Cisco Systems Inc. (NASDAQ:CSCO)

Current Income Tax Expense

The current income tax expense exhibits variability over the six-year period, beginning at $2,794 million in 2020 and generally increasing to a peak of $4,789 million in 2023. Following this peak, the expense decreases significantly to $2,886 million in 2024 and further to $2,052 million in 2025. This pattern suggests a notable rise in taxable income or changes in tax rates until 2023, followed by a substantial reduction.

Deferred Income Tax Expense

The deferred income tax expense is consistently negative throughout the period, indicating deferred tax benefits rather than expenses. The magnitude of these benefits increases sharply from a modest -$38 million in 2020 to -$2,084 million in 2023, representing an increasing recognition of deferred tax assets or reversals of deferred tax liabilities. After 2023, the deferred tax benefits decline in absolute terms to -$972 million in 2024 and -$1,132 million in 2025, though remaining significant.

Provision for Income Taxes

The total provision for income taxes remains relatively stable, fluctuating between $2,665 million and $2,756 million from 2020 through 2023, despite the volatility in current and deferred components. However, a pronounced decline occurs in 2024 and 2025, with provisions dropping to $1,914 million and $920 million, respectively. This decline aligns with the reductions in current tax expense during the same period.

Overall Analysis

The data reveal an increase in current income tax expense until 2023, coinciding with substantial deferred tax benefits, possibly reflecting timing differences or tax planning strategies. The subsequent years show a reversal, with lower current taxes and diminished deferred benefits, culminating in a much lower total tax provision by 2025. These trends may indicate changes in the company's profitability, adjustments in tax legislation, or shifts in deferred tax assets and liabilities over time.

The analysis of the effective income tax rates and their components over the six-year period reveals several notable trends. The federal statutory tax rate remains constant at 21% annually, serving as a baseline for the overall tax structure.

State Taxes, Net of Federal Tax Benefit

This component exhibits a fluctuating pattern, initially decreasing significantly from 3.5% in 2020 to 1.7% in 2022, then rising to 2.8% in 2024 before decreasing sharply again to 1.3% in 2025. This variability suggests changes in state tax policies or adjustments in tax planning strategies.

Foreign Income at Other than U.S. Rates

The impact of foreign income in the tax rate shows variability with a transition from a negative impact of -1.5% in 2020 to positive contributions in 2021 (1.5%) and 2022 (0.8%). This impact slightly turns negative in 2023 and 2024 before rising modestly in 2025 to 0.7%. This fluctuation may reflect varying levels of foreign income and different tax treatments internationally.

Tax Credits

Tax credits consistently contribute to reducing the effective tax rate, with values ranging from -0.9% in 2020 to a deeper reduction of -2.7% in 2025. The increasing magnitude of tax credits implies more aggressive utilization or availability of such credits over time.

Foreign-Derived Intangible Income Deduction

This deduction shows a clear trend of increasing reduction to the tax rate, falling from -2.6% in 2020 to -6.0% in 2025. This growing benefit suggests enhanced reliance on or expansion of income eligible under this deduction, contributing significantly to lowering the effective tax rate.

Stock-Based Compensation

The impact of stock-based compensation on the tax rate varies slightly but remains relatively minor, generally below 1%, with a modest increase from -0.1% in 2020 to 0.7% in 2023 through 2025.

Impact of the Tax Act

This item appears only in 2025 with a significant negative effect of -6.5%, indicating a major one-time tax benefit or adjustment related to the Tax Act during that year.

Other, Net

The 'Other, net' category fluctuates around zero, indicating minor and inconsistent effects on the overall tax rate, ranging from 0.3% in 2020 to -0.7% in 2024, then reducing to -0.2% in 2025.

Effective Income Tax Rate

The effective income tax rate shows a declining trend across the period, starting at 19.7% in 2020, peaking slightly at 20.1% in 2021, and progressively reducing to 8.3% by 2025. This notable reduction is driven primarily by increased utilization of tax credits, the foreign-derived intangible income deduction, and the discrete impact of the Tax Act in 2025.

In summary, the company has achieved a substantial decrease in its effective income tax rate over the years through a combination of increased tax credits, growing benefits from foreign-derived intangible income deductions, and a significant discrete Tax Act impact in the latest period. The fluctuations in state taxes and foreign income effects introduce variability, but overall, the trend indicates enhanced tax efficiency and strategic tax management.

Inventory Write-downs and Capitalization

There is a consistent upward trend over the analyzed periods, increasing from 350 million US dollars in mid-2020 to 532 million US dollars by mid-2025, indicating growing inventory adjustments and capitalization efforts.

Deferred Foreign Income

Values fluctuate moderately, starting at 253 million US dollars in 2020, decreasing to 164 million in 2021, then showing variability but overall a slight decrease to 221 million by 2025.

IPR&D and Purchased Intangible Assets

The amount decreases gradually from 1,289 million US dollars in 2020 to 961 million in 2025, suggesting amortization or impairment of intangible assets or changes in capitalized expenditures related to research and development.

Depreciation

Data shows an absence of values in early years but from 2022 onwards, the recorded depreciation increases notably from 10 million US dollars in 2022 to 242 million in 2025, reflecting increased asset base or changes in depreciation policies.

Deferred Revenue

This liability shows a steady increase from 1,182 million US dollars in 2020 to a peak of 2,034 million in 2024, with a slight reduction to 1,933 million in 2025, indicating growth in advance payments from customers.

Credits and Net Operating Loss Carryforwards

This item fluctuates throughout the periods, increasing initially from 1,105 million in 2020 to 1,863 million in 2024 before declining to 1,350 million in 2025, reflecting varying utilization or generation of tax attributes.

Share-based Compensation Expense

Consistent growth is observed, rising from 135 million US dollars in 2020 to 319 million in 2025, indicating increased equity-based employee compensation.

Accrued Compensation

There is a declining trend from 353 million US dollars in 2020 to 175 million in 2025, suggesting reduced outstanding employee obligations at year-end.

Lease Liabilities

Lease liabilities rise gradually, from 240 million US dollars in 2020 to 379 million in 2025, indicating increased lease obligations.

Capitalized Research Expenditures

This account exhibits notable growth, particularly from 2022 onwards, climbing sharply from 149 million US dollars in 2022 to 4,182 million in 2025, reflecting significantly increased capitalization of research costs.

Other Assets

Mixed results are observed in the "Other" category with some fluctuations, starting at 637 million in 2020, dipping and rising marginally over time, ending at 678 million in 2025.

Gross Deferred Tax Assets

A clear upward trend exists, increasing from 5,767 million US dollars in 2020 to 10,972 million in 2025, reflecting growing temporary differences and tax credits.

Valuation Allowance

Although negative, valuation allowance fluctuates between -700 million and -1,024 million US dollars, indicating persistent but variable potential future tax benefits that may not be realized.

Deferred Tax Assets (Net of Allowance)

Deferred tax assets rise steadily from 5,067 million US dollars in 2020 to 10,062 million in 2025, showing increased realizable tax benefits.

Goodwill and Purchased Intangible Assets (Negative Values)

Negative balances intensify significantly over time, from -577 million US dollars in 2020 to -2,288 million in 2025, primarily due to increases in intangible asset amortization or impairment.

Depreciation (Negative Entries)

Negative depreciation values are recorded only in the early periods, decreasing from -179 million in 2020 to -164 million in 2021, with no data reported thereafter.

Unrealized Gains on Investments

Negative unrealized gains reduce from -119 million US dollars in 2020 to -26 million in 2022, with no data in subsequent periods, possibly indicating decreased volatility or disposal of investment securities.

Right-of-Use (ROU) Lease Assets

Negative amounts increase in magnitude from -222 million US dollars in 2020 to -315 million in 2025, corresponding with increased lease liabilities and reflecting accounting for leased assets.

Other Liabilities (Negative Values)

These fluctuate, starting at -61 million US dollars in 2020 and increasing in negative amount to -178 million by 2025, indicating rising other deferred or accrued liabilities.

Deferred Tax Liabilities

Deferred tax liabilities decline from -1,158 million US dollars in 2020 to a more considerable negative balance of -2,781 million in 2025, indicating an increase in taxable temporary differences.

Net Deferred Tax Assets (Liabilities)

This net figure shows a significant upward trend from 3,909 million US dollars in 2020 to 7,281 million in 2025, reflecting an overall increase in deferred tax assets relative to liabilities, suggesting growing future tax benefits net of obligations.

The analysis of the deferred tax-related financial data over the indicated periods reveals notable trends in both deferred tax assets and deferred tax liabilities.

Deferred Tax Assets

There is a consistent upward trajectory in deferred tax assets from July 25, 2020, through July 26, 2025. Beginning at 3,990 million USD in 2020, the value increased steadily to 4,360 million USD in 2021 and 4,449 million USD in 2022. A significant surge occurred in 2023, with the asset amount rising sharply to 6,576 million USD. Although there was a slight decline to 6,262 million USD in 2024, the value rebounded to reach a peak of 7,356 million USD in 2025. This pattern indicates growing recognized tax benefits that the company expects to realize in the future, with some fluctuations suggesting timing differences or adjustments in tax planning strategies.

Deferred Tax Liabilities

In contrast, deferred tax liabilities have remained relatively stable and low by comparison. Starting at 81 million USD in 2020, the liabilities increased to 134 million USD in 2021, which is the highest point in the observed timeframe. Subsequently, there was a decrease to 55 million USD in 2022, followed by minor increases to 62 million USD in 2023, 76 million USD in 2024, and a slight decrease to 75 million USD in 2025. Overall, the liabilities appear to fluctuate within a narrow range without a clear trend upwards or downwards.

In summary, the data reflect a strengthening position in terms of deferred tax assets, indicating an increase in probable future tax deductions or credits available to the company. The relatively stable and low deferred tax liabilities suggest limited expected future tax obligations from temporary differences. The sharp increase in deferred tax assets around 2023 warrants further investigation to understand the underlying causes, which could include changes in tax law, adjustments in asset valuations, or strategic tax management. The company's tax position appears to be increasingly favorable over the reported periods.

The financial data demonstrates various trends in assets, liabilities, equity, and net income over a six-year period.

Total Assets

Reported total assets display an initial moderate growth from 94,853 million US dollars in 2020 to 97,497 million in 2021, followed by a decline to 94,002 million in 2022. A notable increase occurs in 2023, reaching 101,852 million, continuing to a peak of 124,413 million in 2024 before slightly decreasing to 122,291 million in 2025. Adjusted total assets follow a similar pattern but consistently report lower figures, reflecting adjustments made for deferred income tax impacts. The trend indicates an overall growth in asset base despite some annual fluctuations, especially the significant asset expansion in 2024.

Total Liabilities

The reported total liabilities trend slightly downward from 56,933 million in 2020 to 54,229 million in 2022, then increase substantially to 78,956 million in 2024 before reducing slightly to 75,448 million in 2025. Adjusted liabilities mirror this pattern with marginally lower values than reported liabilities, suggesting deferred tax adjustments have a minor effect on the liability measurements. The significant liability increase in 2024 corresponds with the rise in total assets, possibly indicating increased financing or obligations during that period.

Equity

Reported equity steadily increases from 37,920 million in 2020 to 44,353 million in 2023, followed by modest growth to 45,457 million in 2024 and 46,843 million in 2025. Adjusted equity values are consistently lower than reported equity, with growth trends that are less pronounced, rising from 34,011 million in 2020 to 39,562 million in 2025. This consistent gap between reported and adjusted equity suggests that deferred income tax adjustments materially affect equity valuations, decreasing shareholders' equity compared to reported figures. The steady equity increase signifies ongoing value retention or creation within the business despite shifting asset and liability levels.

Net Income

Reported net income shows a moderate decline from 11,214 million in 2020 to 10,591 million in 2021, then recovers and peaks at 12,613 million in 2023 before dropping to 10,320 million in 2024 and further to 10,180 million in 2025. Adjusted net income follows a somewhat similar trend, starting at 11,176 million in 2020 with a decline to 10,207 million in 2021, peaking at 11,503 million in 2022, but declining more noticeably to 9,048 million by 2025. The divergence between reported and adjusted net income widens over the years, indicating increasing adjustments due to deferred taxes, which reduce net profitability on an adjusted basis.

The financial data reveals several notable trends in profitability, asset management, and leverage ratios over the period analyzed.

Net Profit Margin

Both reported and adjusted net profit margins exhibit a generally declining trend from 2020 to 2025. The reported net profit margin decreased from 22.75% in 2020 to 17.97% in 2025, reflecting a reduction of approximately 4.78 percentage points. The adjusted net profit margin shows a similar pattern but at slightly lower levels overall, falling from 22.67% to 15.97% during the same period. The decline is relatively steady, with the most significant decreases observed from 2022 onward, indicating potential pressure on profitability margins over time.

Total Asset Turnover

For total asset turnover, both reported and adjusted ratios show an initial increase from 2020 through 2023, suggesting improved efficiency in utilizing assets to generate sales. Reported turnover rose from 0.52 to 0.56, while adjusted turnover increased from 0.54 to 0.60 over this interval. However, a reversal occurs after 2023, with a notable drop to 0.43 reported and 0.46 adjusted by 2025, indicating decreased asset utilization efficiency in the most recent years.

Financial Leverage

Financial leverage ratios demonstrate some fluctuations. Reported financial leverage declined from 2.5 in 2020 to 2.3 by 2023, but then increased sharply to a peak of 2.74 in 2024 before slightly decreasing to 2.61 in 2025. The adjusted leverage follows a broadly similar trajectory but starts from a higher base (2.67 in 2020) and peaks at 3.01 in 2024, tapering to 2.91 in 2025. This suggests a gradual increase in reliance on debt or other leveraged financing tools in the middle to later years, potentially impacting risk exposure.

Return on Equity (ROE)

ROE, a key measure of shareholder value generation, exhibits a decline over the period, consistent with the downward trend in profit margins. Reported ROE decreased from 29.57% in 2020 to 21.73% in 2025, while adjusted ROE fell from 32.86% to 22.87%. Notably, adjusted ROE remained above reported ROE in all periods, indicating the impact of adjustments on overall equity returns. The decrease highlights challenges in maintaining historical profitability levels.

Return on Assets (ROA)

The ROA ratios also show a declining trend, mirroring the patterns in profitability and asset turnover. Reported ROA diminished from 11.82% in 2020 to 8.32% in 2025. Adjusted ROA started slightly higher at 12.3% in 2020 but similarly declined to 7.87% by 2025. The sharper decline observed in later years reflects a reduction in net income generated per unit of assets, aligning with reduced efficiency and profitability metrics.

In summary, the data indicate a gradual erosion in profitability margins and returns, coupled with decreased asset utilization efficiency in the latest years, despite an initial improvement in asset turnover. The increased financial leverage in recent periods suggests a potential rise in financial risk. These combined factors may warrant strategic attention to enhance operational efficiency and manage financial risk effectively.

Reported Net Income

The reported net income displays a fluctuating trend over the six-year period. Starting at $11,214 million in 2020, it slightly decreased to $10,591 million in 2021, then increased to a peak of $12,613 million in 2023. Subsequently, there was a decline to $10,320 million in 2024 and a further slight decrease to $10,180 million in 2025. This indicates some volatility with a general downward movement after 2023.

Adjusted Net Income

The adjusted net income exhibits a gradual decline throughout the period. It began near the reported figure at $11,176 million in 2020 but consistently decreased each year to reach $9,048 million in 2025. This continuous downward trend suggests increasing adjustments negatively impacting net income over time.

Reported Net Profit Margin

The reported net profit margin peaked at 22.91% in 2022 after dipping to 21.26% in 2021. It then declined steadily, falling to 22.13% in 2023 and significantly dropping to 17.97% by 2025. The sizeable margin erosion towards the end of the timeframe indicates diminishing profitability relative to revenues.

Adjusted Net Profit Margin

The adjusted net profit margin follows a similar downward trajectory but with sharper decreases. Starting at 22.67% in 2020, it troughs to 20.49% in 2021, recovers somewhat to 22.31% in 2022, and then declines markedly to 15.97% by 2025. The widening gap between adjusted and reported margins over time highlights increasing adjustments that reduce profitability.

Total Assets

Reported total assets increased from 94,853 million US dollars in 2020 to a peak of 124,413 million US dollars in 2024, followed by a slight decline to 122,291 million in 2025. Adjusted total assets followed a similar pattern, rising from 90,863 million in 2020 to 118,151 million in 2024, then decreasing slightly to 114,935 million in 2025. This indicates a general growth in the asset base over the period, with a moderation in growth or slight contraction in the most recent year.

Total Asset Turnover

The reported total asset turnover ratio showed minor fluctuations, decreasing from 0.52 in 2020 to 0.51 in 2021, then improving to 0.55 in 2022 and 0.56 in 2023. However, a significant decline occurred in 2024 to 0.43, with a modest recovery to 0.46 in 2025. The adjusted total asset turnover ratio exhibited a similar trend but slightly higher values, starting at 0.54 in 2020, increasing steadily to 0.60 in 2023, then declining to 0.46 in 2024 and slightly improving to 0.49 in 2025. This pattern suggests that efficiency in using assets to generate revenue improved until 2023, but declined noticeably in 2024, with some recovery thereafter.

Overall Insights

The increase in total assets over the years suggests expansion or investment in the company's asset base. Despite the asset growth, the declining asset turnover ratios after 2023 indicate reduced efficiency in utilizing these assets to generate revenue. The sharp drop in turnover ratios in 2024 may point to changes in operational performance or asset utilization strategies. The slight recovery in 2025 suggests possible adjustments or improvements in managing the asset base.

Total Assets

Reported total assets showed a gradual increase from 94,853 million US dollars in 2020 to a peak of 124,413 million in 2024, before declining slightly to 122,291 million in 2025. The adjusted total assets followed a similar trend but with lower values overall, rising from 90,863 million in 2020 to 118,151 million in 2024, then decreasing to 114,935 million in 2025. This pattern indicates steady growth in asset base over the initial years, with a slight contraction in the final year assessed.

Equity

Reported equity increased consistently from 37,920 million US dollars in 2020 to 46,843 million in 2025, displaying steady shareholder value growth. Adjusted equity also rose over the period, albeit at a slightly slower rate, moving from 34,011 million in 2020 to 39,562 million in 2025. The consistent upward trend in both reported and adjusted equity suggests a strengthening capital base through the years analyzed.

Financial Leverage

The reported financial leverage ratio declined from 2.5 in 2020 to 2.3 in 2023, indicating a reduction in the use of debt relative to equity during this period. However, the ratio increased notably to 2.74 in 2024 and slightly decreased to 2.61 in 2025, signaling a resurgence in leverage levels towards the end of the timeline. Adjusted financial leverage mirrored this behavior broadly, dropping from 2.67 in 2020 to around 2.52 in 2022 and 2023, before rising sharply to 3.01 in 2024 and easing marginally to 2.91 in 2025. This suggests a conservative leverage approach initially, with a more aggressive stance in the later years when adjusted for deferred tax effects.

The financial data reveals notable trends in both reported and adjusted net income, equity, and return on equity (ROE) over a five-year period.

Net Income

Reported net income experienced fluctuations, increasing from 11,214 million US dollars in 2020 to a peak of 12,613 million US dollars in 2023, followed by a decline to 10,180 million US dollars in 2025. Adjusted net income shows a similar pattern but with generally lower values, rising from 11,176 million US dollars in 2020 to 11,503 million US dollars in 2022, then decreasing more markedly to 9,048 million US dollars in 2025.

Equity

Reported equity increased steadily over the period, growing from 37,920 million US dollars in 2020 to 46,843 million US dollars in 2025. Adjusted equity also followed an upward trend, moving from 34,011 million US dollars in 2020 to 39,562 million US dollars in 2025, though it remains consistently below the reported equity figures. The gap suggests significant adjustments primarily related to deferred income tax impacts or other accounting treatments.

Return on Equity (ROE)

Reported ROE showed a decreasing trend after an initial peak, starting at 29.57% in 2020, rising slightly to 29.7% in 2022, then declining gradually to 21.73% by 2025. Adjusted ROE mirrors this trend with slightly higher values initially (32.86% in 2020) but also declining to 22.87% in 2025. This indicates diminishing profitability relative to equity over time, more pronounced in adjusted figures.

Overall, the analysis suggests that while equity expanded consistently, profitability as measured by net income and ROE has faced downward pressure in recent years. The divergence between reported and adjusted figures highlights the impact of accounting adjustments, particularly those relating to deferred income taxes, which have influenced the reported financial performance. The sustained equity growth combined with declining ROE points to a need for efficiency improvements or growth strategies to enhance returns on the capital base.

The financial data reveals several notable trends over the six-year period under review.

Net Income

Reported net income shows fluctuations, initially declining from 11,214 million US dollars in 2020 to 10,591 million in 2021, then increasing to a peak of 12,613 million in 2023, followed by a notable decline to 10,180 million in 2025. Adjusted net income follows a similar trajectory but exhibits a more consistent downward trend after peaking in 2022 at 11,503 million, declining steadily to 9,048 million in 2025.

Total Assets

Reported total assets depict overall growth from 94,853 million in 2020 to a high of 124,413 million in 2024, with a slight contraction to 122,291 million in 2025. Adjusted total assets mirror this pattern, increasing from 90,863 million in 2020 to 118,151 million in 2024 before decreasing to 114,935 million in 2025. This suggests asset expansion predominantly occurred between 2022 and 2024, followed by a mild reduction.

Return on Assets (ROA)

Both reported and adjusted ROA highlight changes in profitability relative to asset base. Reported ROA starts at 11.82% in 2020, dips to 10.86% in 2021, then rises to a peak of 12.57% in 2022, maintaining a similar level in 2023 before falling sharply to approximately 8.3% in 2024 and 2025. Adjusted ROA presents a comparable pattern but oscillates closer around 12.3% in 2020, declines more moderately to 10.96% in 2021, peaks at 12.84% in 2022, declines steadily afterward and reaches around 7.9% in the final two years.

Overall, net income and ROA indicate stronger profitability in the earlier years with a peak around 2022-2023, followed by a noticeable decline toward 2025. Meanwhile, total assets expanded significantly through 2024, suggesting investment or acquisitions, but this growth was partially reversed by 2025. The adjusted figures show a similar but somewhat more conservative pattern, suggesting that non-recurring or deferred tax effects have a material impact on reported results, especially in later years. The decline in ROA despite asset growth in the final years could indicate diminishing returns on the asset base or increased expenses affecting net income.