Cisco Systems Inc. (NASDAQ:CSCO)

The analysis of the financial leverage and debt-related ratios over the given periods reveals notable trends in the company's capital structure and its capacity to cover interest obligations.

Debt to Equity Ratio

This ratio showed a general decline from 0.38 to a low of 0.17 between October 2020 and October 2023, indicating a reduction in reliance on debt relative to equity during this time. However, starting in January 2024, the ratio sharply increased to around 0.7 and remained elevated near this level through October 2025, suggesting a significant increase in leverage in recent quarters.

Debt to Capital Ratio

The debt to capital ratio followed a somewhat similar pattern, initially decreasing gradually from 0.28 to 0.14 by late 2023, implying improved capital structure conservatism. From early 2024 onward, the ratio jumped substantially to around 0.4 and remained stable, further confirming the shift towards increased debt financing.

Debt to Assets Ratio

This ratio was relatively stable but slightly declining from 0.15 to approximately 0.08 during the 2020–2023 period, consistent with a decrease in the proportion of assets financed by debt. It then increased significantly to approximately 0.26 starting early 2024 and maintained that level, reinforcing the trend toward higher leverage.

Financial Leverage

Measured as the ratio of total assets to equity, financial leverage decreased from 2.49 to approximately 2.18 through late 2023, indicating reduced asset financing through debt. Subsequently, it rose to about 2.7 by early 2024 and maintained a slightly declining but elevated level around 2.6 through 2025, in line with the increases seen in debt ratios.

Interest Coverage Ratio

This metric showed a continuous upward trend from 25.98 in October 2020 to a peak near 38.18 in October 2023, reflecting growing earnings relative to interest expenses and strong debt-servicing capability during this period. Afterward, there was a pronounced decline starting January 2024 down to 13.16 and further to a low near 7 by July 2024, with a modest recovery to about 9 by mid-2025. Despite this recovery, the interest coverage remains significantly lower than the peak values, indicating reduced comfort in covering interest costs with earnings in recent quarters.

In summary, the financial data indicate a marked strategic shift beginning in early 2024 where the company increased its leverage considerably, as seen by rising debt ratios and financial leverage. This increase in debt was accompanied by a declining interest coverage ratio, suggesting greater pressure on earnings to meet interest obligations. Prior to this shift, the company had been de-leveraging and strengthening its debt-servicing capacity steadily for several years. The recent trends warrant close monitoring of the company's financial stability and future earnings performance to ensure sustainable leverage levels.

The financial data reveals notable trends in the company's capital structure over the examined periods. Total debt displayed fluctuations, initially showing a general decline from 14,566 million US dollars to a low point around 7,650 million US dollars by late 2023. However, a sharp increase occurred beginning in early 2024, escalating dramatically to a peak exceeding 31,993 million US dollars by mid-2024, before stabilizing somewhat but remaining elevated around 28,089 million US dollars through late 2025.

In contrast, total equity demonstrated a more stable and gradually increasing trajectory over the same timeframe. Starting at 38,157 million US dollars, equity steadily rose to around 46,873 million US dollars by late 2025, with minor fluctuations but no abrupt changes as seen in total debt.

The debt-to-equity ratio mirrored these dynamics, evidencing an initial downward trend from 0.38 to 0.17 by late 2023, indicating a reduction in leverage relative to equity. This was followed by a pronounced reversal, with the ratio climbing steeply to a peak near 0.71 in early to mid-2024, aligning with the surge in total debt. Subsequently, it decreased moderately towards 0.6 by late 2025, reflecting partial deleveraging or equity growth relative to debt.

Summary of trends

The company's leverage was progressively reduced over the first few years, as evidenced by declining total debt and a decreasing debt-to-equity ratio. This suggests a conservative capital management approach or debt repayment during that interval. Equity growth contributed to strengthening the balance sheet.

The sharp increase in total debt starting around early 2024 represents a material shift in the capital structure and increased reliance on external financing. This shift led to a significant spike in financial leverage, temporarily exposing the company to higher financial risk.

Following this surge, the company appears to have worked toward rebalancing its capital structure, with a modest decrease in leverage but maintaining higher debt levels relative to earlier periods. The equity base continued to grow steadily throughout, providing some support for the increased debt burden.

Overall, analysis indicates a period of deleveraging succeeded by a strategic or necessary increase in borrowing, followed by partial stabilization. The increasing equity values suggest sustained profitability or capital injections, which help mitigate the risks tied to the elevated leverage.

The analysis of the quarterly financial data reveals notable changes in the company's debt profile and capital structure over the observed periods.

Total Debt

Total debt exhibited a decreasing trend from the start, dropping from approximately $14,566 million in late 2020 to about $7,650 million by late 2023. This indicates a significant reduction in debt levels over roughly three years. However, from early 2024 onwards, total debt sharply increased, reaching a peak of around $31,993 million in April 2024, after which it slightly declined but remained elevated, fluctuating near $28,000 to $31,000 million through late 2025.

Total Capital

Total capital started relatively stable, fluctuating modestly around the $50,000 to $53,000 million range from late 2020 through late 2023. Beginning in early 2024, total capital increased markedly, rising to over $77,000 million by April 2024. Following this peak, total capital remained relatively stable in the $74,000 to $77,000 million range through late 2025.

Debt to Capital Ratio

The debt to capital ratio similarly followed a downward trend from late 2020 through late 2023, moving from 0.28 to a low of 0.14 in late 2023. This trend reflects a strengthened capital base relative to debt during this period. Nevertheless, beginning in early 2024, this ratio experienced a substantial increase, approximately doubling to around 0.41. It then stabilized, remaining near 0.37 to 0.41 through the later quarters.

Overall, the earlier periods demonstrate prudent deleveraging with reductions in total debt and a stronger capital position relative to debt. Conversely, starting in early 2024, there was a pronounced shift resulting in significantly higher debt levels and increased leverage as evidenced by the debt to capital ratio. The simultaneous rise in total capital suggests new financing or capital increases occurred, but the debt proportion grew substantially, indicating a strategic change in financial structure or increased borrowing activity during that time frame.

The analysis of the recent quarterly financial trends reveals several noteworthy patterns in the company’s capital structure and asset base over time.

Total Debt

The total debt exhibits a fluctuating trend throughout the periods analyzed. Initially, debt levels decreased from a high of approximately $14.6 billion in late 2020 to a low near $7.65 billion by late 2023. However, beginning in early 2024, total debt sharply increased, reaching about $32 billion in April 2024, and remained elevated around $28–31 billion through mid-2025. This suggests a significant strategic change or major financing event during 2024 that substantially increased liabilities.

Total Assets

Total assets remained relatively stable with moderate growth from about $95 billion in late 2020 to a peak near $124 billion during early to mid-2024. After this peak, the asset base slightly fluctuated but stayed generally above $119 billion through mid-2025. This indicates steady asset accumulation and investment, supporting ongoing operations and growth initiatives.

Debt to Assets Ratio

The debt to assets ratio initially declined steadily from 0.15 in late 2020 to a low of about 0.08 in late 2023, reflecting improved leverage and a stronger balance sheet. However, from early 2024 onwards, the ratio more than doubled, rising sharply to approximately 0.26 and remaining in that range through mid-2025. This sharp increase aligns with the surge in total debt, indicating a substantial increase in financial leverage and potentially higher risk exposure relative to the asset base during this period.

Overall, the company demonstrates a period of deleveraging and stable asset management until late 2023, followed by a pronounced increase in indebtedness starting in early 2024. Despite stable or growing assets, the elevated debt levels significantly increased leverage, which may imply strategic investment, acquisitions, or restructuring activities financed through debt. This leverage shift merits close monitoring to assess impacts on financial flexibility and risk going forward.

The analysis of the quarterly financial data reveals several notable trends in the company's asset base, equity, and financial leverage over the observed period.

Total Assets

Total assets exhibit fluctuations throughout the periods, with values generally ranging between approximately 92,000 and 125,000 million US dollars. Initially, total assets showed modest variability around the mid-90,000s to low-100,000s range, with a significant increase commencing around early 2024, peaking near 124,000 million US dollars in the first quarter of 2024. Subsequently, total assets appear to stabilize and slightly decrease toward the last observed quarters, ending near 121,000 million US dollars.

Total Equity

Total equity demonstrates a gradual and steady upward trend across the timeline. Starting close to 38,000 million US dollars, equity increased with minor fluctuations, reaching low 40,000 million US dollars by late 2023. From early 2024 onward, equity continued increasing, approaching around 46,800 million US dollars by the latest quarter. This upward trajectory indicates consistent growth in shareholders' equity over time.

Financial Leverage

The financial leverage ratio initially declines from approximately 2.49 to around 2.18 between late 2020 and late 2023, suggesting a reduction in the ratio of total assets to equity and potentially a strengthening equity base relative to assets. However, from early 2024 the leverage ratio reverses trend, rising significantly to reach about 2.74 and maintaining elevated levels near 2.6 through the remaining periods. This increase indicates an expansion in leverage, implying a greater proportion of assets financed by liabilities in relation to equity during these recent quarters.

Overall, the data suggests a phase of asset growth coupled with a stable increase in equity, followed by increased leverage in the most recent quarters. The rising leverage may indicate a strategic shift toward greater use of debt or other liabilities to finance assets, which requires monitoring for potential impacts on financial risk and capital structure.

Earnings Before Interest and Tax (EBIT)

The EBIT figures exhibit a general upward trend from October 2020 through July 2023, increasing from $2,793 million to a peak of $4,582 million. This period indicates a phase of growth and improving operating profitability. However, starting in October 2023, EBIT experiences a sharp decline, falling to $2,592 million by the same quarter in 2024, which represents a significant downturn. Following this dip, modest recovery is observed with EBIT rising again to approximately $3,741 million by October 2025, although it does not reach the previous peak levels observed in mid-2023.

Interest Expense

Interest expense remains relatively stable and moderate between October 2020 and January 2024, fluctuating narrowly between $88 million and $120 million. A notable increase occurs starting in April 2024, when interest expense jumps sharply to $357 million and continues at elevated levels thereafter, slightly decreasing but maintaining above $350 million through October 2025. This rise may indicate increased borrowing or changes in debt servicing costs.

Interest Coverage Ratio

The interest coverage ratio demonstrates strong coverage from October 2020 to January 2024, peaking at 41.54 and consistently remaining above 25. This suggests comfortable ability to cover interest expenses during that period. However, beginning in April 2024, the ratio declines significantly, dropping to 21.47 and further decreasing to lows near 7.13 in July 2025, indicating weakening capacity to meet interest obligations relative to earnings. The decline in interest coverage aligns with the simultaneous drop in EBIT and increased interest expenses during the same period, suggesting a period of financial strain.

Overall Analysis

The data reflects a period of robust operational performance and stable financing conditions from late 2020 through early 2024. Subsequent to this, a material deterioration occurs, characterized by a sharp reduction in EBIT alongside a marked increase in interest expense, resulting in a pronounced decline in the interest coverage ratio. This shift highlights a potential liquidity or credit risk concern, as the company's earnings become less capable of covering rising interest expenses. While some recovery in EBIT is noted toward late 2025, interest coverage remains subdued, indicating ongoing pressure on financial flexibility.