Cerence (CRNC) AI Stock Analysis

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Cerence

(NASDAQ:CRNC)

Rating:51Neutral

Price Target:

$9.00

▼(-2.17% Downside)

Cerence's overall stock score reflects significant financial and valuation challenges, with high leverage and negative profitability metrics. Despite these issues, the company shows promise with strong earnings call results, including raised revenue guidance and strategic advancements in AI and partnerships. Technical indicators suggest bearish momentum, but potential oversold conditions could offer a buying opportunity.

Positive Factors

Financial Performance

Cerence posted a significant beat with impressive PPU, GM, OM and cash flow metrics all above estimates.

New Business Opportunities

The company won a new xUI customer within VW Group and is expanding their JLR opportunity.

Technology and Innovation

Grok is expected to act as an OEM decision accelerator as conversational AI becomes table stakes.

Negative Factors

Professional Services

Professional Services estimates come down $1-2MM/Q on secular efficiency trends.

Tariff Uncertainty

Cerence posted a solid report and maintained the FY25 outlook, despite tariff uncertainty.

Cerence (CRNC) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$398.54M

Dividend YieldN/A

Average Volume (3M)2.34M

Price to Earnings (P/E)―

Beta (1Y)2.10

Revenue Growth-31.20%

EPS Growth95.56%

CountryUS

Employees1,400

SectorTechnology

Sector Strength84

IndustrySoftware - Application

Share Statistics

EPS (TTM)0.16

Shares Outstanding43,319,653

10 Day Avg. Volume1,518,158

30 Day Avg. Volume2,340,631

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)N/A

P/FCF RatioN/A

Enterprise Value/Market Cap1.45

Enterprise Value/Revenue2.36

Enterprise Value/Gross Profit3.33

Enterprise Value/Ebitda-566.53

Forecast

1Y Price Target

$11.00

Price Target Upside19.57% Upside

Rating ConsensusHold

Number of Analyst Covering5

Cerence Business Overview & Revenue Model

Company DescriptionCerence Inc. provides AI powered virtual assistants for the mobility/transportation market worldwide. The company offers edge software components; cloud-connected components and related toolkits and applications; and virtual assistant coexistence and professional services. It also provides conversational artificial intelligence-based solutions, including speech recognition, natural language understanding, speech signal enhancement, text-to-speech, and acoustic modeling technology. Cerence Inc. is headquartered in Burlington, Massachusetts.

How the Company Makes MoneyCerence generates revenue through a combination of licensing agreements, software sales, and recurring service contracts. Key revenue streams include the sale of its voice and AI solutions to automotive manufacturers, which integrate Cerence's technology into their vehicles. The company also earns income from ongoing support and maintenance services, as well as upgrades to its software products. Significant partnerships with major automakers and technology firms bolster Cerence's earnings, as these collaborations often result in long-term contracts and additional revenue opportunities through joint developments and integrations.

Cerence Key Performance Indicators (KPIs)

Any

Gross Margin by Segment

Gross Margin by Segment
Shows the percentage of revenue that exceeds the cost of goods sold for each segment, revealing efficiency and pricing power across different parts of the business.

Chart InsightsCerence's gross margin trends reveal a notable recovery in Professional Services, with a recent uptick after previous volatility. The License segment remains robust, maintaining high margins despite macroeconomic pressures. Connected Services, however, shows a decline, reflecting challenges noted in the earnings call, such as headwinds in professional services revenue and exchange rate impacts. Despite these challenges, Cerence's strategic focus on AI solutions and new partnerships, as highlighted in the earnings call, suggests potential for future margin improvements and market expansion.

Data provided by:

Main Street Data

Cerence Earnings Call Summary

Earnings Call Date:Aug 06, 2025

(Q3-2025)

% Change Since: |

Next Earnings Date:Nov 24, 2025

Earnings Call Sentiment Positive

The earnings call reflected strong financial performance with revenue exceeding guidance, positive cash flow, and increased revenue guidance. Notable achievements in AI advancements and strategic customer partnerships were highlighted. However, there were challenges related to a decline in total license revenue, professional services revenue, and potential impacts from tariffs and program delays.

Q3-2025 Updates

Positive Updates

Exceeding Revenue Guidance

Cerence reported total revenue of $62.2 million for Q3 FY '25, surpassing the high end of their guidance range of $52 million to $56 million.

Strong Free Cash Flow

Generated strong free cash flow of $16.1 million, marking the fifth consecutive quarter of positive free cash flow.

Increased Revenue Guidance

For the full fiscal year, revenue guidance was raised and narrowed to $244 million to $249 million, with the low end of the range above the previous midpoint.

AI Innovation Progress

Advanced AI roadmap with milestones like increased language availability and enhanced contextual reasoning for xUI platform.

New and Expanded Customer Deals

Signed a deal within Volkswagen Group and expanded work with JLR, with increased PPU in these deals. New design wins with Daihatsu and Hyundai, and renewals with Great Wall Motors and GM.

Successful Debt Reduction

Reduced total debt by $87.5 million using cash on hand, contributing to a comfortable cash position with $79.1 million in cash and marketable securities.

Partnership with LG

Formally announced a partnership with LG to leverage Cerence's technology in LG's global television lineup, spanning 65 voices and languages.

Negative Updates

Decline in Total License Revenue

Total license revenue declined 20.6% year-over-year due to a strategic shift away from large upfront license deals.

Professional Services Revenue Decrease

Professional services revenue was $15.2 million, down 8% from the prior year due to a lower mix of custom work.

Potential Challenges from Tariffs

Noted the potential for future impacts from tariffs, with Q3 possibly benefiting from OEMs producing ahead of tariff impacts expected in Q4.

Vehicle Program Delays

Continued to see some programs being delayed, impacting the timing of revenue recognition.

Company Guidance

During Cerence's Q3 2025 earnings call, the company reported strong financial results, exceeding their guidance with revenue of $62.2 million and adjusted EBITDA of $9 million. They also generated a significant free cash flow of $16.1 million, continuing their streak of five consecutive quarters with positive free cash flow. For the full fiscal year, Cerence raised and narrowed their revenue guidance to a range of $244 million to $249 million, surpassing the previous midpoint of their guidance. The company highlighted the advancement of their AI roadmap, notably their next-generation hybrid Agentic AI assistant platform, Cerence xUI, and expanded partnerships with OEMs such as Volkswagen Group and JLR. They also reported a PPU increase to $4.91 from $4.47, reflecting improved pricing and connected solution adoption. Cerence plans to continue transformation efforts and cost management while expanding into non-automotive markets, as demonstrated by a partnership with LG for voice interaction technology in televisions.

Cerence Financial Statement Overview

Summary

Cerence is facing financial challenges, with declining revenues and persistent net losses impacting its income statement. The balance sheet shows elevated leverage, which could become problematic if earnings do not recover. Cash flow has improved, suggesting some operational efficiencies, yet the company needs to address its profitability to ensure longer-term financial health.

Income Statement

Neutral

Cerence has experienced a decline in revenue from $331.5M in 2024 to $254.3M in TTM 2025, indicating a negative revenue growth trend. The gross profit margin for TTM 2025 is 70.2%, showing strong product profitability. However, the net profit margin is significantly negative at -132.3%, highlighting substantial losses. The EBIT and EBITDA margins are also negative, reflecting operational challenges and high operational costs.

Balance Sheet

Neutral

The debt-to-equity ratio is 1.85, indicating high leverage which could pose a risk if earnings do not improve. The return on equity (ROE) is negative, consistent with current losses. However, the equity ratio stands at 22.4%, suggesting a reasonable level of equity financing compared to total assets.

Cash Flow

Neutral

Free cash flow has grown from $12M in 2024 to $37.3M in TTM 2025, indicating improvement in cash generation. The operating cash flow to net income ratio is positive, showing better cash conversion relative to net losses. However, the free cash flow to net income ratio is negative, reflecting ongoing profitability issues.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	245.95M	331.50M	294.48M	327.89M	387.18M	329.65M
Gross Profit	174.04M	244.27M	199.31M	230.72M	286.11M	221.79M
EBITDA	-1.02M	-561.43M	-5.58M	-160.42M	91.93M	29.74M
Net Income	-25.77M	-588.08M	-56.25M	-310.83M	45.89M	-20.63M
Balance Sheet
Total Assets	636.80M	702.36M	1.30B	1.32B	1.71B	1.69B
Cash, Cash Equivalents and Short-Term Investments	79.13M	126.99M	110.36M	115.16M	158.86M	147.73M
Total Debt	216.83M	295.24M	289.33M	286.82M	288.12M	296.64M
Total Liabilities	481.13M	561.26M	602.72M	605.54M	673.78M	729.69M
Stockholders Equity	155.67M	141.10M	694.88M	712.95M	1.03B	957.76M
Cash Flow
Free Cash Flow	41.74M	12.20M	2.37M	-19.58M	62.34M	25.78M
Operating Cash Flow	54.54M	17.20M	7.50M	-2.14M	74.39M	44.79M
Investing Cash Flow	-8.95M	4.38M	5.82M	-10.56M	-41.63M	-30.68M
Financing Cash Flow	-87.25M	225.00K	-5.33M	-19.61M	-41.51M	121.55M

Cerence Technical Analysis

Technical Analysis Sentiment

Negative

Last Price9.20

Price Trends

50DMA

9.91

Negative

100DMA

9.44

Negative

200DMA

9.84

Negative

Market Momentum

MACD

-0.01

Positive

RSI

41.94

Neutral

STOCH

16.90

Positive

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CRNC, the sentiment is Negative. The current price of 9.2 is below the 20-day moving average (MA) of 10.65, below the 50-day MA of 9.91, and below the 200-day MA of 9.84, indicating a bearish trend. The MACD of -0.01 indicates Positive momentum. The RSI at 41.94 is Neutral, neither overbought nor oversold. The STOCH value of 16.90 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CRNC.

Cerence Risk Analysis

Cerence disclosed 40 risk factors in its most recent earnings report. Cerence reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Cerence Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MITK	77 Outperform	$447.80M	29.77	6.94%	―	6.98%	―
Sector *	61 Neutral	$35.55B	8.88	-11.05%	1.87%	8.55%	-8.14%
SMRT	58 Neutral	$267.06M	―	-25.48%	―	-28.45%	-224.48%
ONTF	56 Neutral	$234.80M	―	-22.60%	―	-6.88%	15.83%
DOMO	53 Neutral	$588.24M	―	48.46%	―	>-0.01%	9.72%
EGHT	52 Neutral	$268.65M	―	-18.25%	―	-0.73%	67.98%
CRNC	51 Neutral	$398.54M	―	-16.63%	―	-31.20%	95.56%

* Technology Sector Average

Performance Comparison

CRNC

Cerence

9.20

6.26

212.93%

EGHT

8X8

2.07

0.31

17.61%

MITK

Mitek Systems

9.81

1.52

18.34%

DOMO

Domo

14.62

7.47

104.48%

ONTF

ON24

5.48

-0.36

-6.16%

SMRT

SmartRent

1.46

-0.16

-9.88%

Cerence Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

Cerence Announces Restructuring Plan to Reduce Expenses

Neutral

Sep 5, 2025

On September 2, 2025, Cerence Inc. announced a restructuring plan aimed at reducing operating expenses and positioning the company for future growth, with estimated cash restructuring charges between $7.2 and $7.9 million. Additionally, the company entered into a retention agreement with Nils Schanz, Executive Vice President, offering a retention bonus and equity awards contingent on his continued service and performance metrics over the next three years.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Sep 06, 2025