SAN JOSE, Calif. — July 28, 2025 — Cadence (Nasdaq: CDNS) today announced results for the second quarter of 2025.

•Revenue of $1.275 billion, compared to revenue of $1.061 billion in Q2 2024

•GAAP operating margin of 19.0%, compared to 27.7% in Q2 2024

•GAAP diluted net income per share of $0.59, compared to $0.84 in Q2 2024

•Non-GAAP operating margin of 42.8%, compared to 40.1% in Q2 2024

•Non-GAAP diluted net income per share of $1.65, compared to $1.28 in Q2 2024

•Quarter-end backlog was $6.4 billion and current remaining performance obligations (“cRPO”), contract revenue expected to be recognized as revenue in the next 12 months, was $3.1 billion

•GAAP results include a one-time charge relating to the $140.6 million settlements of our previously disclosed legal proceedings with the U.S. Department of Justice (“DOJ”) and the Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce

“Cadence delivered an exceptional Q2, with 20% year-over-year revenue growth and stronger than expected bookings. This highlighted the strategic relevance of our AI-driven portfolio and the depth of our customer relationships,” said Anirudh Devgan, president and chief executive officer. “The strength and breadth of our products are enabling us to lead through the accelerating waves of the AI Supercycle, from AI infrastructure build-out, to physical AI in autonomous systems, to the emerging frontier of science AI.”

“I am pleased to report that Cadence delivered excellent results for Q2, with broad-based strength across all businesses, more than offsetting the impact of the temporary restrictions on exports to China imposed on May 23rd,” said John Wall, senior vice president and chief financial officer. “We are raising our 2025 revenue outlook to 13% growth year-over-year, and non-GAAP operating margin to 44%.”

Commentary on the second quarter of 2025 financial results by John Wall, senior vice president and chief financial officer, is available at www.cadence.com/cadence/investor_relations.

For fiscal year 2025, the company expects:

•Revenue in the range of $5.21 billion to $5.27 billion

•GAAP operating margin in the range of 28.5% to 29.5%

•Non-GAAP operating margin in the range of 43.5% to 44.5%

•GAAP diluted net income per share in the range of $3.97 to $4.07

•Non-GAAP diluted net income per share in the range of $6.85 to $6.95

•Operating cash flow in the range of $1.65 billion to $1.75 billion

At the midpoint, the $50 million increase in operating cash flow outlook is primarily driven by the $50 million increase in revenue outlook. Cadence anticipates a $140.6 million cash outflow relating to the DOJ and BIS settlements. In addition, Cadence expects to benefit from approximately $140 million in reduced cash tax payments due to the immediate expensing of U.S. R&D expenditures under the One Big Beautiful Bill Act.

The company utilizes a long-term projected non-GAAP tax rate, which reflects currently available information, as well as other factors and assumptions. The non-GAAP tax rate is subject to change for a variety of reasons, including the rapidly evolving global tax environment, significant changes in the company’s geographic earnings mix, or other changes to the company’s strategy or business operations. The company expects to use the current normalized non-GAAP tax rate through fiscal 2025 but will re-evaluate this rate periodically for significant items that may materially affect its projections.

Reconciliations of the financial results and business outlook from GAAP operating margin, GAAP net income and GAAP diluted net income per share to non-GAAP operating margin, non-GAAP net income and non-GAAP diluted net income per share, respectively, are included in this press release.

•Launched Cadence Cerebrus AI Studio, an agentic AI implementation platform delivering up to 20% PPA improvement and 5x to 10x faster chip delivery time.

•Launched Millennium M2000 AI Supercomputer featuring Nvidia Blackwell, delivering AI-accelerated simulation at unprecedented speed and scale across engineering and science workloads.

•Core EDA, comprised of Cadence’s digital, custom / analog and verification businesses, delivered 16% year-over-year revenue growth, driven by further proliferation of Cadence's AI portfolio.

•IP business delivered more than 25% year-over-year revenue growth, driven by product strength and a broadening silicon solutions portfolio.

•System Design & Analysis business achieved 35% year-over-year revenue growth driven by Cadence’s multi-physics analysis platform and AI-driven optimization, which delivered superior results.

Anirudh Devgan, president and chief executive officer, and John Wall, senior vice president and chief financial officer, will host the second quarter 2025 financial results audio webcast today, July 28, 2025, at 2 p.m. (Pacific) / 5 p.m. (Eastern). Attendees are asked to register at the website at least 10 minutes prior to the scheduled webcast. An archive of the webcast will be available starting July 28, 2025 at 5 p.m. (Pacific) and ending September 16, 2025 at 5 p.m. (Pacific). Webcast access is available at www.cadence.com/cadence/investor_relations.

Cadence is a market leader in AI and digital twins, pioneering the application of computational software to accelerate innovation in the engineering design of silicon to systems. Our design solutions, based on Cadence’s Intelligent System Design™ strategy, are essential for the world’s leading semiconductor and systems companies to build their next-generation products from chips to full electromechanical systems that serve a wide range of markets, including hyperscale computing, mobile communications, automotive, aerospace, industrial, life sciences and robotics. In 2024, Cadence was recognized by the Wall Street Journal as one of the world’s top 100 best-managed companies. Cadence solutions offer limitless opportunities—learn more at www.cadence.com.

This press release contains forward-looking statements, including Cadence’s outlook on future operating results, financial condition, strategic objectives, business model and prospects, technology and product developments, backlog, industry trends, market growth, settlements of legal proceedings, tax payments and rates and other statements using words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “will,” and words of similar import and the negatives thereof. Forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control, and which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates and realize the benefits of its investments in research and development, including opportunities presented by AI; (ii) the success of Cadence’s efforts to maintain and improve operational efficiency and growth; (iii) the mix of products and services sold, the timing of orders and deliveries and the ability to develop, install or deliver Cadence’s products or services; (iv) changes in customer demands or supply constraints that could result in delays in purchases, development, installations or deliveries of Cadence’s products or services, including those resulting from consolidation, restructurings and other operational efficiency improvements of Cadence’s customers; (v) economic, geopolitical and industry conditions, including export controls, tariffs, other trade restrictions and other government regulations, as well as rising tensions and armed conflicts around the world; (vi) changes in tax laws, interest rate and currency exchange rate fluctuations, inflation rates, Cadence’s increased debt levels and obligations and Cadence’s ability to access capital and debt markets in the future; (vii) legislative or regulatory requirements; (viii) Cadence’s pending acquisitions which remain subject to certain closing conditions, the acquisition of other companies, businesses or technologies or the failure to successfully integrate and operate them; (ix) potential harm caused by compromises in cybersecurity and cybersecurity attacks; (x) capital expenditure requirements and events that affect cash flow, liquidity or reserves, or estimates Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation, regulatory or other matters; (xi) the effects of any litigation, regulatory, tax or other proceedings to which Cadence is or may become a party or to which Cadence or its products, services, technologies or properties are subject, including the settlements with the DOJ (which is subject to court approval) and BIS, Cadence’s ongoing compliance, cooperation, audit and other obligations under the settlement agreements, any further inquiries or adverse actions by the court, the DOJ, BIS or other U.S. or foreign governmental authorities and any impact of the settlements on Cadence’s operations and business dealings in China, U.S. government contracting business and other customer relationships; and (xii) Cadence’s ability to successfully meet any environmental, social and governance targets and practices. In addition, the timing and amount of Cadence’s repurchases of its common stock are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

All forward-looking statements in this press release are based on management's expectations as of the date of this press release and, except as required by law, Cadence disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with generally accepted accounting principles, or GAAP. Investors are encouraged to review the reconciliation of non-GAAP measures contained within this press release with their most directly comparable GAAP results. Investors are also encouraged to look at the GAAP results as the best measure of financial performance.

To supplement Cadence’s financial results presented on a GAAP basis, Cadence management uses non-GAAP measures that it believes are helpful in understanding Cadence’s performance. One such measure is non-GAAP net income, which is a financial measure not calculated under GAAP. Non-GAAP net income is calculated by Cadence management by taking GAAP net income and excluding, as applicable, amortization of intangible assets, stock-based compensation expense, acquisition and integration-related costs including retention expenses, income or expenses related to investments, divestitures and Cadence’s non-qualified deferred compensation plan, restructuring, loss related to contingent liability and other significant items not directly related to Cadence’s core business operations, and the income tax effect of non-GAAP pre-tax adjustments.

Cadence management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of Cadence’s core business operations and therefore provides supplemental information to Cadence management and investors regarding the performance of the business operations, facilitates comparisons to the historical operating results and allows the review of Cadence's business from the same perspective as Cadence management, including forecasting and budgeting.

The following tables reconcile the specific items excluded from GAAP operating margin, GAAP net income and GAAP net income per diluted share in the calculation of non-GAAP operating margin, non-GAAP net income and non-GAAP net income per diluted share for the periods shown below:

 

Operating Margin Reconciliation						Three Months Ended
						June 30, 2025						June 30, 2024
						(unaudited)
GAAP operating margin as a percent of total revenue						19.0%						27.7%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Stock-based compensation expense						9.3%						8.3%
Amortization of acquired intangibles						1.8%						1.9%
Acquisition and integration-related costs						2.0%						1.9%
Restructuring						0.0%						0.0%
Non-qualified deferred compensation expenses						0.6%						0.2%
Special charges						0.0%						0.1%
Loss related to contingent liability*						10.1%						0.0%
Non-GAAP operating margin as a percent of total revenue						42.8%						40.1%

For more information, please contact:

Cadence Investor Relations

408-944-7100

investor_relations@cadence.com

Cadence Newsroom

408-944-7039

newsroom@cadence.com

 

						June 30, 2025						December 31, 2024
Current assets:
Cash and cash equivalents						$	2,822,762					$	2,644,030
Receivables, net						670,166						680,460
Inventories						226,162						257,711
Prepaid expenses and other						503,453						433,878
Total current assets						4,222,543						4,016,079
Property, plant and equipment, net						482,131						458,200
Goodwill						2,599,798						2,378,671
Acquired intangibles, net						618,952						594,734
Deferred taxes						980,223						982,057
Other assets						605,051						544,741
Total assets						$	9,508,698					$	8,974,482
Current liabilities:
Accounts payable and accrued liabilities						$	766,636					$	632,692
Current portion of deferred revenue						729,929						737,413
Total current liabilities						1,496,565						1,370,105
Long-term liabilities:
Long-term portion of deferred revenue						154,448						115,168
Long-term debt						2,478,145						2,476,183
Other long-term liabilities						373,002						339,448
Total long-term liabilities						3,005,595						2,930,799
Stockholders’ equity						5,006,538						4,673,578
Total liabilities and stockholders’ equity						$	9,508,698					$	8,974,482

 

						Three Months Ended												Six Months Ended
						June 30, 2025						June 30, 2024						June 30, 2025						June 30, 2024
Revenue:
Product and maintenance						$	1,170,510					$	960,457					$	2,281,360					$	1,873,842
Services						104,931						100,224						236,447						195,942
Total revenue						1,275,441						1,060,681						2,517,807						2,069,784
Costs and expenses:
Cost of product and maintenance						139,298						94,363						255,970						169,758
Cost of services						44,869						44,907						95,330						94,709
Marketing and sales						200,595						186,725						403,295						367,314
Research and development						442,057						370,740						881,159						749,698
General and administrative						69,029						63,436						132,127						132,152
Amortization of acquired intangibles						9,204						6,667						18,126						12,074
Loss related to contingent liability						128,545						—						128,545						—
Restructuring						47						(33)						(62)						247
Total costs and expenses						1,033,644						766,805						1,914,490						1,525,952
Income from operations						241,797						293,876						603,317						543,832
Interest expense						(28,948)						(12,905)						(58,066)						(21,597)
Other income, net						67,758						34,739						91,048						103,518
Income before provision for income taxes						280,607						315,710						636,299						625,753
Provision for income taxes						120,556						86,190						202,669						148,590
Net income						$	160,051					$	229,520					$	433,630					$	477,163
Net income per share - basic						$	0.59					$	0.85					$	1.60					$	1.77
Net income per share - diluted						$	0.59					$	0.84					$	1.59					$	1.74
Weighted average common shares outstanding - basic						271,294						270,912						271,633						270,259
Weighted average common shares outstanding - diluted						272,899						273,520						273,264						273,532

 

			2024																														2025
GEOGRAPHY			Q1						Q2						Q3						Q4						Year						Q1						Q2
Americas			46		%				49		%				50		%				49		%				49		%				48		%				49		%
China			12		%				12		%				13		%				13		%				12		%				11		%				9		%
Other Asia			20		%				19		%				17		%				17		%				18		%				19		%				19		%
Europe, Middle East and Africa			17		%				14		%				14		%				15		%				15		%				16		%				16		%
Japan			5		%				6		%				6		%				6		%				6		%				6		%				7		%
Total			100		%				100		%				100		%				100		%				100		%				100		%				100		%

 

			2024																														2025
PRODUCT CATEGORY			Q1						Q2						Q3						Q4						Year						Q1						Q2
Core EDA			76		%				73		%				70		%				68		%				71		%				71		%				71		%
Semiconductor IP			12		%				13		%				14		%				13		%				13		%				14		%				13		%
System Design and Analysis			12		%				14		%				16		%				19		%				16		%				15		%				16		%
Total			100		%				100		%				100		%				100		%				100		%				100		%				100		%

 

						Three Months Ending September 30, 2025						Year Ending December 31, 2025
						Forecast						Forecast
GAAP operating margin as a percent of total revenue						32% - 33%						28.5% - 29.5%
Reconciling items to non-GAAP operating margin as a percent of total revenue:
Stock-based compensation expense						9%						9%
Amortization of acquired intangibles						2%						2%
Acquisition and integration-related costs						2%						2%
Loss related to contingent liability*						0%						2%
Non-GAAP operating margin as a percent of total revenue†						45% - 46%						43.5% - 44.5%

 

						Three Months Ending September 30, 2025						Year Ending December 31, 2025
						Forecast						Forecast
Diluted net income per share on a GAAP basis						$1.14 to $1.20						$3.97 to $4.07
Stock-based compensation expense						0.44						1.69
Amortization of acquired intangibles						0.10						0.37
Acquisition and integration-related costs						0.07						0.31
Non-qualified deferred compensation expenses						—						0.02
Special charges						—						0.01
Loss related to contingent liability*						—						0.47
Other income or expense related to investments, divestitures and non-qualified deferred compensation plan assets						—						(0.16)
Income tax effect of non-GAAP adjustments						—						0.17
Diluted net income per share on a non-GAAP basis†						$1.75 to $1.81						$6.85 to $6.95

 

						Three Months Ending September 30, 2025						Year Ending December 31, 2025
($ in millions)						Forecast						Forecast
Net income on a GAAP basis						$314 to $330						$1,087 to $1,114
Stock-based compensation expense						120						462
Amortization of acquired intangibles						26						101
Acquisition and integration-related costs						20						86
Non-qualified deferred compensation expenses						—						6
Special charges						—						2
Loss related to contingent liability*						—						129
Other income or expense related to investments, divestitures and non-qualified deferred compensation plan assets						—						(43)
Income tax effect of non-GAAP adjustments						—						47
Net income on a non-GAAP basis†						$480 to $496						$1,877 to $1,904

* Fiscal 2020 was a 53-week year, compared to all other years which were 52 week years. 2020 (which impacts the 3 year CAGR in 2023) included approximately $45 million revenue impact for the extra week.

** At midpoint of outlook.

Profitability Trends

(In Millions)			2019						2020						2021						2022						2023						2024									2025E
Revenue*			$	2,336					$	2,683					$	2,988					$	3,562					$	4,090					$	4,641								$	5,240
Revenue Growth*			9%						15%						11%						19%						15%						13%									13%
3-Year Revenue Growth CAGR*			9%						11%						12%						15%						15%						16%									14%
GAAP operating margin*			21.1%						24.1%						26.1%						30.1%						30.6%						29.1%									29.0%
Non-GAAP operating margin*			32.1%						35.2%						37.2%						40.3%						42.0%						42.5%									44.0%
Stock-based compensation			(7.8)%						(7.4)%						(7.0)%						(7.6)%						(8.0)%						(8.4)%									(8.8)%
Non-GAAP operating margin adjusted for stock-based compensation*			24.3%						27.8%						30.2%						32.7%						34.0%						34.1%									35.2%
GAAP operating income			$	492					$	646					$	779					$	1,074					$	1,251					$	1,351								$	1,520
Non-GAAP operating income*			$	749					$	944					$	1,111					$	1,436					$	1,717					$	1,974								$	2,306
Non-GAAP operating income adjusted for stock-based compensation*			$	567					$	747					$	901					$	1,166					$	1,391					$	1,583								$	1,844

* At midpoint of outlook.

*Q2 2025 GAAP results include a one-time charge relating to the $140.6 million settlements of our previously disclosed legal proceedings with the U.S. Department of Justice (“DOJ”) and the Bureau of Industry and Security (“BIS”) of the U.S. Department of Commerce

Backlog

(In Billions)			2021						2022						2023						2024									Q2 2025
Backlog			$	4.4					$	5.8					$	6.0					$	6.8								$	6.4

Revenue

(In Millions)			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Product and Maintenance			$	961					$	1,100					$	1,239					$	1,111								$	1,170
Services			100						115						117						131									105
Total Revenue			$	1,061					$	1,215					$	1,356					$	1,242								$	1,275

Recurring and Up-Front Revenue*

			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Revenue Recognized Over Time			85		%				79		%				72		%				77		%							73		%
Other Recurring Revenue			3		%				4		%				4		%				5		%							5		%
Recurring Revenue			88		%				83		%				76		%				82		%							78		%
Up-Front Revenue			12		%				17		%				24		%				18		%							22		%
Total Revenue			100		%				100		%				100		%				100		%							100		%

*The definition of recurring revenue was updated in Q2 2025. Prior period numbers reflect the updated definition. Other recurring revenue includes revenue recognized at a point in time for 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.

Trailing Twelve Months Recurring and Up-Front Revenue

			Trailing Twelve Months Ended
			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Recurring Revenue			88		%				87		%				84		%				82		%							80		%
Up-Front Revenue			12		%				13		%				16		%				18		%							20		%
Total			100		%				100		%				100		%				100		%							100		%

Revenue Mix by Geography

(% of Total Revenue)			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Americas			49		%				50		%				49		%				48		%							49		%
China			12		%				13		%				13		%				11		%							9		%
Other Asia			19		%				17		%				17		%				19		%							19		%
Europe, Middle East and Africa			14		%				14		%				15		%				16		%							16		%
Japan			6		%				6		%				6		%				6		%							7		%
Total			100		%				100		%				100		%				100		%							100		%

Revenue Mix by Product Category

(% of Total Revenue)			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Core EDA			73		%				70		%				68		%				71		%							71		%
Semiconductor IP			13		%				14		%				13		%				14		%							13		%
System Design and Analysis			14		%				16		%				19		%				15		%							16		%
Total			100		%				100		%				100		%				100		%							100		%

Gross Margin

			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
GAAP Gross Margin			86.9		%				86.6		%				83.8		%				86.5		%							85.6		%
Non-GAAP Gross Margin			88.5		%				88.6		%				85.5		%				88.4		%							87.2		%

Total Costs and Expenses

(In Millions)			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Total GAAP Costs and Expenses			$	767					$	865					$	899					$	881								$	1,034
Total Non-GAAP Costs and Expenses			$	635					$	671					$	733					$	724								$	729

Operating Margin

			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
GAAP Operating Margin			27.7		%				28.8		%				33.7		%				29.1		%							19.0		%
Non-GAAP Operating Margin			40.1		%				44.8		%				46.0		%				41.7		%							42.8		%

Net Income Per Share

			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
GAAP Net Income Per Share			$	0.84					$	0.87					$	1.24					$	1.00								$	0.59
Non-GAAP Net Income Per Share			$	1.28					$	1.64					$	1.88					$	1.57								$	1.65

Total DSO

			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
DSO			49						44						48						44									51

Free Cash Flow

(In Millions)			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Net Cash from Operating Activities			$	156					$	410					$	441					$	487								$	378
Capital Expenditures			29						27						37						23									44
Free Cash Flow			$	127					$	383					$	404					$	464								$	334

Cash and Cash Equivalents

(In Millions)			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Cash and Cash Equivalents			$	1,059					$	2,786					$	2,644					$	2,778								$	2,823

•Approximately 63 percent of our cash and cash equivalents were in the U.S. at quarter-end.

Debt

(In Millions)			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Debt (principal value)			$	1,350					$	2,850					$	2,500					$	2,500								$	2,500

•In September 2024, Cadence issued $2.5 billion of Senior Notes at a weighted average interest rate of 4.44%.

Share Repurchase

(In Millions)			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Share Repurchase			$	125					$	150					$	150					$	350								$	175
Number of Shares			0.423						0.563						0.519						1.361									0.607

Employees

			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
Headcount			12,665						12,703						12,705						12,837									13,152

This CFO Commentary contains forward-looking statements, including Cadence's outlook on future operating results, financial condition, strategic objectives, business model and prospects, technology and product developments, backlog, industry trends, market growth, settlements of legal proceedings, tax payments and rates and other statements using words such as “anticipates,” “believes,” “expects,” “intends,” “plans,” “will,” and words of similar import and the negatives thereof. Forward-looking statements are subject to a number of risks, uncertainties and other factors, many of which are outside Cadence’s control and which may cause actual results to differ materially from expectations expressed or implied in the forward-looking statements, including, among others: (i) Cadence’s ability to compete successfully in the highly competitive industries in which it operates and realize the benefits of its investments in research and development, including opportunities presented by AI; (ii) the success of Cadence’s efforts to maintain and improve operational efficiency and growth; (iii) the mix of products and services sold, the timing of orders and deliveries and the ability to develop, install or deliver Cadence’s products or services; (iv) changes in customer demands or supply constraints that could result in delays in purchases, development, installations or deliveries of Cadence’s products or services, including those resulting from consolidation, restructurings and other operational efficiency improvements of Cadence’s customers; (v) economic, geopolitical and industry conditions, including export controls, tariffs, other trade restrictions and other government regulations, as well as rising tensions and armed conflicts around the world; (vi) changes in tax laws, interest rate and currency exchange rate fluctuations, inflation rates, Cadence’s increased debt levels and obligations and Cadence’s ability to access capital and debt markets in the future; (vii) legislative or regulatory requirements; (viii) Cadence’s pending acquisitions which remain subject to certain closing conditions, the acquisition of other companies, businesses or technologies or the failure to successfully integrate and operate them; (ix) potential harm caused by compromises in cybersecurity and cybersecurity attacks; (x) capital expenditure requirements and events that affect cash flow, liquidity or reserves, or estimates Cadence may take from time to time with respect to accounts receivable, taxes and tax examinations, litigation, regulatory or other matters; (xi) the effects of any litigation, regulatory, tax or other proceedings to which Cadence is or may become a party or to which Cadence or its products, services, technologies or properties are subject, including the settlements with the DOJ (which is subject to court approval) and BIS, Cadence’s ongoing compliance, cooperation, audit and other obligations under the settlement agreements, any further inquiries or adverse actions by the court, the DOJ, BIS or other U.S. or foreign governmental authorities and any impact of the settlements on Cadence’s operations and business dealings in China, U.S. government contracting business and other customer relationships; and (xii) Cadence’s ability to successfully meet any environmental, social and governance targets and practices. In addition, the timing and amount of Cadence’s repurchases of its common stock are subject to business and market conditions, corporate and regulatory requirements, stock price, acquisition opportunities and other factors.

All forward-looking statements in this document are based on management's expectations as of the date of this document and, except as required by law, Cadence disclaims any obligation to update these forward-looking statements to reflect future events or circumstances.

Non-GAAP financial measures should not be considered as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Investors are encouraged to review the reconciliation of non-GAAP financial measures contained within this CFO Commentary with their most directly comparable GAAP financial results. Investors are also encouraged to look at the GAAP results as the best measure of financial performance. See our earnings press release issued today for further discussion of our non-GAAP financial measures, as well as the reconciliation provided in the Appendix to this CFO Commentary.

Cadence’s management uses non-GAAP net income because it excludes items that are generally not directly related to the performance of the company’s core business operations and therefore provides supplemental information to Cadence’s management and investors regarding the performance of the business operations, facilitates comparisons to the historical operating results and allows the review of Cadence’s business from the same perspective as Cadence’s management, including forecasting and budgeting.

Reconciliation of GAAP to Non-GAAP Financial Measures (Unaudited)

Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses

(In Millions)			Q2 2024						Q3 2024						Q4 2024						Q1 2025									Q2 2025
GAAP total costs and expenses			$	767					$	865					$	899					$	881								$	1,034
Reconciling items to non-GAAP total costs and expenses
Stock-based compensation expense			(88)						(109)						(107)						(108)									(118)
Amortization of acquired intangibles			(20)						(27)						(27)						(25)									(24)
Acquisition and integration-related costs			(21)						(29)						(23)						(23)									(26)
Restructuring			—						(25)						1						—									—
Non-qualified deferred compensation (expenses) credits			(2)						(4)						—						2									(8)
Special charges			(1)						—						(2)						(2)									—
Loss related to contingent liability*			—						—						(8)						—									(129)
Non-GAAP total costs and expenses**			$	635					$	671					$	733					$	724								$	729

Reconciliation of GAAP Total Expenses to Non-GAAP Total Expenses

(In Millions)			2019						2020*						2021						2022						2023						2024									2025E
GAAP total costs and expenses			$	1,845					$	2,037					$	2,209					$	2,488					$	2,839					$	3,291								$	3,720
Reconciling items to non-GAAP total costs and expenses
Stock-based compensation expense			(182)						(197)						(210)						(270)						(326)						(391)									(462)
Amortization of acquired intangibles			(53)						(64)						(67)						(60)						(62)						(90)									(101)
Acquisition and integration-related costs			(8)						(23)						(23)						(41)						(56)						(96)									(86)
Restructuring			(9)						(9)						1						—						(11)						(24)									—
Non-qualified deferred compensation (expenses) credits			(5)						(5)						(6)						8						(11)						(11)									(6)
Special charges**			(1)						—						(27)						—						—						(3)									(2)
Loss related to contingent liability***			—						—						—						—						—						(8)									(129)
Non-GAAP total costs and expenses****			$	1,587					$	1,739					$	1,877					$	2,125					$	2,373					$	2,667								$	2,934