the total consideration is allocated across the separate performance obligations using SSPs and the license revenue is recognized upon the later of the delivery or effective date of the contract and the revenue related to the updates and technical support is recognized over the term of the arrangement.
Hardware Revenue Recognition
Cadence generally has two performance obligations in arrangements involving the sale or lease of hardware products. The first performance obligation is to transfer the hardware product (which includes software integral to the functionality of the hardware product). The second performance obligation is to provide maintenance on hardware and its embedded software, which includes rights to technical support, hardware repairs and software updates that are all provided over the same term and have the same time-based pattern of transfer to the customer. The transaction price allocated to the hardware product is generally recognized as revenue at the time of delivery because the customer obtains control of the product at that point in time. Cadence has concluded that control generally transfers at that point in time because the customer has title to the hardware, physical possession, and a present obligation to pay for the hardware. The transaction price allocated to maintenance is recognized as revenue ratably over the maintenance term. Payments for hardware contracts are generally received subsequent to delivery of the hardware product. Shipping and handling costs are considered fulfillment costs and are included in cost of product and maintenance in Cadence’s consolidated income statements.
IP Revenue Recognition
Cadence generally licenses IP under nonexclusive license agreements that provide usage rights for specific designs. In addition, for certain of Cadence’s IP license agreements, royalties are collected as customers ship their own products that incorporate Cadence IP. These arrangements generally have two performance obligations—transferring the licensed IP and associated maintenance, which includes rights to technical support, and software updates that are all provided over the maintenance term and have a time-based pattern of transfer to the customer.
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Revenue allocated to the IP license is recognized at a point in time upon the later of the delivery of the IP or the beginning of the license period and revenue allocated to the maintenance is recognized over the maintenance term. Royalties are recognized as revenue in the quarter in which the applicable Cadence customer ships its products that incorporate Cadence IP. Payments for IP contracts are generally received subsequent to delivery of the IP. Cadence customizes certain IP and revenue related to this customization is recognized as services revenue as described below.
Services Revenue Recognition
Revenue from service contracts is recognized over time, generally using costs incurred or hours expended to measure progress. Cadence has a history of accurately estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. Payments for services are generally due upon milestones in the contract or upon consumption of the hourly resources.
Stock-Based Compensation
Cadence recognizes the cost of awards of equity instruments granted to employees in exchange for their services as stock-based compensation expense. Stock-based compensation expense is measured at the grant date based on the value of the award and is recognized as expense over the requisite service period, which is typically the vesting period. Cadence recognizes stock-based compensation expense on the straight-line method for awards that only contain a service condition and on the graded-vesting method for awards that contain both a service and performance condition. Cadence recognizes the impact of forfeitures on stock-based compensation expense as they occur.
The fair value of stock options and purchase rights issued under Cadence’s Employee Stock Purchase Plan (“ESPP”) are calculated using the Black-Scholes option pricing model. The computation of the expected volatility assumption used for new awards is based on a weighting of historical and implied volatilities. When determining the expected term, Cadence reviews historical employee exercise behavior from options having similar vesting periods. The risk-free interest rate for the period within the expected term of the option is based on the yield of United States Treasury notes for the comparable term in effect at the time of grant. The expected dividend yield used in the calculation is zero because Cadence has not historically paid and currently does not expect to pay dividends in the foreseeable future.
The fair value of market-based performance stock awards is calculated using a Monte Carlo simulation model and takes into account the same input assumptions as the Black-Scholes model, as well as the possibility that the market conditions may not be satisfied. Cadence recognizes stock-based compensation expense on the graded-vesting method for market-based performance stock awards.
Advertising
Cadence expenses the costs of advertising as incurred. Total advertising expense, including marketing programs and events, was $ 15.2 million, $ 23.2 million and $ 21.7 million during fiscal 2025, 2024 and 2023, respectively, and is included in marketing and sales in the consolidated income statements.
Restructuring
Cadence records personnel-related restructuring charges with termination benefits when the costs are both probable and estimable. Cadence records personnel-related restructuring charges with non-customary termination benefits when the plan has been communicated to the affected employees. Cadence generally begins recording facilities-related restructuring charges in the period in which a formal plan to vacate an affected facility is established. In connection with facilities-related restructuring plans, Cadence has made certain assumptions and estimates related to facilities, particularly the timing of exit and the ability to sublease. Facility closure costs in restructuring charges primarily includes accelerated ROU asset amortization, lease buyout costs and certain contractual costs to maintain facilities during the period after abandonment.
Cadence records estimated provisions for termination benefits and outplacement costs along with other personnel-related restructuring costs, asset impairments related to abandoned assets and other costs associated with the restructuring plan. Cadence regularly evaluates the adequacy of its restructuring liabilities and adjusts the balances based on actual costs incurred or changes in estimates and assumptions. Subsequent adjustments to restructuring accruals are classified as restructuring in the consolidated income statements.
Accounting for Income Taxes
Cadence accounts for the effect of income taxes in its consolidated financial statements using the asset and liability method. This process involves estimating actual current tax liabilities together with assessing carryforwards and temporary differences resulting from differing treatment of items, such as depreciation, for tax and accounting purposes. These differences result in deferred tax assets and liabilities, measured using enacted tax rates expected to apply to taxable income in the years when those temporary differences are expected to be recovered or settled. Cadence accounts for the United States global intangible low-taxed income as a period expense.
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Cadence then records a valuation allowance to reduce the deferred tax assets to the amount that Cadence believes is more likely than not to be realized based on its judgment of all available positive and negative evidence. The weight given to the potential effect of negative and positive evidence is commensurate with the extent to which the strength of the evidence can be objectively verified. This assessment, which is completed on a taxing jurisdiction basis, takes into account a number of types of evidence, including the following:
• the nature and history of current or cumulative financial reporting income or losses;
• sources of future taxable income;
• the anticipated reversal or expiration dates of the deferred tax assets; and
• tax planning strategies.
Cadence takes a two-step approach to recognizing and measuring the financial statement benefit of uncertain tax positions. The first step is to evaluate the tax position for recognition by determining whether the weight of available evidence indicates that it is more likely than not that the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement of the audit. Cadence classifies interest and penalties on unrecognized tax benefits as income tax expense or benefit.
For additional discussion of income taxes, see Note 8 in the notes to the consolidated financial statements.

NOTE 3. REVENUE
Cadence groups its products and services into categories related to major design activities. The following table shows the percentage of revenue contributed by each of Cadence’s product categories for fiscal 2025, 2024 and 2023:

  2025 2024 2023

Core EDA*
70   % 71   % 76   %
Semiconductor IP (“IP”) 14   % 13   % 12   %
System Design and Analysis 16   % 16   % 12   %
Total 100   % 100   % 100   %

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* Includes immaterial amount of revenue accounted for under leasing arrangements .
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, Cadence estimates the allocation of the revenue to product categories based upon the expected usage of products. Revenue by product category fluctuates from period to period based on demand for products and services, and Cadence’s available resources to deliver them. No single customer accounted for 10% or more of total revenue during fiscal 2025, 2024 or 2023.
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 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. Arrangements that require future decisions on the performance obligations to be delivered do not meet the definition of a revenue contract until the customer executes a separate selection form to identify the products and services that they are purchasing. Each separate selection form under the arrangement is treated as an individual contract and accounted for based on the respective performance obligations.
The remainder of 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.
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The following table shows the percentage of Cadence’s revenue that is classified as recurring or up-front for fiscal 2025, 2024 and 2023:

  2025 2024 2023
Revenue recognized over time 76   % 80   % 81   %
Other recurring revenue
4   % 3   % 3   %
Recurring revenue 80   % 83   % 84   %
Up-front revenue 20   % 17   % 16   %
Total 100   % 100   % 100   %

Significant Judgments
Cadence’s contracts with customers often include promises to transfer to a customer multiple software and/or IP licenses and services, including professional services, technical support services, and rights to unspecified updates. Determining whether licenses and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment. In some arrangements, such as most of Cadence’s IP license arrangements and the license of certain software, Cadence has concluded that the licenses and the related updates and technical support are distinct from each other. In others, like Cadence’s time-based software arrangements, the licenses and certain services are not distinct from each other. These time-based software arrangements include multiple software licenses and updates to the licensed software products, as well as technical support, and Cadence has concluded that these promised goods and services are a single, combined performance obligation.
The accounting for contracts with multiple performance obligations requires the contract’s transaction price to be allocated to each distinct performance obligation based on relative SSP. Judgment is required to determine the SSP for each distinct performance obligation because Cadence rarely licenses or sells products on a standalone basis. In instances where the SSP is not directly observable because Cadence does not sell the license, product or service separately, Cadence determines the SSP using information that maximizes the use of observable inputs and may include market conditions. Cadence typically has more than one SSP for individual performance obligations due to the stratification of those items by classes of customers and circumstances. In these instances, Cadence may use information such as the size of the customer and geographic region of the customer in determining the SSP.
Revenue is recognized over time for Cadence’s combined performance obligations that include software licenses, updates, technical support and maintenance that are separate performance obligations with the same term. For Cadence’s professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. For Cadence’s other performance obligations recognized over time, revenue is generally recognized using a time-based measure of progress reflecting generally consistent efforts to satisfy those performance obligations throughout the arrangement term.
If a group of agreements are so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be one arrangement for revenue recognition purposes. Cadence exercises significant judgment to evaluate the relevant facts and circumstances in determining whether the separate agreements should be accounted for separately or as, in substance, a single arrangement. Cadence’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.
Cadence is required to estimate the total consideration expected to be received from contracts with customers. In limited circumstances, the consideration expected to be received is variable based on the specific terms of the contract or based on Cadence’s expectations of the term of the contract. Generally, Cadence has not experienced significant returns or refunds to customers. These estimates require significant judgment and a change in these estimates could have an effect on its results of operations during the periods involved.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) on Cadence’s consolidated balance sheets. For certain software, hardware and IP agreements with payment plans, Cadence records an unbilled receivable related to revenue recognized upon transfer of control because it has an unconditional right to invoice and receive payment in the future related to those transferred products or services. Cadence records a contract asset when revenue is recognized prior to invoicing and Cadence does not have the unconditional right to invoice or retains performance risk with respect to that performance obligation. Cadence records deferred revenue when revenue is recognized subsequent to invoicing. For Cadence’s time-based software agreements, customers are generally invoiced in equal, quarterly amounts, although some customers prefer to be invoiced in single or annual amounts.
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The contract assets indicated below are included in prepaid expenses and other in the consolidated balance sheets and primarily relate to Cadence’s rights to consideration for work completed but not billed as of the balance sheet date on services and customized IP contracts. The contract assets are transferred to receivables when the rights become unconditional, usually upon completion of a milestone.
Cadence’s contract balances as of December 31, 2025, and December 31, 2024, were as follows:

  As of
  December 31,
2025 December 31,
2024
  (In thousands)
Contract assets $ 67,764   $ 29,339  
Deferred revenue 934,432   852,581  

Cadence recognized revenue of $ 737.9 million, $ 669.9 million and $ 689.7 million during fiscal 2025, 2024 and 2023, respectively, that was included in the deferred revenue balance at the beginning of each respective fiscal year. All other activity in deferred revenue, with the exception of deferred revenue assumed from acquisitions, is due to the timing of invoices in relation to the timing of revenue as described above.
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, Cadence has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing Cadence’s products and services, and not to facilitate financing arrangements.
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. Cadence has elected to exclude the potential future royalty receipts from the remaining performance obligations. Contracted but unsatisfied performance obligations were approximately $ 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.
Cadence estimates its 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, Cadence 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.
Cadence recognized revenue of $ 87.3 million, $ 68.0 million and $ 55.0 million during fiscal 2025, 2024 and 2023, respectively, from performance obligations satisfied in previous periods. These amounts represent royalties earned during the period and exclude contracts with nonrefundable prepaid royalties. Nonrefundable prepaid royalties are recognized upon delivery of the IP because Cadence’s right to the consideration is not contingent upon customers’ future shipments.

NOTE 4. RECEIVABLES, NET
Cadence’s current and long-term receivables balances as of December 31, 2025, and December 31, 2024, were as follows:

  As of
  December 31,
2025 December 31,
2024
  (In thousands)
Accounts receivable $ 492,834   $ 393,017  
Unbilled accounts receivable 455,993   293,251  
Long-term receivables 52,451   24,179  
Total receivables 1,001,278   710,447  
Less allowance for doubtful accounts ( 3,888 ) ( 5,808 )
Total receivables, net $ 997,390   $ 704,639  

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Cadence’s customers are primarily concentrated within the semiconductor and electronics systems industries. As of December 31, 2025, no single customer accounted for 10% or more of Cadence’s total receivables. As of December 31, 2024, one customer accounted for approximately 11 % of Cadence’s total receivables.
Allowance for doubtful accounts
Cadence’s provisions for losses on its accounts receivable during fiscal 2025, 2024 and 2023 were as follows:

Balance at Beginning of Period Charged to Costs and Expenses Uncollectible Accounts Written Off, Net Balance at End of Period

Year ended December 31, 2025 $ 5,808   $ 829   $ ( 2,749 ) $ 3,888  
Year ended December 31, 2024 4,553   2,078   ( 823 ) 5,808  
Year ended December 31, 2023 $ 2,290   $ 3,325   $ ( 1,062 ) $ 4,553  

NOTE 5. DEBT
Cadence’s outstanding debt as of December 31, 2025, and December 31, 2024, was as follows:

  December 31, 2025 December 31, 2024
  (In thousands)
Principal Unamortized Discount and Issuance Costs
Carrying Value Principal Unamortized Discount and Issuance Costs
Carrying Value
2027 Notes 500,000   ( 2,073 ) 497,927   500,000   ( 3,206 ) 496,794  
2029 Notes 1,000,000   ( 7,747 ) 992,253   1,000,000   ( 9,666 ) 990,334  
2034 Notes 1,000,000   ( 10,030 ) 989,970   1,000,000   ( 10,945 ) 989,055  
Total outstanding debt $ 2,500,000   $ ( 19,850 ) $ 2,480,150   $ 2,500,000   $ ( 23,817 ) $ 2,476,183  

Senior Notes
In September 2024, Cadence issued $ 500.0 million aggregate principal amount of 4.200 % Senior Notes due September 10, 2027 (the “2027 Notes”). Cadence received net proceeds of $ 496.5 million from the issuance of the 2027 Notes, net of a discount of $ 0.1 million and issuance costs of $ 3.5 million. As of December 31, 2025, the fair value of the 2027 Notes was approximately $ 503 million.
In September 2024, Cadence issued $ 1.0 billion aggregate principal amount of 4.300 % Senior Notes due September 10, 2029 (the “2029 Notes”). Cadence received net proceeds of $ 989.8 million from the issuance of the 2029 Notes, net of a discount of $ 1.4 million and issuance costs of $ 8.8 million. As of December 31, 2025, the fair value of the 2029 Notes was approximately $ 1 billion.
In September 2024, Cadence issued $ 1.0 billion aggregate principal amount of 4.700 % Senior Notes due September 10, 2034 (the “2034 Notes,” and together with the 2027 Notes and the 2029 Notes, the “Senior Notes”). Cadence received net proceeds of $ 988.8 million from the issuance of the 2034 Notes, net of a discount of $ 1.9 million and issuance costs of $ 9.3 million. As of December 31, 2025, the fair value of the 2034 Notes was approximately $ 1 billion.
Cadence used a portion of the net proceeds from the Senior Notes to fully extinguish the principal and accrued interest of other debt instruments that were outstanding at various points in time during fiscal 2024.
Cadence may redeem the Senior Notes, in whole or in part, at any time or from time to time, at redemption prices specified in the governing indenture. In addition, Cadence may be required to repurchase Senior Notes upon occurrence of a change of control triggering event, as set forth in the governing indenture.
The indentures governing the Senior Notes include customary representations, warranties and restrictive covenants, including, but not limited to, restrictions on Cadence’s ability to grant liens on certain assets, enter into certain sale and lease-back transactions, or merge, consolidate or sell assets, and also include customary events of default. As of December 31, 2025, Cadence was in compliance with all covenants associated with the Senior Notes.
Both the discount and issuance costs are being amortized to interest expense over the term of the Senior Notes using the effective interest method. Interest on the Senior Notes is payable semi-annually in arrears in March and September of each year. Cadence’s Senior Notes are unsecured and rank equal in right of payment to all of Cadence’s existing and future senior indebtedness.
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Revolving Credit Facility
In August 2024, Cadence terminated its existing revolving credit facility, dated June 30, 2021, and amended in September 2022, and entered into a five-year senior unsecured revolving credit facility with a group of lenders led by Bank of America, N.A., as administrative agent (the “2024 Credit Facility”). The 2024 Credit Facility provides for borrowings up to $ 1.25 billion, with the right to request increased capacity up to an additional $ 500.0 million upon the receipt of lender commitments, for total maximum borrowings of $ 1.75 billion. The 2024 Credit Facility expires on August 14, 2029 . Any outstanding loans drawn under the 2024 Credit Facility are due at maturity on August 14, 2029 , subject to an option to extend the maturity date. Outstanding borrowings may be repaid at any time prior to maturity. Cadence paid debt issuance costs of $ 1.3 million that were recorded to other assets in Cadence’s consolidated balance sheet at the inception of the agreement. The debt issuance costs will be amortized to interest expense over the term of the 2024 Credit Facility. As of December 31, 2025, there were no outstanding borrowings under the 2024 Credit Facility.
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 commitment fee ranging from  0.050 % to  0.125 % is assessed on the daily average undrawn portion of revolving commitments. Borrowings bear interest at what is estimated to be current market rates of interest. Accordingly, the carrying value of the 2024 Credit Facility approximates fair value.
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 between 3.25 to 1 and 3.75 to 1. As of December 31, 2025, Cadence was in compliance with all covenants associated with the 2024 Credit Facility.

NOTE 6. ACQUISITIONS
Pending Acquisition of Hexagon Design and Engineering Business
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 will be paid in the form of newly issued shares of Cadence’s common stock, par value $0.01 per share. The number of shares of Cadence common stock to be issued will be determined using a per share value calculated as the average of the daily volume weighted average sale price per share (converted to the daily Euro spot rate) of Cadence common stock on Nasdaq for each of the 20 consecutive trading days ending on and including the third trading day immediately prior to the closing date.
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 required approvals under antitrust and foreign direct investment laws of certain other jurisdictions.
The purchase agreement also provides for customary termination rights for the parties, including the right to terminate the purchase agreement due to the failure to obtain required regulatory approvals on or prior to September 4, 2026 (subject to two three-month extensions, at Cadence’s election, until March 4, 2027) or if a governmental authority has issued a final and non-appealable order or injunction prohibiting closing. Under the purchase agreement, Cadence will be required to pay a reverse termination fee of up to € 175 million if the purchase agreement is terminated due to the failure to obtain required regulatory approvals on or prior to March 4, 2027, or following an injunction arising from certain antitrust or foreign investment laws.
In connection with its pending acquisition of Hexagon’s design and engineering business, Cadence entered into foreign currency forward exchange contracts with an aggregate notional value of € 1.89 billion to mitigate the impact of currency price fluctuations of the European Union euro relative to the U.S. dollar on the contractual cash consideration payable to Hexagon at close. These forward contracts are not designated as accounting hedges, so the unrealized gains and losses from the change in the fair value of these contracts are recognized in other income, net, in Cadence’s consolidated income statements. During fiscal 2025, Cadence recognized losses associated with these foreign currency forward contracts of $ 29.2 million. As of December 31, 2025, the fair value of these forward contracts was not material and was included in accounts payable and accrued liabilities on Cadence’s consolidated balance sheets.
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2025 Acquisitions
Acquisition of Secure-IC
On October 30, 2025, Cadence acquired all of the outstanding equity of Secure-IC SAS ("Secure-IC"). The aggregate purchase consideration for Cadence’s acquisition of Secure-IC, net of cash acquired of $ 13.1 million, was $ 139.6 million. The acquisition of Secure-IC strengthens Cadence's embedded security capabilities. By combining Secure-IC’s expertise in cybersecurity with Cadence’s experience in IP and subsystem design, Cadence is 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.
In connection with its acquisition of Secure-IC, Cadence paid an additional immaterial amount to a third-party escrow agent that will be released to certain former Secure-IC shareholders, subject to continued employment with Cadence, through the fourth quarter of fiscal 2028. The release of these funds is subject to continuous service and other conditions and is accounted for over the required service period as post-acquisition compensation expense in Cadence’s consolidated income statements.
The total purchase consideration was allocated to the assets acquired and liabilities assumed with Cadence’s acquisition of Secure-IC based on their respective fair values on the acquisition date as follows:

  Fair Value
  (In thousands)
Current assets $ 33,400  
Goodwill 80,477  
Acquired intangibles 61,800  
Other long-term assets 11,420  
Total assets acquired 187,097  
Current liabilities 14,184  
Long-term liabilities 20,194  
Total liabilities assumed 34,378  
Total purchase consideration $ 152,719  

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce and expected synergies, and is not expected to be deductible for U.S. income tax purposes.
Definite-lived intangible assets acquired with Cadence’s acquisition of Secure-IC were as follows:

  Fair Value Weighted Average Amortization Period
  (In thousands)  (in years)
Existing technology $ 37,000   7.0 years
Agreements and relationships 22,900   10.0 years
Tradenames, trademarks and patents 1,900   7.0 years
Total acquired intangibles with definite lives $ 61,800   8.1 years

As of December 31, 2025 , t he allocation of purchase consideration to the acquired assets and assumed liabilities from Secure-IC was preliminary. Cadence will continue to evaluate the estimates and assumptions used to derive the fair value of certain acquired assets and assumed liabilities, including income tax-related assets and liabilities, during the measurement period (up to one year from the acquisition date). The allocation of purchase consideration may change materially as additional information about conditions existing at the acquisition date becomes available.
Acquisition of Arm Artisan Foundation IP
On August 26, 2025, Cadence acquired the Artisan foundation IP business from Arm Limited. Cadence paid aggregate purchase consideration of $ 128.5 million. The acquisition of Artisan foundation IP is intended to accelerate Cadence’s Intelligent System Design™ (“ISD”) strategy by expanding its design IP offerings with standard cell libraries, memory compilers, and general purpose I/Os (“GPIOs”) optimized for advanced process nodes at leading foundries.
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The total purchase consideration was allocated to the assets acquired and liabilities assumed with Cadence’s acquisition of the Artisan foundation IP business based on their respective fair values on the acquisition date as follows:

  Fair Value
  (In thousands)
Current assets $ 936  
Goodwill 49,671  
Acquired intangibles 80,800  
Other long-term assets 948  
Total assets acquired 132,355  
Current liabilities 3,089  
Long-term liabilities 775  
Total liabilities assumed 3,864  
Total purchase consideration $ 128,491  

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce and expected synergies, and is deductible for U.S. income tax purposes.
Definite-lived intangible assets acquired with Cadence’s acquisition of the Artisan foundation IP business were as follows:

  Fair Value Weighted Average Amortization Period
  (In thousands)  (in years)
Existing technology $ 45,400   4.5 years
Agreements and relationships 27,100   10.0 years
Tradenames, trademarks and patents 8,300   6.5 years
Total acquired intangibles with definite lives $ 80,800   6.6 years

Acquisition of VLAB Works
On May 29, 2025, Cadence acquired all of the outstanding equity of a holding company containing the VLAB Works business (“VLAB Works”). The aggregate purchase consideration for Cadence’s acquisition of VLAB Works, net of cash acquired of $ 5.2 million, was $ 121.1 million. The addition of VLAB Works’ technologies and talent is intended to accelerate Cadence’s ISD strategy by enhancing system verification full flow, while strengthening its capabilities in virtual and hybrid pre-silicon software validation. In connection with the acquisition of VLAB Works, Cadence paid an additional immaterial amount to a third-party escrow agent that will be released to a former VLAB Works shareholder, subject to continued employment with Cadence, through the fourth quarter of fiscal 2026. The release of these funds is subject to continuous service and other conditions and is accounted for over the required service period as post-acquisition compensation expense in Cadence’s consolidated income statements.
The total purchase consideration was allocated to the assets acquired and liabilities assumed with Cadence’s acquisition of VLAB Works based on their respective fair values on the acquisition date as follows:

  Fair Value
  (In thousands)
Current assets $ 9,343  
Goodwill 93,068  
Acquired intangibles 27,700  
Other long-term assets 1,322  
Total assets acquired 131,433  
Current liabilities 4,222  
Long-term liabilities 898  
Total liabilities assumed 5,120  
Total purchase consideration $ 126,313  

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce and expected synergies, and is deductible for U.S. income tax purposes.
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Definite-lived intangible assets acquired with Cadence’s acquisition of VLAB Works were as follows:

  Fair Value Weighted Average Amortization Period
  (In thousands)  (in years)
Existing technology $ 18,300   6.0 years
Agreements and relationships 9,000   7.0 years
Tradenames, trademarks and patents 400   3.0 years
Total acquired intangibles with definite lives $ 27,700   6.3 years

Other 2025 Acquisitions
During fiscal 2025, Cadence completed three other business combinations for aggregate cash consideration of $ 38.9 million, net of cash acquired. The total purchase consideration was allocated to assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition dates. Cadence recorded $ 14.1 million of definite-lived intangible assets with a weighted average amortization period of 3.4 years. Cadence also recognized $ 26.5 million of goodwill, which is primarily attributed to the assembled workforce of the acquired businesses. The goodwill recognized with these acquisitions is not expected to be deductible for tax purposes.
In connection with these acquisitions, Cadence paid additional immaterial amounts to third-party escrow agents that will be released to certain former shareholders, subject to continued employment with Cadence, through the fourth quarter of fiscal 2028. The release of these funds is subject to continuous service and other conditions and is accounted for over the required service period as post-acquisition compensation expense in Cadence’s consolidated income statements.
As of December 31, 2025 , t he allocation of purchase consideration to the acquired assets and assumed liabilities from these acquisitions was preliminary. Cadence will continue to evaluate the estimates and assumptions used to derive the fair value of certain acquired assets and assumed liabilities during the measurement period (up to one year from the acquisition date). The allocation of purchase consideration may change materially as additional information about conditions existing at the acquisition date becomes available.
2024 Acquisitions
Acquisition of BETA CAE
On May 30, 2024, Cadence acquired all of the outstanding equity of BETA CAE, a system analysis platform provider of multi-domain, engineering simulation solutions. The aggregate purchase consideration for Cadence’s acquisition of BETA CAE, net of cash acquired of $ 91.3 million, was $ 1.14 billion. The aggregate purchase consideration was comprised of $ 638.2 million of cash and non-cash consideration of 1.74 million shares of Cadence common stock with an aggregate acquisition date fair value of $ 501.8 million. The addition of BETA CAE’s technologies and talent is expected to accelerate Cadence’s ISD strategy by expanding its multiphysics system analysis portfolio and enabling entry into the structural analysis space.
In connection with its acquisition of BETA CAE, Cadence paid an additional $ 55.8 million to a third-party escrow agent that will be released to certain former BETA CAE shareholders, subject to continued employment with Cadence, through the second quarter of fiscal 2026. The release of these funds is subject to continuous service and other conditions and is accounted for over the required service period as post-acquisition compensation expense in Cadence’s consolidated income statements.
The total purchase consideration was allocated to the assets acquired and liabilities assumed with Cadence’s acquisition of BETA CAE based on their respective fair values on the acquisition date as follows:

  Fair Value
  (In thousands)
Current assets $ 118,676  
Goodwill 822,129  
Acquired intangibles 345,000  
Other long-term assets 18,198  
Total assets acquired 1,304,003  
Current liabilities 36,465  
Long-term liabilities 36,250  
Total liabilities assumed 72,715  
Total purchase consideration $ 1,231,288  

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce, and is deductible for U.S. income tax purposes.
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Definite-lived intangible assets acquired with Cadence’s acquisition of BETA CAE were as follows:

  Fair Value Weighted Average Amortization Period
  (In thousands)  (in years)
Existing technology $ 140,000   6.0 years
Agreements and relationships 190,000   15.0 years
Tradenames, trademarks and patents 15,000   7.0 years
Total acquired intangibles with definite lives $ 345,000   11.0 years

Acquisition of Invecas, Inc.
On January 8, 2024, Cadence acquired all of the outstanding equity of Invecas, Inc. (“Invecas”), a provider of design engineering, embedded software and system-level solutions. The aggregate cash consideration for Cadence’s acquisition of Invecas, net of cash acquired of $ 23.8 million, was $ 71.2 million. The acquisition adds a skilled system design engineering team to Cadence, with expertise in providing customers with custom solutions across chip design, product engineering, advanced packaging and embedded software. In connection with the acquisition of Invecas, Cadence paid an additional amount to a third-party escrow agent that will be released to certain former Invecas shareholders, subject to continued employment with Cadence, through the first quarter of fiscal 2028. The release of these funds is subject to continuous service and other conditions and is accounted for over the required service period as post-acquisition compensation expense in Cadence’s consolidated income statements.
The total purchase consideration was allocated to the assets acquired and liabilities assumed with Cadence’s acquisition of Invecas based on their respective fair values on the acquisition date as follows:

  Fair Value
  (In thousands)
Current assets $ 50,608  
Goodwill 42,209  
Acquired intangibles 15,500  
Other long-term assets 7,414  
Total assets acquired 115,731  
Current liabilities 17,114  
Long-term liabilities 3,647  
Total liabilities assumed 20,761  
Total purchase consideration $ 94,970  

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce, and will not be deductible for tax purposes.
The definite-lived intangible assets acquired with Cadence’s acquisition of Invecas include agreements and relationships of $ 15.0 million and tradenames of $ 0.5 million. These assets will be amortized over a weighted average life of 6.8 years.
Other 2024 Acquisitions
During fiscal 2024, Cadence completed two other business combinations for aggregate cash consideration of $ 28.3 million, net of cash acquired. The total purchase consideration was allocated to assets acquired and liabilities assumed based on their respective estimated fair values on the acquisition dates. Cadence recorded $ 5.5  million of definite-lived intangible assets with a weighted average amortization period of 4.9 years. Cadence also recognized $ 25.2 million of goodwill, which is primarily attributed to the assembled workforce of the acquired businesses. The goodwill recognized with these acquisitions is not deductible for tax purposes.
2023 Acquisitions
Acquisition of IP Assets from Rambus Inc.
On September 6, 2023, Cadence acquired the serializer/deserializer (“SerDes”) and memory interface physical layer (“Memory”) IP business from Rambus Inc. (“Rambus”) for an aggregate cash consideration of $ 108.6 million. Memory and SerDes IP design and integration continues to be integral to the design of artificial intelligence, data center and hyperscale applications, CPU architectures and networking devices. The addition of the Rambus IP and seasoned team accelerates Cadence’s ISD strategy and strengthens Cadence's IP technology portfolio.
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The total purchase consideration was allocated to the assets acquired and liabilities assumed based on their respective fair values on the acquisition date as follows:

  Fair Value
  (In thousands)
Current assets $ 1,460  
Goodwill 80,999  
Acquired intangibles 26,000  
Other long-term assets 2,798  
Total assets acquired 111,257  
Current liabilities 2,531  
Long-term liabilities 142  
Total liabilities assumed 2,673  
Total purchase consideration $ 108,584  

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce, and will be deductible for tax purposes.
Definite-lived intangible assets acquired with Cadence’s acquisition of the SerDes and Memory business from Rambus were as follows:

  Fair Value Weighted Average Amortization Period
  (In thousands)  (in years)
Existing technology $ 16,700   5.0 years
Agreements and relationships 9,300   7.0 years

Total acquired intangibles with definite lives $ 26,000   5.7 years

Acquisition of Pulsic, Ltd.
On May 4, 2023, Cadence acquired all of the outstanding equity of Pulsic, Ltd. (“Pulsic”), a longtime provider of production-proven technology for floor-planning, placement, and routing of custom ICs. The addition of Pulsic’s technologies and experienced team supports Cadence’s ISD strategy and strengthens Cadence’s Custom IC Design and Simulation technology portfolio. The aggregate cash consideration for Cadence’s acquisition of Pulsic, net of cash acquired of $ 3.8 million, was $ 56.1 million. Subject to service and other conditions, Cadence recognized expense for consideration paid to certain former Pulsic shareholders, subject to continued employment with Cadence, through the second quarter of fiscal 2025.
The total purchase consideration was allocated to the assets acquired and liabilities assumed with Cadence’s acquisition of Pulsic based on their respective fair values on the acquisition date as follows:

  Fair Value
  (In thousands)
Current assets $ 4,369  
Goodwill 47,448  
Acquired intangibles 12,400  
Other long-term assets 89  
Total assets acquired 64,306  
Current liabilities 1,553  
Long-term liabilities 2,885  
Total liabilities assumed 4,438  
Total purchase consideration $ 59,868  

The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce, and is not deductible for tax purposes.
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Definite-lived intangible assets acquired with Cadence’s acquisition of Pulsic were as follows:

  Fair Value Weighted Average Amortization Period
  (In thousands)  (in years)
Existing technology $ 8,000   6.2 years
Agreements and relationships 4,100   8.0 years
Tradenames, trademarks and patents 300   6.0 years
Total acquired intangibles with definite lives $ 12,400   6.8 years

Acquisition of Intrinsix Corporation
On October 2, 2023, Cadence acquired all of the outstanding equity of Intrinsix Corporation (“Intrinsix”) from CEVA, Inc. The acquisition enhances Cadence’s system and IC design services resources with the addition of a team with expertise in advanced nodes, radio frequency, mixed-signal and security algorithms. The acquisition also expands Cadence’s reach in key high-growth vertical sectors, including aerospace and defense. The aggregate cash consideration for Cadence’s acquisition of Intrinsix was $ 34.6 million, net of cash acquired of $ 0.5 million. With its acquisition of Intrinsix, Cadence recorded $ 2.6 million of definite-lived intangible assets, $ 31.6 million of goodwill and $ 0.9 million net assets. The weighted average amortization period for the definite-lived intangible assets acquired with Cadence’s acquisition of Intrinsix was 5.0 years. The recorded goodwill is attributed to intangible assets that do not qualify for separate recognition, including the acquired assembled workforce, and is not deductible for tax purposes.
Pro Forma Financial Information
Cadence has not presented pro forma financial information for any of the businesses it acquired during fiscal 2025, 2024 and fiscal 2023 because the results of operations for these businesses are not material to Cadence’s consolidated financial statements.
Acquisition-Related Transaction Costs
Transaction costs associated with acquisitions, which consist of professional fees and administrative costs, are expensed as incurred and are included in general and administrative expense in Cadence’s consolidated income statement. During fiscal 2025, 2024 and 2023, transaction costs associated with acquisitions were $ 30.5 million, $ 14.6 million and $ 12.1 million, respectively.

NOTE 7. GOODWILL AND ACQUIRED INTANGIBLES
Goodwill
The changes in the carrying amount of goodwill during fiscal 2025 and 2024 were as follows:

  Gross Carrying
Amount
  (In thousands)
Balance as of December 31, 2023 $ 1,535,845  
Goodwill resulting from acquisitions 889,585  
Effect of foreign currency translation ( 46,759 )
Balance as of December 31, 2024 2,378,671  
Goodwill resulting from acquisitions 249,712  

Effect of foreign currency translation 120,760  
Balance as of December 31, 2025 $ 2,749,143  

Cadence completed its annual goodwill impairment test during the third quarter of fiscal 2025 and determined that the fair value of Cadence’s single reporting unit exceeded the carrying amount of its net assets and that no impairment existed.
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Acquired Intangibles, Net
Acquired intangibles as of December 31, 2025, were as follows, excluding intangibles that were fully amortized as of December 31, 2024:

Gross Carrying
Amount Accumulated
Amortization Acquired
Intangibles, Net
  (In thousands)
Existing technology $ 590,211   $ ( 256,589 ) $ 333,622  
Agreements and relationships 470,334   ( 114,697 ) 355,637  
Tradenames, trademarks and patents 40,984   ( 12,020 ) 28,964  

Total acquired intangibles $ 1,101,529   $ ( 383,306 ) $ 718,223  

Acquired intangibles as of December 31, 2024, were as follows, excluding intangibles that were fully amortized as of December 31, 2023:

Gross Carrying
Amount Accumulated
Amortization Acquired
Intangibles, Net
  (In thousands)
Existing technology $ 465,453   $ ( 199,126 ) $ 266,327  
Agreements and relationships 386,365   ( 78,605 ) 307,760  
Tradenames, trademarks and patents 28,113   ( 7,466 ) 20,647  
Total acquired intangibles $ 879,931   $ ( 285,197 ) $ 594,734  

Amortization expense from existing technology is included in cost of product and maintenance. Amortization expense for fiscal 2025, 2024 and 2023, by consolidated income statement caption, was as follows:

2025 2024 2023
  (In thousands)
Cost of product and maintenance $ 65,395   $ 60,074   $ 43,808  
Amortization of acquired intangibles 39,937   30,375   18,162  
Total amortization of acquired intangibles $ 105,332   $ 90,449   $ 61,970  

As of December 31, 2025, the estimated amortization expense for intangible assets with definite lives was as follows for the following five fiscal years and thereafter:

  (In thousands)
2026 $ 125,335  
2027 117,035  
2028 112,320  
2029 97,511  
2030 62,280  
Thereafter 203,742  
Total estimated amortization expense $ 718,223  

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NOTE 8. INCOME TAXES
Cadence’s income before provision for income taxes included income from the United States and from foreign subsidiaries for fiscal 2025, 2024 and 2023, was as follows:

2025 2024 2023
(In thousands)
United States $ 535,551   $ 600,088   $ 533,442  
Foreign subsidiaries 986,492   795,731   748,484  
Total income before provision for income taxes $ 1,522,043   $ 1,395,819   $ 1,281,926  

Cadence’s provision for income taxes was comprised of the following items for fiscal 2025, 2024 and 2023:

2025 2024 2023
(In thousands)
Current:
Federal $ 133,235   $ 281,674   $ 156,495  
State and local 67,323   50,430   15,933  
Foreign 146,549   136,968   104,866  
Total current 347,107   469,072   277,294  

Deferred:
Federal 31,079   ( 130,490 ) ( 87,851 )
State and local 8,805   ( 5,127 ) 25,440  
Foreign 26,164   6,880   25,899  
Total deferred 66,048   ( 128,737 ) ( 36,512 )

Total provision for income taxes $ 413,155   $ 340,335   $ 240,782  

During fiscal 2025, the United States enacted the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions including the immediate expensing of United States research and development expenditures. The legislation has multiple effective dates, with certain provisions effective in fiscal 2025 and others effective from fiscal 2026. Cadence’s consolidated net deferred tax assets as of December 31, 2025 and December 31, 2024 were $ 870.2  million and $ 951.7  million, respectively. The decrease was principally due to the immediate expensing of United States research and development expenditures.
During fiscal 2024, the State of California enacted legislation that, for a three-year period beginning in fiscal 2024, will limit Cadence's utilization of California research and development tax credits to $5 million annually and provides the ability to receive a refund of credits that would have otherwise been used to reduce the California tax liability. The legislation increased the cash paid for income taxes and long-term receivables for fiscal 2024 by approximately $ 33  million and $ 21  million, respectively.
During fiscal 2023, Cadence recognized a tax benefit of approximately $ 24.8  million due to the recognition of previously unrecognized tax benefits from the expiration of the applicable statute of limitations and a tax benefit of approximately $ 14.0  million primarily related to a change in R&D expenses that were capitalized in fiscal 2022.
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The following table presents required disclosures pursuant to ASU 2023-09 and reconciles the provision computed at the U.S. federal statutory income tax rate to the provision for income taxes for fiscal 2025.

2025
(In thousands) (%)
Provision computed at federal statutory income tax rate $ 319,629   21.0   %
State and local income tax, net of federal tax effect*
68,258   4.5   %
Foreign tax effects

Ireland

Statutory tax rate difference between Ireland & United States ( 45,716 ) ( 3.0 ) %
Other
( 16,302 ) ( 1.1 ) %
Other foreign jurisdictions
66,259   4.4   %
Effect of cross-border tax laws

Global intangible low-taxed income
131,254   8.6   %
Foreign-derived intangible income
( 7,342 ) ( 0.5 ) %
Subpart F
22,040   1.4   %
Tax credits

Research and development tax credits
( 20,556 ) ( 1.4 ) %
Foreign tax credits
( 110,079 ) ( 7.2 ) %
Change in deferred tax asset valuation allowance
( 11 ) —   %
Nontaxable or nondeductible items

Stock based compensation
( 29,013 ) ( 1.9 ) %
Settlements with BIS and the DOJ
26,994   1.8   %
Acquisition-related costs
14,105   0.9   %
Decrease in unrecognized tax benefits
( 4,837 ) ( 0.3 ) %
Other
( 1,528 ) ( 0.1 ) %
Provision for income taxes $ 413,155   27.1   %

_____________
* State taxes in California make up the majority (greater than 50 percent) of the tax effect in this category.

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The following table presents the required disclosures prior to the adoption of ASU 2023-09 and reconciles the provision computed at the U.S. federal statutory income tax rate to the provision for income taxes for fiscal 2024 and fiscal 2023.

2024 2023
(In thousands)
Provision computed at federal statutory income tax rate $ 293,122   $ 269,205  
State and local income tax, net of federal tax effect 50,130   40,304  
Intercompany transfers of intangible property rights 7,833   23,826  
Foreign income tax rate differential ( 62,798 ) ( 54,210 )

Foreign-derived intangible income deduction ( 13,344 ) ( 14,253 )
U.S. tax on foreign entities 144,222   113,011  
Stock-based compensation ( 6,181 ) ( 26,805 )
Change in deferred tax asset valuation allowance 11,441   9,077  
Tax credits ( 135,344 ) ( 130,383 )
Non-deductible acquisition-related costs
11,770   6,709  

Withholding taxes 20,175   15,300  
Tax settlements, foreign —   4,034  
Increase (decrease) in unrecognized tax benefits 9,061   ( 19,660 )
Other 10,248   4,627  
Provision for income taxes $ 340,335   $ 240,782  
Effective tax rate 24   % 19   %

The components of deferred tax assets and liabilities consisted of the following as of December 31, 2025, and December 31, 2024:

As of
December 31,
2025 December 31,
2024
(In thousands)
Deferred tax assets:
Tax credit carryforwards $ 125,267   $ 110,031  
Reserves and accruals 110,634   103,731  
Intangible assets 472,393   487,947  
Capitalized research and development expense for income tax purposes 305,835   368,085  
Operating loss carryforwards 12,801   9,781  
Deferred income 84,309   79,195  
Capital loss carryforwards 16,601   16,861  
Stock-based compensation costs 38,610   34,045  
Depreciation and amortization 33,759   17,228  
Investments 22,826   20,757  
Lease liability 39,606   33,341  
Total deferred tax assets 1,262,641   1,281,002  
Valuation allowance ( 104,782 ) ( 90,603 )
Net deferred tax assets 1,157,859   1,190,399  

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Deferred tax liabilities:
Intangible assets ( 139,761 ) ( 107,251 )
Undistributed foreign earnings ( 92,954 ) ( 76,045 )
ROU assets ( 39,606 ) ( 33,341 )
Investments
( 11,422 ) ( 14,171 )
Other ( 3,950 ) ( 7,869 )
Total deferred tax liabilities ( 287,693 ) ( 238,677 )
Total net deferred tax assets $ 870,166   $ 951,722  

During fiscal 2025, 2024 and 2023 Cadence maintained valuation allowances of $ 104.8 million, $ 90.6 million, and $ 79.2 million, respectively, on certain federal, state and foreign deferred tax assets because the realization of these deferred tax assets requires future income of a specific character or amount that Cadence considered uncertain. The valuation allowance primarily relates to the following:
• Tax credits in certain states that are accumulating at a rate greater than Cadence’s capacity to utilize the credits and tax credits in certain states where it is likely the credits will expire unused;
• Federal, state and foreign deferred tax assets related to investments and capital losses that can only be utilized against gains that are capital in nature; and
• Foreign tax credits that can only be fully utilized if Cadence has sufficient income of a specific character in the future.
The valuation allowance increased by $ 14.2 million and $ 11.4 million during fiscal 2025 and fiscal 2024, respectively, and decreased by $ 9.1 million during fiscal 2023. The valuation allowance activity was primarily related to state research and development tax credits and certain foreign tax credits.
As of December 31, 2025, Cadence’s operating loss carryforwards were as follows:

Amount Expiration Periods
(In thousands)
Federal $ 41   2033

California 31,209   from 2026 through 2046

Other states (tax effected, net of federal benefit) 164   from 2028 through indefinite
Foreign (tax effected) 10,334   indefinite

As of December 31, 2025, Cadence had tax credit carryforwards of:

Amount Expiration Periods
(In thousands)
Federal* $ 60,773   from 2031

California —   indefinite
Other states 10,261   from 2034 through 2045

Foreign 54,234   from 2045 through indefinite

_____________
* Certain of Cadence’s foreign tax credits have yet to be realized and as a result do not yet have an expiration period.
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Examinations by Tax Authorities
Taxing authorities regularly examine Cadence’s income tax returns. As of December 31, 2025, Cadence’s earliest tax years that remain open to examination and the assessment of additional tax include:

Jurisdiction Earliest Tax Year Open to Examination

United States – Federal 2020
United States – California 2020
Ireland 2021
Israel 2017

Unrecognized Tax Benefits
The changes in Cadence’s gross amount of unrecognized tax benefits during fiscal 2025, 2024 and 2023 are as follows:

2025 2024 2023
(In thousands)
Unrecognized tax benefits at the beginning of the fiscal year $ 107,388   $ 94,311   $ 126,073  
Gross amount of the increase (decrease) in unrecognized tax benefits of tax positions taken during a prior year*
232   10,109   ( 1,401 )
Gross amount of the increases in unrecognized tax benefits as a result of tax positions taken during the current year 4,118   6,669   2,565  
Amount of decreases in unrecognized tax benefits relating to settlements with taxing authorities, including the utilization of tax attributes ( 6,598 ) —   ( 8,000 )
Reductions to unrecognized tax benefits resulting from the lapse of the applicable statute of limitations ( 4,118 ) ( 3,173 ) ( 24,768 )
Effect of foreign currency translation ( 81 ) ( 528 ) ( 158 )
Unrecognized tax benefits at the end of the fiscal year $ 100,941   $ 107,388   $ 94,311  

Total amounts of unrecognized tax benefits that, if upon resolution of the uncertain tax positions would reduce Cadence’s effective tax rate $ 99,944   $ 106,420   $ 93,398  

_____________
* Includes unrecognized tax benefits of tax positions recorded in connection with acquisitions
The total amounts of interest, net of tax, and penalties recognized in the consolidated income statements as provision for income taxes for fiscal 2025, 2024 and 2023 were as follows:

2025 2024 2023
(In thousands)
Interest $ 1,984   $ 3,893   $ 2,282  
Penalties (308) 143   267  

The total amounts of gross accrued interest and penalties recognized in the consolidated balance sheets as of December 31, 2025, and December 31, 2024, were as follows:

As of
December 31,
2025 December 31,
2024
(In thousands)
Interest $ 9,050   $ 9,010  
Penalties 891   1,261  

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Cash Taxes Paid
Cadence adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025. Total income taxes paid (net of refunds) for fiscal 2025 include:

2025
(In thousands)
U.S. Federal
$ 76,724  
U.S. State & Local 29,980  
Foreign 140,663  
Total $ 247,367  

Individual jurisdictions equaling 5% or more of the total income taxes paid (net of refunds) for fiscal 2025 include U.S. Federal at $ 76.7  million, California at $ 13.1  million, China at $ 27.2  million, India at $ 23.6  million, Israel at $ 22.4  million, and Taiwan at $ 18.3  million.
Cash paid for income taxes, net of refunds, for fiscal 2024 and 2023 were $ 510.0  million and $ 253.7  million, respectively.

NOTE 9. STOCK COMPENSATION PLANS AND STOCK-BASED COMPENSATION
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 issuance under the Omnibus Plan was 12.1  million. Options granted under the Omnibus Plan have an exercise price not less than the fair market value of the stock on the date of grant. Options and restricted stock generally vest over a period of three years to four years . Options granted under the Omnibus Plan expire seven years from the date of grant. Vesting of restricted stock awards granted under the Omnibus Plan may require the attainment of specified performance criteria.
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 Plan expire after ten years , and options, restricted stock awards and restricted stock units vest one year from the date of grant.
Stock-Based Compensation
Stock-based compensation expense and the related income tax benefit recognized in connection with stock options, restricted stock and the ESPP during fiscal 2025, 2024 and 2023 were as follows:

2025 2024 2023
(In thousands)
Stock options $ 16,101   $ 18,610   $ 15,939  
Restricted stock 400,699   338,082   278,567  
ESPP 38,375   34,527   31,105  
Total stock-based compensation expense $ 455,175   $ 391,219   $ 325,611  

Income tax benefit $ 76,978   $ 66,080   $ 50,994  

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Stock-based compensation expense is reflected in Cadence’s consolidated income statements during fiscal 2025, 2024 and 2023 as follows:

2025 2024 2023
(In thousands)
Cost of product and maintenance $ 8,216   $ 6,402   $ 4,500  
Cost of services 9,498   8,149   5,728  
Marketing and sales 87,150   77,195   66,304  
Research and development 278,489   241,730   194,709  
General and administrative 71,822   57,743   54,370  
Total stock-based compensation expense $ 455,175   $ 391,219   $ 325,611  

Stock Options
The exercise price of each stock option granted under Cadence’s employee equity incentive plans is equal to or greater than the closing price of Cadence’s common stock on the date of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. No stock options were granted in fiscal 2025. The weighted average grant date fair value of options granted, and the weighted average assumptions used in the model for fiscal 2024 and 2023 were as follows:

2024 2023
Dividend yield None None
Expected volatility 31.9   % 32.6   %
Risk-free interest rate 4.3   % 3.6   %
Expected term (in years) 4.8 5.0
Weighted average fair value of options granted $ 103.79   $ 71.83  

A summary of the changes in stock options outstanding under Cadence’s equity incentive plans during fiscal 2025 is presented below:

Weighted
Average
Weighted
Average
Remaining
Contractual
Terms

Aggregate
Intrinsic

Shares Exercise Price (Years) Value
(In thousands) (In thousands)
Options outstanding as of December 31, 2024 1,322   $ 171.08  
Granted —   —  
Exercised ( 289 ) 93.81  
Forfeited ( 26 ) 230.93  
Options outstanding as of December 31, 2025 1,007   $ 191.75   3.5 $ 121,643  
Options vested as of December 31, 2025 806   $ 176.62   3.2 $ 109,590  

Cadence had total unrecognized compensation expense related to stock option grants of $ 16.6  million as of December 31, 2025, which will be recognized over the remaining vesting period. The remaining weighted average vesting period of unvested awards is 1.7 years.
The total intrinsic value of and cash received from options exercised during fiscal 2025, 2024 and 2023 was:

2025 2024 2023
(In thousands)
Intrinsic value of options exercised $ 65,864   $ 266,336   $ 139,125  
Cash received from options exercised 27,125   88,903   30,940  

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Restricted Stock
Generally, restricted stock, which includes restricted stock awards and restricted stock units, vests over three years to four years and is subject to the employee’s continuing service to Cadence. Stock-based compensation expense is recognized ratably over the vesting term. The vesting of certain restricted stock grants is subject to attainment of specified performance criteria. Each fiscal quarter, Cadence estimates the probability of the achievement of these performance goals and recognizes any related stock-based compensation expense using the graded-vesting method. The amount of stock-based compensation expense recognized in any one period can vary based on the attainment or expected attainment of the various performance goals. If such performance goals are not ultimately met, no compensation expense is recognized and any previously recognized compensation expense is reversed.
Certain long-term, market-based stock awards granted to executives vest over three to five years and are subject to certain market conditions and the executive’s continuing service to Cadence. Vesting of the market-based awards is contingent upon achieving market conditions of total shareholder return relative to a peer index. Stock-based compensation expense is recognized using the graded-vesting method over the vesting term. If the market-based conditions are not ultimately met, compensation expense previously recognized is not reversed. As of December 31, 2025, Cadence had 2.6 million shares of unvested long-term, market-based stock awards outstanding.
Cadence granted market-based awards in fiscal 2025 and 2023. No market-based awards were granted in fiscal 2024. Compensation expense is calculated using the fair value of the market-based stock awards under Monte Carlo simulation model. The weighted average assumptions used in the model for fiscal 2025 and 2023 were as follows:

2025 2023
Dividend yield None None
Expected volatility 33.5   % 33.6   %
Risk-free interest rate 4.0   % 3.6   %
Expected term (in years) 4.9 3.8
Weighted average fair value of market-based awards granted
$ 128.47   $ 132.20  

Stock-based compensation expense related to performance-based restricted stock grants and market-based restricted stock grants for fiscal 2025, 2024 and 2023 was as follows:

2025 2024 2023
(In thousands)
Stock-based compensation expense related to performance-based restricted stock $ 27,557   $ 29,178   $ 22,922  
Stock-based compensation expense related to market-based stock awards
57,753   19,934   30,095  

A summary of the changes in restricted stock outstanding under Cadence’s equity incentive plans during fiscal 2025 is presented below:

Weighted
Average Grant Date

Aggregate
Intrinsic

Shares Fair Value Value
(In thousands) (In thousands)
Unvested shares as of December 31, 2024 4,557   $ 186.79  
Granted 2,341   181.08  
Vested ( 2,049 ) 185.75  
Forfeited ( 203 ) 229.50  
Unvested shares as of December 31, 2025 4,646   $ 182.50   $ 779,350  

As of December 31, 2025, Cadence had total unrecognized compensation expense related to restricted stock grants of $ 641.9 million, which will be recognized over a weighted average vesting period of 1.9 years.
The total fair value realized by employees upon vesting of restricted stock during fiscal 2025, 2024 and 2023 was:

2025 2024 2023
(In thousands)
Fair value of restricted stock realized upon vesting $ 610,406   $ 649,152   $ 442,556  

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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 applicable offering period, in an amount not to exceed 15 % of their annual base earnings plus bonuses and commissions, and subject to a limit in any calendar year of $ 25,000 . The ESPP may be amended from time to time. During fiscal 2024, Cadence's stockholders approved an amendment to Cadence's Employee Stock Purchase Plan to increase the number of shares of common stock authorized for issuance by 3.5 million. As of December 31, 2025, the total number of shares available for future issuance under the ESPP was 5.7 million.
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:

2025 2024 2023
Dividend yield None None None
Expected volatility 38.8   % 32.1   % 29.9   %
Risk-free interest rate 4.2   % 5.1   % 4.5   %
Expected term (in years) 0.5 0.5 0.5
Weighted average fair value of purchase rights granted
$ 87.92   $ 65.50   $ 50.95  

Shares of common stock issued under the ESPP for fiscal 2025, 2024 and 2023 were as follows:

2025 2024 2023
(In thousands, except per share amounts)
Cadence shares purchased under the ESPP 507   548   647  
Cash received for the purchase of shares under the ESPP $ 118,776   $ 115,335   $ 102,017  
Weighted average purchase price per share $ 234.08   $ 210.31   $ 157.70  

Reserved for Future Issuance
As of December 31, 2025, Cadence had reserved the following shares of authorized but unissued common stock for future issuance:

Shares
(In thousands)
Employee equity incentive plans* 16,748  
Employee stock purchase plans 5,724  
Directors stock plans* 424  
    Total 22,896  

_____________
* Includes shares reserved for: (i) issuance upon exercise of future option grants, (ii) issuance upon vesting of future restricted stock grants, (iii) outstanding but unexercised options to purchase common stock, or (iv) unvested restricted stock units.

NOTE 10. STOCK REPURCHASE PROGRAMS
Cadence is authorized to repurchase shares of its common stock under a publicly announced program that was most recently increased by its Board of Directors in May 2025. 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. During fiscal 2025, Cadence repurchased approximately 3.2 million shares on the open market for an aggregate purchase price of $925.0 million. As of December 31, 2025, approximately $ 1.4 billion of the share repurchase authorization remained available to repurchase shares of Cadence common stock.
During fiscal 2024, Cadence repurchased approximately 1.9 million shares on the open market for an aggregate purchase price of $ 550.0 million.
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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 own stock. In June 2023, Cadence received an initial share delivery of approximately 0.6 million shares, which represented the number of shares at a market price equal to $ 140.0 million. An equity-linked contract for $ 60.0 million, representing the remaining shares to be delivered by HSBC under the ASR agreement, was recorded to stockholders' equity as of June 30, 2023. In August 2023, the ASR agreement settled and resulted in a delivery of approximately 0.3  million additional shares to Cadence. In total, Cadence received approximately 0.9 million shares under the ASR agreement at an average price per share of $ 228.26 . The shares received were treated as repurchased common stock for purposes of calculating earnings per share.
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:

2025*
2024 2023**

(In thousands)
Shares repurchased 3,165   1,930   3,145  
Total cost of repurchased shares $ 925,034   $ 550,026   $ 700,134  

_____________
*     Excludes $ 3.1 million of excise tax.
**     Includes  276  thousand shares and $ 60 million equity forward contract from the June 2023 ASR settled in August 2023, and excludes $ 0.9 million of excise tax.

NOTE 11. RESTRUCTURING AND OTHER CHARGES
From time to time, Cadence has initiated various restructuring plans in an effort to better align its resources with its business strategy. The most recent of these plans was initiated in September 2025 (the “2025 Restructuring Plan”). The charges incurred with the 2025 Restructuring Plan were comprised of severance payments and termination benefits related to headcount reductions and are included in restructuring on Cadence’s consolidated income statements.
The following table presents activity for Cadence’s restructuring plans during fiscal 2025, 2024 and 2023:

Severance
and
Benefits
Excess
Facilities
Total
(In thousands)
Balance, December 31, 2022 $ —   $ —   $ —  
Restructuring 10,935   78   11,013  
Non-cash changes
—   ( 78 ) ( 78 )
Cash payments ( 8,211 ) —   ( 8,211 )
Effect of foreign currency translation ( 121 ) —   ( 121 )
Balance, December 31, 2023 $ 2,603   $ —   $ 2,603  
Restructuring 22,735   1,030   23,765  
Non-cash changes
—   ( 1,030 ) ( 1,030 )
Cash payments ( 20,464 ) —   ( 20,464 )
Effect of foreign currency translation ( 147 ) —   ( 147 )
Balance, December 31, 2024 $ 4,727   $ —   $ 4,727  
Restructuring 25,808   3,386   29,194  
Non-cash changes
—   ( 3,386 ) ( 3,386 )
Cash payments ( 15,957 ) —   ( 15,957 )
Effect of foreign currency translation ( 111 ) —   ( 111 )
Balance, December 31, 2025 $ 14,467   $ —   $ 14,467  

All liabilities for severance and related benefits under the 2025 Restructuring Plan are included in accounts payable and accrued liabilities on Cadence’s consolidated balance sheet as of December 31, 2025. Cadence expects to make cash payments to settle these liabilities through fiscal 2026.
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NOTE 12. OTHER INCOME, NET
Cadence’s other income, net, for fiscal 2025, 2024 and 2023 was as follows:

  2025 2024 2023
  (In thousands)
Interest income $ 101,584   $ 62,484   $ 29,637  
Gain on sale of IP and other assets
11,500   —   —  
Gains on investments
57,589   49,593   34,602  
Gains on securities in NQDC trust
14,029   11,145   10,851  
Losses on foreign exchange ( 36,090 ) ( 965 ) ( 5,490 )
Other expense, net ( 2,070 ) ( 1,202 ) ( 2,714 )
Total other income, net
$ 146,542   $ 121,055   $ 66,886  

For additional information relating to the gains from Cadence’s investment activity, see Note 14 in the notes to consolidated financial statements.
In September 2025, Cadence entered into foreign currency forward exchange contracts with an aggregate notional value of € 1.89 billion to mitigate the impact of currency price fluctuations of the European Union euro relative to the U.S. dollar for its pending acquisition of Hexagon’s design and engineering business. These forward contracts were not designated as accounting hedges, so the unrealized gains and losses from the change in the fair value of these contracts were included as a component of other income (expense), net as gains or losses on foreign exchange. During fiscal 2025, Cadence recognized losses associated with these foreign currency forward contracts of $ 29.2 million.

NOTE 13. NET INCOME PER SHARE
Basic net income per share is computed by dividing net income during the period by the weighted average number of shares of common stock outstanding during that period, less unvested restricted stock awards. Diluted net income per share is impacted by equity instruments considered to be potential common shares, if dilutive, computed using the treasury stock method of accounting.
The calculations for basic and diluted net income per share for fiscal 2025, 2024 and 2023 are as follows:

  2025 2024 2023
  (In thousands, except per share amounts)
Net income $ 1,108,888   $ 1,055,484   $ 1,041,144  
Weighted average common shares used to calculate basic net income per share 271,333   271,212   269,381  
Stock-based awards 1,979   2,621   3,367  
Weighted average common shares used to calculate diluted net income per share 273,312   273,833   272,748  
Net income per share – basic $ 4.09   $ 3.89   $ 3.86  
Net income per share – diluted $ 4.06   $ 3.85   $ 3.82  

The following table presents shares of Cadence’s common stock outstanding for fiscal 2025, 2024 and 2023 that were excluded from the computation of diluted net income per share because the effect of including these shares in the computation of diluted net income per share would have been anti-dilutive: 

  2025 2024 2023
  (In thousands)

Long-term market-based awards 1,168   —   1,381  
Options to purchase shares of common stock 207   184   345  
Non-vested shares of restricted stock 70   258   232  
Total potential common shares excluded 1,445   442   1,958  

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NOTE 14. INVESTMENTS
Investments in Equity Securities
Marketable Equity Investments
Cadence’s investments in marketable equity securities consist of purchased shares of publicly held companies and are included in prepaid expenses and other in Cadence’s consolidated balance sheets. Changes in the fair value of these investments are recorded to other income, net in Cadence’s consolidated income statements. The carrying value of marketable equity investments was $ 83.2 million and $ 90.4 million as of December 31, 2025, and December 31, 2024, respectively.
Non-Marketable Equity Investments
Cadence’s investments in non-marketable equity securities generally consist of stock or other instruments of privately held entities and are included in other assets on Cadence’s consolidated balance sheets. As of December 31, 2025, Cadence held a 10.5 % interest in a privately held company that was accounted for using the equity method of accounting. Cadence records its proportionate share of net income from the investee, offset by amortization of basis differences, to other income, net in Cadence’s consolidated income statements. During the fourth quarter of fiscal 2025, Cadence liquidated a portion of its holdings through a share buyback for total cash consideration of $ 56.0 million, which resulted in a gain, net of basis differences, of $ 15.9 million. During fiscal 2025, Cadence recognized a net gain on this investment of $ 12.2 million, inclusive of the gain on the liquidation of a portion of its holdings during the fourth quarter. During fiscal 2024 and 2023, Cadence recognized net losses on this investment of $ 2.5 million and $ 2.7 million, respectively. The carrying value of this investment was $ 51.0 million and $ 97.5 million as of December 31, 2025 and December 31, 2024, respectively.
Cadence also holds other non-marketable equity investments in privately held companies where Cadence does not have the ability to exercise significant influence and the fair value of the investments is not readily determinable. During fiscal 2025, Cadence recognized net gains on its portfolio of other non-marketable equity investments of $ 53.4 million. During fiscal 2024 and 2023, gains and losses on these investments were not material to Cadence’s consolidated financial statements. The carrying value of these investments was $ 16.6 million and $ 26.6 million as of December 31, 2025 and December 31, 2024, respectively.
The portion of gains and losses included in Cadence’s consolidated income statements related to equity securities still held at the end of the period were as follows:

2025 2024 2023
(In thousands)
Net gains recognized on equity securities
$ 57,777   $ 49,653   $ 34,651  
Less: Net gains recognized on equity securities sold
( 66,171 ) ( 20,367 ) ( 12,283 )
Net gains (losses) recognized on equity securities still held
$ ( 8,394 ) $ 29,286   $ 22,368  

Investments in Debt Securities
The following is a summary of Cadence’s available-for-sale debt securities recorded within prepaid expenses and other on its consolidated balance sheets:

  As of December 31, 2025
   Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated
Fair Value
  (In thousands)
Available-for-sale debt securities
Mortgage-backed and asset-backed securities $ 70,317   $ 852   $ ( 199 ) $ 70,970  

Total available-for-sale securities $ 70,317   $ 852   $ ( 199 ) $ 70,970  

  As of December 31, 2024
   Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated
Fair Value
  (In thousands)
Available-for-sale debt securities

Mortgage-backed and asset-backed securities $ 50,604   $ 230   $ ( 582 ) $ 50,252  

Total available-for-sale securities $ 50,604   $ 230   $ ( 582 ) $ 50,252  

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Gross unrealized gains and losses are recorded as a component of accumulated other comprehensive loss on Cadence’s consolidated balance sheets. As of December 31, 2025, the fair value of available-for-sale debt securities in a continuous unrealized loss position for greater than 12 months was $ 6.6 million, and the unrealized losses on these securities were not material.
As of December 31, 2025, the fair values of available-for-sale debt securities, by remaining contractual maturity, were as follows:

  (In thousands)
Due within 1 year
$ 1,150  
Due after 1 year through 5 years 15,481  
Due after 5 years through 10 years 26,916  
Due after 10 years 27,423  
Total $ 70,970  

As of December 31, 2025, Cadence did not intend to sell any of its available-for-sale debt securities in an unrealized loss position, and it was more likely than not that Cadence will hold the securities until maturity or a recovery of the cost basis.

NOTE 15. FAIR VALUE
Inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Cadence’s market assumptions. These two types of inputs have created the following fair value hierarchy:
• Level 1 – Quoted prices for identical instruments in active markets;
• Level 2 – Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
• Level 3 – Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
This hierarchy requires Cadence to minimize the use of unobservable inputs and to use observable market data, if available, when determining fair value. Cadence recognizes transfers between levels of the hierarchy based on the fair values of the respective financial instruments at the end of the reporting period in which the transfer occurred. There were no transfers between levels of the fair value hierarchy during the fiscal years presented.
On a quarterly basis, Cadence measures at fair value certain financial assets and liabilities. The fair value of financial assets and liabilities was determined using the following levels of inputs as of December 31, 2025, and December 31, 2024:

  Fair Value Measurements as of December 31, 2025
   Total Level 1 Level 2 Level 3
  (In thousands)
Assets
Cash equivalents:
Money market funds $ 2,100,210   $ 2,100,210   $ —   $ —  
Marketable securities:
Marketable equity securities 83,244   83,244   —   —  
Mortgage-backed and asset-backed securities 70,970   —   70,970   —  
Securities held in NQDC trust 117,732   117,732   —   —  

Total Assets $ 2,372,156   $ 2,301,186   $ 70,970   $ —  

   Total Level 1 Level 2 Level 3
  (In thousands)
Liabilities
Foreign currency exchange contracts 25,999   —   25,999   —  
Total Liabilities $ 25,999   $ —   $ 25,999   $ —  

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  Fair Value Measurements as of December 31, 2024
   Total Level 1 Level 2 Level 3
  (In thousands)
Assets
Cash equivalents:
Money market funds $ 1,700,084   $ 1,700,084   $ —   $ —  
Marketable securities:

Marketable equity securities 90,374   90,374   —   —  
Mortgage-backed and asset-backed securities 50,252   —   50,252   —  
Securities held in NQDC trust 96,450   96,450   —   —  

Total Assets $ 1,937,160   $ 1,886,908   $ 50,252   $ —  

   Total Level 1 Level 2 Level 3
  (In thousands)
Liabilities
Foreign currency exchange contracts 7,533   —   7,533   —  
Total Liabilities $ 7,533   $ —   $ 7,533   $ —  

Level 1 Measurements
Cadence’s cash equivalents held in money market funds, marketable equity securities and the trading securities held in Cadence’s NQDC trust are measured at fair value using Level 1 inputs.
Level 2 Measurements
The valuation techniques used to determine the fair value of Cadence’s investments in marketable debt securities, foreign currency forward exchange contracts and Senior Notes are classified within Level 2 of the fair value hierarchy. For additional information relating to Cadence’s debt arrangements, see Note 5 in the notes to consolidated financial statements.
Level 3 Measurements
During fiscal 2025, Cadence acquired intangible assets of $ 184.4 million primarily through its acquisitions of VLAB Works, Artisan foundation IP business from Arm Limited and Secure-IC. The fair value of the intangible assets acquired was determined using variations of the income approach that utilizes unobservable inputs classified as Level 3 measurements.
For existing technology, the fair value was determined by applying the relief-from-royalty method. This method is based on the application of a royalty rate to forecasted revenue to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. To estimate royalty savings over time, Cadence projected revenue from the acquired existing technology over the estimated remaining life of the technology, including the effect of assumed technological obsolescence, before applying an assumed royalty rate. Cadence assumed technological obsolescence at rates between 8 % and 13 % annually, before applying an assumed royalty rate between 25 % and 30 % and discount rates between 10 % and 13 %.
For agreements and relationships, the fair value was determined by using the multi-period excess earnings method. This method reflects the present value of the projected cash flows that are expected to be generated from existing customers, less charges representing the contribution of other assets to those cash flows. Projected income from existing customer relationships was determined using a customer retention rate between 85 % and 90 %. The present value of operating cash flows from existing customers was determined using a discount rate between 10 % and 13 %.
During fiscal 2024, Cadence acquired intangible assets of $ 366.0 million, primarily through its acquisitions of BETA CAE and Invecas. The fair value of the intangible assets acquired was determined using variations of the income approach that utilizes unobservable inputs classified as Level 3 measurements.
For existing technology, the fair value was determined by applying the relief-from-royalty method. This method is based on the application of a royalty rate to forecasted revenue to quantify the benefit of owning the intangible asset rather than paying a royalty for use of the asset. To estimate royalty savings over time, Cadence projected revenue from the acquired existing technology over the estimated remaining life of the technology, including the effect of assumed technological obsolescence, before applying an assumed royalty rate. Cadence assumed technological obsolescence at a rate of 10 % annually, before applying an assumed royalty rate of 30 % and a discount rate of 10 %.
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For agreements and relationships, the fair value was determined by using the multi-period excess earnings method. This method reflects the present value of the projected cash flows that are expected to be generated from existing customers, less charges representing the contribution of other assets to those cash flows. Projected income from existing customer relationships was determined using customer retention rates between 85 % and 92 %. The present value of operating cash flows from existing customers was determined using discount rates between 10 % and 14 %.
Cadence believes that its estimates and assumptions related to the fair value of its acquired intangible assets and assumed liabilities are reasonable, but significant judgment is involved.
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NOTE 16. BALANCE SHEET COMPONENTS
A summary of certain balance sheet components as of December 31, 2025, and December 31, 2024, is as follows:
As of
December 31,
2025 December 31,
2024
(In thousands)
Inventories:
Raw materials $ 245,487   $ 243,244  
Work-in-process
14,665   1,216  
Finished goods 43,393   13,251  
Inventories $ 303,545   $ 257,711  

Prepaid expenses and other:
Short-term investments
154,213   140,625  
Other prepaid expenses and other assets 265,659   293,253  
Prepaid expenses and other $ 419,872   $ 433,878  

Property, plant and equipment:
Equipment and internal-use software
$ 990,700   $ 875,399  
Buildings 137,597   137,781  
Land 57,413   57,687  
Leasehold, building and land improvements 298,417   245,669  
Furniture and fixtures 51,189   43,517  
In-process capital assets 3,193   14,879  
Total cost 1,538,509   1,374,932  
Less: Accumulated depreciation and amortization ( 1,021,505 ) ( 916,732 )
Property, plant and equipment, net $ 517,004   $ 458,200  

Other assets:
Long-term investments
$ 67,517   $ 124,086  
ROU lease assets 175,964   146,190  
Other long-term assets 337,891   274,465  
Other assets $ 581,372   $ 544,741  

Accounts payable and accrued liabilities:
Trade accounts payable
$ 93,491   $ 5,555  
Payroll and payroll-related accruals 384,424   335,232  

Other accrued operating liabilities 378,941   291,905  
Accounts payable and accrued liabilities $ 856,856   $ 632,692  

Other long-term liabilities:
Operating lease liabilities $ 136,289   $ 108,893  
Other accrued liabilities 271,240   230,555  
Other long-term liabilities $ 407,529   $ 339,448  

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NOTE 17. LEASES
Operating lease expense, which includes immaterial amounts of short-term leases, variable lease costs and sublease income, was as follows during fiscal 2025, 2024 and 2023:

2025 2024 2023
(In thousands)
Operating lease expense $ 70,846   $ 61,827   $ 56,805  

Additional activity related to Cadence’s leases during fiscal 2025, 2024 and 2023 was as follows:

2025 2024 2023
(In thousands)
Cash paid for amounts included in the measurement of operating lease liabilities $ 55,244   $ 49,978   $ 46,069  
ROU assets obtained in exchange for operating lease obligations 79,567   42,614   32,597  

ROU lease assets and lease liabilities for Cadence’s operating leases were recorded in the consolidated balance sheets as follows:

As of
December 31,
2025 December 31,
2024
(In thousands)
Other assets $ 175,964   $ 146,190  

Accounts payable and accrued liabilities 49,889   41,554  
Other long-term liabilities 136,289   108,893  
Total lease liabilities $ 186,178   $ 150,447  

Weighted average remaining lease term (in years) 5.6 5.3
Weighted average discount rate 5   % 4   %

Future lease payments included in the measurement of lease liabilities on the consolidated balance sheet as of December 31, 2025, for the following five fiscal years and thereafter were as follows:

Operating
 Leases
(In thousands)
2026 $ 55,588  
2027 38,885  
2028 31,555  
2029 25,575  
2030 17,385  
Thereafter 44,761  
Total future lease payments 213,749  
Less imputed interest ( 27,571 )
Total lease liability balance $ 186,178  

As of December 31, 2025, Cadence had additional operating lease obligations of approximately $ 33.3 million for facility leases that will commence in 2026.
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NOTE 18. COMMITMENTS AND CONTINGENCIES
Purchase Obligations
Cadence had purchase obligations of $ 162.1 million as of December 31, 2025, that were associated with agreements or commitments for purchases of goods or services. Cadence expects to settle these obligations in the following five fiscal years and thereafter as follows:

Purchase

Obligations

(In thousands)
2026 $ 99,629  
2027 27,319  
2028 20,939  
2029 7,181  
2030 7,015  
Thereafter —  
Total
$ 162,083  

Legal Proceedings
From time to time, Cadence is involved in various disputes and litigation that arise in the ordinary course of business. These include disputes and legal proceedings related to intellectual property, indemnification obligations, mergers and acquisitions, licensing, contracts, customers, products, distribution and other commercial arrangements and employee relations matters. Cadence is also subject from time to time to inquiries, investigations and regulatory proceedings involving governments and regulatory agencies in the jurisdictions in which Cadence operates. At least quarterly, Cadence reviews the status of each significant matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based on Cadence’s judgments using the best information available at the time. As additional information becomes available, Cadence reassesses the potential liability related to pending claims and legal proceedings and may revise estimates.
As previously disclosed, on July 27, 2025, Cadence reached a settlement with each of BIS and DOJ that resolved matters relating to export violations that took place 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, Cadence entered into a plea agreement with the DOJ pursuant to which Cadence agreed to plead guilty to one count of conspiracy to commit export controls violations. In addition, Cadence entered into an administrative settlement agreement with BIS. Both agreements include ongoing audit, compliance and other obligations. Under these agreements, Cadence recorded a charge of $ 128.5 million in Loss related to contingent liability in its consolidated income statement and paid BIS and the DOJ aggregate net penalties and forfeitures of $ 140.6 million during fiscal 2025.
Tax Proceedings
In December 2022, Cadence received a tax audit assessment, primarily related to value-added taxes, of approximately $ 49 million from the Korea taxing authorities for years 2017-2019. Cadence was required to pay these assessed taxes, prior to being allowed to contest or litigate the assessment in administrative and judicial proceedings. The assessment was paid by Cadence in January 2023 and was recorded as a component of other assets in the consolidated balance sheets. During August 2024, the Tax Tribunal cancelled the entire tax audit assessment, and during the fourth quarter of fiscal 2024, Cadence received a refund of the payment previously made to the Korea taxing authorities plus interest.
Other Contingencies
Cadence provides its customers with a warranty on sales of hardware products, generally for a 90-day period. Cadence did not incur any significant costs related to warranty obligations during fiscal 2025, 2024 or 2023.
Cadence’s product license and services agreements typically include a limited indemnification provision for claims from third parties relating to Cadence’s IP. If the potential loss from any indemnification claim is considered probable and the amount or the range of loss can be estimated, Cadence accrues a liability for the estimated loss.
Cadence did not incur any material losses from indemnification claims during fiscal 2025, 2024 or 2023.
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NOTE 19. EMPLOYEE AND DIRECTOR BENEFIT PLANS
Cadence maintains various defined contribution plans for its eligible U.S. and non-U.S. employees. For employees in the United States, Cadence maintains a 401(k) savings plan to provide retirement benefits through tax-deferred salary deductions and may make discretionary contributions, as determined by the Board of Directors, which cannot exceed a specified percentage of the annual aggregate salaries of those employees eligible to participate. Cadence’s total contributions made to these plans during fiscal 2025, 2024 and 2023 were as follows:

2025 2024 2023
(In thousands)
Contributions to defined contribution plans $ 51,104   $ 45,164   $ 39,651  

Executive Officers and Directors may also elect to defer compensation payable to them under Cadence’s NQDC. Deferred compensation payments are held in investment accounts and the values of the accounts are adjusted each quarter based on the fair value of the investments held in the NQDC. These investments are classified in other assets in the consolidated balance sheets and gains and losses are recognized as other income (expense), net in the consolidated income statements.
Certain of Cadence’s international subsidiaries sponsor defined benefit retirement plans. The unfunded projected benefit obligation for Cadence’s defined benefit retirement plans is recorded in other long-term liabilities in the consolidated balance sheets.

NOTE 20. ACCUMULATED OTHER COMPREHENSIVE LOSS
Cadence’s accumulated other comprehensive loss is comprised of the aggregate impact of foreign currency translation gains and losses, changes in defined benefit plan liabilities and unrealized gains and losses on investments and is presented in Cadence’s consolidated statements of comprehensive income.
Accumulated other comprehensive loss was comprised of the following as of December 31, 2025, and December 31, 2024:

As of
December 31,
2025 December 31,
2024
  (In thousands)
Foreign currency translation loss $ 14,266   $ ( 178,611 )
Changes in defined benefit plan liabilities ( 10,293 ) ( 4,447 )
Unrealized losses on derivatives designated as hedging instruments, net of taxes
( 6,431 ) ( 7,038 )
Unrealized gains (losses) on available-for-sale debt securities
653   ( 352 )
Total accumulated other comprehensive loss $ ( 1,805 ) $ ( 190,448 )

During fiscal 2024, in anticipation of issuing the Senior Notes, Cadence entered into a series of treasury lock agreements which fixed benchmark U.S. Treasury rates for an aggregate notional amount of $ 850  million to hedge the impact of changes in the benchmark interest rate on future interest payments. Upon issuance of the Senior Notes in September 2024, Cadence settled the treasury lock agreements and incurred a loss of $ 9.7  million, which is being amortized to interest expense using the effective interest method over the term of the 2034 Notes.
For fiscal 2025, 2024 and 2023, there were no significant amounts related to foreign currency translation loss or changes in defined benefit plan liabilities reclassified to net income from accumulated other comprehensive loss.

NOTE 21. SEGMENT REPORTING
Segment reporting is based on the “management approach,” following the method that management organizes the company’s reportable segments for which separate financial information is made available to, and evaluated regularly by, the chief operating decision maker in allocating resources and in assessing performance. Cadence operates as one operating segment. Cadence’s chief operating decision maker (“CODM”) is its CEO. The CODM makes decisions on resource allocation and assesses performance of the business based on Cadence’s consolidated results, including net income.
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For additional information on Cadence’s revenue, including the nature and timing of revenue from contracts with customers, see Note 3 in the notes to consolidated financial statements. The following table presents revenue, significant expenses and net income for fiscal 2025, 2024 and 2023:

  2025 2024 2023
  (In thousands)
Revenue
5,296,759   4,641,264   4,089,986  
Costs and Expenses:

Salary, benefits and other employee-related costs
2,132,023   1,936,542   1,754,223  
Stock based compensation
455,175   391,219   325,611  
Manufacturing costs
376,610   330,903   232,012  
Facilities and other infrastructure costs
192,719   174,102   156,977  
Depreciation and amortization
227,828   196,935   145,292  
Professional services
169,290   153,439   117,752  
Loss related to contingent liability (1)
128,545   8,322   —  
Restructuring
29,194   23,765   11,013  
Other segment items (2)
48,375   16,703   58,632  
Interest income ( 101,584 ) ( 62,484 ) ( 29,637 )
Interest expense 116,541   75,999   36,185  
Provision for income taxes 413,155   340,335   240,782  
Net income $ 1,108,888   $ 1,055,484   $ 1,041,144  

_____________
(1) For information regarding the loss related to a contingent liability, see Note 18 in the notes to the consolidated financial statements.
(2) Other segment items includes direct costs for advertising, marketing events, travel, entertainment, bad debt and other operating expense categories that are not considered significant individually. It also includes non-operating expenses such as gains and losses on investments, foreign currency and other non-operating expenses that are not considered significant individually.
Outside the United States, Cadence markets and supports its products and services primarily through its subsidiaries. Revenue is attributed to geography based upon the country in which the product is used, or services are delivered. Long-lived assets are attributed to geography based on the country where the assets are located.
The following table presents a summary of revenue by geography for fiscal 2025, 2024 and 2023:
  2025 2024 2023
  (In thousands)
Americas:
United States $ 2,310,965   $ 2,159,703   $ 1,694,529  
Other Americas 168,349   93,101   65,259  
Total Americas 2,479,314   2,252,804   1,759,788  
Asia:
China 679,971   573,096   679,538  
Other Asia 1,005,232   855,919   766,409  
Total Asia 1,685,203   1,429,015   1,445,947  
Europe, Middle East and Africa 790,569   699,241   655,078  
Japan 341,673   260,204   229,173  
Total $ 5,296,759   $ 4,641,264   $ 4,089,986  

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The following table presents a summary of long-lived assets by geography as of December 31, 2025, December 31, 2024, and December 31, 2023: 

  As of
  December 31,
2025 December 31,
2024 December 31,
2023
  (In thousands)
Americas:
United States $ 439,902   $ 412,339   $ 383,807  
Other Americas 10,114   7,437   10,219  
Total Americas 450,016   419,776   394,026  
Asia:
China 23,014   22,929   29,598  
Other Asia 110,844   83,951   71,365  
Total Asia 133,858   106,880   100,963  
Europe, Middle East and Africa 105,015   73,551   56,449  
Japan 4,079   4,183   2,572  
Total $ 692,968   $ 604,390   $ 554,010  

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EXHIBIT INDEX
 
Incorporated by Reference
Exhibit Exhibit Filing Provided
Number Exhibit Title Form File No. No. Date Herewith
2.1
Share Purchase Agreement related to BETA CAE Systems International AG and BETA CAE Systems SA, dated March 2, 2024.
10-Q
000-15867 2.1
4/24/2024
2 .2#
Equity Purchase Agreement between H exagon Smart S o lutions AB and the R egistrant dated September 4, 2025.
10-Q
000-15867 2.1
10/9/2025
3.1
The Registrant’s Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on May 3, 2024.
8-K 000-15867 3.1 5/6/2024
3.2
The Registrant’s Amended and Restated Bylaws, effective as of November 2, 2023.
8-K 000-15867 3.1 11/3/2023
4.1 Specimen Certificate of the Registrant’s Common Stock. S-4 033-43400 4.01 10/17/1991
4.2
Base Indenture, dated September 10, 2024, by and between the Registrant and U.S. Bank Trust Company, National Association, as trustee.
8-K 000-15867 4.1 9/10/2024
4.3
First Supplemental Indenture, dated September 10, 2024, by and between the Registrant and U.S. Bank Trust Company, National Association, as trustee (including the Form of 4.200% Senior Notes due 2027, the Form of 4.300% Senior Notes due 2029 and the Form of 4.700% Senior Notes due 2034).
8-K 000-15867 4.2 9/10/2024
4.4
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
10-K
000-15867 4.4 2/21/2025
10.1*
The Registrant’s 1995 Directors Stock Incentive Plan.
10-Q 001-15867 10.01 7/26/2012
10.2*
Form of Stock Option Agreement, as currently in effect under the Registrant’s 1995 Directors Stock Incentive Plan.
10-K 000-15867 10.76 2/21/2013
10.3*
Form of Incentive Stock Award Agreement, as currently in effect under the Registrant’s 1995 Directors Stock Incentive Plan.
X

1 0.4*
Form of Re stricted Stock Unit Agreement, as currently in effect under the R egistrant's 1 995 Director s Stock Incentive Plan.
X

10. 5 *
The Registrant’s Omnibus Equity Incentive Plan, as amended and restated.
S-8 333-275140
99.01 10/23/2023
10.6
Form of Incentive Stock Award Agreement for Non-Executive Employees and Consultants, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.
X

10.7
F orm of Long Term Equity Award V (LTP V) Agreement for Non-Executives under the Registrant's Omnibus Equity Incentive Plan.
10-Q
000-15867 10.2 4/30/2025
10.8
Form of Restricted Stock Unit Agreement for Non-Executive Employees and Consultants, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.
X

10. 9
Form of Stock Option Agreement for Non-Executive Employees and Consultants, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.
S-8 333-195771 99.04 5/7/2014
10.10*
Form of Incentive Stock Award Agreement for Executives, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.
S-8 333-195771 99.05 5/7/2014

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1 0.11*
F orm of Long Term Equity Award V (LTP V) Agreement for Executives under the Registrant's Omnibus Equity Incentive Plan.
10-Q
000-15867 10.4 4/30/2025
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
000-15867 10.5 4/30/2025
1 0.13*
F orm of Performance-Based Restricted Stock Unit (PSU) Agreement for Executives with Relative Total Shareholder R e turn (rTSR) Metrics under the Registrant's Omnibus Equity Incentive Plan.
10-Q
000-15867 10.6 4/30/2025
10.14*
Form of Restricted Stock Unit Agreement for Executives, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.
10-Q
000-15867 10.7 4/30/2025
10.1 5 *
Form of Stock Option Agreement for Executives, as currently in effect under the Registrant’s Omnibus Equity Incentive Plan.
S-8 333-195771 99.07 5/7/2014
10.16*
The Registrant’s Amended and Restated Employee Stock Purchase Plan.
S-8 333-282884 99.1 10/30/2024
10.1 7 *

The Registrant’s 2009 Deferred Compensation Plan, as amended and restated on February 5, 2019.
10-K 000-15867 10.26 2/24/2020
10.1 8 *
The Registrant’s Senior Executive Bonus Plan.
8-K 000-15867 10.01 2/8/2019
10.1 9 *
The Registrant’s Executive Severance Plan.
8-K 001-15867 10.01 5/11/2016
10.20*
The Registrant’s Director Medical and Prescription Benefits Coverage Reimbursement Plan.
10-Q 001-10606 10.02 4/29/2011
10.21*
Form of Indemnity Agreement between the Registrant and its directors and executive officers, as amended and restated.
10-Q 000-15867 10.01 7/25/2016
10.22*
Amended and Restated Employment Agreement, effective as of December 15, 2021, between the Registrant and Anirudh Devgan.
8-K/A 000-15867 10.01 12/17/2021
10.2 3
Credit Agreement, dated as of June 30, 2021, by and among the Registrant, Bank of America, N.A., and other lenders party thereto.
8-K 000-15867 10.01 7/1/2021
10.2 4
First Amendment to Credit Agreement, dated September 7, 2022, by and among the Registrant, Bank of America, N.A. and other lenders party thereto .
8-K 000-15867 10.02 9/8/2022
10.2 5
Credit Agreement, dated August 14, 2024, by and among the Registrant, Bank of America, N.A., as a lender and administrative agent, the other lenders and issuing banks party thereto and BofA Securities, Inc., JPMorgan Chase Bank, N.A. and HSBC Bank USA, National Association, as joint lead arrangers and joint bookrunners.
8-K 000-15867 10.1 8/15/2024
10.2 6
Loan Agreement, dated September 7, 2022, by and among the Registrant, Bank of America, N.A., and other lenders party thereto.
8-K 000-15867 10.01 9/8/2022
10.2 7
First Amendment to Loan Agreement, dated August 14, 2024, with respect to that certain Loan Agreement, dated September 7, 2022, by and among the Registrant, Bank of America, N.A. and the other lenders party thereto.
8-K 000-15867 10.2 8/15/2024
10.2 8
Loan Agreement, dated May 30, 2024, by and among the Registrant, Bank of America, N.A., and the other lenders party thereto.
8-K 000-15867 10.1 6/3/2024
10.2 9
First Amendment to Loan Agreement, dated August 14, 2024, with respect to that certain Loan Agreement, dated May 30, 2024, by and among the Registrant, Bank of America, N.A. and the other lenders party thereto.
8-K 000-15867 10.3 8/15/2024

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1 0.30
P lea Agreement, dated July 27, 2025, by and among the Registrant, the U.S. Department of Justice and the U.S. Attorney's Office for the Northern District of California.
10-Q
000-15867 10.3 7/30/2025
1 0. 31
S ettlement Agreement, dated July 27, 2025, by and between the Registrant and the B ureau of Industry and Security, U.S. Department of C o mmerce.
10-Q
000-15867 10.4 7/30/2025
19.1
The Registrant's Securities Trading Policy.
10-K
000-15867 19.1 2/21/2025
21.1
Subsidiaries of the Registrant.
X
23.1
Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.
X
24.1
Power of Attorney (incorporated by reference to the signature page to this Annual Report on Form 10-K).

31.1
Certification of the Registrant’s Chief Executive Officer, Anirudh Devgan, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
X
31.2
Certification of the Registrant’s Chief Financial Officer, John M. Wall, pursuant to Rule 13a-14 of the Securities Exchange Act of 1934.
X
32.1†
Certification of the Registrant’s Chief Executive Officer, Anirudh Devgan, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2†
Certification of the Registrant’s Chief Financial Officer, John M. Wall, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
97.1
The Registrant's Policy for Recovery of Erroneously Awarded Compensation .
10-K
000-15867 97.01 2/14/2024
101.INS Inline XBRL Instance Document. X
101.SCH Inline XBRL Taxonomy Extension Schema Document. X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document. X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document. X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document. X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document. X
104 Cover Page Interactive Data File - The cover page from this Annual Report on Form 10-K is formatted in iXBRL.

* Indicates management contract or compensatory plan or arrangement covering executive officers or directors of the Registrant.
† In accordance with Item 601(b)(32)(ii) of Regulation S-K, the certifications furnished in Exhibits 32.01 and 32.02 hereto will not be deemed "filed" for purposes of Section 18 of the Exchange Act or incorporated by reference into any filings under the Securities Act or the Exchange Act (except to the extent that the registrant specifically incorporates it by reference).
# Portions of the exhibit, marked by brackets, have been omitted because the omitted information (i) is not material and (ii) is the type of information that the registrant treats as private or confidential.

Item 16. Form 10-K Summary

None.
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
                        
CADENCE DESIGN SYSTEMS, INC.

/s/ Anirudh Devgan
Anirudh Devgan
President and Chief Executive Officer
Dated: February 18, 2026

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Anirudh Devgan DATE: February 18, 2026
Anirudh Devgan
President and Chief Executive Officer
(Principal Executive Officer)

/s/ John M. Wall DATE: February 18, 2026
John M. Wall
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Anirudh Devgan, John M. Wall and Marc Taxay, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their, his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

/s/ ML Krakauer
February 18, 2026
ML, Chair

/s/ Mark W. Adams February 18, 2026
Mark W. Adams, Director

/s/ Ita Brennan February 18, 2026
Ita Brennan, Director

/s/ Lewis Chew February 18, 2026
Lewis Chew, Director

/s/
Anirudh Devgan
February 18, 2026
Anirudh Devgan, Director

/s/ Moshe Gavrielov
February 18, 2026
Moshe Gavrielov, Director

/s/ Julia Liuson February 18, 2026
Julia Liuson, Director

/s/ Dr. James D. Plummer February 18, 2026
Dr. James D. Plummer, Director

/s/ Dr. Alberto Sangiovanni-Vincentelli February 18, 2026
Dr. Alberto Sangiovanni-Vincentelli, Director

/s/ Young K. Sohn February 18, 2026
Young K. Sohn, Director

/s/ Dr. Luc Van den hove
February 18, 2026
Dr. Luc Van den hove, Director

107