Cerence (CRNC) AI Stock Analysis

• Market Cap: $334.48M
• Dividend Yield: N/A
• Average Volume (3M): 1.13M
• Price to Earnings (P/E): ―
• Beta (1Y): 2.22
• Revenue Growth: -24.05%
• EPS Growth: 96.90%
• Country: US
• Employees: 1,400
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Application
• EPS (TTM): 0.17
• Shares Outstanding: 45,018,080
• 10 Day Avg. Volume: 907,109
• 30 Day Avg. Volume: 1,126,905
• PEG Ratio: 0.30
• Price to Book (P/B): 3.57
• Price to Sales (P/S): 2.14
• P/FCF Ratio: 11.49
• Enterprise Value/Market Cap: 1.39
• Enterprise Value/Revenue: 1.47
• Enterprise Value/Gross Profit: 1.87
• Enterprise Value/Ebitda: 7.92
• 1Y Price Target: $10.00
• Price Target Upside: 27.06% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 3
• EPS Forecast (FY): 0.77
• Revenue Forecast (FY): $314.78M

• Rating: 52 Neutral
• Price Target: $7.50 ▼(-4.70% Downside)
• Action: Reiterated Date: 02/06/26
• Date: Action: Reiterated 02/06/26

The score reflects improving fundamentals led by strong and growing free cash flow and rebounding revenue/gross margins, partially reinforced by reaffirmed FY2026 guidance. These positives are weighed down by a pronounced downtrend in the stock’s technicals, ongoing profitability fragility with a negative P/E, and earnings volatility driven by one-time IP settlement revenue and softer near-term (Q2) guidance.

Positive Factors

Free Cash Flow Strength

Sustained, sizable free cash flow across recent quarters gives Cerence durable financial flexibility to fund R&D, support production ramps, and pay down debt without relying on equity markets. Consistent cash conversion reduces refinancing risk and underpins long-term investment in AI products.

High Gross Margins & Rebound

Very high gross margins driven by software/licensing mix indicate strong unit economics that are scalable as volume grows. A robust revenue rebound demonstrates demand recovery; together these factors support eventual operating leverage and the potential for sustainable profitability as fixed costs are absorbed.

Product & Commercial Momentum

Securing multiple OEM programs and production starts creates multi-year, recurring licensing and royalty streams. Demonstrated product progress (XUI, AI agents) and strategic integrations increase OEM stickiness, accelerating adoption and raising the likelihood that connected services grow into stable revenue pillars.

Negative Factors

Remaining Leverage

Although leverage improved, a materially debt-funded capital structure constrains flexibility: interest and principal obligations limit ability to invest aggressively or weather revenue volatility. With GAAP profitability still fragile, high leverage elevates refinancing and covenant risk over the medium term.

Earnings Volatility from IP Reliance

A sizable portion of recent outperformance came from a one-off IP settlement, creating lumpy, unpredictable income. Dependence on sporadic IP monetization undermines the transparency and sustainability of earnings, complicating forecasting and reducing confidence in recurring profitability metrics.

Billings & Services Timing Weakness

Billings growth lagging revenue, plus declines in fixed-license recognition and professional services, signal timing and conversion issues. This disparity can produce quarter-to-quarter volatility and suggests some demand or contract-structure weakness that may limit the visibility of sustained revenue growth.

Cerence Business Overview & Revenue Model

Company Description

Cerence 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 Money

Cerence generates revenue primarily through licensing its voice recognition technologies and software solutions to automotive manufacturers and OEMs. The company typically operates on a subscription and usage-based model, where clients pay for the integration of Cerence's technology into their vehicles. Key revenue streams include software licenses, maintenance and support services, and professional services for customization and integration. Significant partnerships with major automotive companies enhance Cerence's market reach and contribute to its earnings, as these collaborations often lead to long-term contracts and recurring revenue. Additionally, Cerence may benefit from advancements in AI and increased demand for connected vehicle technologies, driving further growth in revenue.

Cerence Financial Statement Overview

Summary

Fundamentals are improving but still uneven: revenue rebounded strongly (+25.49% TTM) with very high gross margin (~72%), and cash generation is a standout (TTM operating cash flow ~$89.8M; free cash flow ~$74.6M, +59.3%). Offsetting this, profitability remains fragile (negative net margin) and the balance sheet is still meaningfully leveraged despite improvement (debt-to-equity down to ~1.44 TTM).

Income Statement

TTM (Trailing-Twelve-Months) revenue rebounded strongly (+25.49%) and gross margin remains very high (~72%), pointing to solid product economics. However, profitability is still fragile: net margin is negative and operating profitability is thin, even though it has improved materially from the deeply loss-making FY2024. The overall picture is a recovery in progress, but not yet consistently profitable.

Balance Sheet

Leverage has improved versus prior years (debt-to-equity down from ~2.09 in FY2024 to ~1.44 in TTM), but the balance sheet is still meaningfully debt-funded. Equity is relatively modest versus total assets, and returns to shareholders remain negative, indicating the company has not translated the capital base into sustained earnings. Reduced leverage is a positive trend, but financial flexibility still looks constrained.

Cash Flow

Cash generation is a clear strength. TTM (Trailing-Twelve-Months) operating cash flow (~$89.8M) and free cash flow (~$74.6M) are solid, with strong free-cash-flow growth (+59.3%). While accounting earnings are not yet strong, cash flow has improved substantially versus FY2022–FY2024 and provides a cushion to service obligations and fund operations.

Breakdown	TTM	Sep 2025	Sep 2024	Sep 2023	Sep 2022	Sep 2021
Income Statement
Total Revenue	315.96M	251.78M	331.50M	294.48M	327.89M	387.18M
Gross Profit	248.30M	181.47M	242.07M	193.46M	219.21M	273.42M
EBITDA	58.64M	11.95M	-561.43M	-5.58M	-160.42M	91.93M
Net Income	335.00K	-18.71M	-588.08M	-56.25M	-310.83M	45.89M
Balance Sheet
Total Assets	602.04M	630.59M	702.36M	1.30B	1.32B	1.71B
Cash, Cash Equivalents and Short-Term Investments	94.67M	87.45M	126.99M	110.36M	115.16M	158.86M
Total Debt	200.40M	230.26M	295.24M	289.33M	286.82M	289.79M
Total Liabilities	451.60M	479.92M	561.26M	602.72M	605.54M	673.78M
Stockholders Equity	150.44M	150.68M	141.10M	694.88M	712.95M	1.03B
Cash Flow
Free Cash Flow	74.57M	46.82M	12.20M	2.37M	-19.58M	62.34M
Operating Cash Flow	89.81M	61.17M	17.20M	7.50M	-2.14M	74.39M
Investing Cash Flow	-13.10M	-10.55M	4.38M	5.82M	-10.56M	-41.63M
Financing Cash Flow	-87.57M	-87.00M	225.00K	-5.33M	-19.61M	-41.51M

Cerence Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 7.87
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

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 7.87 is below the 20-day moving average (MA) of 8.71, below the 50-day MA of 10.41, and below the 200-day MA of 10.29, indicating a bearish trend. The MACD of -0.89 indicates Positive momentum. The RSI at 36.28 is Neutral, neither overbought nor oversold. The STOCH value of 30.05 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CRNC.

Cerence Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MITK	67 Neutral	$583.67M	42.56	7.45%	―	4.42%	165.42%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%
WEAV	58 Neutral	$396.37M	-13.24	-37.56%	―	17.34%	-8.35%
SOUN	53 Neutral	$3.51B	-10.21	-90.15%	―	120.52%	-124.81%
CRNC	52 Neutral	$334.48M	-286.25	0.25%	―	-24.05%	96.90%
VERI	48 Neutral	$258.89M	-1.30	―	―	-17.50%	-51.25%

Cerence Corporate Events

Cerence Repurchases Convertible Notes to Strengthen Capital Structure

On December 23, 2025, Cerence entered into privately negotiated transactions with certain holders of its 1.50% Convertible Senior Notes due 2028 to repurchase $30 million in aggregate principal amount at 92% of face value, plus accrued and unpaid interest up to but excluding the settlement date. The company plans to cancel the repurchased notes, reducing its outstanding convertible debt and modestly improving its capital structure ahead of the notes’ 2028 maturity, which may be seen as a proactive balance-sheet management step for debtholders and equity investors.

The most recent analyst rating on (CRNC) stock is a Hold with a $13.50 price target. To see the full list of analyst forecasts on Cerence stock, see the CRNC Stock Forecast page.