Cisco Systems Inc. (NASDAQ:CSCO)

The analysis of the financial data reveals several notable trends and patterns over the examined period.

Net Operating Profit After Taxes (NOPAT)

NOPAT fluctuated moderately, starting at $12,905 million in 2020, dipping to $11,686 million in 2021, recovering in 2022 and 2023, but then declining significantly by 2025 to $9,841 million. This indicates some volatility in operating profitability, with a generally downward trend in the most recent period.

Cost of Capital

The cost of capital showed a gradual increase from 12.29% in 2020 to a peak of 12.95% in 2023, then slightly decreased to 12.02% in 2024 before rising again to 12.38% in 2025. This pattern suggests a tightening capital environment overall, with some short-term fluctuations.

Invested Capital

Invested capital steadily increased from $53,498 million in 2020 to a significant jump in 2024 and 2025, reaching approximately $91,789 million in both years. This substantial increase may indicate large investments, acquisitions, or capital expenditures during the latter half of the timeline.

Economic Profit

Economic profit showed a declining trajectory from a high of $6,330 million in 2020 to negative figures by 2025. It dropped to $4,372 million in 2021, slightly recovered through 2023, but then plummeted to $1,149 million in 2024 and further into negative territory at -$1,524 million in 2025. This suggests that the company increasingly struggled to generate returns exceeding its cost of capital, particularly in the final years.

In summary, despite relatively stable operating profits in the initial years, the combined effects of rising invested capital and fluctuating cost of capital led to deteriorating economic profit margins. The negative economic profit in the most recent year is indicative of diminished value creation, calling for closer scrutiny of capital allocation and operational efficiency going forward.

Net Income

The net income experienced a slight decline from 11,214 million USD in 2020 to 10,591 million USD in 2021, followed by an increase to a peak of 12,613 million USD in 2023. However, after this peak, net income decreased significantly in the subsequent years, reaching 10,320 million USD in 2024 and further down to 10,180 million USD in 2025. Overall, the trend demonstrates volatility with a general downward movement in the last two years.

Net Operating Profit After Taxes (NOPAT)

The NOPAT showed a declining trend from 12,905 million USD in 2020 to 11,686 million USD in 2021, then rose to 12,468 million USD in 2022 and stabilized somewhat in 2023 at 12,636 million USD. However, similar to net income, NOPAT decreased notably in 2024 and more sharply in 2025, falling to 12,178 million USD and 9,841 million USD respectively. This indicates decreasing operational profitability over the last two years examined.

Summary

Both net income and NOPAT exhibited fluctuations over the six-year period, with initial declines, mid-period recoveries, and then a marked decline in the most recent years. The declining net income and operating profit in 2024 and 2025 suggest challenges affecting profitability and operational efficiency. Such trends may warrant further investigation into factors impacting earnings and operational costs during these years.

Provision for Income Taxes

The provision for income taxes exhibits a downward trend over the analyzed period. Starting at $2,756 million in July 2020, the provision declines slightly to $2,671 million in July 2021 and remains relatively stable through July 2023, fluctuating marginally around the mid-2600s. A notable decrease occurs in July 2024 to $1,914 million, followed by a further significant reduction to $920 million in July 2025. This consistent decrease in income tax provision suggests either improved tax efficiency, changes in taxable income, or tax planning strategies reducing tax liabilities.

Cash Operating Taxes

Cash operating taxes demonstrate more variability across the same time frame. Beginning at $2,718 million in July 2020, the cash taxes increase steadily to peak at $4,688 million in July 2023, marking the highest point within the observed period. After this peak, cash operating taxes sharply decline to $2,835 million in July 2024 and further decrease to $2,211 million in July 2025. The increase through mid-2023, followed by a rapid fall, may reflect timing differences in tax payments, changes in cash tax obligations, or alterations in tax regulations impacting cash outflows.

Comparative Insights

While both provision for income taxes and cash operating taxes show declines in the latter years, the disparity in their patterns is notable. The provision decreases steadily, whereas cash taxes rise considerably before dropping. This divergence could indicate differences in accrued tax liabilities versus actual cash payments, highlighting potential timing differences, deferred tax impacts, or effective tax rate adjustments. The divergence may warrant further examination of tax expense recognition versus cash tax payments and their drivers.

The financial data reveals several notable trends over the examined periods.

Total reported debt & leases

This item shows a generally decreasing trend from July 2020 through July 2023, declining from 15,585 million US dollars to 9,411 million US dollars. However, there is a significant increase observed in the subsequent two years, with the value rising sharply to 32,232 million US dollars in July 2024, before slightly decreasing to 29,643 million US dollars in July 2025. This suggests a considerable increase in debt and lease obligations in the more recent years after a prior period of debt reduction.

Equity

Equity exhibits a consistent upward trend throughout the entire timeframe. Starting at 37,920 million US dollars in July 2020, it gradually increases with minor fluctuations to reach 46,843 million US dollars by July 2025. This progression indicates steady growth in shareholders' equity, reflecting either retained earnings accumulation or capital infusions over the years.

Invested capital

Invested capital remains relatively stable from July 2020 through July 2023, fluctuating moderately between approximately 53,498 million to 58,979 million US dollars. A marked increase occurs in July 2024, where invested capital jumps sharply to approximately 91,785 million US dollars, maintaining this level into July 2025. This significant upsurge aligns with the increase in total debt and leases, implying increased investment possibly funded by the higher debt levels.

Overall, the data reflects a strategic shift starting in 2024 characterized by elevated leverage and invested capital, while equity continues a steady growth path throughout the entire period. The increased debt suggests augmented financing activity, potentially for expansion or acquisition purposes, supported by the rise in invested capital. The stability and growth in equity throughout the years provide a positive signal regarding the company’s financial foundation.

The financial analysis of the company over the six-year period indicates several notable trends in economic profit, invested capital, and economic spread ratio.

Economic Profit

The economic profit shows a declining trend overall. It started at a high point of 6,330 million US dollars in 2020, then decreased significantly to 4,372 million in 2021, followed by slight fluctuations in 2022 and 2023, where it remained close to 4,900 and 5,000 million respectively. From 2024 onwards, there is a sharp decline, with economic profit dropping drastically to 1,149 million in 2024 and turning negative to -1,524 million in 2025, indicating a loss in economic profit during the last reported year.

Invested Capital

The invested capital exhibits a consistent increase over the years. It started at 53,498 million US dollars in 2020, gradually increasing annually to reach nearly 59,000 million in 2022 and 2023. However, there is a substantial jump in invested capital in the last two reported years, almost doubling to approximately 91,785 million in 2024 and remaining steady in 2025. This considerable rise in invested capital contrasts sharply with the declining economic profit in the corresponding period.

Economic Spread Ratio

The economic spread ratio follows a declining trajectory, mirroring the trends in economic profit. It began at 11.83% in 2020 but experienced a notable drop to 7.61% in 2021. The ratio showed a slight recovery to 8.36% and 8.48% in 2022 and 2023 respectively. Nevertheless, from 2024 onwards, the ratio fell drastically to 1.25% and turned negative to -1.66% in 2025, reflecting diminished returns relative to the invested capital and possibly indicating challenges in generating adequate returns on the expanded capital base.

In summary, while the company steadily increased its invested capital over the reviewed timeframe, this was accompanied by a decline in economic profit and economic spread ratio, culminating in negative economic profit and spread in the most recent year. These patterns suggest a decreasing efficiency in the use of capital to generate economic profit, calling for further examination of operational effectiveness and capital allocation strategy moving forward.

The analysis of the financial data reveals fluctuating performance indicators over the six-year period. The economic profit demonstrated a declining trend overall, beginning at a peak value and then experiencing notable decreases, with an especially marked drop in the most recent year. This decline in profit suggests challenges in maintaining profitability or increased costs impacting net value creation.

Adjusted revenue showed a more variable trend, initially exhibiting slight growth followed by a significant increase around the fourth year. However, in the subsequent years, revenue experienced a decline and then stabilized, indicating some recovery but not reaching prior peak levels. This pattern may reflect market conditions, competitive pressures, or changes in product or service demand.

The economic profit margin closely mirrored the economic profit trend. It started at a relatively strong margin, then decreased substantially over time, reaching negative territory in the last reported year. This shift to a negative profit margin indicates that the company faced operational inefficiencies, cost overruns, or pricing pressures that eroded profitability relative to revenue.

Economic Profit

Decreased from 6,330 million US dollars at the start to a negative figure in the final year, highlighting reduced value generation.

Adjusted Revenue

Increased initially with a peak at nearly 59,000 million US dollars, but later showed a decline and stabilization around 56,000 million US dollars.

Economic Profit Margin

Declined from 12.34% to -2.67%, indicating a shift from profitability to losses relative to revenue.

In summary, while revenue levels showed some resilience, profitability metrics indicated weakening financial health in the most recent years, which may require strategic review or operational adjustments to restore positive economic returns.