Cisco Systems Inc. (NASDAQ:CSCO)

Net Operating Profit After Taxes (NOPAT)

NOPAT shows a fluctuating trend over the periods analyzed. It initially declined from 12,905 million USD in 2020 to 11,686 million USD in 2021, then increased slightly to 12,468 million USD in 2022 and 12,636 million USD in 2023. However, it decreased again in 2024 to 12,178 million USD and notably dropped to 9,841 million USD in 2025. This indicates variability in operating profitability with a marked decline in the most recent year.

Cost of Capital

The cost of capital has remained relatively stable throughout the years, with a slight increase from 12.24% in 2020 to a peak of 12.89% in 2023, followed by a decrease to 11.96% in 2024 before rising again to 12.33% in 2025. The fluctuations are moderate and suggest consistent capital expenses relative to risk and financing structure.

Invested Capital

Invested capital experienced a gradual increase from 53,498 million USD in 2020 to 58,979 million USD in 2023. There is a substantial jump in 2024 to 91,785 million USD, which remains almost unchanged in 2025 at 91,789 million USD. This significant increase indicates considerable asset investments or acquisitions during the 2024 fiscal year, after a steady growth in previous years.

Economic Profit

Economic profit demonstrates a clear declining trend. It decreased from 6,359 million USD in 2020 to 4,404 million USD in 2021, followed by a moderate recovery to 5,033 million USD in 2023 before sharply dropping to 1,197 million USD in 2024 and becoming negative at -1,474 million USD in 2025. This trajectory reflects diminishing returns on invested capital relative to the cost of capital, culminating in value destruction by 2025.

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.

Economic Profit

The economic profit exhibited a declining trend over the observed periods. Starting from a high of 6,359 million US dollars in July 2020, it decreased substantially to 4,404 million in July 2021. Although there was a slight recovery to 4,972 and 5,033 million in 2022 and 2023 respectively, the figure dropped sharply thereafter to 1,197 million in 2024 and turned negative, reaching -1,474 million in 2025. This indicates a significant reduction in the company’s ability to generate returns above its cost of capital in recent years.

Invested Capital

The invested capital increased steadily over the majority of the periods under review. From 53,498 million US dollars in 2020, it rose gradually to 57,460 million in 2021 and further to 59,063 million in 2022. It remained relatively stable at 58,979 million in 2023 before experiencing a pronounced surge to approximately 91,785 million in 2024 and marginally higher to 91,789 million in 2025. This sharp increase suggests substantial capital investment or acquisition activities during the latter part of the period analyzed.

Economic Spread Ratio

The economic spread ratio, which reflects the return on invested capital relative to the cost of capital, showed a downward trajectory. It started at 11.89% in 2020 and decreased to 7.67% in 2021. There was a modest improvement to 8.42% in 2022 and 8.53% in 2023, but the ratio declined drastically to 1.3% in 2024 and turned negative to -1.61% in 2025. This trend indicates diminishing profitability on each unit of capital invested, correlating with the negative economic profit in the final year.

Summary

Overall, the data reveal a consistent increase in invested capital accompanied by declining returns and profitability. The reduction in economic profit and economic spread ratio in the later periods highlights challenges in achieving efficient returns on the expanded capital base. The negative values in 2025 suggest that the company may be facing costs that exceed its generated shareholder value, signaling potential operational or strategic issues that require attention.

Adjusted Revenue

Adjusted revenue showed an overall increasing trend from 2020 to 2025. Starting at $51,280 million in 2020, it remained relatively stable through 2021 and 2022, before increasing significantly to $59,284 million in 2023. However, in the final two years, revenue declined slightly, ending at $56,958 million in 2025.

Economic Profit

Economic profit exhibited more volatility over the same period. It began at $6,359 million in 2020, followed by a sharp decline to $4,404 million in 2021. A moderate recovery occurred in 2022 and 2023, reaching $5,033 million, but then economic profit sharply dropped to $1,197 million in 2024 and turned negative to -$1,474 million in 2025. This indicates a deterioration in profitability despite relatively stable or growing revenues.

Economic Profit Margin

The economic profit margin trends mirrored those of economic profit, starting from a robust 12.4% in 2020. It decreased significantly to 8.55% in 2021, recovered slightly to 9.44% in 2022, then again declined to 8.49% in 2023. In 2024 and 2025, the margin contracted sharply to 2.11% and ultimately became negative at -2.59%, reflecting the negative economic profit and indicating reduced efficiency in generating economic profit relative to revenue.

Overall Insights

While revenue remained relatively steady with a peak in 2023, economic profit and economic profit margin showed substantial declines starting in 2024, culminating in negative economic profit and margin in 2025. This suggests rising costs, decreasing operational efficiency, or other financial pressures that are eroding profitability despite stable revenue figures. Such a pattern highlights the importance of focusing on cost management and profitability strategies going forward.