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Cerence
(NASDAQ:CRNC)
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Rating:56Neutral
Price Target:
$9.00
▲(12.22% Upside)
Action:Reiterated
Date:08/26/26
Overall score reflects improving operating execution and strong cash generation supported by upbeat guidance and raised free-cash-flow outlook from the latest earnings call. The rating is held back by a leveraged balance sheet, loss-linked valuation (negative P/E), and weak technicals with the stock trading below key moving averages and negative MACD.
Positive Factors
Strong cash generation
Cerence is converting operations into substantial cash, with quarterly free cash flow and higher full-year guidance providing funding for product development, debt reduction, and shareholder returns. This improves financial resilience and supports execution over the next several quarters.
Negative Factors
Leverage and ongoing losses
Debt exceeding equity leaves Cerence with less flexibility if operating conditions weaken, particularly while bottom-line earnings remain negative. Although debt has declined, leverage and past losses can constrain investment choices and increase the importance of maintaining the current cash-generation run rate.
Read all positive and negative factors
Positive Factors
Negative Factors
Strong cash generation
Cerence is converting operations into substantial cash, with quarterly free cash flow and higher full-year guidance providing funding for product development, debt reduction, and shareholder returns. This improves financial resilience and supports execution over the next several quarters.
Read all positive factors
Cerence Key Performance Indicators (KPIs)
Any
Gross Profit by Segment
Highlights the profitability of each business segment, indicating which areas contribute most to the bottom line and where there might be opportunities or challenges in cost management.
Highlights the profitability of each business segment, indicating which areas contribute most to the bottom line and where there might be opportunities or challenges in cost management.
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The Fly
The FlyCerence (CRNC) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$402.10M
Dividend YieldN/A
Average Volume (3M)643.94K
Price to Earnings (P/E)―
Beta (1Y)2.73
Revenue Growth25.84%
EPS Growth42.54%
CountryUS
Employees1,300
SectorTechnology
Sector Strength88
IndustrySoftware - Application
Share Statistics
EPS (TTM)-0.36
Shares Outstanding45,230,255
10 Day Avg. Volume779,284
30 Day Avg. Volume643,940
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 Cap1.49
Enterprise Value/Revenue1.94
Enterprise Value/Gross Profit2.46
Enterprise Value/Ebitda15.26
Forecast
1Y Price Target
$10.00Price Target Upside24.69% Upside
Rating ConsensusHold
Number of Analyst Covering1
EPS Forecast (FY)0.76
Revenue Forecast (FY)$288.87M
Cerence Business Overview & Revenue Model
Company Description
Cerence Inc. specializes in developing and providing AI-driven virtual assistants tailored for the global mobility and transportation industry. The company's diverse portfolio includes both embedded (edge) software components and cloud-based solut...
How the Company Makes Money
Cerence primarily makes money by licensing and delivering its automotive AI software and related technologies to vehicle manufacturers (OEMs) and automotive suppliers. Revenue is generally generated through (1) software licensing and royalties tie...
Cerence Earnings Call Summary
Earnings Call Date:Aug 06, 2026
(Q3-2026)
| % Change Since: |
Next Earnings Date:Nov 23, 2026
Earnings Call Sentiment Positive
The call communicated clear execution progress: double-digit revenue growth, strong margin and EBITDA expansion, robust free cash flow with upward guidance, recurring connected services growth (+20% YoY), xUI commercialization (100k cars) and new strategic wins (Stellantis, mobile work agent). Offsetting these positives are softer variable license and unit production (variable license -15% YoY; production -8% YoY), a decline in pro forma royalties (~-11.6%), and near-term seasonality that leads to lower Q4 revenue and compressed EBITDA guidance. Management emphasized that weak Q4 guidance is driven by timing and seasonality (no fixed license in Q4) rather than a change in underlying health, and positioned FY27 as a growth year powered by xUI, connected services and non-automotive expansion.Positive Updates
Revenue Growth and Top-Line Performance
Q3 revenue of approximately $70M, up 12% year-over-year (vs $62M prior year) and within guidance ($68M–$72M). Full fiscal 2026 revenue guidance of $310M–$314M maintained.
Negative Updates
Variable License and Production Headwinds
Variable license revenue declined 15% year-over-year to $29.1M. Production of vehicles with Cerence technology was 11.4M in the quarter, down 8% year-over-year, versus a ~2% decline in global light vehicle production — reflecting OEM/regional mix and program life-cycle transitions.
Read all updates
Q3-2026 Updates
Positive
Negative
Revenue Growth and Top-Line Performance
Q3 revenue of approximately $70M, up 12% year-over-year (vs $62M prior year) and within guidance ($68M–$72M). Full fiscal 2026 revenue guidance of $310M–$314M maintained.
Read all positive updates
Company Guidance
Management provided fourth-quarter guidance of $61–$65M revenue, 72–73% gross margin, $1–$5M adjusted EBITDA, $1–$5M net income and $0.02–$0.10 diluted EPS (noting no fixed license revenue expected in Q4 and normal seasonal production step-down), and full‑year FY26 guidance of $310–$314M revenue, 78–79% gross margin, GAAP profitability of a $1.1M loss to $2.9M income (diluted EPS –$0.02 to $0.06), $66–$70M adjusted EBITDA and raised free cash flow to $76–$82M (from $66–$76M); they also cited ~ $20M full‑year tax expense, ~ $9M FY26 IP legal costs, ~$7–$9M non‑automotive revenue for FY26, $128M cash on hand and a newly authorized $30M share repurchase program.Cerence Financial Statement Overview
Summary
Income Statement
54
Neutral
Balance Sheet
45
Neutral
Cash Flow
76
Positive
| Breakdown | TTM | Sep 2025 | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 309.49M | 251.78M | 331.50M | 294.48M | 327.89M | 387.18M |
| Gross Profit | 243.56M | 181.47M | 242.07M | 193.46M | 219.21M | 273.42M |
| EBITDA | 39.32M | 11.95M | -561.43M | -5.58M | -160.42M | 91.93M |
| Net Income | -15.39M | -18.71M | -588.08M | -56.25M | -310.83M | 45.89M |
Balance Sheet | ||||||
| Total Assets | 620.94M | 630.59M | 702.36M | 1.30B | 1.32B | 1.71B |
| Cash, Cash Equivalents and Short-Term Investments | 127.61M | 87.45M | 126.99M | 110.36M | 115.16M | 158.86M |
| Total Debt | 187.05M | 230.26M | 295.24M | 289.33M | 286.82M | 289.79M |
| Total Liabilities | 454.58M | 479.92M | 561.26M | 602.72M | 605.54M | 673.78M |
| Stockholders Equity | 166.35M | 150.68M | 141.10M | 694.88M | 712.95M | 1.03B |
Cash Flow | ||||||
| Free Cash Flow | 78.64M | 46.82M | 12.20M | 2.37M | -19.58M | 62.34M |
| Operating Cash Flow | 84.71M | 61.17M | 17.20M | 7.50M | -2.14M | 74.39M |
| Investing Cash Flow | -2.07M | -10.55M | 4.38M | 5.82M | -10.56M | -41.63M |
| Financing Cash Flow | -26.69M | -87.00M | 225.00K | -5.33M | -19.61M | -41.51M |
Cerence Technical Analysis
Positive
8.02
Price Trends
8.31
Positive
9.30
Negative
9.16
Negative
Market Momentum
0.10
Negative
59.51
Neutral
75.78
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 8.02 is below the 20-day moving average (MA) of 8.16, below the 50-day MA of 8.31, and below the 200-day MA of 9.16, indicating a neutral trend. The MACD of 0.10 indicates Negative momentum. The RSI at 59.51 is Neutral, neither overbought nor oversold. The STOCH value of 75.78 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 |
|---|---|---|---|---|---|---|---|
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
60 Neutral | $246.79M | -7.19 | -7.84% | 1.27% | -3.87% | -946.99% | |
57 Neutral | $361.07M | -18.38 | -3.92% | ― | 15.14% | 52.80% | |
56 Neutral | $402.10M | -24.01 | -9.84% | ― | 25.84% | 42.54% | |
56 Neutral | $242.74M | 20.85 | 3.45% | 3.81% | 4.12% | -68.41% | |
40 Underperform | $7.39M | -0.15 | -62.46% | ― | -10.97% | 99.70% |
* Technology Sector Average
CRNC
Cerence
8.72
-3.36
-27.80%
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2.52
-2.93
-53.76%
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7.09
0.24
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CYN
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0.44
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XPER
Xperi Inc
5.04
-1.72
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MWC
Micware Co., Ltd. Sponsored American Depositary Shares Repr 1 Shs
1.66
-6.54
-79.76%
Cerence Corporate Events
Business Operations and StrategyPrivate Placements and Financing
Cerence Repurchases Portion of 2028 Convertible Notes
Positive
Aug 26, 2026
On August 25, 2026, Cerence entered into privately negotiated transactions with certain holders of its 1.50% Convertible Senior Notes due 2028 to repurchase $10 million in aggregate principal amount. The company agreed to pay 92.75% of the notes&#...
Business Operations and StrategyStock BuybackFinancial Disclosures
Cerence AI Posts Strong Q3 Results, Launches Buyback Program
Positive
Aug 6, 2026
Cerence AI reported third-quarter fiscal 2026 results on August 6, 2026, with revenue rising 12% year over year to $69.6 million and GAAP net income reaching $1.5 million, alongside a 50% jump in adjusted EBITDA to $13.5 million. Connected Service...
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.