Good afternoon. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cadence First Quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. Thank you. I will now turn the call over to Richard Gu, Vice President of Investor Relations for Cadence. Please go ahead. Thank you, Operator. I would like to welcome everyone to our First Quarter of 2025 earnings conference call. I'm joined today by Anirudh Devgan, President and Chief Executive Officer, and John Wall, Senior Vice President and Chief Financial Officer. The webcast of this call and a copy of today's prepared remarks will be available on our website, cadence.com. Today's discussion will contain forward-looking statements, including our outlook on future business and operating results. Due to risks and uncertainties, actual results may differ materially from those projected or implied in today's discussion. For information on factors that could cause actual results to differ, please refer to our SEC filings, including our most recent Forms 10-K and 10-Q, CFO commentary, and today's earnings release. All forward-looking statements during this call are based on estimates and information available to us as of today, and we disclaim any obligation to update them. In addition, all financial measures discussed on this call are non-GAAP unless otherwise specified. The non-GAAP measures should not be considered in isolation from or as a substitute for GAAP results. Reconciliations of GAAP to non-GAAP measures are included in today's earnings release. For the Q&A session today, we would ask that you observe a limit of one question only. If time permits, you can re-queue with additional questions. Now, I'll turn the call over to Anirudh. Thank you, Richard. Good afternoon, everyone, and thank you for joining us today. I'm pleased to report that Cadence delivered excellent results for the first quarter of 2025 with robust ongoing customer demand for innovative technologies. We exceeded our guidance on all key financial metrics, achieving 23% year-over-year revenue growth and 34% increase in non-GAAP EPS. Given this outperformance and the continued strength of our business, we are raising our financial outlook for the year. John will provide more details in a moment. Before diving in, I would like to share my perspective on the prevailing macroeconomic uncertainty. Semiconductors remain foundational to realizing transformative technologies such as hyperscale computing, 5G, and autonomous systems, all fueled by the AI megatrend. We haven't seen any shifts in customer behavior at this time as they continue investing in their next-generation designs, recognizing that today's R&D efforts are critical to deliver their groundbreaking products of tomorrow. Additionally, our radical software business model, strong Q1 exit backlog, and a predominantly recurring revenue mix provide resilience and excellent visibility. Customers are increasingly relying on our product as we execute our intelligent system design strategy and expand our differentiated end-to-end portfolio to serve a growing and diversified customer base. As the fast-evolving AI landscape expands the market opportunities and reshapes the entire chip and system development process, our Cadence AI portfolio delivers unparalleled PPA, productivity, and time-to-market benefits. At GTC, we announced an expanded partnership with NVIDIA on their latest Grace Blackwell architecture. In addition to enabling up to an 80x acceleration of Cadence solvers, we are collaborating on developing a full-stack agentic AI solution for engineering and science using the new Llama and Nemotron reasoning model. We are also one of the first adopters of NVIDIA Omniverse Blueprint for AI factory digital twins, advancing data center design and operational efficiency. In Q1, we expanded our footprint at several top-tier customers and furthered our relationship with key ecosystem partners. Last quarter, we announced a collaboration with Rapidus on 2-nanometer IP development. This quarter, we are pleased to share that Rapidus has made a wide-ranging commitment to our core EDA software portfolio across digital, custom analog, and verification solutions. In Q1, we deepened our partnership with Socionext through a broad expansion of our EDA software, particularly AI-driven digital solutions, along with our system software. We furthered our partnership with the Marquee Hyperscaler through a broad proliferation of our digital and verification software, particularly our AI-driven Cadence Cerebrus and Verisium solutions. We expanded our collaboration with Intel Foundry by officially joining the Intel Foundry Accelerator Design Services Alliance. From systems on chip to advanced IP for AI and HPC applications, Cadence's inclusion in the alliance helps Intel Foundry customers remain at the forefront of innovation. Now, let's talk about key product highlights for Q1. Our IP business grew 40% year-over-year in Q1 as we continued to benefit from the strong market opportunities offered by AI, chiplet-based architectures, and the foundry ecosystem build-out. We secured a major expansion at a global Marquee system company for our AI HPC design IP and deepened our partnership with a major foundry through their commitment to our memory and interface IP. Following our pending acquisition of Secure-IC last quarter, we continued to build out our design IP portfolio, and earlier this month, we entered into a definite agreement to acquire Arm's Artisan Foundation IP business. A Tensilica DSP is the de facto choice for automotive ADAS and infotainment systems and continued being widely integrated into vision, radar, lidar, and audio systems for the autonomous driving as well as emerging robotics use cases. Our core EDA revenue grew 16% year-over-year in Q1, with further proliferation of our digital full flow at the most advanced nodes. Cadence Cerebrus AI solution continued its strong momentum with nearly 50 new logos in Q1 and well over 1,000 tapeouts till date. Engineering change orders, or ECOs, are a critical part of any design process. AI is particularly suitable to dramatically improve ECOs. Using the new Cadence Conformal AI ECO flows, MediaTek saw early positive results, generating 83% smaller ECO patches in nearly half the runtime. MediaTek also improved runtime and memory by 100x through its deployment of Conformal AI low power. Our collection of new smart ECO technologies has sped up Renesas' automated functional ECO runtimes by more than 50% while improving quality. Our flagship Virtuoso platform, the industry's gold standard for advanced node custom analog and mixed signal design, continued to expand into new areas such as photonics and circuit and yield optimization. Ever-increasing complexities in system verification and software bring-up continued to drive secular demand for our market-leading Palladium Z3 and Protium X3 platforms. Demand for hardware was broad-based, with particular strength driven by AI, HPC, and hyperscaler customers. Our hardware products continued to proliferate at existing customers, especially top hyperscalers, while gaining notable competitive wins, including a market-shaping semiconductor company. Our verification software suite that includes Verisium, Xcelium, and Jasper leverages big data and AI to optimize verification workloads and saw continued expansion across aerospace and defense, electronics, and automotive segments. Our system design and analysis business delivered more than 50% year-over-year revenue growth in Q1, as our AI-driven optimization solutions, integrated with our physics-based simulation platforms, continued to deliver superior results across multiple end markets. Our digital twin Reality data center product gained momentum, signing multiple deals with large hyperscaler and cloud service providers in Q1. BETA CAE delivered a strong quarter and is opening up tremendous opportunities for us in the automotive vertical. Allegro X's Omniverse integration was highlighted at GTC with photorealistic 3D views of a full multi-board system designed in Allegro X. Our AI-driven substate router, the industry's premier solution for full package routing of complex 3DIC designs, saw strong customer interest and engagements during the early adopter program. In summary, I'm pleased with our Q1 results and the continued momentum of our business. The growing complexity of chip and system design, coupled with the transformative potential of AI-driven automation, creates significant opportunities for our products to enable and empower our customers. In addition to our strong business results, I'm proud of our high-performance inclusive culture and thrilled that Cadence was recently named by Fortune and Great Place to Work yet again as one of the 100 best companies to work for, ranking number 11. Now, I will turn it over to John to provide more details on the Q1 results and our updated 2025 outlook. Thanks, Anirudh. Good afternoon, everyone. I'm pleased to report that Cadence delivered excellent results for the first quarter of 2025 with broad-based strength across all of our businesses. Robust design activity and customer demand drove 23% year-over-year revenue growth and 42% non-GAAP operating margin for Q1. We are tracking ahead of our original forecast for 2025. We repurchased more Cadence shares than initially planned in Q1, which reduced our share count. Here are some of the financial highlights from the first quarter, starting with the P&L. Total revenue was $1,242 million. GAAP operating margin was 29.1%, and non-GAAP operating margin was 41.7%. GAAP EPS was $1, with non-GAAP EPS $1.57. Next, turning to the balance sheet and cash flow, cash balance at quarter end was $2,778 million, while the principal value of debt outstanding was $2,500 million. Operating cash flow was $487 million. DSOs were 44 days, and we used $350 million to repurchase Cadence shares. Before I provide our updated outlook, I'd like to share the assumption that is embedded. It contains the usual assumption that export control regulations that exist today remain substantially similar for the remainder of the year. Our updated outlook for 2025 is revenue in the range of $5.15-$5.23 billion, GAAP operating margin in the range of 30.25%-31.25%, non-GAAP operating margin in the range of 43.25%-44.25%, GAAP EPS in the range of $4.21-$4.31, non-GAAP EPS in the range of $6.73-$6.83, operating cash flow in the range of $1.6-$1.7 billion, and we expect to use at least 50% of our annual free cash flow to repurchase Cadence shares. With that in mind, for Q2, we expect revenue in the range of $1,250 million-$1,270 million, GAAP operating margin in the range of 27.5%-28.5%, non-GAAP operating margin in the range of 41.5%-42.5%, GAAP EPS in the range of $0.89-$0.95, and non-GAAP EPS in the range of $1.55-$1.61. As usual, we have published a CFO commentary document on our investor relations website, which includes our outlook for additional items as well as further analysis and GAAP to non-GAAP reconciliations. In conclusion, Cadence is off to a strong start to the year. We are raising our 2025 revenue and EPS outlook. Our technology platform is essential to customers' R&D investments, and our resilient software model positions us well in navigating today's dynamic macro environment. I would like to close by thanking our customers, partners, and our employees for their continued support. With that, operator, we will now take questions. At this time, I would like to remind everyone who wants to ask a question to press Star, then the number one on your telephone keypad now. As a courtesy to all participants, we do ask that you limit yourself to one question. We will pause for a moment to compile the Q&A roster. Your first question comes from Harlan Sur with JPMorgan. Please go ahead. Good afternoon. Thank you for taking my question. Good to see the strong mid-teens% of your growth in the core EDA business. On your China business in particular, the team did continue to see year-over-year growth acceleration, right, to plus 13% in the March quarter versus 10% back in the December quarter. On top of this, tariff, trade, regulatory dynamics are, I think, driving more focus on domestic China chip design programs, especially in AI. Like we've heard, for example, ByteDance engaging on new custom AI chip programs. We've heard Alibaba as well in automotive. There continues to be more domestic China design programs firing, both analog, power management, and digital. Is this domestic focus and design activity a potential tailwind for your China business? Are you getting more optimistic on a growth profile for your China business this year versus the team's prior view of flattish? Yeah, Arlen, great question. First, I would like to say I'm pretty pleased by our performance in Q1, and the strength is coming in all the various product groups and also all the various geographies, like you mentioned. The reason is, even in this kind of dynamic macro environment, the customers are investing for the future, and R&D investment takes months to years. As you know, we are tied to the design activity, which is strong. Now, in China, or actually in multiple countries, the AI development is taking multiple cycles. I mean, not just, as you know, not just the development of data centers, but I've said for a while now that also the development of physical AI systems, which is autos and robots and drones. China is particularly strong in that as well. Overall, I think we are pleased with the silicon and system development driven for AI. I'm pleased with the performance of the China business and the start of the year, but we're still prudent assuming China flat for the whole year. John, you want to comment on that? No, I think that's the important point. The design activity remains strong in China, but we're continuing to be prudent with the guide for the year and continue to assume that China revenue is flat year over year at the midpoint of that guidance. Thank you very much. Next question comes from Lee Simpson with Morgan Stanley. Please go ahead. Great. Thanks for fitting me in, and great quarter to everyone. Thanks. I mean, as we all know, your main offering is a software and services product, which may not have the same risk from reciprocal tariffing regimes that other parts of the semiconductor ecosystem does. I think if you look at your hardware chip, it's an ASIC fabbed at TSMC. I guess one assumes this is only limited exposure to tariffing into China. I guess what I'm asking more generally is, can you confirm, if at all at this point, where you think you do have any exposure to the tariffing regime announced by the U.S. government, at least as you currently understand things? Thanks. Yes. With respect to tariffs, I mean, there are two parts to it. One is the customer behavior, which I mentioned we don't see any change at this time. The second is our own product. Like you said correctly, software and services are not subject to tariffs. Now, in terms of our hardware business, just to remind everyone, we do have multiple manufacturing lines in the U.S. and outside the U.S. This was something we did as part of COVID a few years ago. That's paying off well. At this point, we do not believe that, given our diversified supply chain, the tariffs will have an effect on our hardware business as well. Okay. On the other hand, we continue to monitor the situation. It is a dynamic situation, but I feel that we are more resilient for multiple reasons. One is that we are tied to the design cycle. We do not see that much change. Second is we are very diversified, both in terms of products and geographies. Third, our business model is a reliable business model. Even in these uncertain times, we feel that we have enough confidence and visibility to raise our outlook for 2025. That is great. Thanks. Your next question comes from the line of Gary Mobley with Loop Capital. Please go ahead. Gary, you might be on mute. Yep. Sorry, guys. Thanks for taking my question. This question might be more for Anirudh. The question is, as more and more tools that you sell, like simulation, synthesis, place and route, etc., run on generation-based compute and run on GPU-based servers, how does this impact your licensing model? More specifically, how does it potentially affect your annual contract value? Okay. That's a good question. I think you mean that as we enrich the hardware that our software runs on, how does it affect our business model? Actually, first of all, I've talked about this three-layer cake for a while, right, with the bottom layer of the cake being accelerated compute. In the old days, we used to run on CPUs, mostly x86 CPUs. Now we run on all kinds of CPUs, including ARM, and then GPUs, especially with our collaboration, very strong collaboration with NVIDIA. For hardware, we have our own kind of Boolean processor because GPUs are excellent for numerical calculation, like circuit simulation or CFD or electromagnetics. For zero-one kind of Boolean calculation, we make a special chip in Palladium, right, which is a Boolean supercomputer. As a reason, we have a very rich kind of set of offerings on the hardware side. On how we go to market, we maintain our previous model in which you can subscribe to the traditional licensing model, which is typically yearly license over a three-year term. We are also offering more and more cloud solutions, okay? There is an uptake in cloud offering. Sometimes the cloud could be on public clouds. The access to CPUs, just like AWS has ARM CPUs and other cloud vendors, and also GPUs. We also have our own cloud offering through outsourced data centers, which are actually seeing good availability. In our own Cadence All Cloud, we also are packaging hardware and software together. A good example is Millennium, just like we do with Palladium for our own chips. I think this is a new kind of business model to see how the customers will react. We have the existing business model of software only, and then this cloud SaaS model, especially as the hardware gets more rich in its offering. Thank you. Your next question comes from Vivek Arya with Bank of America. Please go ahead. Tools. And Anirudh, I wanted to check what is Cadence's share gain opportunity because when I look at your main tier, they have double-digit sales exposure at Intel. I'm curious, what is Cadence's exposure? How soon can we start to see any potential share gains? Because these kinds of relationships tend to be sticky. Just how large is the opportunity, and how soon can it start to show up tangibly for Cadence? Thank you. Hi, Vivek. Great question. I think your question is on Intel because I missed the beginning part of the question. First of all, I am very pleased by Lip-Bu's appointment as CEO of Intel. For Cadence, you know for a while, I think Intel has been a, I would say, a weak spot, relatively speaking, for Cadence. This goes back 10, 15 years. It is not a new issue. The other thing has been our investment in IP. In general, I am pleased with the—so both of these two areas have been the main kind of areas to improve for Cadence: IP and Intel. IP, I think I'm pleased to see improvement last year and also in Q1. I feel good about our IP business in general. On Intel, I mean, this is a great opportunity as they have to, of course, reformulate their strategy and how they work with their ecosystem partners. We look forward to engaging with Intel in a lot more detail. Those discussions have already started, and we'll keep you updated as they progress. Thank you. Your next question comes from the line of Gianmarco Conti with Deutsche Bank. Please go ahead. Yes, thank you. Congratulations on another great quarter. I guess, could you perhaps share some detail into your hardware delivery this quarter and whether you're seeing the demand for the third generation in line with what was expected, especially on customers accepting the high pricing in this environment? I know that you've briefly mentioned about it not having any impacts from tariffs, but could you share a few words on your Mexico plans where you assemble your hardware and whether that could be a potential issue from a capacity production standpoint? Were tariffs being enacted on that front? Thank you. Hi, Giomarco. Great questions. Generally, our hardware revenue is limited by our production capacity because demand continues to outstrip our ability to supply the hardware products. As Anirudh mentioned earlier, we have a very resilient and agile supply chain capability, and that lessens the direct impact of tariffs. We produce and build hardware for the U.S. market in the U.S. and for the international market outside the U.S. That gives us kind of an optimized setup for hardware. We're not seeing any real direct impact of tariffs on our numbers right now. Amazing. Thank you. Also, just to emphasize, we have multiple lines, right? Not just the one you mentioned. Your next question comes from the line of Jay Vleeschhouwer with Griffin Securities. Please go ahead. Thank you. Good evening. Anirudh, what would you say are the two or three most important technical or product enhancement deliverables this year that may have already occurred or yet to occur this year, even if not with an immediate impact on revenue, but in terms of enhancing your overall technical capabilities or positioning? Related to that, maybe you could talk about some of the investments you're making in some critical technology areas that may not get a lot of attention, one being, for example, physical verification, your physical verification, maybe the next generation silicon for hardware, Gen 4. Lastly, maybe talk about some of the incremental investments you're making in your acquired simulation solver products. Jay, that's a great question. It's a multi-part answer. Just to highlight a few key things, first of all, before I get into specifics, you know this, but just to emphasize, we have a massive investment in R&D, right? Like 35%-40% of our revenue is going to R&D. At a given point, we always have a lot of exciting projects that are ongoing. In terms of a few themes that are critical, of course, AI is super critical in applying AI to the chip and system design process. I think we are seeing a lot of very good results. Actually, one thing on something like Cerebrus or AI-driven design tools, at this point, we expect that the majority of more than 50% of the designs are now AI-enabled. Our tools are AI-enabled in those designs. The others, I'm sure, will catch up as well. AI still has a long ways to go with all these new agentic features, and you will see us talk more about it throughout the year. That is the number one thing I would like to highlight. We have these five major platforms, and all kinds of new models can be used in those. The second thing, which is also a pretty broad theme, which makes sure we always stay ahead, is 3DIC. I mean, 3DIC is a big theme, another theme for the next 5-10 years. You can see that in Blackwell. Right now, the packages can handle like three times reticle size, but they could easily go to 10 times reticle size in the next few years. There is massive investment in 3DIC in terms of the tool flow, in terms of analysis of these complex systems, thermal and electromagnetics, warpage analysis. Of course, IP that is needed for high-speed serdes and UCIe and other things. 3DIC remains as a critical focus for both our chip business, system business, and IP business. The last thing is, I think Gary asked earlier, is this rich hardware set, this bottom layer of the cake with Arm CPUs, x86 CPUs, Palladium hardware, and GPUs. We will have some more developments next week at Cadence Live about that part. This hardware-software co-optimization, I think, is going to be critical for our industry. Those are the three things I would highlight as top critical R&D focus areas. Okay. Thanks, Anirudh. Your next question comes from the line of Jason Celino with KeyBanc Capital Markets. Please go ahead. Great. Thank you. Keeping to this IP topic, I think you've planned to acquire Arm's Artisan IP asset. I know this hasn't closed yet, but when we think about the foundational IP market, just curious, why hasn't this been a bigger focus in the past? What's changed to make this opportunity more attractive? Just to clarify with John, this pending acquisition is not included in guidance. Thank you. Yeah. Let me take the second part first, Jason, just to clarify that, that yeah, it's not in our current guide. It's not closed yet. We haven't put that into the guide. Yeah, I'm actually pleased with this partnership and acquisition. Arm's foundation IP business has a very rich history, as you may know. It started with Artisan a long time ago and has very good credibility in the market. Also, as our IP position improves with our kind of performance over the last two years, we also have to expand our portfolio. I'm pleased with the performance and PPA of the current portfolio, but we have to fill in the gaps in our portfolio. That's the reason we, for example, acquired Rambus's IP business and then acquired Secure-IC a few months ago. This is a critical piece. Foundation IP, and it is becoming more and more critical versus five, seven years ago. Foundation IP became a lot more critical, especially in the interaction with the software, with place and route. Also, there is a massive, as you know, foundry build-out. Not just there are multiple foundries in multiple countries, and they all require foundation IP. That is the other reason I feel that foundation IP is much more critical now. It is a combination of foundation IP being more critical, a need to broaden our IP portfolio, work with our software tools. This opportunity came along to acquire a leading product in that space because we did not want to enter the space with not a good product. ARM's Artisan business has a good history, great product. We hope to finish that acquisition later in the year and talk to our customers about that. Perfect. Thank you. Your next question comes from the line of Joe Quatrochi with Wells Fargo. Please go ahead. Yeah. Thanks for taking the question. You mentioned that you were developing a full-stack agentic AI solution. I was wondering if you could talk about just the areas of the design workflow you're targeting first with that. Oh, great question. I mean, it could be applied to almost all the design process, but some that are super critical in terms of need. Of course, verification is always critical because verification, of course, we have great products with both hardware and software, but you never know when you're done with verification. It's like an NP-complete problem. If you look at now our Sim AI offering, which works with a logic simulator, can improve performance by 5-20x. We have all these several customer endorsements, public consumer endorsements for applying Sim AI to verification. I think verification, to me, is a great area for agentic AI. Implementation is always a good area. Things like Cerebrus can be further enhanced, and you will see more and more developments from us on digital design and agentic AI pretty soon. I would say that's the second area. One area that traditionally has not seen that much automation but is becoming more and more critical is package and PCB design, Allegro and Allegro X and Allegro XAI. Actually, I'm very optimistic that as package design becomes super critical, and package is the critical thing in a 3DIC system. 3DIC is another name for system in a package. There is a more need for automation in packaging and automation in PCB design. I'm actually pretty optimistic that AI can finally provide automation in packaging. I would say analog migration is another big area. Analog is like art plus science, but AI can also help in analog. I think these are the three or four key areas that we will work on. The scope of agentic AI is throughout the product spectrum. Very helpful. Thank you. Your next question comes from the line of Joe Vruwink with Baird. Please go ahead. Thank you. This might be an overly simplistic question relative to those before me, but your commentary and guidance raised strikes me as having greater visibility into strength during the second half of this year than maybe what's apparent just in our seat when analyzing the size of the one cube beat or even your quarter-end backlog value. Can you maybe just speak to some of the things that changed for the better in the last 60- 90 days that make you feel better about the 2025 outlook? Yes. Joe, yeah, I'll take that one. Yeah. I mean, we're tracking ahead of our original forecast for 2025 with solid Q1 results. We only gave you the guide a few weeks ago for the year. Not a huge amount has changed. I think we have had a bit more strength in our recurring revenue. And of course, as you know, recurring revenue, any beat in recurring revenue feeds through the rest of the year. A small beat in Q1 kind of follows through in Q2, Q3, and Q4. We were, like I say, ahead of the original forecast, even with including building in an expectation that we'll pick up some slightly higher expenses on the tariff side. We're still resilient on the tariff side. We felt it was right to raise the guides. Okay. Thank you. Your next question comes from the line of Joshua Tilton with Wolfe Research. Please go ahead. Hey, guys. Can you hear me? Yeah. Loud and clear, Josh. Great. Thank you for sneaking me in. I always love it when the guy before you kind of steals your question. I guess just to put a finer point on things, I think, Anirudh, you mentioned that the guidance still assumes that China is flat for the year. You guys are being prudent. I guess my question to that is, I understand there was an easier comp in Q1, but year to date, are you guys seeing anything that suggests that China should actually grow flat for the year? Another way of saying it is, is the decision to keep China flat for the year in the guide prudence or more along the lines of your expectations of how things will shake out by the end of the year? Thanks. Yeah. Josh, I'll take that one as well. I think it's more prudence that we thought it's wise to remain prudent in the current macro environment. I think we're very resilient in this environment. I mean, a company with high gross margin and essential products should do well in this type of environment. The bookings were really solid in Q1. We had stronger bookings than expected, kind of fed into it with more recurring revenue bookings as well. That fell into us tracking ahead of the original forecast for 2025. We thought the right thing to do was raise the guides. Super helpful, guys. Thank you. Your next question comes from the line of Siti Panigrahi with Mizuho. Please go ahead. Hey. Thanks for taking my question. Anirudh, if you see there are a lot of news going around, we saw DeepSeek early this year, wondering how that's impacting the design velocity or even how you see the compute capacity will change. At the same time, also, we are seeing hyperscalers trying to purge their data center build-out. Are you seeing any kind of impact there? Would love to hear your views on this. Yeah. Siti, that's a great question. I mean, that's a big question. Let me try to—I mean, it's a critical thing for the whole industry. First of all, I mean, when I talk to customers, DeepSeek is one advancement. A lot of customers expect multiple advancements like this. AI will get more and more efficient as—and this happened if you look at even EDA's history, right? When AI started off, it was more like dense computation. If you look at EDA history in the 1970s, we started off with dense computation. Then we have sparse computation. We have partitioning. We have hierarchy. We have latency. There are all kinds of computer science methods that will be applied to AI. I believe that there will be multiple DeepSeek moments, not just one DeepSeek moment. At the same time, AI will get more and more prevalent in its use. This happened in CPUs. I expect the same thing will happen with AI and GPUs. In terms of when we talk to customers—first, I have to remind you that we are on the design side, not on the production side. In terms of design, we only see acceleration of more and more designs to do AI, even on the data center side. Of course, NVIDIA is a great partner of ours. I think NVIDIA is doing exceptionally well. A lot of the other hyperscalers, all the four or five major US hyperscalers and companies in other countries are also investing heavily in their own designs. We are glad to work with them. Like I mentioned before, the physical AI part of it, which is cars, planes, and drones, is also—there is a lot of design activity now. Even though the car market may not be as strong, that is for current products. They are designing for future products, which will be AI-enabled. The other thing, as AI gets more efficient, I think there will be more inference use. There is a lot of design of inference chips to support that. Right now, in terms of design activity, I feel pretty good. Like I was mentioning before, even on the data center side, the 3DIC is going to cause a massive change in complexity. Right now, we have Blackwell with two kind of big dies with HBM. The packaging roadmap is very aggressive by all foundries. I think that is also going to drive new and new AI designs with putting more kind of big chips in packages. That should also drive AI performance and efficiency. Right now, we do not see any big change in terms of the design activity for AI. Thanks for that color. Your next question comes from the line of Nay Soe Naing with Berenberg. Please go ahead. Hi. Thank you for giving me a question. Mine is on your SD&A segment, please. Another very impressive quarter in Q1. I was just trying to understand if you could maybe share where the strength is coming from, especially when we put it against the product market and your peers as well. In the last three years, you've been growing at 2-3x. What have your competitors been able to do? I was wondering if there were any competitive market wins that's driving your performance. If not, what are the reasons, please? Maybe if I could squeeze in a second part of this question, the solid performance we've had in the past, does it, any chance at all, create any headwinds for you or tough comps for you going forward? Thank you. Thanks for the question. You're right to raise the comps because I think one of the benefits for Q1 is that Q1 2024 was a pretty easy comp for us on the SD&A side. I mean, Beta performed well in Q1 2025, but we only acquired that in the middle of the year last year. I think the first time Beta turned up in our results was Q3 2024. Beta is providing a huge amount of pull-through business for Cadence. Cadence products are being sold alongside Beta products, and that is really helping us for growth. We are expanding reach to the longer-tail customers through our e-commerce model. We have seen strength in automotive and aero and defense. I do not know, Anirudh, do you want to add anything about Beta? Beta is performing great. It has a pull-through to other parts of our portfolio. One thing we are always confident, and I think you have seen some benchmarks in the industry in the past, that our R&D products are solid. They are rewritten. They have no accuracy loss. They have much better performance because of massive parallelism, whether it is on CPUs or GPUs. We are always confident on our product side, and we continue to innovate there. I think what Beta helps is to increase the reach of those products because they are working with all the auto companies. Not only can we benefit from the performance of Beta, but we also can sell our other products to those customers. We also improved our cloud offering and go-to-market with indirect channel. I think you're seeing some benefits of that, better go-to-market operation on the system side. Thank you. Our next question comes from the line of Ruben Roy with Stifel. Please go ahead. Thank you for letting me ask the question. Anirudh, I had a similar question to Jason's on IP. You touched on this in your answer to that question, but just wanted to make sure I understood in terms of sort of these, I would say, accelerated pace of recent tuck-ins on the IP side. Sounds like they're opportunistic rather than customer-driven. I wanted to make sure I got that right. The second part of the question is just maybe if you can update sort of how you're thinking about IP in terms of longer-term growth from that segment, given all that's going on with foundry and customers, etc. Thank you. Yes. Great question. I think in terms of IP, there are multiple factors. One is our performance is better. The portfolio we had, especially the PPA, Power Performance in the Area for TSMC, the most advanced foundry, the IP is just much better quality and performance. That's driving customer demand. The customers want us to get IP from us and want us to have a bigger portfolio. Okay. As a result, we do, of course, invest organically, and we will do inorganic acquisition if we see a good fit. Okay. It is both a combination of what is available, but the customers are definitely driving us to broaden our portfolio. That is one. Second thing is there are more and more foundries. We are glad with our partnership with TSMC, but we highlighted even this time, like Rapidus is making massive investments. Of course, Samsung and Intel, and we are glad to. There are at least four major foundries at advanced nodes along with all the foundries like GlobalFoundries and UMC at more mainstream nodes. I think the foundry ecosystem is rich, and that provides more opportunities in IP. The third thing, of course, is AI and 3DIC and all this in die-to-die IP. For all these three reasons, I'm optimistic. We are performing well. We are increasing our portfolio. The market wants more IP from us. I expect IP to, of course, we had a good year last year. We had a very good quarter, Q1. I expect IP to grow better than Cadence average going forward. Perfect. Thank you. Our final question comes from the line of Blair Abernethy with Rosenblatt Securities. Please go ahead. Thanks for squeezing me in, guys. Nice quarter. Anirudh, just wondering if you could give us sort of high-level thoughts on the data center digital twins. You bought Future Facilities back in July 2022. It seems to be getting some traction out there. I just want to see how you feel about the size of the TAM, the size of the opportunity there with that asset, and sort of are there expansion opportunities beyond data centers? Absolutely. The two areas that I have been very excited about, especially on the system side, one is which is very close to the package, like I mentioned, thermal, electromagnetics, warpage, because there's a massive transformation right next to the chip. We are in a very strong position with Allegro and all the analysis tools. The second area is all the way at the data center level. That's why we acquired Future Facilities. Actually, it had a very strong Q1. We also have a great partnership with NVIDIA there. NVIDIA is designing their data centers with our Cadence Reality digital twin and also working with joint partners as we go to market with them together on Cadence Reality. That opportunity is huge. I mean, even we applied it to our own IT group, for example. We have our own data centers, right? The product is general enough to be used in any data center. We saw a 10% improvement in power, which is huge. Typically, that's the area that has not seen a lot of analysis and automation because it's typically done in a typical construction kind of work, whereas chip design is very analytical, mathematical. That area needs more kind of optimization and simulation. I am optimistic. The way Cadence Reality works, there is a design side of it in which we help customers design the data center. There is the operation side of it in which we can analyze on the fly, use the digital twin to optimize their operation. If you include both sides, I mean, the opportunity is huge. We are still kind of prudent in our assumptions like we do in everything. I am very optimistic about these two extremes. One is all the way to data center, and second is all the way very close to the chip on the package. That is where you see us investing. Yeah. Great. Thanks very much for the color. I will now turn the call back over to Anirudh Devgan for closing remarks. Thank you all for joining us this afternoon. It is an exciting time for Cadence as a broad portfolio and product leadership ideally positions us to maximize the growing opportunities in the semiconductor and system industry. On behalf of our employees and our board of directors, we thank our customers, partners, and investors for your continued trust and confidence in Cadence. Thank you for participating in today's Cadence First Quarter 2025 earnings conference call. This concludes today's call. You may now disconnect. Good.