Cadence Design Systems, Inc. stock research
FY2025 Q3
Cadence Design Systems (CDNS) Gross Margin — Quarter Ended Sep 30, 2025
Revenue remained stable sequentially, while a substantial reduction in cost of revenue lifted gross profit and significantly improved gross margin. Compared to the same quarter last year, revenue and gross profit both grew, but cost of revenue increased at a slightly faster rate, resulting in a marginal weakening of gross margin.
Gross margin takeaway
Quarter ended Sep 30, 2025 · FY2025 Q3
Revenue remained stable sequentially, while a substantial reduction in cost of revenue lifted gross profit and significantly improved gross margin. Compared to the same quarter last year, revenue and gross profit both grew, but cost of revenue increased at a slightly faster rate, resulting in a marginal weakening of gross margin.
- The most notable driver this quarter was the sharp decline in cost of revenue relative to the prior quarter, which directly bolstered gross profit and margin despite flat revenue. This improvement underscores the leverage inherent in the company's revenue model when cost of revenue is managed lower.
- Relative to the immediately preceding quarter, gross margin strengthened considerably. Versus the identical quarter one year earlier, gross margin was slightly weaker.
Gross margin snapshot
The selected quarter's reported revenue, gross profit, direct costs, and margin comparisons.
Gross margin
86.4%
Gross profit
$1.2B
Revenue
$1.3B
Cost of revenue
$182.2M
Quarter-over-quarter change
+10.9 pts
Year-over-year change
-0.2 pts
Quarterly gross margin trend
A four-quarter view of the revenue and direct-cost bridge behind gross margin.
| Period | Revenue | Gross profit | Cost of revenue | Gross margin |
|---|---|---|---|---|
| Sep 30, 2024 | $1.2B | $1.1B | $163.0M | 86.6% |
| Mar 31, 2025 | $1.2B | $1.1B | $167.1M | 86.5% |
| Jun 30, 2025 | $1.3B | $962.7M | $312.7M | 75.5% |
| Sep 30, 2025 | $1.3B | $1.2B | $182.2M | 86.4% |
Quarterly comparisons
Compare the selected margin with the preceding quarter and the same fiscal quarter one year earlier.
Previous-quarter change
Jun 30, 2025
+10.9 pts
Year-over-year change
Sep 30, 2024
-0.2 pts
What the margin says
Filing-constrained interpretation of margin direction, comparisons, and what to monitor next.
The most notable driver this quarter was the sharp decline in cost of revenue relative to the prior quarter, which directly bolstered gross profit and margin despite flat revenue. This improvement underscores the leverage inherent in the company's revenue model when cost of revenue is managed lower.
Relative to the immediately preceding quarter, gross margin strengthened considerably. Versus the identical quarter one year earlier, gross margin was slightly weaker.
Monitor the trajectory of cost of revenue, as it increased year over year and could pressure margins if revenue growth does not keep pace.