Cadence Design Systems, Inc.

Company Overview

Business Model: Cadence Design Systems, Inc. is a global technology leader specializing in computational, AI-driven software, accelerated hardware, and silicon intellectual property (IP) products and solutions. The company empowers semiconductor companies to design and manufacture integrated circuits (ICs) and systems companies to design and manufacture electromechanical systems. Revenue is primarily generated through time-based software licenses, sales and leases of hardware products, IP licenses (including royalties), technical support and maintenance, and engineering and cloud services. The core value proposition is to enable customers to design, verify, and bring to life innovative electronic products, addressing complex product development needs and critical business priorities such as reducing time-to-market and advancing sustainability goals.

Market Position: Cadence Design Systems, Inc. holds a leadership position in the technology sector, particularly in electronic design automation (EDA). Its Virtuoso platform is considered the industry standard for custom and analog IC design. The company's success is driven by continuous technological innovation, the quality and differentiation of its offerings, and strong customer relationships. Key competitive factors include the ability to deliver comprehensive, integrated solutions that manage the increasing complexity of semiconductor and systems design. The competitive landscape includes large, established providers such as Synopsys, Inc., Ansys, Inc. (acquired by Synopsys), and Siemens EDA, as well as specialized firms and emerging players, particularly in China.

Recent Strategic Developments:

• AI-Driven Design & Verification: In fiscal 2025, Cadence Design Systems, Inc. acquired industry-leading technology that expands its AI-driven design and verification capabilities to include advanced agentic AI technology purpose-built for semiconductor development, integrating with existing verification platforms.
• Automotive Virtual Prototyping: Also in fiscal 2025, the company acquired VLAB Works, expanding its automotive electronic software and hardware development capabilities with advanced virtual prototyping technology for embedded software development across various markets, including software-defined vehicles.
• Semiconductor IP Expansion: Fiscal 2025 saw the expansion of the design IP portfolio with the acquisition of the Arm Artisan foundation IP business, adding standard cell libraries, memory compilers, and general-purpose I/Os optimized for advanced process nodes.
• Embedded Security: In fiscal 2025, Cadence Design Systems, Inc. strengthened its embedded security capabilities through the acquisition of Secure-IC, a leader in embedded security IP, solutions, and evaluation tools.
• Strategic Acquisition in System Design & Analysis: In September 2025, the company announced its intent to acquire the Design & Engineering business of Hexagon Smart Solutions AB, including its MSC Software division, which is expected to accelerate its Intelligent System Design strategy and expand its structural analysis market presence. This builds upon the fiscal 2024 acquisition of BETA CAE Systems International AG.
• Supercomputing Platform: In May 2025, Cadence Design Systems, Inc. announced the M2000 supercomputer, a specialized, AI-accelerated platform co-developed with NVIDIA for complex simulations in semiconductor design, aerospace and defense, and drug discovery.

Geographic Footprint: Cadence Design Systems, Inc. operates globally, with its corporate headquarters in San Jose, California, and key research and development facilities located outside the United States, including in New Mexico, India, Greece, and Italy. In fiscal 2025, 56% of total revenue was derived from international operations.

• United States: 44% of total revenue
• Other Americas: 3% of total revenue
• China: 13% of total revenue
• Other Asia: 19% of total revenue
• Europe, Middle East and Africa (EMEA): 15% of total revenue
• Japan: 6% of total revenue

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 86.4%
• Operating Margin: 28.2%
• Net Margin: 20.9%

Investment in Growth:

• R&D Expenditure: $1,768.8 million (33.4% of revenue)
• Capital Expenditures: $141.9 million
• Strategic Investments: $429.5 million cash paid for business combinations (net of cash acquired) in fiscal 2025. Major acquisitions included Secure-IC ($139.6 million), Arm Artisan foundation IP business ($128.5 million), and VLAB Works ($121.1 million).

Business Segment Analysis

Core EDA

Financial Performance:

• Revenue: $3,707.7 million (+12.5% YoY)
• Key Growth Drivers: Continued investment by existing customers in complex designs, integration of machine learning, generative AI, and native cloud scalability. Acquisitions, such as VLAB Works, expanded capabilities in automotive electronic software and hardware development. Product Portfolio:
• Virtuoso: Flagship platform for custom IC design (analog, digital, mixed-signal, memory, RF, silicon photonics).
• Innovus: Platform for large digital IC design and optimization for performance, power, and area (PPA).
• Functional Verification: Jasper Formal Verification Platform, Xcelium Parallel Logic Simulation Platform, Verisium generative AI solution.
• Hardware Acceleration: Palladium Enterprise Emulation Platform and Protium FPGA-Based Prototyping Platforms for high-performance chip verification.
• New product launches or major updates: Acquired advanced agentic AI technology for semiconductor development, integrated with existing verification tools. Acquired VLAB Works for virtual prototyping, supporting software-defined vehicles and systems.

Semiconductor IP

Financial Performance:

• Revenue: $741.5 million (+22.9% YoY)
• Key Growth Drivers: Integration of strategic, mission-critical design architectures into customer products across high-volume markets including automotive, hyperscale, mobile computing, and AI chips. Acquisitions, such as Arm Artisan foundation IP business and Secure-IC, enhanced the portfolio. Product Portfolio:
• Controllers and Physical Interfaces: PCI Express, Universal Accelerator Link, Compute Express Link, High Bandwidth Memory, Graphics Double Data Rate, and other industry standards.
• Tensilica Configurable DSPs: Vertically targeted subsystems for AI, audio/voice, baseband, and vision/imaging applications.
• Design IP: High-speed serializer/deserializer (SerDes), peripheral component interconnect (PCI), USB, and other standard protocols.
• Verification IP (VIP): Enables system-level validation, integrated with Xcelium simulator and Palladium Enterprise Emulation solutions.
• New product launches or major updates: Acquired Arm Artisan foundation IP business, adding standard cell libraries, memory compilers, and general-purpose I/Os optimized for advanced process nodes. Acquired Secure-IC, a leader in embedded security IP, solutions, and evaluation tools.

System Design and Analysis (SD&A)

Financial Performance:

• Revenue: $847.5 million (+14.1% YoY)
• Key Growth Drivers: Comprehensive end-to-end system-level design and verification across chips, packages, PCBs, and complete electronic systems. Advanced multiphysics simulation capabilities and agentic AI-driven optimization. Product Portfolio:
• Core SD&A Products: Allegro X and OrCAD X platforms (PCB and advanced packaging), Sigrity X (signal and power integrity), AWR (RF design), Fidelity (computational fluid dynamics), Celsius (thermal and airflow analysis), Clarity 3D Solver (electromagnetic and power electronics), Integrity 3D-IC solution (advanced 3D-IC and multi-chiplet designs).
• Optimization & Digital Twin: Optimality Intelligent System Explorer (generative AI-driven multiphysics optimization), Reality Digital Twin (data center performance-aware design), Millennium Enterprise Multiphysics platform (AI-enabled digital twin).
• New product launches or major updates: Allegro X AI (generative AI for PCB design). Announced M2000 supercomputer co-developed with NVIDIA. Announced intent to acquire Hexagon's Design & Engineering business (including MSC Software division) to expand structural analysis capabilities. Molecular modeling and simulation solutions for life sciences.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $925.0 million (3.165 million shares) in fiscal 2025.
• Dividend Payments: Cadence Design Systems, Inc. has never declared or paid, and does not anticipate declaring or paying in the foreseeable future, any cash dividends on its common stock.
• Future Capital Return Commitments: Approximately $1.4 billion of share repurchase authorization remained available as of December 31, 2025.

Balance Sheet Position:

• Cash and Equivalents: $3,001.3 million as of December 31, 2025.
• Total Debt: $2,480.2 million as of December 31, 2025.
• Net Cash Position: $521.1 million as of December 31, 2025.
• Credit Rating: Senior Notes have an investment grade credit rating.
• Debt Maturity Profile: Senior Notes include $500.0 million due 2027, $1.0 billion due 2029, and $1.0 billion due 2034. The 2024 Credit Facility (revolving credit facility) expires on August 14, 2029.

Cash Flow Generation:

• Operating Cash Flow: $1,728.8 million in fiscal 2025.
• Free Cash Flow: $1,586.9 million in fiscal 2025 (Operating Cash Flow less Purchases of property, plant and equipment).
• Cash Conversion Metrics: Cash flows from operating activities are significantly influenced by business levels, timing of cash receipts from customers, timing of cash disbursements for operating assets and liabilities, and cash paid for income taxes.

Operational Excellence

Production & Service Model: Cadence Design Systems, Inc.'s operational philosophy centers on delivering highly specialized and deeply technical solutions. Hardware products, including all individual PCBs, custom ICs, and FPGA-based prototyping components, are manufactured, assembled, and tested by subcontractors. Software and documentation are primarily distributed to customers through secure electronic delivery. The company provides extensive customer service and support, including technical support and maintenance, education services (online, app-based, classroom), and a range of professional services such as design services, methodology services, and hosted design solutions. The Cadence Cloud portfolio offers both Cadence-managed and customer-managed cloud environments, expanding access to cloud-based and Software as a Service (SaaS) products.

Supply Chain Architecture: Key Suppliers & Partners:

• Hardware Components: Relies on a single or limited number of suppliers for certain hardware components.
• Manufacturing Partners: Utilizes contract manufacturers for the production of its hardware products.
• Ecosystem Partners: Works closely with leading semiconductor ecosystem partners to develop foundry process design kits (PDKs) and ensure compatibility with manufacturing sign-off requirements. Collaborates with major providers of semiconductor IP, particularly microprocessor IP, to optimize EDA products and ensure interoperability.

Facility Network:

• Manufacturing: Primarily outsourced to subcontractors.
• Research & Development: Operates R&D facilities at its corporate headquarters in San Jose, California, and in various international locations including New Mexico, India, Greece, and Italy.
• Distribution: Leverages subcontractors for hardware distribution and secure electronic delivery for software.

Market Access & Customer Relationships

Go-to-Market Strategy: Cadence Design Systems, Inc. employs a multi-faceted go-to-market strategy to reach its diverse customer base. Distribution Channels:

• Direct Sales: The company primarily markets its products and services through a direct sales force, which includes salespeople and applications engineers who provide technical pre-sales and post-sales support. The sales cycle is typically long, often extending up to six months or longer, due to the complexity and expense of the products.
• Channel Partners: Value-added resellers are selectively utilized to broaden market reach and reduce sales costs, particularly for products like OrCAD and certain Allegro products.
• Digital Platforms: Promotional activities include advertising, marketing automation, trade shows, public relations, and internet-based channels.

Customer Portfolio: Cadence Design Systems, Inc. serves a broad range of customers across various high-growth vertical sectors. Enterprise Customers:

• Tier 1 Clients: Customers include semiconductor companies that design and manufacture integrated circuits (ICs), as well as systems companies that design and manufacture electromechanical systems. These span industries such as automotive, aerospace and defense, consumer electronics, data centers, industrial, medical, and mobile.
• Strategic Partnerships: The company engages in engineering services to collaborate with customers on complex IC designs, custom IP development, and implementation of key design capabilities (e.g., low power design, IC packaging, board design, functional verification, digital implementation, analog/mixed-signal design, and system-level design).
• Customer Concentration: No single customer accounted for 10% or more of total revenue during fiscal 2025 or 2024.

Geographic Revenue Distribution:

• United States: 44% of total revenue
• Other Americas: 3% of total revenue
• China: 13% of total revenue
• Other Asia: 19% of total revenue
• EMEA: 15% of total revenue
• Japan: 6% of total revenue
• Growth Markets: The company has expanded into new verticals such as life sciences, leveraging its expertise in simulation and algorithmic design.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The market in which Cadence Design Systems, Inc. operates is highly competitive, characterized by constant and rapid technological change, product obsolescence, price erosion, evolving standards, short product life cycles, and wide fluctuations in product supply and demand. The semiconductor and electronics systems industries are cyclical. Key drivers include the transformative impact of AI and the increasing complexity of semiconductors and electronic system design. The industry faces challenges with migration to advanced-process nodes, requiring novel design tools and methodologies.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Synopsys, Inc.: A major competitor with significant overlap in EDA and IP offerings.
• Ansys, Inc. (acquired by Synopsys): Competes in system analysis and simulation.
• Siemens EDA: A key competitor in the electronic design automation space.
• Other Tool Providers: Keysight Technologies, Inc., Schrödinger, Inc., CEVA, Inc.
• International Competitors: Altium Limited (acquired by Renesas Electronics Corporation), Zuken, Inc. (Japan). Emerging Competitive Threats:
• New Entrants: Emerging players in China such as Huada Empyrean, Xpeedic Technology, X-EPIC, Primarius Technologies, Univista, and Giga Design Automation.
• Disruptive Technologies: New entrants, disruptive technologies, and alternative solutions, including open-source alternatives, pose competitive threats.
• In-house Capabilities: Internal design teams within major technology corporations also represent a form of competition.

Competitive Response Strategy: Cadence Design Systems, Inc. maintains its competitive advantage through continuous and significant investments in Research and Development (R&D) to innovate, commercialize new solutions, and enhance existing products. The company focuses on adapting products to new physics challenges, addressing increasing design complexity, and keeping pace with customer technical developments and industry standards. This includes frequent and relevant updates to software products, enhancing hardware platforms, and offering high-quality technical support. Strategic acquisitions are also a key part of the strategy to expand capabilities and market reach.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: The company's business growth is primarily dependent on the semiconductor and electronics systems industries, which are cyclical and characterized by rapid technological change, product obsolescence, and price erosion. Uncertainty in the global economy, including inflation, interest rates, and geopolitical conflicts, can negatively affect customer spending on design projects. Customer consolidation in the semiconductor industry could lead to increased bargaining power for fewer customers and reduced demand for products and services. Technology Disruption: Failure to quickly adapt to technological developments or customers' evolving requirements, such as migration to advanced-process nodes or the slowing of Moore's Law, could render products uncompetitive or obsolete. The company's ability to address requirements in new technology segments, including those driven by AI, is critical for future growth. Customer Concentration: While no single customer accounted for 10% or more of total revenue in fiscal 2025 or 2024, customer consolidation could increase dependency on fewer customers, potentially impacting operating results.

Operational & Execution Risks

Supply Chain Vulnerabilities: Cadence Design Systems, Inc. relies on a single or limited number of suppliers for certain hardware components and contract manufacturers for hardware production, making it vulnerable to supply disruptions and price fluctuations. Geographic Concentration: A significant portion of R&D and other facilities, including the corporate headquarters, are located in regions prone to natural disasters (e.g., seismic activity in Silicon Valley). International operations are subject to risks from political instability, terrorist acts, or military conflicts, which could disrupt business.

Financial & Regulatory Risks

Demand Volatility: The long sales cycle for products and services (up to six months or longer) can cause operating results to fluctuate unexpectedly. Customer payment delays, bankruptcies, defaults, or non-renewals of licenses could adversely affect revenue and cash flow. Foreign Exchange: Approximately one-third of total costs and expenses are transacted in foreign currencies, and over half of revenue comes from international operations, creating exposure to foreign exchange rate fluctuations (e.g., U.S. dollar, Chinese renminbi, Japanese yen, European Union euro, British pound, Indian rupee, Taiwan dollar, Israeli shekel). Credit & Liquidity: The company has significant outstanding indebtedness ($2.48 billion as of December 31, 2025) and a substantial portion of cash is held outside the United States (29% as of December 31, 2025), which could pose risks if U.S. cash is insufficient for domestic requirements. Regulatory & Compliance Risks:

• Industry Regulation: Subject to complex and evolving federal, state, local, and foreign laws and regulations, including trade controls, anti-corruption, anti-bribery, data privacy, data protection, and AI.
• Export Controls: U.S. trade control laws, including restrictions on advanced node IC production in China, the Entity List, and the Military End-User List, have impacted and may continue to impact the ability to transact business with certain customers and in certain countries.
• Data Privacy: Compliance with regulations like the California Consumer Privacy Act and EU/UK General Data Protection Regulation (GDPR) requires significant resources and poses risks of legal claims or regulatory actions.
• AI Regulation: The rapidly evolving regulatory framework for AI technologies, including the EU Artificial Intelligence Act (effective August 1, 2024), may impact development, use, and commercialization of AI, potentially increasing costs and legal liabilities. Legal Proceedings: In fiscal 2025, Cadence Design Systems, Inc. settled export control violations with the U.S. Department of Justice (DOJ) and the Bureau of Industry and Security (BIS), resulting in a $128.5 million charge and $140.6 million in aggregate net penalties and forfeitures. This included a plea agreement for conspiracy to commit export controls violations and an administrative settlement with BIS, both with ongoing compliance obligations.

Geopolitical & External Risks

Geopolitical Exposure: Geopolitical and economic uncertainty, particularly between the United States and China, and risks related to Taiwan (a central hub for the technology supply chain), could materially harm business. Trade Relations: New or increased tariffs, trade protection measures, sanctions, and trade embargoes, along with retaliatory actions by affected countries (e.g., China's "unreliable entity list"), can disrupt trade and increase costs. Sanctions & Export Controls: The rescinded but potentially reimposable BIS license requirements for EDA software/technology to China, and the interim final rule extending export restrictions to entities 50% or more owned by sanctioned parties (suspended until November 9, 2026), highlight ongoing risks. Economic sanctions on Russia and entities in the Middle East also impact operations.

Innovation & Technology Leadership

Research & Development Focus: Cadence Design Systems, Inc. maintains a strong focus on R&D, which is critical for its future performance and competitive positioning. Core Technology Areas:

• AI-Driven Computational Software: Significant investments in agentic and generative AI, machine learning, and digital twin algorithms integrated into core products.
• Accelerated Hardware: Continuous enhancement of hardware platforms to keep pace with technological advancements.
• Silicon IP Solutions: Development of strategic, mission-critical design architectures for various markets. Innovation Pipeline: The company continuously adapts its products to solve new or increased physics challenges arising with successive process nodes and addresses the increasing complexity of larger designs. R&D efforts are geared towards meeting evolving customer technical developments, satisfying industry standards, and fulfilling demanding performance, productivity, quality, and predictability requirements.

Intellectual Property Portfolio:

• Patent Strategy: Cadence Design Systems, Inc. relies on a combination of patents, copyrights, trademarks, trade secret laws, licenses, and restrictive agreements to protect its proprietary technology.
• Licensing Programs: Design IP is generally licensed under nonexclusive agreements, with royalties collected for products incorporating Cadence Design Systems, Inc. IP.
• IP Litigation: The company faces the risk of IP infringement and misappropriation claims, which can lead to costly litigation and potential product shipment delays.

Technology Partnerships:

• Strategic Alliances: Cadence Design Systems, Inc. collaborates closely with leading semiconductor ecosystem partners to develop foundry process design kits (PDKs) and ensure product compatibility. It also works with major IP providers, such as microprocessor IP companies, to optimize its EDA products.
• Co-development: The company co-developed the M2000 supercomputer with NVIDIA, demonstrating strategic collaboration in advanced computing platforms.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The company's business depends on the continued services of its senior management and qualified employees. Changes in the management team can lead to business disruption. Board Composition: The Board of Directors is responsible for overseeing enterprise risk management. The Audit Committee, comprised entirely of independent directors, reviews and discusses risk assessment and management, including cybersecurity.

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 13,800 employees as of December 31, 2025.
• Skill Mix: The global workforce is highly educated, technical, and specialized, with a substantial majority of employees working in engineering roles.

Talent Management: Acquisition & Retention:

• Hiring Strategy: The company faces intense competition for highly skilled executive officers and employees, particularly in high-technology centers and the EDA, commercial electronics engineering services, IP, and AI industries.
• Retention Metrics: Regular employee engagement surveys are administered to measure engagement and collect feedback.
• Employee Value Proposition: Cadence Design Systems, Inc. offers competitive compensation and benefits programs, including a semi-annual bonus program, 401(k) match, Employee Stock Purchase Plan, and equity compensation. A peer-to-peer recognition program is also in place. Diversity & Development:
• Development Programs: Formal training programs, curriculums, and on-the-job training are provided to help employees succeed and advance. The high performance culture platform offers an online Learning Management program with training and development tools. Tuition reimbursement opportunities are also available.
• Culture & Engagement: The "One Team culture" is central to the employee experience, aiming to attract and retain top talent. Leaders are measured on their contributions to talent attraction, development, engagement, innovation, and sustainability objectives.

Environmental & Social Impact

Environmental Commitments: Cadence Design Systems, Inc. is focused on contributing to the health of the planet through initiatives to reduce its environmental footprint. Climate Strategy:

• Emissions Targets: The company has established greenhouse gas emissions reduction targets and a net-zero target.
• Carbon Neutrality: Commitments and milestones towards achieving carbon neutrality are in place.
• Renewable Energy: Information on clean energy adoption and sourcing strategies is not explicitly detailed in the filing. Supply Chain Sustainability: The filing does not explicitly detail specific supply chain sustainability initiatives or supplier engagement programs.

Social Impact Initiatives:

• Community Investment: The company provides paid volunteer time off, charitable contribution matching, company-wide volunteer campaigns, international service immersion projects, and grants to employees.
• Cadence Giving Foundation: Established in 2021, this foundation focuses on "AI for Good," science, technology, engineering, and math (STEM) education, and local communities through grant-making and partnerships with non-profit organizations.
• Product Impact: The company's mission is to empower innovative companies to deliver electronic products that drive the global economy and improve everyday life, including supporting customers in pursuing sustainability goals by developing energy-efficient products.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: The filing does not explicitly detail seasonal trends in demand for its products and services.
• Economic Sensitivity: Demand for Cadence Design Systems, Inc.'s products and services is highly dependent on the cyclical semiconductor and electronics systems industries. The business is sensitive to global economic conditions, including inflation, interest rates, and geopolitical conflicts, which can reduce new chip designs and overall R&D spending.
• Industry Cycles: The semiconductor and electronics systems industries are characterized by constant and rapid technological change, product obsolescence, and wide fluctuations in product supply and demand, leading to cyclical patterns. Planning & Forecasting: The company plans its operating expenses based on forecasted revenue, expected business needs, and other factors such as inflation. However, bookings and related revenue are harder to forecast in difficult economic environments, and long sales cycles can delay the impact of economic conditions on results.

Regulatory Environment & Compliance

Regulatory Framework: Cadence Design Systems, Inc. operates under a complex and evolving regulatory framework across multiple jurisdictions. Industry-Specific Regulations:

• Trade Controls: Subject to U.S. and international laws concerning the sale, shipment, and transmission of products and technology, including tariffs, export licensing, sanctions, and trade embargoes.
• Anti-corruption and Anti-bribery: Complies with laws such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act.
• Data Privacy and Data Protection: Adheres to regulations like the California Consumer Privacy Act and the EU/UK General Data Protection Regulation (GDPR).
• Artificial Intelligence: The regulatory framework for AI, machine learning, and automated decision-making technologies is rapidly evolving, with new laws like the EU Artificial Intelligence Act (effective August 1, 2024) and U.S. state/federal considerations impacting development and commercialization. Trade & Export Controls:
• Export Restrictions: U.S. export control restrictions, particularly concerning advanced node IC production in China and the inclusion of Chinese technology companies on the Bureau of Industry and Security (BIS) "Entity List" and "Military End-User List," have impacted and may continue to impact the business. An interim final rule extending restrictions to entities 50% or more owned by sanctioned parties was issued, then suspended until November 9, 2026.
• Sanctions Compliance: Economic sanctions imposed by the U.S. and other global actors on countries like Russia and entities in the Middle East affect the ability to transact business. Legal Proceedings: In July 2025, Cadence Design Systems, Inc. reached a settlement with BIS and the U.S. Department of Justice (DOJ) regarding export control violations from 2015-2021, primarily involving sales to a customer in China and subsequent technology transfer without authorization. This resulted in a $128.5 million charge and $140.6 million in aggregate net penalties and forfeitures in fiscal 2025. The settlement includes a plea agreement and an administrative settlement with ongoing audit, compliance, and reporting obligations.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: The effective tax rate was 27.1% in fiscal 2025 and 24.4% in fiscal 2024. The company expects its fiscal 2026 effective tax rate to be approximately 27%.
• Geographic Tax Planning: A significant amount of foreign earnings is generated by subsidiaries organized in Ireland and Hungary.
• Tax Reform Impact: The One Big Beautiful Bill Act (OBBBA), enacted in the U.S. in July 2025, included provisions such as the permanent extension of certain Tax Cuts and Jobs Act provisions, modifications to the international tax framework, and the restoration of immediate expensing for U.S. R&D expenditures, which decreased fiscal 2025 cash tax payments by approximately $151 million. The OECD's Pillar Two Model Rules, calling for a 15% global minimum tax, have been enacted in many non-U.S. jurisdictions but did not materially impact the provision for income taxes in fiscal 2025 or 2024.

Insurance & Risk Transfer

Risk Management Framework: Cadence Design Systems, Inc. has a cybersecurity risk management program guided by frameworks from the EU, National Institute of Standards and Technology (NIST), Cloud Security Alliance (CSA), and International Organization for Standardization/International Electrotechnical Commission (ISO/IEC).

• Insurance Coverage: The company maintains a cybersecurity insurance policy to cover certain types of costs and losses from cybersecurity incidents.
• Risk Transfer Mechanisms: Cadence Design Systems, Inc. enters into foreign currency forward exchange contracts to protect against currency exchange risks associated with existing assets, liabilities, and other commitments, including a €1.89 billion notional value for the pending Hexagon acquisition. These are not designated as accounting hedges.