Page
(a) 1. Financial Statements
			Report of Independent Registered Public Accounting Firm (Auditor Firm ID 238)			56
			Consolidated Balance Sheets as of December 31, 2025, and December 31, 2024			58
			Consolidated Income Statements for the three fiscal years ended December 31, 2025			59
			Consolidated Statements of Comprehensive Income for the three fiscal years ended December 31, 2025			60
			Consolidated Statements of Stockholders’ Equity for the three fiscal years ended December 31, 2025			61
			Consolidated Statements of Cash Flows for the three fiscal years ended December 31, 2025			62
			Notes to Consolidated Financial Statements			63
(a) 2. Financial Statement Schedules
			All financial statement schedules are omitted because they are not applicable, not required or the required information is shown in the consolidated financial statements or notes thereto.
(a) 3. Exhibits						103

The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this Annual Report.

The exhibits filed or incorporated by reference as part of this Annual Report contain agreements to which Cadence is a party. These agreements are included to provide information regarding their terms and are not intended to provide any other factual or disclosure information about Cadence or the other parties to the agreements. Certain of the agreements contain representations and warranties by each of the parties to the applicable agreement, and any such representations and warranties have been made solely for the benefit of the other parties to the applicable agreement as of specified dates, may apply materiality standards that are different than those applied by investors, and may be subject to important qualifications and limitations that are not necessarily reflected in the agreement. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time and should not be relied upon as statements of factual information.

_____________

© 2026 Cadence Design Systems, Inc. All rights reserved worldwide. Cadence, the Cadence logo, and the other Cadence marks found at www.cadence.com/go/trademarks are trademarks or registered trademarks of Cadence Design Systems, Inc. All other trademarks are the property of their respective holders.

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Cadence Design Systems, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Cadence Design Systems, Inc. and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of income, of comprehensive income, of stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2025, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition – Identifying and Evaluating Terms and Conditions in Contracts

As described in Note 2 and Note 3 to the consolidated financial statements, the Company 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, management allocates the transaction price of the contract to each performance obligation and recognizes revenue upon transfer of control of promised products or services to customers. Management applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. For the year ended December 31, 2025, the Company’s total revenue was $5.297 billion.

The principal considerations for our determination that performing procedures relating to revenue recognition, specifically the identification and evaluation of terms and conditions in contracts, is a critical audit matter are the significant judgment by management in identifying and evaluating terms and conditions in contracts that impact revenue recognition, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating whether terms and conditions in contracts were appropriately identified and evaluated by management.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls related to the identification and evaluation of terms and conditions in contracts that impact revenue recognition. These procedures also included, among others (i) testing management’s process of identifying and evaluating the terms and conditions in contracts, including management’s determination of the impact of those terms and conditions on revenue recognition and (ii) testing the completeness and accuracy of management’s identification and evaluation of the terms and conditions in contracts by examining revenue arrangements on a test basis.

/s/ PricewaterhouseCoopers LLP

San Jose, California

February 18, 2026

We have served as the Company’s auditor since 2020.

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CADENCE DESIGN SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

December 31, 2025 and December 31, 2024

(In thousands, except par value)

			As of
			December 31, 2025						December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents			$	3,001,317					$	2,644,030
Receivables, net			944,939						680,460
Inventories			303,545						257,711
Prepaid expenses and other			419,872						433,878
Total current assets			4,669,673						4,016,079
Property, plant and equipment, net			517,004						458,200
Goodwill			2,749,143						2,378,671
Acquired intangibles, net			718,223						594,734
Deferred taxes			917,733						982,057
Other assets			581,372						544,741
Total assets			$	10,153,148					$	8,974,482
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities			$	856,856					$	632,692
Current portion of deferred revenue			778,435						737,413
Total current liabilities			1,635,291						1,370,105
Long-term liabilities:
Long-term portion of deferred revenue			155,997						115,168
Long-term debt			2,480,150						2,476,183
Other long-term liabilities			407,529						339,448
Total long-term liabilities			3,043,676						2,930,799
Commitments and contingencies (Notes 8, 17 and 18)
Stockholders’ equity:
Preferred stock – $0.01 par value; authorized 400 shares, none issued or outstanding			—						—
Common stock – $0.01 par value; authorized 600,000 shares; issued and outstanding shares: 271,799 and 273,851, respectively			4,719,443						4,181,737
Treasury stock, at cost; 59,101 shares and 57,049 shares, respectively			(6,344,213)						(5,309,579)
Retained earnings			7,100,756						5,991,868
Accumulated other comprehensive loss			(1,805)						(190,448)
Total stockholders’ equity			5,474,181						4,673,578
Total liabilities and stockholders’ equity			$	10,153,148					$	8,974,482

See notes to consolidated financial statements.

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CADENCE DESIGN SYSTEMS, INC.

CONSOLIDATED INCOME STATEMENTS

For the three fiscal years ended December 31, 2025

(In thousands, except per share amounts)

			2025						2024						2023
Revenue:
Product and maintenance			$	4,821,589					$	4,213,509					$	3,834,359
Services			475,170						427,755						255,627
Total revenue			5,296,759						4,641,264						4,089,986
Costs and expenses:
Cost of product and maintenance			518,673						436,600						331,760
Cost of services			203,576						210,902						103,281
Marketing and sales			802,633						757,483						690,319
Research and development			1,768,772						1,549,093						1,441,796
General and administrative			313,387						273,961						242,430
Amortization of acquired intangibles			39,937						30,375						18,162
Loss related to contingent liability			128,545						8,322						—
Restructuring			29,194						23,765						11,013
Total costs and expenses			3,804,717						3,290,501						2,838,761
Income from operations			1,492,042						1,350,763						1,251,225
Interest expense			(116,541)						(75,999)						(36,185)
Other income, net			146,542						121,055						66,886
Income before provision for income taxes			1,522,043						1,395,819						1,281,926
Provision for income taxes			413,155						340,335						240,782
Net income			$	1,108,888					$	1,055,484					$	1,041,144
Net income per share – basic			$	4.09					$	3.89					$	3.86
Net income per share – diluted			$	4.06					$	3.85					$	3.82
Weighted average common shares outstanding – basic			271,333						271,212						269,381
Weighted average common shares outstanding – diluted			273,312						273,833						272,748

See notes to consolidated financial statements.

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CADENCE DESIGN SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the three fiscal years ended December 31, 2025

(In thousands)

			2025						2024						2023
Net income			$	1,108,888					$	1,055,484					$	1,041,144
Other comprehensive income (loss), net of tax effects:
Foreign currency translation adjustments			192,877						(87,933)						(4,815)
Changes in defined benefit plan liabilities			(5,846)						(239)						1,566
Unrealized losses on derivatives designated as hedging instruments			—						(7,038)						—
Reclassification of losses on derivatives designated as hedging instruments			607						—						—
Unrealized gains (losses) on investments			1,005						(484)						132
Total other comprehensive income (loss), net of tax effects			188,643						(95,694)						(3,117)
Comprehensive income			$	1,297,531					$	959,790					$	1,038,027

See notes to consolidated financial statements.

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CADENCE DESIGN SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the three fiscal years ended December 31, 2025

(In thousands)

			Common Stock
									Par Value																		Accumulated
									and Capital																		Other
									in Excess						Treasury						Retained						Comprehensive
			Shares						of Par						Stock						Earnings						Income (Loss)						Total
Balance, December 31, 2022			272,675						$	2,765,673					$	(3,824,163)					$	3,895,240					$	(91,637)					$	2,745,113
Net income			—						—						—						1,041,144						—						$	1,041,144
Other comprehensive loss, net of taxes			—						—						—						—						(3,117)						$	(3,117)
Purchase of treasury stock, including excise tax			(3,145)						—						(641,041)						—						—						$	(641,041)
Equity forward contract			—						1,688						(61,688)						—						—						$	(60,000)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures			2,704						97,050						35,907						—						—						$	132,957
Stock received for payment of employee taxes on vesting of restricted stock			(528)						(23,058)						(113,338)						—						—						$	(136,396)
Stock-based compensation expense			—						325,611						—						—						—						$	325,611
Balance, December 31, 2023			271,706						$	3,166,964					$	(4,604,323)					$	4,936,384					$	(94,754)					$	3,404,271
Net income			—						—						—						1,055,484						—						$	1,055,484
Other comprehensive loss, net of taxes			—						—						—						—						(95,694)						$	(95,694)
Purchase of treasury stock			(1,930)						—						(550,026)						—						—						$	(550,026)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures			3,035						154,233						50,004						—						—						$	204,237
Issuance of common stock in a business combination			1,741						501,824						—						—						—						$	501,824
Stock received for payment of employee taxes on vesting of restricted stock			(701)						(32,503)						(205,234)						—						—						$	(237,737)
Stock-based compensation expense			—						391,219						—						—						—						$	391,219
Balance, December 31, 2024			273,851						$	4,181,737					$	(5,309,579)					$	5,991,868					$	(190,448)					$	4,673,578
Net income			—						—						—						1,108,888						—						$	1,108,888
Other comprehensive income, net of taxes			—						—						—						—						188,643						$	188,643
Purchase of treasury stock, including excise tax			(3,165)						—						(928,162)						—						—						$	(928,162)
Issuance of common stock and reissuance of treasury stock under equity incentive plans, net of forfeitures			1,477						138,723						7,178						—						—						$	145,901
Stock received for payment of employee taxes on vesting of restricted stock			(364)						(56,192)						(113,650)						—						—						$	(169,842)
Stock-based compensation expense			—						455,175						—						—						—						$	455,175
Balance, December 31, 2025			271,799						$	4,719,443					$	(6,344,213)					$	7,100,756					$	(1,805)					$	5,474,181

See notes to consolidated financial statements.

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CADENCE DESIGN SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three fiscal years ended December 31, 2025

(In thousands)

			2025						2024						2023
Cash and cash equivalents at beginning of year			$	2,644,030					$	1,008,152					$	882,325
Cash flows from operating activities:
Net income			1,108,888						1,055,484						1,041,144
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			227,828						196,935						145,292
Stock-based compensation			455,175						391,219						325,611
Gain on divestitures and investments, net			(69,089)						(49,593)						(34,602)
Deferred income taxes			66,048						(128,737)						(36,512)
ROU asset amortization and change in operating lease liabilities			6,016						(1,920)						451
Other non-cash items			7,166						6,138						6,570
Changes in operating assets and liabilities, net of effect of acquired businesses:
Receivables			(274,894)						(180,287)						(11,748)
Inventories			(91,029)						(82,771)						(65,895)
Prepaid expenses and other			43,382						(81,529)						39,015
Other assets			(18,569)						11,866						(45,784)
Accounts payable and accrued liabilities			184,897						33,676						5,415
Deferred revenue			69,411						66,478						(21,583)
Other long-term liabilities			13,551						23,592						1,802
Net cash provided by operating activities			1,728,781						1,260,551						1,349,176
Cash flows from investing activities:
Purchases of investments			(40,895)						(4,982)						(176,170)
Proceeds from the sale and maturity of investments			140,281						47,980						64,775
Proceeds from the sale of IP and other assets			11,500						—						—
Purchases of property, plant and equipment			(141,871)						(142,542)						(102,337)
Purchases of intangible assets			—						—						(166)
Cash paid in business combinations, net of cash acquired			(429,538)						(737,574)						(198,351)
Net cash used for investing activities			(460,523)						(837,118)						(412,249)
Cash flows from financing activities:
Proceeds from revolving credit facility			—						—						50,000
Payments on revolving credit facility			—						—						(150,000)
Proceeds from the issuance of debt			—						3,196,595						—
Payments of debt			—						(1,350,000)						—
Payments of debt issuance costs			—						(23,828)						—
Proceeds from issuance of common stock			145,901						204,237						132,957
Stock received for payment of employee taxes on vesting of restricted stock			(169,842)						(237,737)						(136,396)
Payments for repurchases of common stock			(925,034)						(550,026)						(700,134)
Net cash provided by (used for) financing activities			(948,975)						1,239,241						(803,573)
Effect of exchange rate changes on cash and cash equivalents			38,004						(26,796)						(7,527)
Increase in cash and cash equivalents			357,287						1,635,878						125,827
Cash and cash equivalents at end of year			$	3,001,317					$	2,644,030					$	1,008,152
Supplemental cash flow information:
Cash paid for interest			$	111,951					$	43,219					$	34,934

See notes to consolidated financial statements.

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CADENCE DESIGN SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three fiscal years ended December 31, 2025

NOTE 1. BUSINESS OVERVIEW

Cadence® is a global market leader that develops computational, AI-driven software, accelerated hardware, and IP solutions for engineers and scientists to bring new and innovative products to life. The world’s most innovative technology companies use Cadence solutions and services to deliver transformational products to multiple industries that drive the global economy. The products these companies develop are some of the most complex systems in the world. Since its inception, Cadence has been at the forefront of technology innovation with its customers, helping them solve their most complex challenges in the semiconductor and electronic systems industries to unlock limitless opportunities.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of Cadence and its subsidiaries after elimination of intercompany accounts and transactions. All consolidated subsidiaries are wholly owned by Cadence. Certain prior year information has been reclassified to conform to the current year presentation.

Cadence’s fiscal year end is December 31, and its fiscal quarters end on March 31, June 30, and September 30.

Use of Estimates

Preparation of the consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Recently Adopted Accounting Standards

Income Taxes

In December 2023, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” (“ASU 2023-09”) which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures. Cadence adopted this ASU prospectively during fiscal 2025. See Note 8 in the notes to the consolidated financial statements for further details.

New Accounting Standards Not Yet Adopted

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,” which requires additional disclosure of certain costs and expenses in the notes to the financial statements. The updated standard is effective for annual periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027. Early adoption is permitted and will be applied prospectively with the option for retrospective application. Cadence is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

Measurements of Credit Losses for Accounts Receivable and Contract Assets

In July 2025, the FASB issued ASU No. 2025-05, “Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses for Accounts Receivable and Contract Assets.” This ASU provides a practical expedient that allows entities to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset when estimating expected credit losses for current accounts receivable and current contract assets. This standard is effective for annual and interim periods beginning after December 15, 2025. Cadence does not expect the adoption of this ASU to have a material impact on its consolidated financial statements and disclosures.

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Accounting for Internal-Use Software

In September 2025, the FASB issued ASU No. 2025‑06, “Intangibles—Goodwill and Other—Internal‑Use Software (Subtopic 350‑40): Simplifying the Accounting for Internal‑Use Software.” The updated guidance changes the capitalization criteria for internal‑use software by replacing the existing stage‑based model with a principles‑based approach focused on the point at which management authorizes the software project, funding is approved, and it is probable that the software will be completed and used as intended. Costs that do not directly relate to the development of internal‑use software, such as training, data conversion, and ongoing maintenance, will continue to be expensed as incurred. This standard is effective for annual and interim periods beginning after December 15, 2026, and interim periods within those fiscal years. Early adoption is permitted and the standard will be applied prospectively. Cadence does not expect the adoption of this ASU to have a material impact on its consolidated financial statements or disclosures.

Interim Reporting

In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270) Narrow-Scope Improvements,” which provides clarifications intended to improve the consistency and usability of interim disclosure requirements, including a comprehensive listing of required interim disclosures and a new disclosure principle for reporting material events occurring after the most recent annual period. The amendments do not change the underlying objectives of interim reporting but are designed to enhance clarity in application. The guidance is effective for annual and interim periods beginning after December 15, 2027. Cadence is currently evaluating the impact of adopting this ASU on its consolidated financial statements and disclosures.

Foreign Operations

Cadence transacts business in various foreign currencies. The United States dollar is the functional currency of Cadence’s consolidated entities operating in the United States and certain of its consolidated subsidiaries operating outside the United States. The functional currency for Cadence’s other consolidated entities operating outside of the United States is generally the country’s local currency.

Cadence translates the financial statements of consolidated entities whose functional currency is not the United States dollar into United States dollars. Cadence translates assets and liabilities at the exchange rate in effect as of the financial statement date and translates income statement accounts using an average exchange rate for the period. Cadence includes adjustments from translating assets and liabilities into United States dollars, and the effect of exchange rate changes on intercompany transactions of a long-term investment nature in stockholders’ equity as a component of accumulated other comprehensive income. Cadence reports gains and losses from foreign exchange rate changes related to intercompany receivables and payables that are not of a long-term investment nature, as well as gains and losses from foreign currency transactions of a monetary nature in other income (expense), net, in the consolidated income statements.

Concentrations of Credit Risk

Financial instruments, including derivative financial instruments, that may potentially subject Cadence to concentrations of credit risk, consist principally of cash and cash equivalents, accounts receivable, investments and forward contracts. Credit exposure related to Cadence’s foreign currency forward contracts is limited to the realized and unrealized gains on these contracts.

Cash and Cash Equivalents

Cadence considers all highly liquid investments with original maturities of three months or less on the date of purchase to be cash equivalents.

Receivables

Cadence’s receivables, net includes invoiced accounts receivable and the current portion of unbilled receivables. Unbilled receivables represent amounts Cadence has recorded as revenue for which payments from a customer are due over time and Cadence has an unconditional right to the payment. Cadence’s accounts receivable and unbilled receivables were initially recorded at the transaction value. Cadence’s long-term receivables balance includes receivable balances to be invoiced more than one year after each balance sheet date.

Allowances for Doubtful Accounts

Cadence assesses its ability to collect outstanding receivables and provides customer-specific allowances, allowances for credit losses and general allowances for the portion of its receivables that are estimated to be uncollectible. The allowances are based on the current creditworthiness of its customers, historical experience, expected credit losses, changes in customer demand and the overall economic climate in the industries that Cadence serves. Provisions for these allowances are recorded in general and administrative expense in Cadence’s consolidated income statements.

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Inventories

Inventories are computed at standard costs which approximate actual costs and are valued at the lower of cost or net realizable value based on the first-in, first-out method. Cadence’s inventories include high technology parts and components for complex accelerated hardware systems. These parts and components are specialized in nature and may be subject to rapid technological obsolescence. While Cadence has programs to manage the required inventories on hand and considers technological obsolescence when estimating required reserves to reduce recorded amounts to market values, it is reasonably possible that such estimates could change in the near term. Cadence’s policy is to reserve for inventory in excess of future demand forecasts or for other known obsolescence or realization issues. Provisions for obsolescence reserves are recorded as a component of cost of product and maintenance in Cadence’s consolidated income statements.

Property, Plant and Equipment

Property, plant and equipment is stated at historical cost. Depreciation and amortization are generally provided over the estimated useful lives, using the straight-line method, as follows:

Equipment and internal-use software			2-7 years
Buildings			25-32 years
Leasehold improvements			Shorter of the lease term or the estimated useful life
Building improvements and land improvements			Up to 32 years
Furniture and fixtures			3-5 years

Cadence capitalizes certain costs of software developed for internal use. Capitalization of software developed for internal use begins at the application development phase of the project. Amortization begins when the computer software is substantially complete and ready for its intended use. Amortization is recorded on a straight-line basis over the estimated useful life. Capitalized costs were not material during fiscal 2025, 2024 or 2023.

Cadence recorded depreciation and amortization expense of $111.4 million, $96.9 million and $78.4 million during fiscal 2025, 2024 and 2023, respectively, for property, plant and equipment.

Software Development Costs

Software development costs are capitalized beginning when a product’s technological feasibility has been established by completion of a working model of the product and amortization begins when a product is available for general release to customers. The period between the achievement of technological feasibility and the general release of Cadence’s products has typically been of short duration. Costs incurred during fiscal 2025, 2024 and 2023 were not material.

Deferred Sales Commissions

Cadence records an asset for the incremental costs of obtaining a contract with a customer, including direct sales commissions that are earned upon execution of the contract. Cadence uses the portfolio method to recognize the amortization expense related to these capitalized costs related to initial contracts and renewals and such expense is recognized over a period associated with the revenue of the related portfolio, which is generally two to three years for Cadence’s software arrangements and upon delivery for its hardware and IP arrangements. Incremental costs related to initial contracts and renewals are amortized over the period of the arrangement in each case because Cadence pays the same commission rate for both new contracts and renewals. Deferred sales commissions are tested for impairment on an ongoing basis when events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment is recognized to the extent that the amount of deferred sales commission exceeds the remaining expected gross margin (remaining revenue less remaining direct costs) on the goods and services to which the deferred sales commission relates. Total capitalized costs were $53.1 million and $51.9 million as of December 31, 2025, and December 31, 2024, respectively, and are included in other assets in Cadence’s consolidated balance sheets. Amortization of these assets was $50.0 million, $47.6 million and $41.4 million during fiscal 2025, 2024 and 2023, respectively, and is included in sales and marketing expense in Cadence’s consolidated income statements.

Goodwill

Cadence conducts a goodwill impairment analysis annually and as necessary if changes in facts and circumstances indicate that the fair value of Cadence’s single reporting unit may be less than its carrying amount. To assess for impairment, Cadence compares the estimated fair value of its single reporting unit to the carrying value of the reporting unit’s net assets, including goodwill. If the fair value of the reporting unit is greater than the carrying value of its net assets, goodwill is not considered to be impaired, and no further analysis is required. If the fair value of the reporting unit is less than the carrying value of its net assets, Cadence would be required to record an impairment charge.

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Long-Lived Assets, Including Acquired Intangibles

Cadence’s long-lived assets consist of property, plant and equipment, and acquired intangibles. Acquired intangibles consist of acquired technology, certain contract rights, customer relationships, trademarks and trade names, capitalized software, and in-process research and development. These acquired intangibles are acquired through business combinations or direct purchases. Acquired intangibles with definite lives are amortized on a straight-line basis over the estimated economic life of the underlying products and technologies, which range from one year to fifteen years. Acquired intangibles with indefinite lives, or in-process technology, consists of projects that had not reached technological feasibility by the date of acquisition. Upon completion of the project, the assets are amortized over their estimated useful lives. If the project is abandoned rather than completed, the asset is written off. In-process technology is tested for impairment annually and as necessary if changes in facts and circumstances indicate that the assets might be impaired.

Cadence reviews its long-lived assets, including acquired intangibles, for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset or asset group may not be recoverable. Recoverability of an asset or asset group is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset or asset group is expected to generate. If it is determined that the carrying amount of an asset group is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset or asset group exceeds its fair value.

Leases

Lessee Considerations

Cadence has operating leases primarily consisting of facilities with remaining lease terms of approximately one year to thirteen years. Cadence has options to terminate many of its leases early. The lease term represents the period up to the early termination date unless it is reasonably certain that Cadence will not exercise the early termination option. For certain leases, Cadence has options to extend the lease term for additional periods ranging from one year to ten years. Renewal options are not considered in the remaining lease term unless it is reasonably certain that Cadence will exercise such options.

At inception of a contract, Cadence determines an arrangement contains a lease if the arrangement conveys the right to use an identified asset and Cadence obtains substantially all of the economic benefits from the asset and has the ability to direct the use of the asset. Leases with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed after the adoption of ASU 2016-02, “Leases (Topic 842),” Cadence combines the lease and non-lease components in determining the lease liabilities and right-of-use (“ROU”) assets. Non-lease components primarily include common-area maintenance and other management fees.

Operating lease expense is generally recognized evenly over the term of the lease. Payments under Cadence’s lease agreements are primarily fixed; however, certain agreements contain rental payments that are adjusted periodically based on changes in consumer price and other indices. Changes to payments resulting from changes in indices are expensed as incurred and not included in the measurement of lease liabilities and ROU assets. Cadence’s lease agreements do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. The incremental borrowing rate represents a comparable rate to borrow on a collateralized basis over a similar term and in the economic environment where the leased asset is located.

Lessor Considerations

Although most of Cadence’s revenue from its hardware business comes from sales of hardware, Cadence also leases its hardware products to some customers. Cadence determines the existence of a lease when the customer controls the use of the identified hardware for a period of time defined in the lease agreement.

Cadence’s leases range in duration up to three years with payments generally collected in equal quarterly installments. Cadence’s leases do not include termination rights or variable pricing and typically do not include purchase rights at the end of the lease. Short-term leases are usually less than two years and are classified as operating leases with revenue recognized and depreciation expensed on a straight-line basis over the term of the lease. Long-term leases are typically for three years and are classified as sales-type leases with revenue and cost of sales recognized upon installation.

Cadence’s operating leases and sales-type leases contain both lease and non-lease components. Because the pattern of revenue recognition is the same for both the lease and non-lease components in Cadence’s operating leases, Cadence has elected the practical expedient to not separate lease and related non-lease components and accounts for both components under Topic 842. Cadence allocates value to the lease and non-lease components in its sales-type leases using standalone selling prices (“SSPs”) similar to those used under ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” the current accounting standard governing revenue recognition. When Cadence leases its hardware in the same arrangement as software or IP, Cadence allocates value to each performance obligation using SSPs.

Investments in Equity Securities

Cadence’s investments in marketable equity securities are carried at fair value as a component of prepaid expenses and other in the consolidated balance sheets. Cadence records realized and unrealized holding gains or losses as part of other income (expense), net in the consolidated income statements.

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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, the 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, the 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 Hexagon Smart Solutions AB and the Registrant 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
10.4*						Form of Restricted Stock Unit Agreement, as currently in effect under the Registrant's 1995 Directors 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						Form 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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10.11*						Form 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
10.12*						Form 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
10.13*						Form of Performance-Based Restricted Stock Unit (PSU) Agreement for Executives with Relative Total Shareholder Return (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
10.15*						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
10.17*						The Registrant’s 2009 Deferred Compensation Plan, as amended and restated on February 5, 2019.						10-K						000-15867						10.26						2/24/2020
10.18*						The Registrant’s Senior Executive Bonus Plan.						8-K						000-15867						10.01						2/8/2019
10.19*						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
10.23						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
10.24						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
10.25						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
10.26						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
10.27						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
10.28						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
10.29						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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10.30						Plea 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
10.31						Settlement Agreement, dated July 27, 2025, by and between the Registrant and the Bureau of Industry and Security, U.S. Department of Commerce.						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.