Cisco Systems Inc. (NASDAQ:CSCO)

The financial data reveals several notable trends in the company's current and deferred income tax expenses over the six-year period analyzed.

Current Income Tax Expense

The current income tax expense exhibits variability without a consistent upward or downward trend. It starts at $3,300 million in 2019, decreases to $2,794 million in 2020, increases again in 2021 to $3,055 million, slightly decreases in 2022 to $2,974 million, peaks significantly at $4,789 million in 2023, and then declines to $2,886 million in 2024. The sharp increase in 2023 followed by a considerable decline in 2024 indicates possible fluctuations in taxable income or changes in tax rates or regulations during those periods.

Deferred Income Tax Expense

The deferred income tax expense consistently shows negative values, representing deferred tax benefits. It begins at -$350 million in 2019, dramatically improves to a marginal -$38 million in 2020, then declines again to -$384 million in 2021, and moderately rebounds to -$309 million in 2022. However, in 2023, there is a substantial increase in the deferred tax benefit to -$2,084 million, which lessens to -$972 million in 2024. The large negative values in 2023 and 2024 suggest significant changes in deferred tax assets or liabilities, possibly related to timing differences, tax credits, or adjustments in estimated future tax obligations.

Provision for Income Taxes

The provision for income taxes generally trends downward from $2,950 million in 2019 to $1,914 million in 2024, with some fluctuations in between. After a slight decrease in 2020 to $2,756 million, the provision declines more gradually through 2021 and 2022 to around $2,665 million. It then remains relatively stable at $2,705 million in 2023 before dropping noticeably in 2024. This decline toward the end of the period could reflect a combination of changing tax strategies, reduced taxable income, or increased tax benefits realized through deferred taxes.

Overall, the data suggest that while current tax expenses fluctuate, the deferred tax components have shown large variations, particularly in the last two years, impacting the overall tax provision. These patterns may indicate shifting tax conditions or strategic tax planning activities influencing both current and deferred tax expenses.

Federal Statutory Tax Rate

The federal statutory tax rate remains constant at 21% throughout the entire period from 2019 to 2024, indicating no legislative changes affecting the federal tax rate for the company.

State Taxes, Net of Federal Tax Benefit

State taxes as a percentage show variability, starting at 2% in 2019 and peaking at 3.5% in 2020. Afterward, there is a decline to 1.7% in 2022, followed by a moderate increase to 2.8% by 2024. This suggests fluctuations in state tax obligations or benefits over the years with some stabilization towards the later period.

Foreign Income at Other Than U.S. Rates

This category starts with a negative impact of -4.5% in 2019, improving significantly to slight positive territory at 1.5% in 2021. Subsequently, it reverses to near zero negative values around -0.1% to -0.3% by 2024. The pattern indicates initial disadvantages due to foreign tax rate differences that improve temporarily before slightly declining again.

Tax Credits

Tax credits exhibit fluctuations with a negative tax effect of -1.7% in 2019, improving to a lesser reduction of -0.3% in 2023, but markedly increasing to -2.4% in 2024. This suggests irregular use or changes in tax credits impacting the effective tax rate over time.

Foreign-Derived Intangible Income Deduction (FDII)

The FDII deduction deepens substantially from -1.3% in 2019 to a peak deduction of -5.8% in 2023, followed by a marginal reduction to -5.5% in 2024. This indicates increased utilization or benefit from FDII provisions, providing a growing offset to overall tax liabilities during this period.

Stock-Based Compensation

Stock-based compensation's impact on tax rate starts negative at -0.6% in 2019, turns positive in 2021 at 0.6%, peaks at 1.1% in 2023, and slightly decreases to 0.7% in 2024. This variability suggests changing treatment or volume of stock-based compensation affecting taxable income components.

Other, Net

The "Other, net" component shows limited magnitude changes, fluctuating near zero with small positive or negative effects, ending at -0.7% in 2024. Its contribution to overall tax rate changes is minor and relatively stable.

Effective Income Tax Rate Before Impact of Tax Act

Starting at 14.1% in 2019, the effective tax rate (excluding Tax Act effects) rises sharply to 19.7% in 2020, slightly increasing to 20.1% in 2021, followed by a declining trend down to 15.6% in 2024. This trajectory reflects both transient and persistent factors influencing the tax burden excluding the one-time impact of the Tax Act.

Impact of the Tax Act

The impact of the Tax Act is recorded as a 6.1% increase only in 2019, with no further entries, indicating a one-time adjustment in 2019 that elevated the effective tax rate temporarily.

Effective Income Tax Rate

The overall effective income tax rate mirrors the pattern seen before, with 20.2% in 2019 (including the Tax Act impact), declining gradually from 19.7% in 2020 to 15.6% in 2024. The trend points to a reduction in the overall tax burden over time following an initial elevated rate in 2019.

The financial data exhibits several notable trends across various items over the six-year period ending in July 2024.

Allowance for accounts receivable and returns

This allowance decreased from 127 million in 2019 to a low of 68 million in 2021, then slightly increased to 94 million by 2024, indicating fluctuations in expected credit losses or returns.

Sales-type and direct-financing leases

Values started at 176 million in 2019, remained relatively stable until 2021, then sharply declined to around 22-29 million from 2022 onward, suggesting a reduced volume or change in lease agreements.

Inventory write-downs and capitalization

After a dip to 350 million in 2020, this item has shown a consistent upward trend, rising to 530 million by 2024, reflecting increased inventory adjustments or capital expenditures related to inventory.

Deferred foreign income

Data is missing for 2019 but from 2020 onward, the figures range between 164 million and 277 million, with an overall increasing tendency, potentially indicating growing deferred foreign taxation liabilities or assets.

IPR&D and purchased intangible assets

There is a steady decline over the years from 1,427 million in 2019 to 1,039 million in 2024, which may reflect amortization or write-offs of intangible assets and in-process research and development.

Depreciation

Reported depreciation data is fragmented. Negative depreciation figures reported in early years contrast with a sharp increase to 184 million in 2024, indicating possible changes in accounting treatment or asset base expansion.

Deferred revenue

Deferred revenue consistently increased from 1,150 million in 2019 to 2,034 million in 2024, demonstrating growth in advance payments or unearned income, reflecting stronger sales or service contracts billed upfront.

Credits and net operating loss carryforwards

These carryforwards fluctuated but experienced a pronounced jump to 1,863 million in 2024 after a decline in 2023, indicating changes in the company’s tax position and potential future tax benefits.

Share-based compensation expense

This expense decreased from 164 million in 2019 to 123 million in 2021 but subsequently rose sharply to 297 million by 2024, suggesting increased issuance or valuation of stock-based awards.

Accrued compensation

Accrued compensation remained relatively stable around 330 million until 2023 when it declined to 275 million in 2024, possibly reflecting lower accrued payroll or bonuses.

Lease liabilities

Lease liabilities first appeared at 240 million in 2020, increased to 308 million in 2024, showing higher leased obligations likely due to adoption of new accounting standards or increased leasing activity.

Capitalized research expenditures

After moderate values in 2020 and 2021, this category surged dramatically to 2,042 million in 2023 and further to 3,030 million in 2024, indicating substantial investments in research and development being capitalized rather than expensed.

Other items (positive)

Other assets roughly maintained a range between 348 million and 484 million over the period with minor fluctuations, revealing relative stability in miscellaneous asset categories.

Gross deferred tax assets

These assets increased consistently from 5,455 million in 2019 to 10,396 million in 2024, reflecting growing timing differences and potential future tax benefits.

Valuation allowance

The valuation allowance increased in magnitude from -457 million in 2019 to -1,024 million in 2024, indicating a higher estimation of deferred tax assets that may not be realized.

Deferred tax assets

Net deferred tax assets increased steadily from 4,998 million in 2019 to 9,372 million in 2024, following the pattern of gross deferred tax assets despite the growing valuation allowance.

Goodwill and purchased intangible assets

This item was negative throughout the period, worsening drastically from -705 million in 2019 to -2,808 million in 2024, possibly indicating impairments or reclassifications.

Unrealized gains on investments

The item was negative and declining from -70 million in 2019 to -26 million in 2022, with no data thereafter, suggesting unrealized investment losses being recognized.

ROU lease assets

Right-of-use lease assets appeared in 2020 at -222 million and remained within a similar negative range around -234 to -259 million through 2024, consistent with lease accounting impacts.

Other items (negative)

Other liabilities or negative items fluctuated modestly from -112 million to -119 million, showing minor volatility.

Deferred tax liabilities

Deferred tax liabilities decreased significantly from -1,028 million in 2019 to -3,186 million in 2024, indicating an increase in future taxable amounts.

Net deferred tax assets (liabilities)

This net figure stayed positive and increased from 3,970 million in 2019 to 6,514 million in 2023 but dropped slightly to 6,186 million in 2024, suggesting a generally favorable net deferred tax asset position with minor volatility.

Overall, there is a consistent expansion in deferred revenue, gross deferred tax assets, and capitalized research expenditures. Conversely, intangible assets and goodwill have declined notably, likely due to amortization or impairments. Share-based compensation expenses and lease liabilities show increasing trends, reflecting evolving compensation strategies and lease obligations. Variations in allowances and other provisions suggest ongoing adjustments in asset valuation and tax accounting. The data indicates strategic capitalization of research costs, growth in deferred tax assets despite rising valuation allowances, and a complex interplay between liabilities and assets related to taxation and leases.

Deferred Tax Assets

The deferred tax assets exhibited a generally increasing trend over the analyzed period, rising from $4,065 million in 2019 to a peak of $6,576 million in 2023. However, this was followed by a slight decline to $6,262 million in 2024. The significant increase between 2022 and 2023 suggests improved recognition of future tax benefits, possibly due to changes in the company’s tax positions or anticipated profitability. The minor decrease in 2024 may indicate a reassessment or utilization of these assets.

Deferred Tax Liabilities

Deferred tax liabilities fluctuated throughout the period without a clear upward or downward trend. Starting at $95 million in 2019, the value decreased to $81 million in 2020, then rose sharply to $134 million in 2021. It subsequently dropped to $55 million in 2022, before gradually increasing again to $76 million by 2024. These variations may reflect changes in the timing differences between accounting income and taxable income, influenced by evolving asset valuations or temporary differences.

Overall Observations

The difference between deferred tax assets and liabilities widened over time, indicating that the company's anticipatory tax benefits increasingly exceeded its deferred tax obligations. This could imply expectations of improved taxable income in the future or strategic tax planning. The peaks and troughs in deferred tax liabilities suggest responsiveness to fluctuating tax regulations or asset revaluations. The relatively stable large balance of deferred tax assets compared to liabilities highlights the importance of these assets in the company’s tax strategy.

The data presents a multi-year overview of financial metrics adjusted for reported and deferred income taxes, revealing various trends and developments in asset, liability, equity, and net income figures over six fiscal years.

Total Assets

Both reported and adjusted total assets exhibit a generally upward trend from 2019 to 2024, albeit with fluctuations. Reported assets start at approximately $97.8 billion in 2019, decline slightly in subsequent years before rising sharply to $124.4 billion in 2024. Adjusted assets follow a similar pattern, starting at $93.7 billion and increasing to $118.2 billion by 2024. The divergence between reported and adjusted assets persists, with adjustments resulting in consistently lower values, likely due to the exclusion of deferred income tax impacts.

Total Liabilities

Total liabilities, both reported and adjusted, decrease from 2019 through 2022, reaching a low point of around $54.2 billion (reported) and $54.2 billion (adjusted). However, a notable increase occurs in 2023 and 2024, culminating in reported liabilities of approximately $78.9 billion and adjusted liabilities of $78.9 billion by the latest year. This surge suggests either increased borrowing or the recognition of new liabilities, impacting the company’s financial leverage.

Equity

Reported equity steadily increases from approximately $33.6 billion in 2019 to $45.5 billion in 2024, with minor fluctuations. Adjusted equity reflects a similar upward trend but remains consistently lower than reported equity, starting at $29.6 billion and reaching $39.3 billion in 2024. The persistent difference indicates continuous adjustments for deferred taxes or other factors not accounted for in reported equity, showing a more conservative estimate of net ownership value.

Net Income

Reported net income shows some volatility. It declines from $11.6 billion in 2019 to about $10.6 billion in 2021, rises to a peak of $12.6 billion in 2023, then declines to $10.3 billion in 2024. Adjusted net income mirrors this pattern but remains slightly lower throughout, declining more sharply after 2022 to about $9.3 billion in 2024. These fluctuations suggest variations in profitability and the impact of income tax adjustments over time, reflecting possible changes in tax strategies, operational performance, or one-time items.

Overall, the company experienced growth in both assets and equity over the period studied, supported by increasing liabilities from 2023 onward. The gap between reported and adjusted figures highlights the significance of deferred income tax adjustments in its financial reporting. Net income trends indicate modest volatility, with a notable decrease in adjusted net income in the most recent fiscal year, which might warrant further examination.

Net Profit Margin

The reported net profit margin shows a generally stable pattern from 2019 through 2022, fluctuating marginally between 21.26% and 22.91%. However, a noticeable decline is evident in 2023 and 2024, reaching 19.18%. The adjusted net profit margin mirrors this trend with a similar stability until 2022 and then a sharper decrease in the last two periods, falling to 17.37% by 2024. This indicates a reduction in profitability on both reported and adjusted bases in recent years.

Total Asset Turnover

Reported total asset turnover remains relatively consistent around the 0.51 to 0.56 range from 2019 to 2023 but drops significantly to 0.43 in 2024. Adjusted total asset turnover exhibits a similar trend with slightly higher values throughout, peaking at 0.60 in 2023 before declining to 0.46 in 2024. This suggests a decreasing efficiency in asset utilization in the most recent year.

Financial Leverage

Reported financial leverage decreases steadily from 2.91 in 2019 to 2.3 in 2023, before climbing again to 2.74 in 2024. Adjusted financial leverage follows a similar path but with generally higher leverage levels, declining from 3.17 in 2019 to around 2.52 in 2023, then increasing to 3.01 in 2024. This pattern indicates fluctuating reliance on debt or financial obligations, with a reduction phase followed by increased leverage in the latest period.

Return on Equity (ROE)

Reported ROE demonstrates a declining trend from 34.62% in 2019 to 22.7% in 2024. Adjusted ROE follows the same downward trajectory, moving from 38.08% to 23.8%. Despite some fluctuations around 2021 and 2022, both measures show a consistent reduction in shareholder returns over the analyzed timeframe.

Return on Assets (ROA)

Reported ROA generally remains stable between approximately 10.86% and 12.57% from 2019 through 2023 but falls sharply to 8.29% in 2024. Adjusted ROA also maintains a similar range before declining to 7.91% in 2024. This decline suggests diminishing asset profitability in the most recent period.

Overall Insights

The data reveals a pattern of relative stability in profitability, asset efficiency, and leverage from 2019 to 2022, followed by a noticeable deterioration in the most recent years, particularly in 2023 and 2024. Profit margins, asset turnover, and returns on equity and assets all show signs of weakening, while financial leverage decreases initially but rises again by 2024. This combination points to emerging challenges in maintaining profitability and efficiency, alongside a renewed reliance on financial leverage.

Reported Net Income

The reported net income figures exhibit some variability over the analyzed periods. Starting at $11,621 million in 2019, there is a slight decline in 2020 and 2021, reaching $10,591 million. The amount rebounds to $11,812 million in 2022 and further increases to a peak of $12,613 million in 2023. However, in 2024, the reported net income decreases significantly to $10,320 million.

Adjusted Net Income

Adjusted net income follows a generally similar pattern to the reported net income but with a more consistent downward trend from 2019 to 2024. It starts at $11,271 million in 2019, decreasing steadily to $9,348 million by 2024, representing an overall reduction over the six-year span. Notably, adjusted net income exhibits less pronounced fluctuations compared to reported net income but shows a marked decline in the latest period.

Reported Net Profit Margin

The reported net profit margin percentages indicate relative stability with some fluctuation across years. Margins remain above 21% throughout the period, peaking at 22.91% in 2022. After a gradual increase from 22.39% in 2019 to 22.91% in 2022, margins decrease to 22.13% in 2023, followed by a sharper decline to 19.18% in 2024, indicating a decrease in profitability relative to revenue in the latest year.

Adjusted Net Profit Margin

The adjusted net profit margin shows a declining trend over the period. Starting at 21.72% in 2019, the margin remains relatively stable through 2020 and 2022, fluctuating slightly between 20.49% and 22.67%. However, from 2022 onward, there is a consistent decline, dropping markedly from 22.31% in 2022 to 17.37% in 2024. This suggests diminishing profitability when excluding certain tax effects or other adjustments.

Overall Trends and Insights

Both reported and adjusted net incomes demonstrate a pattern of early stability or slight decline followed by a peak and then a notable decrease in the most recent year. Reported figures show more variability compared to adjusted figures, which generally trend downward over the period. Profit margins based on reported data remain relatively high but experience a significant drop in the latest year, whereas adjusted margins show a clearer downward trajectory starting earlier. The divergence in margin trends between reported and adjusted figures in the final year suggests potential impacts from tax factors or extraordinary items influencing reported profitability. Overall, the data indicates challenges in maintaining profitability levels in the most recent period under both reported and adjusted measures.

Over the periods presented, there are observable changes and trends in both the total assets and asset turnover ratios when comparing reported and adjusted figures.

Total Assets

The reported total assets show an initial decline from 97,793 million US$ in 2019 to 94,002 million US$ in 2022, followed by a notable increase to 101,852 million US$ in 2023 and a further rise to 124,413 million US$ in 2024. The adjusted total assets mirror this pattern, decreasing from 93,728 million US$ in 2019 to 89,553 million US$ in 2022 and then climbing to 95,276 million US$ in 2023 and substantially increasing to 118,151 million US$ in 2024. The overall trend suggests a period of contraction in asset base followed by significant expansion in the last two years.

Total Asset Turnover

In terms of efficiency measured by total asset turnover, the reported ratio gradually declines from 0.53 in 2019 to 0.51 in 2021, then improves to 0.55 in 2022 and 0.56 in 2023 before falling sharply to 0.43 in 2024. The adjusted total asset turnover follows a similar trajectory but consistently registers slightly higher values, moving from 0.55 in 2019 down to 0.53 in 2021, then increasing to 0.58 in 2022 and 0.60 in 2023 before decreasing to 0.46 in 2024. This suggests that asset utilization was relatively stable with modest improvement in 2022 and 2023 but declined notably in the latest year.

Insights

The simultaneous increase in assets during 2023 and 2024, coupled with a decrease in asset turnover in 2024, may imply that asset growth outpaced revenue generation or operational efficiency, potentially signaling investments or acquisitions that have not yet fully translated into higher output or sales. The consistent difference between reported and adjusted figures indicates some adjustments related to income tax accounting impact asset base measurements and efficiency metrics. Overall, the data indicates a strategic shift marked by expansion efforts but accompanied by a short-term reduction in asset productivity.

The analysis of the financial data over the six-year period reveals several notable trends in assets, equity, and financial leverage, both in reported and adjusted terms.

Assets Trends:

Reported total assets have shown fluctuation with an initial decline from 97,793 million USD in 2019 to 94,853 million USD in 2020, followed by a brief increase in 2021 but a drop again in 2022. Since then, assets have experienced growth reaching 124,413 million USD in 2024, indicating an overall upward trend in the latest years.

Adjusted total assets follow a similar pattern, declining from 93,728 million USD in 2019 to 90,863 million USD in 2020, then gradually increasing until 2024, reaching 118,151 million USD. The adjusted asset values are consistently lower than the reported values, which implies adjustments related to deferred and income tax influences.

Equity Trends:

Reported equity increased notably from 33,571 million USD in 2019 to 41,275 million USD in 2021, followed by a slight decline in 2022 before rising again to 45,457 million USD in 2024. This suggests a general growth in owners’ equity despite some volatility.

Adjusted equity values are lower than reported equity, beginning at 29,601 million USD in 2019 and growing steadily though more moderately to 39,271 million USD by 2024. The lower adjusted equity reflects the impact of tax adjustments on equity recognition.

Financial Leverage Patterns:

Reported financial leverage exhibits a downward trend from 2.91 in 2019 to 2.3 in 2023, suggesting a reduction in the relative use of debt financing or liabilities over this period. However, in 2024, the ratio increases significantly to 2.74, indicating a possible increase in liabilities or a change in capital structure.

Adjusted financial leverage also decreases from 3.17 in 2019 to 2.52 in 2023, mirroring the reported trend but on a generally higher scale, pointing to higher leverage when adjustments are taken into account. Similar to the reported ratio, adjusted leverage rises in 2024 to 3.01, indicating increased financial risk or leverage adjusted for tax impacts.

Overall, the data illustrate growth in both total assets and equity over the timeframe, with adjusted figures consistently lower than reported values due to tax-related adjustments. Financial leverage shows a tendency to decrease until 2023, followed by an increase in 2024, which may warrant further investigation to understand the factors behind the increased leverage in the latest year.

The financial data reveals several notable trends over the six-year period. Reported net income shows some fluctuation, initially decreasing from 11,621 million US dollars in July 2019 to 10,591 million US dollars in July 2021, then rising to a peak of 12,613 million US dollars in July 2023 before declining again to 10,320 million US dollars in July 2024. Adjusted net income follows a similar pattern but displays a consistent downward movement beginning in July 2022, culminating at 9,348 million US dollars in July 2024, which suggests some adjustments have a dampening effect on reported earnings in the recent years.

Equity Trends

Reported equity generally increases over the period, growing from 33,571 million US dollars in July 2019 to 45,457 million in July 2024. However, there is a slight dip observed in July 2022, where reported equity decreases to 39,773 million before rising again. Adjusted equity mirrors this trend but maintains consistently lower values relative to reported equity, increasing from 29,601 million to 39,271 million during the same timeframe. The gap between reported and adjusted equity remains relatively stable, indicating consistent adjustments applied to equity figures.

Return on Equity (ROE)

Reported ROE demonstrates a declining trend, starting at a high of 34.62% in July 2019 and decreasing steadily to 22.7% by July 2024. This decline suggests diminishing profitability relative to equity over the years despite fluctuations in net income. Adjusted ROE follows the same downward trajectory, beginning at 38.08% in July 2019 and falling to 23.8% in July 2024. The adjusted ROE is consistently higher than the reported ROE, indicating that adjustments made to the data positively impact the perceived efficiency of equity utilization.

Overall, the data indicates that while equity has generally increased, both net income and return on equity have shown downward pressure in recent years, particularly from 2022 onwards. Adjusted figures consistently present a more conservative estimate of earnings and equity efficiency, which may reflect the impact of deferred income taxes or other accounting adjustments. The decline in adjusted net income alongside adjusted equity growth suggests challenges in maintaining profitability relative to the equity base, highlighting potential areas for operational or financial review.

The analysis of the financial data over the six-year period reveals various trends and fluctuations in income, asset base, and profitability metrics after adjustments for deferred income tax.

Reported and Adjusted Net Income

Reported net income exhibits a general decline from 2019 to 2021, dropping from approximately 11.6 billion to around 10.6 billion USD, followed by a recovery in 2022 and 2023, peaking at about 12.6 billion USD, before decreasing again in 2024 to roughly 10.3 billion USD. The adjusted net income follows a similar pattern but starts slightly lower and shows a more pronounced decline in the recent two years, particularly between 2022 and 2024, indicating potential impacts from deferred income tax adjustments or other non-cash items affecting the reported earnings.

Reported and Adjusted Total Assets

Reported total assets decline moderately from nearly 97.8 billion USD in 2019 to about 94 billion USD in 2022. A significant increase is observed in 2023 and 2024, reaching approximately 101.9 billion USD and then expanding substantially to 124.4 billion USD. Adjusted total assets follow a similar trend, though consistently lower than the reported values, with a notable rise in the last two years indicating asset growth after adjustments for deferred income taxes or related factors.

Reported and Adjusted Return on Assets (ROA)

The reported ROA percentage trends downward slightly from 2019 (11.88%) through 2021 (10.86%), then demonstrates improvement in 2022 (12.57%) and 2023 (12.38%), before declining sharply to 8.29% in 2024. Adjusted ROA follows a comparable trajectory with marginally higher percentages initially and also experiences a marked decline in 2024 to 7.91%. This suggests that despite the asset growth in 2023 and 2024, net income growth did not keep pace, resulting in lower overall asset profitability.

Overall, both reported and adjusted figures indicate a cyclic pattern in income and profitability, with relative stability or improvement until 2023, but a stress or downturn during 2024. The substantial asset increase in the final years suggests capital accumulation or revaluation, yet this did not translate into commensurate increases in net income or returns. The adjustments for deferred income taxes seem to slightly temper net income and ROA metrics consistently throughout the period, emphasizing their relevance in providing a conservative and nuanced view of financial performance.