CADENCE DESIGN SYSTEMS INCCDNS
CADENCE DESIGN SYSTEMS INC Revenue Disclosure
REVENUE
Cadence groups its products and services into categories related to major design activities. The following table shows the percentage of revenue contributed by each of Cadence’s product categories for fiscal 2025, 2024 and 2023:
| 2025 | 2024 | 2023 | |||||||||||||||
Core EDA* | 70 | % | 71 | % | 76 | % | |||||||||||
| Semiconductor IP (“IP”) | 14 | % | 13 | % | 12 | % | |||||||||||
| System Design and Analysis | 16 | % | 16 | % | 12 | % | |||||||||||
| Total | 100 | % | 100 | % | 100 | % | |||||||||||
_____________
* Includes immaterial amount of revenue accounted for under leasing arrangements.
Cadence generates revenue from contracts with customers and applies judgment in identifying and evaluating any terms and conditions in contracts which may impact revenue recognition. Certain of Cadence’s licensing arrangements allow customers the ability to remix among software products. Cadence also has arrangements with customers that include a combination of products, with the actual product selection and number of licensed users to be determined at a later date. For these arrangements, Cadence estimates the allocation of the revenue to product categories based upon the expected usage of products. Revenue by product category fluctuates from period to period based on demand for products and services, and Cadence’s available resources to deliver them. No single customer accounted for 10% or more of total revenue during fiscal 2025, 2024 or 2023.
Recurring revenue includes revenue recognized over time from certain of Cadence’s software licensing arrangements, services, royalties, maintenance on IP licenses and hardware, and operating leases of hardware. Other recurring revenue includes revenue recognized at a point in time for certain short-term software arrangements that are typically renewed at least annually and revenue recognized at varying points in time over the term of other arrangements with non-cancelable commitments, whereby the customer commits to a fixed dollar amount over a specified period of time that can be used to purchase from a list of products. Arrangements that require future decisions on the performance obligations to be delivered do not meet the definition of a revenue contract until the customer executes a separate selection form to identify the products and services that they are purchasing. Each separate selection form under the arrangement is treated as an individual contract and accounted for based on the respective performance obligations.
The remainder of Cadence’s revenue is recognized at a point in time and is characterized as up-front revenue. Up-front revenue is primarily generated by sales of hardware, individual IP licenses and certain software licenses with a term greater than one year. The percentage of Cadence’s recurring and up-front revenue in any single fiscal period is primarily impacted by delivery of hardware and IP products to its customers.
The following table shows the percentage of Cadence’s revenue that is classified as recurring or up-front for fiscal 2025, 2024 and 2023:
| 2025 | 2024 | 2023 | |||||||||||||||
| Revenue recognized over time | 76 | % | 80 | % | 81 | % | |||||||||||
Other recurring revenue | 4 | % | 3 | % | 3 | % | |||||||||||
| Recurring revenue | 80 | % | 83 | % | 84 | % | |||||||||||
| Up-front revenue | 20 | % | 17 | % | 16 | % | |||||||||||
| Total | 100 | % | 100 | % | 100 | % | |||||||||||
Significant Judgments
Cadence’s contracts with customers often include promises to transfer to a customer multiple software and/or IP licenses and services, including professional services, technical support services, and rights to unspecified updates. Determining whether licenses and services are distinct performance obligations that should be accounted for separately, or not distinct and thus accounted for together, requires significant judgment. In some arrangements, such as most of Cadence’s IP license arrangements and the license of certain software, Cadence has concluded that the licenses and the related updates and technical support are distinct from each other. In others, like Cadence’s time-based software arrangements, the licenses and certain services are not distinct from each other. These time-based software arrangements include multiple software licenses and updates to the licensed software products, as well as technical support, and Cadence has concluded that these promised goods and services are a single, combined performance obligation.
The accounting for contracts with multiple performance obligations requires the contract’s transaction price to be allocated to each distinct performance obligation based on relative SSP. Judgment is required to determine the SSP for each distinct performance obligation because Cadence rarely licenses or sells products on a standalone basis. In instances where the SSP is not directly observable because Cadence does not sell the license, product or service separately, Cadence determines the SSP using information that maximizes the use of observable inputs and may include market conditions. Cadence typically has more than one SSP for individual performance obligations due to the stratification of those items by classes of customers and circumstances. In these instances, Cadence may use information such as the size of the customer and geographic region of the customer in determining the SSP.
Revenue is recognized over time for Cadence’s combined performance obligations that include software licenses, updates, technical support and maintenance that are separate performance obligations with the same term. For Cadence’s professional services, revenue is recognized over time, generally using costs incurred or hours expended to measure progress. Judgment is required in estimating project status and the costs necessary to complete projects. A number of internal and external factors can affect these estimates, including labor rates, utilization and efficiency variances and specification and testing requirement changes. For Cadence’s other performance obligations recognized over time, revenue is generally recognized using a time-based measure of progress reflecting generally consistent efforts to satisfy those performance obligations throughout the arrangement term.
If a group of agreements are so closely related that they are, in effect, part of a single arrangement, such agreements are deemed to be one arrangement for revenue recognition purposes. Cadence exercises significant judgment to evaluate the relevant facts and circumstances in determining whether the separate agreements should be accounted for separately or as, in substance, a single arrangement. Cadence’s judgments about whether a group of contracts comprise a single arrangement can affect the allocation of consideration to the distinct performance obligations, which could have an effect on results of operations for the periods involved.
Cadence is required to estimate the total consideration expected to be received from contracts with customers. In limited circumstances, the consideration expected to be received is variable based on the specific terms of the contract or based on Cadence’s expectations of the term of the contract. Generally, Cadence has not experienced significant returns or refunds to customers. These estimates require significant judgment and a change in these estimates could have an effect on its results of operations during the periods involved.
Contract Balances
The timing of revenue recognition may differ from the timing of invoicing to customers, and these timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) on Cadence’s consolidated balance sheets. For certain software, hardware and IP agreements with payment plans, Cadence records an unbilled receivable related to revenue recognized upon transfer of control because it has an unconditional right to invoice and receive payment in the future related to those transferred products or services. Cadence records a contract asset when revenue is recognized prior to invoicing and Cadence does not have the unconditional right to invoice or retains performance risk with respect to that performance obligation. Cadence records deferred revenue when revenue is recognized subsequent to invoicing. For Cadence’s time-based software agreements, customers are generally invoiced in equal, quarterly amounts, although some customers prefer to be invoiced in single or annual amounts.
The contract assets indicated below are included in prepaid expenses and other in the consolidated balance sheets and primarily relate to Cadence’s rights to consideration for work completed but not billed as of the balance sheet date on services and customized IP contracts. The contract assets are transferred to receivables when the rights become unconditional, usually upon completion of a milestone.
Cadence’s contract balances as of December 31, 2025, and December 31, 2024, were as follows:
| As of | |||||||||||
| December 31, 2025 | December 31, 2024 | ||||||||||
| (In thousands) | |||||||||||
| Contract assets | $ | 67,764 | $ | 29,339 | |||||||
| Deferred revenue | 934,432 | 852,581 | |||||||||
Cadence recognized revenue of $737.9 million, $669.9 million and $689.7 million during fiscal 2025, 2024 and 2023, respectively, that was included in the deferred revenue balance at the beginning of each respective fiscal year. All other activity in deferred revenue, with the exception of deferred revenue assumed from acquisitions, is due to the timing of invoices in relation to the timing of revenue as described above.
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, Cadence has determined that its contracts generally do not include a significant financing component. The primary purpose of invoicing terms is to provide customers with simplified and predictable ways of purchasing Cadence’s products and services, and not to facilitate financing arrangements.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, which includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods. Cadence has elected to exclude the potential future royalty receipts from the remaining performance obligations. Contracted but unsatisfied performance obligations were approximately $7.8 billion as of December 31, 2025, which included $0.6 billion of non-cancelable commitments from customers where actual product selection and quantities of specific products or services are to be determined by customers at a later date.
Cadence estimates its remaining performance obligations at a point in time. Actual amounts and timing of revenue recognition may differ from these estimates largely due to changes in actual installation and delivery dates, as well as contract renewals, modifications and terminations. As of December 31, 2025, Cadence expected to recognize 53% of the contracted but unsatisfied performance obligations, excluding non-cancelable commitments, as revenue over the next 12 months, 43% over the next 13 to 36 months and the remainder thereafter.
Cadence recognized revenue of $87.3 million, $68.0 million and $55.0 million during fiscal 2025, 2024 and 2023, respectively, from performance obligations satisfied in previous periods. These amounts represent royalties earned during the period and exclude contracts with nonrefundable prepaid royalties. Nonrefundable prepaid royalties are recognized upon delivery of the IP because Cadence’s right to the consideration is not contingent upon customers’ future shipments.
Free Sentinel
Track for freeWant the next CADENCE DESIGN SYSTEMS INC revenue disclosure the moment it drops?
Set a Sentinel and we'll alert you the moment CADENCE DESIGN SYSTEMS INC's next filing hits EDGAR. No credit card, your email never gets sold.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 14, 2024 | |
| 2022 | Feb 22, 2022 | |
| 2021 | Feb 22, 2021 | |
| 2019 | Feb 24, 2020 | |
| 2018 | Feb 27, 2019 | |
About Revenue Disclosures
Revenue disclosures under ASC 606 explain how a company identifies performance obligations, allocates transaction prices, and determines when revenue is recognized. This section is essential for understanding whether reported revenue reflects genuine economic activity or aggressive accounting choices. Analysts examine the mix of point-in-time versus over-time recognition, which directly affects revenue timing and comparability.
Key signals: rising contract liabilities (deferred revenue) suggest strong future revenue visibility, while declining contract assets may indicate slowing project milestones. Watch for variable consideration estimates — rebates, returns, and performance bonuses that require management judgment. Significant changes in disaggregated revenue by geography or product line can reveal shifting business mix before it appears in headline numbers. Compare revenue growth against contract liability growth to assess sustainability, and scrutinize any changes in the timing of recognition that coincide with earnings pressure.