Cerence Inc (CRNC)
NASDAQ:CRNC
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Cerence
(NASDAQ:CRNC)
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Rating:60Neutral
Price Target:
$11.50
▲(32.18% Upside)
Action:Reiterated
Date:05/23/26
The score is driven primarily by improving operating performance and strong free cash flow generation, reinforced by upbeat earnings-call guidance upgrades. These positives are tempered by recent revenue contraction, ongoing net losses and leverage constraints, plus a relatively expensive valuation (high P/E) despite supportive technical trends.
Positive Factors
Strong free cash flow generation
Cerence converts revenue into cash reliably: TTM operating cash flow ~$88.5M and free cash flow ~$75.1M. Durable cash generation funds continued R&D, supports product rollouts and debt service, and gives management flexibility to pursue GenAI/XUI investments and opportunistic M&A.
Negative Factors
Revenue contraction and choppy growth
Trailing‑twelve‑month revenue has declined (-4.4%), reflecting a choppy growth profile. Persistent top-line softness reduces visibility into operating leverage, delays recouping R&D investment, and increases reliance on timing of license recognitions and future program ramps to restore sustained growth.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong free cash flow generation
Cerence converts revenue into cash reliably: TTM operating cash flow ~$88.5M and free cash flow ~$75.1M. Durable cash generation funds continued R&D, supports product rollouts and debt service, and gives management flexibility to pursue GenAI/XUI investments and opportunistic M&A.
Read all positive factors
Cerence Key Performance Indicators (KPIs)
Any
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.
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.
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The Fly
The FlyCerence (CRNC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$496.16M
Dividend YieldN/A
Average Volume (3M)1.01M
Price to Earnings (P/E)42.5
Beta (1Y)2.57
Revenue Growth18.84%
EPS Growth94.41%
CountryUS
Employees1,400
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)-0.46
Shares Outstanding45,187,810
10 Day Avg. Volume1,364,904
30 Day Avg. Volume1,008,077
Financial Highlights & Ratios
PEG Ratio0.30
Price to Book (P/B)3.57
Price to Sales (P/S)2.14
P/FCF Ratio11.49
Enterprise Value/Market Cap1.16
Enterprise Value/Revenue1.90
Enterprise Value/Gross Profit2.43
Enterprise Value/Ebitda15.22
Forecast
1Y Price Target
$10.00Price Target Upside14.94% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
EPS Forecast (FY)0.71
Revenue Forecast (FY)$315.57M
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 ...
How the Company Makes Money
Cerence primarily makes money by licensing its automotive conversational AI software and related technologies to original equipment manufacturers (automakers) and, in some cases, automotive suppliers that integrate Cerence functionality into in-ve...
Cerence Earnings Call Summary
Earnings Call Date:May 07, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Aug 11, 2026
Earnings Call Sentiment Positive
The call presented clear operational and commercial momentum — revenue and adjusted EBITDA beats, strong cash flow, growing recurring connected services (+21% YoY), PPU improvement (+5% YoY), and significant XUI and GenAI customer wins including BYD entering production. Management raised full-year revenue, adjusted EBITDA, and free cash flow guidance. Headwinds were largely timing-related (notably a sharp YoY decline in fixed license revenue) along with higher near-term OpEx due to lower capitalization of R&D and increased legal/IP expenses. Given the breadth of wins, cash generation, and upgraded guidance outweighing the timing-driven negatives, the tone is constructive.Positive Updates
Revenue and Profitability Beat
Q2 revenue of $64.2M exceeded the high end of guidance ($58–62M). Adjusted EBITDA was $7.2M, also above the guidance range of $2–6M, demonstrating outperformance versus expectations.
Negative Updates
Large Year‑Over‑Year Fixed License Revenue Decline (Timing Driven)
Fixed license revenue was $5.8M in Q2 versus $21.5M in the prior-year period, driving a difficult year-over-year comp; management attributes this primarily to timing of contract execution rather than a demand decline.
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Q2-2026 Updates
Positive
Negative
Revenue and Profitability Beat
Q2 revenue of $64.2M exceeded the high end of guidance ($58–62M). Adjusted EBITDA was $7.2M, also above the guidance range of $2–6M, demonstrating outperformance versus expectations.
Read all positive updates
Company Guidance
Cerence guided Q3 revenue of $68–72M (including about $10M of expected fixed license deals), gross margin of 75–76%, adjusted EBITDA of $8–12M, net income of $(1)–$3M and EPS of $(0.02)–$0.07. For fiscal 2026 they raised and narrowed full‑year guidance to revenue $305–320M (midpoint $312.5M), adjusted EBITDA $60–70M (midpoint up ~8%), reaffirmed gross margin of 79–80%, projected net income $(3)–$7M and EPS $(0.07)–$0.15, and raised free cash flow by $10M to $66–76M (a ~16% increase at the midpoint); they also expect full‑year income tax expense of roughly $18–22M. Management noted Q2 results of $64.2M revenue, $7.2M adjusted EBITDA and $13.6M free cash flow as the basis for the outlook and highlighted supporting metrics including five‑year backlog of ~$971M, adjusted total billings of $239M (up 7% YoY), pro forma royalties of $40.3M, PPU of $5.09 TTM (up 5% YoY) and connected cars shipped +12% TTM.Cerence Financial Statement Overview
Summary
Income Statement
48
Neutral
Balance Sheet
44
Neutral
Cash Flow
74
Positive
| Breakdown | TTM | Sep 2025 | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 302.14M | 251.78M | 331.50M | 294.48M | 327.89M | 387.18M |
| Gross Profit | 236.53M | 181.47M | 242.07M | 193.46M | 219.21M | 273.42M |
| EBITDA | 37.81M | 11.95M | -561.43M | -5.58M | -160.42M | 91.93M |
| Net Income | -19.65M | -18.71M | -588.08M | -56.25M | -310.83M | 45.89M |
Balance Sheet | ||||||
| Total Assets | 616.95M | 630.59M | 702.36M | 1.30B | 1.32B | 1.71B |
| Cash, Cash Equivalents and Short-Term Investments | 108.26M | 87.45M | 126.99M | 110.36M | 115.16M | 158.86M |
| Total Debt | 187.52M | 230.26M | 295.24M | 289.33M | 286.82M | 289.79M |
| Total Liabilities | 458.41M | 479.92M | 561.26M | 602.72M | 605.54M | 673.78M |
| Stockholders Equity | 158.54M | 150.68M | 141.10M | 694.88M | 712.95M | 1.03B |
Cash Flow | ||||||
| Free Cash Flow | 75.07M | 46.82M | 12.20M | 2.37M | -19.58M | 62.34M |
| Operating Cash Flow | 88.45M | 61.17M | 17.20M | 7.50M | -2.14M | 74.39M |
| Investing Cash Flow | -9.75M | -10.55M | 4.38M | 5.82M | -10.56M | -41.63M |
| Financing Cash Flow | -86.92M | -87.00M | 225.00K | -5.33M | -19.61M | -41.51M |
Cerence Technical Analysis
Positive
8.70
Price Trends
8.38
Positive
9.02
Positive
9.98
Positive
Market Momentum
0.42
Positive
64.64
Neutral
38.37
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CRNC, the sentiment is Positive. The current price of 8.7 is below the 20-day moving average (MA) of 9.76, above the 50-day MA of 8.38, and below the 200-day MA of 9.98, indicating a bullish trend. The MACD of 0.42 indicates Positive momentum. The RSI at 64.64 is Neutral, neither overbought nor oversold. The STOCH value of 38.37 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CRNC.
Cerence Risk Analysis
Cerence disclosed 38 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
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $723.90M | 15.94 | 6.97% | ― | 6.88% | 26.04% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
60 Neutral | $496.16M | 42.52 | -12.77% | ― | 18.84% | 94.41% | |
57 Neutral | $454.32M | -15.73 | -30.94% | ― | 16.80% | 21.61% | |
51 Neutral | $3.48B | -23.23 | -40.15% | ― | 79.98% | 21.99% | |
45 Neutral | $198.93M | -2.35 | -331.54% | ― | -9.07% | 35.07% |
* Technology Sector Average
CRNC
Cerence
10.98
2.44
28.57%
MITK
Mitek Systems
16.03
6.58
69.63%
VERI
Veritone
2.14
0.40
22.64%
WEAV
Weave Communications
5.71
-4.18
-42.26%
SOUN
SoundHound AI, Inc Class A
8.17
-2.95
-26.53%
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.