Analysis of Inventory
Inventory Disclosure
Cadence Design Systems Inc., balance sheet: inventory
US$ in thousands
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The composition of inventories has undergone significant changes over the five-year period. A consistent upward trend is evident in total inventories, while the relative proportions of raw materials, work-in-process, and finished goods have shifted considerably.
- Raw Materials
- Raw materials consistently represent the largest component of total inventories. A substantial increase is observed from US$88.629 million in 2021 to US$243.244 million in 2024, before stabilizing at US$245.487 million in 2025. This suggests a growing need for input materials, potentially driven by increased production expectations or supply chain strategies.
- Work-in-Process
- Work-in-process inventory was not reported for 2021, 2022, or 2023. It first appears in 2024 at US$1.216 million, increasing significantly to US$14.665 million in 2025. The emergence and subsequent growth of this category indicate a potential shift in the production cycle, possibly involving more complex or longer-duration manufacturing processes.
- Finished Goods
- Finished goods inventory exhibited more fluctuation. It decreased from US$27.092 million in 2021 to US$14.023 million in 2022, then increased to US$18.907 million in 2023, decreased again to US$13.251 million in 2024, and rose substantially to US$43.393 million in 2025. This variability could be linked to changes in sales demand, production efficiency, or inventory management policies.
- Total Inventories
- Total inventories increased steadily throughout the period, rising from US$115.721 million in 2021 to US$303.545 million in 2025. This overall growth is primarily driven by the increase in raw materials, with the later contributions from work-in-process and finished goods also playing a role. The accelerating growth in later years suggests a potential build-up of inventory, which warrants further investigation into the underlying causes and potential implications for carrying costs and obsolescence.
The changes in inventory composition suggest evolving operational dynamics. The significant increase in raw materials, coupled with the emergence of work-in-process and the fluctuating levels of finished goods, indicate a potential shift in production strategies and inventory management practices.