Financial Analysis

"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 Hexagons design and engineering business. This acquisition is expected to accelerate Cadences Intelligent System Design strategy by expanding its System Design & Analysis portfolio, building upon Cadences 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 Cadences 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 represen …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

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 Cadences judgments …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

DEBT Cadences 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 N …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

The following table shows the percentage of Cadences 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 % …

DisaggregationOfRevenueTableTextBlock · excerpt; the full note is in the filing

STOCK COMPENSATION PLANS AND STOCK-BASED COMPENSATION Equity Incentive Plans Cadences 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, Cadences 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. Cadences 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 …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

FAIR VALUE Inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Cadences 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 Decembe …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

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 Cadences single reporting unit exceeded the carrying amount of its net assets and that no impairment existed. 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 rela …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

INCOME TAXES Cadences 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 Cadences 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. Cadences consolidated net deferred tax ass …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

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 Cadences 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 Cadences 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 additi …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

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 StatementReporting Comprehensive IncomeExpense 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 disclosure s. 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 Losse …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

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. Cadences 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 Cadences 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 Cadences international subsidiaries sponsor defined benefit retirement plans. The unfunded projected benefit obligation for Cadences defined benefit retirement plans is recorded in other long-term liabilities in the consolidated balance sheets. …

PensionAndOtherPostretirementBenefitsDisclosureTextBlock · excerpt; the full note is in the filing

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 Cadences consolidated income statements. The following table presents activity for Cadences 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 Cadences consolidated balance sheet as of December 31, 2025. Cadence expects to make c …

RestructuringAndRelatedActivitiesDisclosureTextBlock · excerpt; the full note is in the filing

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 Cadences 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 % _____________ * 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 Cadences 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 Cadences 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 Cadences software licensing arrangements, services, royalties, maintenance on IP licenses and ha …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

SEGMENT REPORTING Segment reporting is based on the management approach, following the method that management organizes the companys 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. Cadences chief operating decision maker (CODM) is its CEO. The CODM makes decisions on resource allocation and assesses performance of the business based on Cadences consolidated results, including net income. For additional information on Cadences 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 1 …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

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. Cadences 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 …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

ACQUISITIONS Acquisition of Hexagon Design and Engineering Business On February 23, 2026, Cadence acquired all of the outstanding equity of the design and engineering (D&E) business of Hexagon Smart Solutions AB. The aggregate purchase consideration paid to Hexagon, net of cash acquired of $154.6 million, was $2.9 billion. The aggregate purchase consideration was comprised of $2.2 billion of cash and non-cash consideration of 3.2 million shares of Cadence common stock with an aggregate acquisition date fair value of $902.2 million. This acquisition expands Cadences System Design and Analysis (SD&A) portfolio, building upon its acquisition of BETA CAE in fiscal 2024. The total purchase consideration was allocated to the assets acquired and liabilities assumed with Cadences acquisition of the D&E business based on their respective fair values on the acquisition date as follows: Fair Value (In thousands) Current assets $ 267,711 Goodwill 2,147,191 Acquired intangibles 1,248,000 Other assets 18,317 Total assets acquired 3,681,219 Current liabilities 250,361 Long-term liabilities 329,850 Total liabilities assumed 580,211 Total purchase consideration $ 3,101,008 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 Cadences acquisition of the D …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

COMMITMENTS AND CONTINGENCIES 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 Cadences 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, in July 2025, Cadence reached a settlement with each of BIS and the U.S. Department of Justice (DOJ) that resolved matters relating to export violations that took place between …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

DEBT Revolving Credit Facility In August 2024, Cadence 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 Credit Facility). The 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 Credit Facility expires on August 14, 2029. Any outstanding loans drawn under the 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 Cadences condensed consolidated balance sheet at the inception of the agreement. The debt issuance costs will be amortized to interest expense over the term of the Credit Facility. Interest accrues on borrowings under the Credit Facility at a rate equal to, at Cadences 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 Cadences 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 Cadences unsecured debt. Interest is payable quarterly. A commitment fee ranging from 0.050% …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

The following table shows the percentage of Cadences revenue that is classified as recurring or up-front for the three and six months ended June 30, 2026 and June 30, 2025: Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Revenue recognized over time 72 % 73 % 72 % 75 % Other recurring revenue 6 % 5 % 6 % 5 % Recurring revenue 78 % 78 % 78 % 80 % Up-front revenue 22 % 22 % 22 % 20 % Total revenue 100 % 100 % 100 % 100 % …

DisaggregationOfRevenueTableTextBlock · excerpt; the full note is in the filing

STOCK-BASED COMPENSATION Stock-based compensation expense is reflected in Cadences condensed consolidated income statements for the three and six months ended June 30, 2026 and June 30, 2025 as follows: Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 (In thousands) Cost of product and maintenance $ 3,205 $ 2,122 $ 6,211 $ 4,276 Cost of services 3,660 2,449 7,081 4,915 Marketing and sales 26,285 22,857 50,387 44,528 Research and development 93,318 73,188 180,659 140,277 General and administrative 20,422 17,709 40,735 31,942 Total stock-based compensation expense $ 146,890 $ 118,325 $ 285,073 $ 225,938 Cadence had total unrecognized compensation expense related to stock option and restricted stock grants of $970.8 million as of June 30, 2026, which is expected to be recognized over a weighted average vesting period of 2.2 years. …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

FAIR VALUE Inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Cadences 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 six months ended June 30, 2026. 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 June 30, 2026 and December 31, 2025: Fair Value Measurements as of June …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

GOODWILL AND ACQUIRED INTANGIBLES Goodwill The changes in the carrying amount of goodwill during the six months ended June 30, 2026 were as follows: Gross Carrying Amount (In thousands) Balance as of December 31, 2025 $ 2,749,143 Goodwill resulting from acquisitions 2,198,007 Effect of foreign currency translation (32,362) Balance as of June 30, 2026 $ 4,914,788 Acquired Intangibles, Net Acquired intangibles as of June 30, 2026 were as follows: Gross Carrying Amount Accumulated Amortization Acquired Intangibles, Net (In thousands) Existing technology $ 1,233,132 $ (237,583) $ 995,549 Agreements and relationships 995,221 (160,221) 835,000 Tradenames, trademarks and patents 57,008 (13,102) 43,906 Total acquired intangibles $ 2,285,361 $ (410,906) $ 1,874,455 Acquired intangibles as of December 31, 2025 were as follows: 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 Amortization expense from existing technology is included in cost of product and maintenance. Amortization expense for the three and six months ended June 30, 2026 and June 30, 2025 by condensed consolidated income statement caption was as follows: Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 (In thousands) C …

GoodwillAndIntangibleAssetsDisclosureTextBlock · excerpt; the full note is in the filing

"Recently Adopted Accounting Standards Measurements of Credit Losses for Accounts Receivable and Contract Assets In July 2025, the Financial Accounting Standards Board (""FASB"") issued Accounting Standards Update (""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. Cadence adopted this ASU on the first day of fiscal 2026. The adoption of this ASU did not have a material impact on Cadences consolidated financial statements and disclosures. New Accounting Standards Not Yet Adopted Disaggregation of Income Statement Expenses In November 2024, the FASB issued ASU No. 2024-03, Income StatementReporting Comprehensive IncomeExpense 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 d …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

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 Cadences product categories for the three and six months ended June 30, 2026 and June 30, 2025: Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 Core EDA* 68 % 71 % 69 % 71 % Semiconductor IP (IP) 15 % 13 % 15 % 13 % System Design and Analysis 17 % 16 % 16 % 16 % Total 100 % 100 % 100 % 100 % _____________ * 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 Cadences 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, Cadences ability to deliver them and the introduction or acquisition of new products and services. No single customer accounted for 10% or more of total revenue during the three an …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

SEGMENT REPORTING Segment reporting is based on the management approach, following the method that management organizes the companys 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. Cadences chief operating decision maker (CODM) is its CEO. The CODM makes decisions on resource allocation and assesses performance of the business based on Cadences consolidated results, including net income. For additional information on Cadences revenue, including the nature and timing of revenue from contracts with customers, see Note 3 in the notes to condensed consolidated financial statements. The following table presents revenue, significant expenses and net income for the three and six months ended June 30, 2026 and June 30, 2025: Three Months Ended Six Months Ended June 30, 2026 June 30, 2025 June 30, 2026 June 30, 2025 (In thousands) Revenue $ 1,584,451 $ 1,275,441 $ 3,058,671 $ 2,517,807 Costs and Expenses: Salary, benefits and other employee-related costs 617,106 521,608 1,197,210 1,064,265 Stock-based compensation 146,890 118,325 285,073 225,938 Manufacturing costs 104,477 101,480 215,327 183,149 Facilities and other infrastructure costs 58,043 47,277 113,001 91,115 Depreciation and amortization 116,989 53,676 201,611 106,592 Professional services 63,956 37,684 117,756 70,143 Loss related to c …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing