0000813672-25-000148
SEC filingRevenue grew 10% YoY to $1.34B, driven by software and hardware demand, with operating margin expanding to 32%.
For the three months ended September 30, 2025, Cadence reported total revenue of $1,338.8 million, up 10% from $1,215.5 million in the prior-year period. Product and maintenance revenue grew 10% to $1,207.7 million, while services revenue increased 14% to $131.1 million. The growth was primarily driven by continued customer investment in complex designs across software, hardware, and IP offerings. Gross margin is not explicitly disclosed, but cost of product and maintenance increased 8% (to $118.7 million) and cost of services rose 19% (to $63.5 million). Operating expenses increased 4% to $693.6 million, with marketing and sales up 1%, R&D up 4%, and G&A up 9%. Operating margin improved to 32% from 29% in the prior year, attributed to revenue growth and a decrease in variable compensation. Interest expense rose to $29.0 million from $24.5 million due to new senior notes issued in September 2024. The effective tax rate was 26.9% versus 28.6% a year ago.
The MD&A does not provide absolute dollar revenue by product category for the current quarter. However, percentage contributions were: Core EDA 71%, Semiconductor IP 14%, and System Design and Analysis 15%, compared to 70%, 14%, and 16% respectively in the prior year. The slight shift toward Core EDA suggests strong demand for core EDA tools. Geographically, U.S. revenue declined 8% to $532.1 million due to fulfillment shifts to international customers, while international revenue grew 22% driven by China (+56% to $245.0 million), Other Americas (+73%), Japan (+28%), and Other Asia (+15%). The China recovery followed the rescission of BIS license requirements in July 2025, enabling hardware deliveries that had been delayed.
Management expects fiscal 2025 effective tax rate to be approximately 29%. They anticipate that the percentage of annual up-front revenue will increase as growth in up-front product offerings outpaces recurring revenue growth. The pending acquisition of Hexagon's design and engineering business (expected to close in Q1 2026) for €2.70 billion (partly cash, partly stock) will expand the System Design & Analysis portfolio. Ongoing investments in R&D and technical sales, including headcount from acquisitions, are expected to continue. Export control uncertainties persist, but the impact of recent BIS rule changes is expected to be limited. The company maintains a strong liquidity position with $2.75 billion in cash and equivalents as of September 30, 2025.
As of September 30, 2025, Cadence maintained a strong liquidity position with $2.75 billion in cash and cash equivalents. Total assets were $9.60 billion, supported by $2.64 billion in goodwill and $672.5 million in acquired intangibles. Total debt stood at $2.48 billion, consisting of $500 million of 4.200% Senior Notes due 2027, $1.0 billion of 4.300% Senior Notes due 2029, and $1.0 billion of 4.700% Senior Notes due 2034, all unsecured. Stockholders' equity reached $5.20 billion, driven by retained earnings of $6.71 billion offset by treasury stock of $6.13 billion. Deferred revenue was $905.3 million, reflecting the company's subscription-based licensing model. The company also had $1.25 billion available under its revolving credit facility with no outstanding borrowings.
The Notes disclose $7.0 billion in contracted but unsatisfied performance obligations as of September 30, 2025. This includes $0.4 billion of non-cancelable commitments where customers have yet to specify product selection. Excluding those, Cadence expects to recognize 52% of the remainder as revenue over the next 12 months, 44% over the next 13–36 months, and the balance thereafter. The company also settled export control violations with BIS and DOJ in July 2025, paying aggregate penalties and forfeitures of $140.6 million, which was recorded as a $128.5 million contingent liability charge in the nine months. No other material commitments or contingencies were noted beyond standard hardware warranties and indemnification provisions.
Cadence repurchased 2.55 million shares for $725.0 million during the nine months ended September 30, 2025. In May 2025, the Board authorized an additional $1.5 billion for share repurchases, leaving $1.6 billion of remaining authorization as of quarter-end. The company did not issue any new debt or repay existing debt during the period. Capital expenditures were $100.8 million, representing 2.6% of revenue. No dividends were declared or paid. Stock-based compensation was $342.0 million for the nine months, with $686.0 million in unrecognized compensation expected to be recognized over a weighted-average vesting period of 2.0 years.
Cadence operates as a single operating segment, with the CEO serving as chief operating decision maker. Revenue for the nine months ended September 30, 2025 was $3.86 billion, with product categories: Core EDA 71%, Semiconductor IP 14%, and System Design and Analysis 15%. Geographically, the United States contributed 44% of revenue, China 13%, other Asia 19%, EMEA 15%, Japan 6%, and other Americas 3%. Long-lived assets were primarily in the United States ($440.9 million), with China holding only $24.7 million.
Operating cash flow of $1,175M significantly outpaced net income of $721M, reflecting strong cash conversion. The primary non-cash add-backs were stock-based compensation ($342M) and depreciation/amortization ($163M). Capex of $101M was modest relative to CFO, yielding an implied free cash flow of approximately $1,074M (CFO minus capex). This FCF comfortably covered $725M in share repurchases, leaving ample headroom.
Working capital was a net use of cash: receivables increased $91M, inventories rose $61M, and prepaid expenses grew $15M. These were partially offset by a $44M increase in deferred revenue. A notable one-time item was $140.6M in penalties and forfeitures paid during Q3 2025 related to export settlement agreements, which impacted operating cash flow but is not separately broken out in the cash flow statement. Cash paid for income taxes was $199M, down from $296M in the prior period. Overall, cash generation remains robust with disciplined capital allocation.