CADENCE DESIGN SYSTEMS INC
For the period ended Jun 30, 2025. Filed Jul 30, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Jul 30, 2025
CDNS$319.92+2.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-04-30.
0000813672-25-000051
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-07-30.
0000813672-25-000113
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 116 previous paragraphs and 134 current paragraphs.
67 unchanged; 48 reworded; 15 added; 0 removed; 1 previous and 4 current paragraphs rearranged.
Tables are not compared: 21 previous and 26 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
As used in this Quarterly Report on Form 10-Q, “we,” “us,” “our company” and "Cadence” mean Cadence Design Systems, Inc. and our subsidiaries, unless the context indicates or requires otherwise.
Current report
As previously reported, on May 23, 2025, BIS informed us that a license was required for the export, re-export or in-country transfer of EDA software and technology classified under Export Control Classification Numbers (ECCNs) 3D991 and 3E991 on the Commerce Control List (“EDA Software and Technology”), when a party to the transaction is located in China or is a Chinese “military end user” wherever located. On July 2, 2025, BIS informed us that the license requirements set forth in the May 23, 2025 letter from BIS were rescinded effective immediately. During this period, our revenue in China decreased primarily due to reduced deliveries of software offerings to our customers in China due to these license requirements. We have since restored access to EDA Software and Technology for affected customers in accordance with these updated U.S. export regulations.
Current report
•A loss related to a contingent liability; and
Current report
During the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, revenue in China decreased primarily due to decreased deliveries of software offerings to our customers in China resulting from the export license requirements temporarily imposed by BIS on EDA Software and Technology from May 23, 2025 to July 2, 2025.
Current report
During the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, revenue in China increased primarily due to demand for our hardware offerings, partially offset by decreased deliveries of software offerings to our customers in China due to the export license requirement temporarily imposed by BIS on EDA Software and Technology.
Current report
During the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, revenue growth in Japan was primarily driven by continued customer demand for our software product offerings.
Current report
Salary, benefits and other employee-related costs and stock-based compensation included in general and administrative expense increased during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to additional headcount from acquisitions.
Current report
Loss Related to Contingent Liability
Current report
During the three and six months ended June 30, 2025, we recognized a loss related to a contingent liability. For additional information relating to this matter, see Note 14 in the notes to condensed consolidated financial statements.
Current report
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. 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. We intend to recognize the fiscal 2025 tax effects of the OBBBA in our provision for income taxes for the period ending September 30, 2025. We are currently assessing the tax impact of the legislation; however, we do not currently expect the OBBBA to materially impact our fiscal 2025 effective tax rate.
Current report
Cash Flows From (Used for) Financing Activities
Current report
Cash Payments for Income Taxes
Current report
On July 4, 2025, the OBBBA was enacted in the United States. The OBBBA included the restoration of the immediate expensing of United States research and development costs starting in fiscal 2025. We currently estimate that the legislation will decrease our remaining fiscal 2025 cash tax payments by approximately $140 million.
Current report
Settlement Payments
Current report
As part of our settlements with BIS and the DOJ described in Note 14 in the notes to condensed consolidated financial statements and elsewhere in this Quarterly Report, we have agreed to pay BIS and the DOJ aggregate net penalties and forfeitures of $140.6 million during the fiscal quarter ending September 30, 2025.
Reworded paragraphs (48)
Previous wording
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (our “Annual Report”). This Quarterly Report contains statements that are not historical in nature, are predictive, or that depend upon or refer to future events or conditions or contain other forward-looking statements. Statements including, but not limited to, statements regarding the extent, timing and mix of future revenues and customer demand; the deployment of our products and services; the impact of the macroeconomic and geopolitical environment, including but not limited to, expanded trade controls, tariffs, conflicts around the world, volatility in foreign currency exchange rates, inflation and changes in interest rates; the impact of government actions; future costs, expenses, tax rates and uses of cash; pending legal, administrative and tax proceedings; restructuring actions and associated charges and benefits; pending acquisitions, the accounting for acquisitions and integration of acquired businesses; and other statements using words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and “would,” and words of similar import and the negatives thereof, constitute forward-looking statements. These statements are predictions based upon our current expectations about future events. Actual results could vary materially as a result of certain factors, including, but not limited to, those expressed in these statements. We refer you to the “Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” and “Liquidity and Capital Resources” sections contained in this Quarterly Report, the "Risk Factors" section contained in our Annual Report, and the risks discussed in our other Securities and Exchange Commission (“SEC”) filings, which identify important risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.
Current wording
The following discussion should be read in conjunction with the condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q (this “Quarterly Report”) and in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (our “Annual Report”). This Quarterly Report contains statements that are not historical in nature, are predictive, or that depend upon or refer to future events or conditions or contain other forward-looking statements. Statements including, but not limited to, statements regarding the extent, timing and mix of future revenues and customer demand; the deployment of our products and services; the impact of the macroeconomic and geopolitical environment, including but not limited to, expanded trade controls, tariffs, conflicts around the world, volatility in foreign currency exchange rates, inflation and changes in interest rates; the impact of government actions; future costs, expenses, tax rates and uses of cash; pending legal, administrative and tax proceedings, including our settlements with BIS and the DOJ and ongoing obligations; restructuring actions and associated charges and benefits; pending acquisitions, the accounting for acquisitions and integration of acquired businesses; and other statements using words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “plans,” “projects,” “should,” “targets,” “will” and “would,” and words of similar import and the negatives thereof, constitute forward-looking statements. These statements are predictions based upon our current expectations about future events. Actual results could vary materially as a result of certain factors, including, but not limited to, those expressed in these statements. We refer you to the “Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk,” and “Liquidity and Capital Resources” sections contained in this Quarterly Report, the "Risk Factors" section contained in our Annual Report and this Quarterly Report, and the risks discussed in our other Securities and Exchange Commission (“SEC”) filings, which identify important risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.
Previous wording
Our customers include semiconductor companies that design and manufacture semiconductor devices and systems companies that design and manufacture products containing many different types of semiconductors, which they either make themselves or buy from a semiconductor company. Semiconductors, also referred to as integrated circuits (“ICs”), or chips, are the heart of almost every industry. Semiconductors are the catalyst for innovation in many industries including automotive, aerospace, biotech, hyperscale and cloud computing, data centers, telecommunications, medical technology, industrial internet of things (“IIoT”), and AI. They are found in a wide variety of consumer products such as cell phones, automobiles, computers, home appliances, home security, drones, and home entertainment systems.
Current wording
Our customers include semiconductor companies that design and manufacture semiconductor devices and systems companies that design and manufacture products containing many different types of semiconductors, which they either make themselves or buy from a semiconductor company. Semiconductors, also referred to as integrated circuits (“ICs”), or chips, are at the heart of almost every major industry. Semiconductors are the catalyst for innovation in many industries including automotive, aerospace, biotech, hyperscale and cloud computing, data centers, telecommunications, medical technology, industrial internet of things (“IIoT”), and AI. They are found in a wide variety of consumer products such as cell phones, automobiles, computers, home appliances, home security, drones, and home entertainment systems.
Previous wording
During the second quarter of fiscal 2024, we completed our acquisition of BETA CAE Systems International AG (“BETA CAE”), a system analysis platform provider of multi-domain, engineering simulation solutions. For the three months ended March 31, 2025, revenue associated with contracts assumed with our acquisition of BETA CAE is primarily classified as product and maintenance revenue in our System Design and Analysis product category, and cost of revenue associated with these contracts is primarily classified as cost of product and maintenance in our condensed consolidated income statements.
Current wording
During the second quarter of fiscal 2024, we completed our acquisition of BETA CAE Systems International AG (“BETA CAE”), a system analysis platform provider of multi-domain, engineering simulation solutions. For the three and six months ended June 30, 2025, revenue associated with contracts assumed with our acquisition of BETA CAE was primarily classified as product and maintenance revenue in our System Design and Analysis product category, and cost of revenue associated with these contracts was primarily classified as cost of product and maintenance in our condensed consolidated income statements.
Previous wording
We have been impacted by the continued expansion of trade control laws and regulations, including certain export control restrictions concerning advanced node IC production in China, the inclusion of additional Chinese technology companies on the Bureau of Industry and Security “Entity List” and regulations governing the sale of certain technologies. Based on our current assessments, we expect the impact of these expanded trade control laws and regulations on our business to be limited.
Current wording
Trade control laws and regulations have expanded over the past several years, including through the imposition of certain export control restrictions concerning advanced node IC production in China, the inclusion of additional Chinese technology companies on the Bureau of Industry and Security (“BIS”) “Entity List” and the issuance of new regulations governing the sale of certain technologies. Based on our current assessments, the impact of these expanded trade control laws and regulations on our business has been limited.
Previous wording
While our business model provides some resilience against these factors, we will continue to monitor the direct and indirect impacts of these or similar circumstances on our business and financial results. For additional information on the potential impact of macroeconomic and geopolitical conditions on our business, see the “Risk Factors” section in our Annual Report. For additional information on the potential impact of foreign currency exchange rates and interest rates on our business, see the “Quantitative and Qualitative Disclosures About Market Risk” section of this Quarterly Report.
Current wording
While our business model provides some resilience against these factors, we will continue to monitor the direct and indirect impacts of these or similar circumstances on our business and financial results. For additional information on the potential impact of macroeconomic and geopolitical conditions on our business, see the “Risk Factors” section in our Annual Report and this Quarterly Report. For additional information on the potential impact of foreign currency exchange rates and interest rates on our business, see the “Quantitative and Qualitative Disclosures About Market Risk” section of this Quarterly Report.
Previous wording
Financial results for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, reflect the following:
Current wording
Financial results for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, reflect the following:
Previous wording
•Growth in revenue from our software, hardware and IP offerings;
Current wording
•Growth in revenue from our hardware, software and IP offerings;
Previous wording
•Continued investment in research and development activities and technical sales support, including headcount from acquisitions; and
Current wording
•Continued investment in research and development activities and technical sales support, including headcount from acquisitions;
Previous wording
Recurring revenue includes revenue recognized over time from our software licensing arrangements, services, royalties, maintenance on IP licenses and hardware products, and operating leases of hardware. Recurring revenue also includes revenue recognized at varying points in time over the term of other arrangements with non-cancelable commitments, whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of products.
Current wording
Recurring revenue includes revenue recognized over time from certain of our software licensing arrangements, services, royalties, maintenance on IP licenses and hardware, and operating leases of hardware. Other recurring revenue includes revenue recognized at a point in time for certain short-term software arrangements that are typically renewed at least annually and revenue recognized at varying points in time over the term of other arrangements with non-cancelable commitments, whereby the 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.
Previous wording
The remainder of our revenue is recognized at a point in time and is characterized as up-front revenue. Up-front revenue is primarily generated by our sales of hardware products, individual IP licenses and certain software licenses. The percentage of our recurring and up-front revenue and fluctuations in revenue within our geographies in any single fiscal period are primarily impacted by delivery of hardware and IP products to our customers.
Current wording
The remainder of our revenue is recognized at a point in time and is characterized as up-front revenue. Up-front revenue is primarily generated by our sales of hardware products, individual IP licenses and certain software licenses with a term greater than one year. The percentage of our recurring and up-front revenue and fluctuations in revenue within our geographies in any single fiscal period are primarily impacted by delivery of hardware and IP products to our customers.
Previous wording
The following table shows the percentage of our revenue that is classified as recurring or up-front for the three months ended March 31, 2025 and March 31, 2024:
Current wording
The following table shows the percentage of our revenue that is classified as recurring or up-front for the three and six months ended June 30, 2025 and June 30, 2024:
Previous wording
Product and maintenance revenue increased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to growth in revenue from our software, hardware and IP product offerings as a result of existing customers' continued investment in complex designs for their products.
Current wording
Product and maintenance revenue increased during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to growth in revenue from our software, hardware and IP product offerings as a result of existing customers' continued investment in complex designs for their products.
Previous wording
Services revenue increased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to increased revenue from our IP service offerings. Services revenue may fluctuate from period to period based on the timing of fulfillment of our services and IP performance obligations.
Current wording
Services revenue increased during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to increased revenue from our IP service offerings. Services revenue may fluctuate from period to period based on the timing of fulfillment of our services and IP performance obligations.
Previous wording
No single customer accounted for 10% or more of total revenue during the three months ended March 31, 2025 or March 31, 2024.
Current wording
No single customer accounted for 10% or more of total revenue during the three and six months ended June 30, 2025 or June 30, 2024.
Previous wording
During the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, demand for our software product offerings contributed to growth in each geography. In addition, growth from our hardware and IP product offerings contributed to increased revenue in the United States.
Current wording
During the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, demand for our hardware and software product offerings contributed to revenue growth in the United States, Other Americas, Other Asia and EMEA.
Previous wording
The changes in product and maintenance-related costs for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, were due to the following:
Current wording
The changes in product and maintenance-related costs for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, were due to the following:
Previous wording
Costs associated with our hardware products include components, assembly, testing, applicable reserves and overhead. These costs make our cost of hardware products higher, as a percentage of revenue, than our cost of software and IP products. Hardware product costs increased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to increased installations of our hardware products.
Current wording
Costs associated with our hardware products include components, assembly, testing, applicable reserves and overhead. These costs make our cost of hardware products higher, as a percentage of revenue, than our cost of software and IP products. Hardware product costs increased during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to increased installations of our hardware products.
Previous wording
Our operating expenses for the three months ended March 31, 2025 and March 31, 2024 were as follows:
Current wording
Our operating expenses for the three and six months ended June 30, 2025 and June 30, 2024 were as follows:
Previous wording
Our operating expenses, as a percentage of total revenue, for the three months ended March 31, 2025 and March 31, 2024 were as follows:
Current wording
Our operating expenses, as a percentage of total revenue, for the three and six months ended June 30, 2025 and June 30, 2024 were as follows:
Previous wording
The increase in marketing and sales expense for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was due to the following:
Current wording
The increase in marketing and sales expense for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, was due to the following:
Previous wording
Salary, benefits and other employee-related costs and stock-based compensation included in marketing and sales expense increased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to our continued investment in attracting and retaining talent dedicated to technical sales support, including additional headcount from acquisitions. We expect to continue attracting and retaining talent dedicated to technical sales support through hiring and acquisitions.
Current wording
Salary, benefits and other employee-related costs and stock-based compensation included in marketing and sales expense increased during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to our continued investment in attracting and retaining talent dedicated to technical sales support, including additional headcount from acquisitions. We expect to continue attracting and retaining talent dedicated to technical sales support through hiring and acquisitions.
Previous wording
The increase in research and development expense for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was due to the following:
Current wording
The increase in research and development expense for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, was due to the following:
Previous wording
Salary, benefits and other employee-related costs and stock-based compensation included in research and development expense increased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to our continued investment in attracting and retaining talent for research and development activities, including additional headcount from acquisitions. Facilities and other infrastructure costs included in research and development expense increased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to our growing workforce. We expect to continue attracting and retaining talent dedicated to research and development activities through hiring and acquisitions.
Current wording
Salary, benefits and other employee-related costs and stock-based compensation included in research and development expense increased during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to our continued investment in attracting and retaining talent for research and development activities, including additional headcount from acquisitions. Facilities and other infrastructure costs included in research and development expense increased during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to our growing workforce. We expect to continue attracting and retaining talent dedicated to research and development activities through hiring and acquisitions.
Previous wording
The decrease in general and administrative expense for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was due to the following:
Current wording
The changes in general and administrative expense for the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, was due to the following:
Previous wording
Professional services decreased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to decreased legal and consulting services associated with acquisition-related activities.
Current wording
Professional services decreased during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to decreased legal and consulting services associated with acquisition-related activities.
Previous wording
Operating margin represents income from operations as a percentage of total revenue. Our operating margin for the three months ended March 31, 2025 and the three months ended March 31, 2024 was as follows:
Current wording
Operating margin represents income from operations as a percentage of total revenue. Our operating margin for the three and six months ended June 30, 2025 and the three and six months ended June 30, 2024 was as follows:
Previous wording
Operating margin increased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to the mix of products and services sold during each respective period.
Current wording
Our operating margin may vary from period to period depending on the mix of products and services sold during each period. During the three and six months ended June 30, 2025, our operating margin decreased, as compared to the three months ended June 30, 2024, primarily due to the recognized loss from a contingent liability. For additional information about the recognized loss, see Note 14 in the notes to condensed consolidated financial statements.
Previous wording
During the three months ended March 31, 2024, our indebtedness was comprised of $350.0 million aggregate principal amount of senior notes that were due October 15, 2024 (the “2024 Senior Notes”) and a $300.0 million three-year senior non-amortizing term loan facility that was due on September 7, 2025 (the “2025 Term Loan”).
Current wording
As of June 30, 2024, our indebtedness was comprised of $350.0 million aggregate principal amount of senior notes that were due October 15, 2024 (the “2024 Notes”), a $300.0 million three-year senior non-amortizing term loan facility that was due on September 7, 2025 (the “2025 Term Loan”) and a $700.0 million two-year senior non-amortizing term loan facility due on May 30, 2026 (the “2026 Term Loan”).
Previous wording
In September 2024, we used a portion of the net proceeds from the New Senior Notes to fully prepay the outstanding principal and accrued interest of the 2025 Term Loan. In October 2024, we settled the outstanding principal of $350.0 million and accrued interest on the 2024 Senior Notes.
Current wording
In September 2024, we used a portion of the net proceeds from the New Senior Notes to fully prepay the outstanding principal and accrued interest of both the 2025 Term Loan and the 2026 Term Loan. In October 2024, we settled the outstanding principal of $350.0 million and accrued interest on the 2024 Notes.
Previous wording
Interest expense increased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to the increased level of debt on our condensed consolidated balance sheet as of March 31, 2025, as compared to March 31, 2024. For additional information relating to our debt arrangements, see Note 4 in the notes to condensed consolidated financial statements.
Current wording
Interest expense increased during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, primarily due to the increased level of debt on our condensed consolidated balance sheet as of June 30, 2025, as compared to June 30, 2024. For additional information relating to our debt arrangements, see Note 4 in the notes to condensed consolidated financial statements.
Previous wording
Other income, net consists primarily of interest earned on cash, cash equivalents and investments in debt securities, realized and unrealized gains and losses from our investments in equity securities of other companies, gains and losses from investments held in the Nonqualified Deferred Compensation (“NQDC”) trust and foreign exchange gains and losses. Other income, net decreased during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to net losses from our investments in equity securities of publicly held companies, offset by increased interest from deposits and a gain on the sale of IP and other assets. For additional information about other income, net, see Note 8 in the notes to condensed consolidated financial statements.
Current wording
Other income, net increased during the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, primarily due to increased interest earned on cash and cash equivalents and a net increase of gains from our investments in equity securities of publicly held companies. Other income, net decreased during the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, primarily due to a net decrease of gains from our investments in equity securities of publicly held companies, partially offset by an increase in interest earned on cash and cash equivalents.
Previous wording
The following table presents the provision for income taxes and the effective tax rate for the three months ended March 31, 2025 and March 31, 2024:
Current wording
The following table presents the provision for income taxes and the effective tax rate for the three and six months ended June 30, 2025 and June 30, 2024:
Previous wording
Our provision for income taxes for the three months ended March 31, 2025 was primarily attributable to federal, state and foreign income taxes on our anticipated fiscal 2025 income. We also recognized tax benefits of $18.6 million related to stock-based compensation that vested or was exercised during the period. The increase in our provision for income taxes during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was primarily attributable to an increase in our earnings.
Current wording
Our provision for income taxes for the three and six months ended June 30, 2025 was primarily attributable to federal, state and foreign income taxes on our anticipated fiscal 2025 income. We also recognized tax benefits of $2.8 million and $21.4 million related to stock-based compensation that vested or was exercised during the respective periods. The increase in our provision for income taxes during the three and six months ended June 30, 2025, as compared to the three and six months ended June 30, 2024, was primarily attributable to an increase in our earnings and nondeductible expenses.
Previous wording
In 2021, the Organisation for Economic Co-operation and Development ("OECD") announced Pillar Two Model Rules which call for the taxation of large multinational corporations, such as Cadence, at a global minimum tax rate of 15%. The currently enacted Pillar Two Model Rules did not have a material impact to our provision for income taxes for the three months ended March 31, 2025.
Current wording
In 2021, the Organisation for Economic Co-operation and Development ("OECD") announced Pillar Two Model Rules which call for the taxation of large multinational corporations, such as Cadence, at a global minimum tax rate of 15%. The currently enacted Pillar Two Model Rules did not have a material impact to our provision for income taxes for the three and six months ended June 30, 2025.
Previous wording
Our provision for income taxes for the three months ended March 31, 2024 was primarily attributable to federal, state and foreign income taxes on our then anticipated fiscal 2024 income. We also recognized tax benefits of $22.8 million related to stock-based compensation that vested or was exercised during the respective periods.
Current wording
Our provision for income taxes for the three and six months ended June 30, 2024 was primarily attributable to federal, state and foreign income taxes on our then anticipated fiscal 2024 income. We also recognized tax benefits of $5.4 million and $28.2 million related to stock-based compensation that vested or was exercised during the respective periods.
Previous wording
Our future effective tax rates may also be materially impacted by tax amounts associated with our foreign earnings at rates different from the United States federal statutory rate, research credits, the tax impact of stock-based compensation, accounting for uncertain tax positions, business combinations, closure of statutes of limitations or settlement of tax audits and changes in tax law. A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland and Hungary. Our future effective tax rates may be adversely affected if our earnings were to be lower in countries where we have lower statutory tax rates relative to earnings in countries where we have higher statutory tax rates. We currently expect that our fiscal 2025 effective tax rate will be approximately 26%. We expect that our quarterly effective tax rates will vary from our fiscal 2025 effective tax rate as a result of recognizing the income tax effects of stock-based awards in the quarterly periods that the awards vest or are settled and other items that we cannot anticipate. For additional discussion about how our effective tax rate could be affected by various risks, see Part I, Item 1A, “Risk Factors,” in our Annual Report.
Current wording
Our future effective tax rates may also be materially impacted by tax amounts associated with our foreign earnings at rates different from the United States federal statutory rate, research credits, the tax impact of stock-based compensation, accounting for uncertain tax positions, business combinations, closure of statutes of limitations or settlement of tax audits and changes in tax law. A significant amount of our foreign earnings is generated by our subsidiaries organized in Ireland and Hungary. Our future effective tax rates may be adversely affected if our earnings were to be lower in countries where we have lower statutory tax rates relative to earnings in countries where we have higher statutory tax rates. We currently expect that our fiscal 2025 effective tax rate will be approximately 28%. We expect that our quarterly effective tax rates will vary from our fiscal 2025 effective tax rate as a result of recognizing the income tax effects of stock-based awards in the quarterly periods that the awards vest or are settled and other items that we cannot anticipate. For additional discussion about how our effective tax rate could be affected by various risks, see Part I, Item 1A, “Risk Factors,” in our Annual Report.
Previous wording
As of March 31, 2025, our principal sources of liquidity consisted of $2,777.7 million of cash and cash equivalents as compared to $2,644.0 million as of December 31, 2024.
Current wording
As of June 30, 2025, our principal sources of liquidity consisted of $2,822.8 million of cash and cash equivalents as compared to $2,644.0 million as of December 31, 2024.
Previous wording
Our primary sources of cash and cash equivalents during the three months ended March 31, 2025 were cash generated from operations and proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the period.
Current wording
Our primary sources of cash and cash equivalents during the six months ended June 30, 2025 were cash generated from operations and proceeds from the issuance of common stock resulting from stock purchases under our employee stock purchase plan and stock options exercised during the period.
Previous wording
Our primary uses of cash and cash equivalents during the three months ended March 31, 2025 were payments related to employee salaries and benefits, repurchases of our common stock, payment of employee taxes on vesting of restricted stock, and purchases of property, plant and equipment.
Current wording
Our primary uses of cash and cash equivalents during the six months ended June 30, 2025 were payments related to repurchases of our common stock, business combinations, payment of employee taxes on vesting of restricted stock, purchases of property, plant and equipment and purchases of investments.
Previous wording
Approximately 33% of our cash and cash equivalents was held by our foreign subsidiaries as of March 31, 2025. Our cash and cash equivalents held by our foreign subsidiaries may vary from period to period due to the timing of collections and repatriation of foreign earnings. We expect that current cash and cash equivalent balances and cash flows that are generated from operations and financing activities will be sufficient to meet the needs of our domestic and international operating activities and other capital and liquidity requirements, including acquisitions, investments and share repurchases, for at least the next 12 months and thereafter for the foreseeable future.
Current wording
Approximately 37% of our cash and cash equivalents was held by our foreign subsidiaries as of June 30, 2025. Our cash and cash equivalents held by our foreign subsidiaries may vary from period to period due to the timing of collections and repatriation of foreign earnings. We expect that current cash and cash equivalent balances and cash flows that are generated from operations and financing activities will be sufficient to meet the needs of our domestic and international operating activities and other capital and liquidity requirements, including acquisitions, investments and share repurchases, for at least the next 12 months and thereafter for the foreseeable future.
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Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
During the second quarter of fiscal 2025, we completed our acquisition of a holding company containing the VLAB Works business (“VLAB Works”). VLAB Works is a leader in virtual models for hardware verification and software development. For the three and six months ended June 30, 2025, revenue associated with contracts assumed with our acquisition of VLAB Works was primarily classified as product and maintenance revenue in our Core EDA product category, and cost of revenue associated with these contracts was primarily classified as cost of product and maintenance in our condensed consolidated income statements.
Current report — wording carried from elsewhere
The following table shows our revenue for the six months ended June 30, 2025 and June 30, 2024 and the change in revenue between periods:
Current report — wording carried from elsewhere
Other income, net consists primarily of interest earned on cash, cash equivalents and investments in debt securities, realized and unrealized gains and losses from our investments in equity securities of other companies, gains and losses from investments held in the Nonqualified Deferred Compensation (“NQDC”) trust and foreign exchange gains and losses.
Current report — wording carried from elsewhere
For additional information about other income, net, see Note 9 in the notes to condensed consolidated financial statements.
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Previous report — wording carried elsewhere
Cash Flows Used for Financing Activities