Texas Instruments Inc. (NASDAQ:TXN)

Current Income Tax Expense

The current income tax expense demonstrates an overall increasing trend from 2020 to 2022, rising from $559 million to $1,474 million. After peaking in 2022, it declines in subsequent years, falling to $1,207 million in 2023 and further to $864 million in 2024. This pattern suggests a significant rise in the company’s taxable income or effective tax rates up to 2022, followed by a reduction in the current tax obligation over the last two reporting years.

Deferred Income Tax Expense

The deferred income tax expense presents a more volatile pattern across the years. It starts with a negative amount of $ -137 million in 2020, shifts to a small positive value of $15 million in 2021, and then reverts to negative values in the following years: $ -191 million in 2022, decreasing further to $ -299 million in 2023, and moving slightly upward to $ -210 million in 2024. The generally negative deferred tax expense in later years indicates more tax benefits being recognized from timing differences, with the exception of a brief positive deferral in 2021.

Provision for Income Taxes

The overall provision for income taxes somewhat follows the trend of the current tax expense. It rises sharply from $422 million in 2020 to $1,150 million in 2021 and reaches $1,283 million in 2022. Then, the provision decreases to $908 million in 2023 and further to $654 million in 2024. This trend aligns with changes seen in current taxes, reflecting the combined impact of current and deferred tax expenses.

Summary of Trends

The analysis reveals that while current income tax expenses have increased markedly through 2022 before falling, deferred tax expenses have fluctuated, typically showing negative amounts in recent years suggestive of tax timing benefits. The total income tax provision reflects these movements, indicating an initial growth in tax liabilities with a subsequent easing. The varying deferred tax expenses contribute to the fluctuations in total tax provision, highlighting the importance of timing differences in the company’s tax accounting.

The effective tax rate demonstrates an overall increasing trend from 7% in 2020 to a peak of approximately 12.9% in 2021, followed by slight decreases in subsequent years, settling around 12% by 2024. Despite the stability of the U.S. statutory income tax rate at 21% throughout the period, significant factors contribute to the variance in the effective tax rate.

Foreign derived intangible income

This item exhibits a consistent negative impact on the tax rate, fluctuating between -6.1% and -7%, indicating the benefit of foreign income tax advantages. There is a slight reduction in the absolute negative value by 2024 compared to 2022, suggesting a marginal decrease in this income's tax benefit.

Stock compensation

The impact of stock compensation on the tax rate has been relatively volatile. It decreased in its negative effect from -2.5% in 2020 to a low of -0.7% in 2022, before increasing back to -2.1% by 2024. This pattern suggests fluctuating costs or tax treatments of stock-based compensation over the years.

R&D tax credit

The R&D tax credit consistently reduces the effective tax rate, with its impact deepening from -1.3% in 2020 to -2% in 2024. This trend implies growing utilization or allocation of research and development credits, enhancing tax efficiency related to innovation activities.

Changes in uncertain tax positions

These changes diminished significantly between 2020 and 2022, shifting from -4% to nearly neutral or slightly positive values, and displayed minor positive effects by 2024. This indicates a resolution or reduction of tax uncertainties, contributing less to lowering the effective tax rate over time.

Other factors

The other category showed a minor positive influence on the tax rate initially, shifting from -0.1% in 2020 to 1.1% in 2024. This gradual increase suggests additional tax-related factors increasingly contributed to raising the effective tax rate.

Overall, the effective tax rate trend reflects a balance of tax credits and deductions against a consistent statutory tax framework, with the interplay of intangible income, stock compensation, R&D credits, and uncertain tax positions driving the year-to-year variability. The increasing use of R&D tax credits and reductions in uncertain tax position benefits are particularly noteworthy for their roles in moderating the effective rate despite rising other tax-related costs.

Capitalized R&D

The capitalized research and development expenses show a significant upward trend, starting with no recorded values in 2020 and 2021, then increasing sharply from $380 million in 2022 to $750 million in 2023, and reaching $1,076 million in 2024. This indicates a growing investment in long-term development activities.

Accrued expenses

Accrued expenses fluctuated over the period, beginning at $180 million in 2020, rising to $209 million in 2021, dipping to $182 million in 2022, then increasing again to $236 million in 2023 and $297 million in 2024. This reflects variability in short-term liabilities with an overall rising tendency.

Deferred loss and tax credit carryforwards

This item remained relatively stable, with minor fluctuations between $201 million and $216 million over the five years, suggesting consistent utilization and recognition of tax credits and losses.

Stock compensation

Stock compensation expenses demonstrated a steady increase, rising from $106 million in 2020 to $186 million in 2024, indicating a growing use of equity-based incentives as part of the compensation strategy.

Inventories

Inventories decreased from $105 million in 2020 to a low of $74 million in 2021, followed by a gradual increase back to $105 million by 2024, signaling some stabilization in inventory levels after a dip.

Retirement costs for defined benefit and retiree health care

The retirement costs show a general decline from $44 million in 2020 to $17 million in 2024, with some data missing. This may indicate a reduction in obligations or changes in plan structures.

Other

Other miscellaneous expenses varied substantially, peaking at $47 million in 2023 from much lower levels in prior years, and then declining to $23 million in 2024, reflecting volatility in non-categorized expenses.

Deferred tax assets, before valuation allowance

This asset category exhibited strong growth, rising from $645 million in 2020 to $1,920 million in 2024, indicating accumulating deferred tax benefits.

Valuation allowance

The valuation allowance gradually increased in negative value from -$179 million in 2020 to -$212 million in 2024, suggesting a cautious approach to recognizing certain deferred tax assets fully.

Deferred tax assets, after valuation allowance

After accounting for valuation allowances, the deferred tax assets showed significant expansion from $466 million in 2020 to $1,708 million in 2024, emphasizing an overall strengthening in net deferred tax benefits.

Property, plant and equipment

This item displays increasing negative amounts, reaching a peak negative adjustment of -$592 million in 2023 before improving to -$441 million in 2024, signaling considerable depreciation or impairments with some recovery in the final year.

CHIPS Act incentives

CHIPS Act incentives appear as a negative item only in 2024 at -$336 million, indicating the recognition of government-related incentive impacts in the latest year.

International earnings

International earnings show consistent negative values, slightly declining in magnitude from -$44 million in 2020 to -$33 million in 2024, reflecting ongoing foreign operational expenses or losses.

Acquisition-related intangibles and fair-value adjustments

These adjustments show a trend of decreasing negative impact over the years, from -$40 million in 2020 to -$6 million in 2024, indicating a reduction in acquisition-related charges or amortization.

Deferred tax liabilities

Deferred tax liabilities steadily increased in magnitude from -$213 million in 2020 to -$825 million in 2024, reflecting growing future tax obligations.

Net deferred tax asset (liability)

The net deferred tax asset position improved significantly from $253 million in 2020 to $883 million in 2024, representing enhanced net deferrals of taxes payable.

The analysis of the deferred tax accounts over the reported five-year period reveals notable trends in the company’s tax positions. Deferred tax assets show a consistent and marked increase from 2020 through 2024. Beginning at $343 million in 2020, these assets declined to $263 million in 2021 but then rose substantially each year thereafter, reaching $936 million by the end of 2024. This reflects a growing recognition of future tax benefits that the company expects to realize.

Conversely, deferred tax liabilities exhibit a gradual decrease over the same period. Starting at $90 million in 2020, liabilities decreased steadily each year, ending at $53 million in 2024. This decline suggests a reduction in the company’s future tax obligations or a shift in the timing differences that give rise to these liabilities.

Deferred Tax Assets

After a temporary dip in 2021, the deferred tax assets expanded significantly by over threefold by 2024, indicating increased deductions or losses carried forward that can offset future taxable profits.

Deferred Tax Liabilities

The gradual decline in deferred tax liabilities suggests a reduction in taxable temporary differences, potentially due to changes in asset bases or tax planning strategies.

Overall Impact

The widening gap between deferred tax assets and liabilities over the years points toward a more favorable net deferred tax position, which could enhance future tax cash flows and indicates prudent tax management by the company.

Asset Trends

The total assets of the company have shown consistent growth over the analyzed five-year period. Reported total assets increased from approximately 19.35 billion USD in 2020 to 35.51 billion USD in 2024, representing substantial expansion. Similarly, adjusted total assets followed a comparable trajectory, rising from about 19.01 billion USD to 34.57 billion USD over the same timeframe. The slight differences between reported and adjusted figures indicate ongoing adjustments related to income tax considerations, but these do not materially alter the overall upward trend in asset base.

Liabilities Development

Total liabilities have also increased steadily across the period. Reported liabilities rose from 10.16 billion USD in 2020 to 18.61 billion USD in 2024, with adjusted liabilities reflecting almost identical values each year. The growing liabilities align with the expansion of assets, maintaining a consistent scale of financial obligations. This growing liability level suggests increasing leverage, which needs to be evaluated in conjunction with equity changes.

Stockholders’ Equity Evolution

Stockholders’ equity expanded consistently from 9.19 billion USD reported in 2020 to approximately 16.90 billion USD in 2024. The adjusted equity figures are slightly below the reported numbers but show a similar growth pattern, increasing from 8.93 billion USD to 16.02 billion USD. This progression evidences strengthening shareholder value over time, though the rate of equity growth is somewhat slower relative to asset expansion, implying a moderate increase in financial leverage.

Net Income Patterns

Net income demonstrates a distinct trend with an increase from 5.60 billion USD reported in 2020 to a peak near 8.75 billion USD in 2022 before decreasing in subsequent years to 4.80 billion USD by 2024. Adjusted net income mirrors this pattern closely, beginning at 5.46 billion USD, peaking at approximately 8.56 billion USD, and declining to 4.59 billion USD. This decline in profitability after 2022 could reflect operational challenges, market conditions, or changes in tax-related adjustments. The reduction in net income despite rising assets and equity suggests potential pressure on earnings quality or margin compression.

Summary of Financial Position and Profitability

Over the five-year horizon, the company has expanded considerably in asset size and equity base, with increasing liabilities that indicate moderate leverage growth. The sustained asset growth is a positive signal of capacity expansion or investment. However, the declining net income during the latter part of the period raises concerns regarding earnings sustainability and operational efficiency. The differences between reported and adjusted financial data are modest, indicating that tax-related adjustments have limited impact on the overall financial outlook.

The analysis of the adjusted and reported financial metrics for the company over the five-year period reveals several notable trends and shifts in performance.

Net Profit Margin

The reported net profit margin increased from 38.69% in 2020 to a peak of 43.68% in 2022, followed by a decline to 30.68% in 2024. The adjusted net profit margin displays a similar trend, rising from 37.74% in 2020 to 42.73% in 2022, then decreasing to 29.34% in 2024. This pattern suggests that profitability margins improved significantly in the first three years but weakened noticeably in the last two years.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios remained relatively stable around 0.75 until 2022, indicating consistent efficiency in asset utilization. However, a pronounced decline occurred in 2023 and 2024, with reported ratios dropping to 0.54 and 0.44, and adjusted ratios to 0.55 and 0.45 respectively. This decline points to decreased efficiency in generating sales from assets in the latter years.

Financial Leverage

Financial leverage, measured as a ratio, showed a downward trend from 2.11 in 2020 to around 1.85-1.89 in 2021 and 2022, indicating reduced reliance on debt or increased equity financing. In 2023 and 2024, both reported and adjusted leverage increased again, reaching 2.1 and 2.16 respectively by 2024, suggesting a return or increase in leverage usage in recent years.

Return on Equity (ROE)

Reported ROE declined from 60.9% in 2020 to 28.39% in 2024, while adjusted ROE similarly decreased from 61.09% to 28.65% over the same period. The significant decrease in ROE reflects diminished profitability and efficiency in generating returns for shareholders, particularly notable after 2022.

Return on Assets (ROA)

ROA trends also illustrate a peak around 2021 and 2022, with reported ROA rising from 28.91% in 2020 to 32.16% in 2022 before dropping to 13.51% in 2024. The adjusted ROA follows a close pattern. This translates to a reduction in the company's ability to generate profit from its asset base over the recent two years.

Overall, the data indicates that the company experienced improved profitability and operational efficiency up to 2022. However, following this period, key performance metrics such as net profit margin, total asset turnover, ROE, and ROA have all shown marked declines. Concurrently, financial leverage decreased initially but then increased again by 2024. This combination of declining profitability and asset efficiency, accompanied by increased leverage, may warrant further investigation into factors influencing the recent downturn in financial performance.

Net Income Trends

The reported net income demonstrated a general upward trend from US$5,595 million in 2020 to a peak of US$8,749 million in 2022, followed by a notable decline to US$6,510 million in 2023 and a further drop to US$4,799 million in 2024. The adjusted net income closely mirrored this pattern, increasing from US$5,458 million in 2020 to US$8,558 million in 2022, then decreasing to US$6,211 million in 2023 and US$4,589 million in 2024. The similarity between reported and adjusted figures suggests consistent deferred income tax adjustments over time, with adjustments having a minor impact on the net income figures.

Net Profit Margin Trends

Reported net profit margin improved steadily from 38.69% in 2020 to a high of 43.68% in 2022, indicating increasing profitability relative to revenue. Subsequently, there was a decline to 37.16% in 2023 and a sharper decline to 30.68% in 2024. Adjusted net profit margin followed a comparable pattern, rising from 37.74% in 2020 to 42.73% in 2022, decreasing to 35.45% in 2023, and falling further to 29.34% in 2024. The narrowing gap between reported and adjusted margins over the years highlights consistent tax-related adjustments with limited effect on profitability percentages.

Overall Observations

The data reveals a period of growth in both net income and profit margins from 2020 through 2022, followed by a period of contraction in 2023 and 2024. This may suggest external or internal factors affecting profitability during the latter years. The close alignment between reported and adjusted figures indicates that deferred income tax impacts have been relatively stable and do not significantly distort the underlying profitability trends.

The data reveals a consistent increase in both reported and adjusted total assets over the five-year period. Reported total assets rose from $19,351 million in 2020 to $35,509 million in 2024, while adjusted total assets followed a similar trend, growing from $19,008 million to $34,573 million within the same timeframe. This indicates sustained asset growth for the company.

In contrast, both reported and adjusted total asset turnover ratios exhibited a declining trend throughout the period. Reported total asset turnover decreased from 0.75 in 2020 to 0.44 in 2024, and similarly, adjusted total asset turnover dropped from 0.76 to 0.45 over these years. The decline in turnover ratios suggests that the company generated less revenue per dollar of assets held as time progressed.

Asset Growth

Steady increase in total assets, with reported assets growing by approximately 84% and adjusted assets by about 82% over five years.

Asset Turnover Decline

Decreasing efficiency in asset utilization, nearly halving the turnover ratio during this period, which may reflect slower revenue growth relative to asset expansion or increased asset base without proportional revenue gains.

Reported vs. Adjusted Figures

Reported and adjusted values are closely aligned, showing minimal differences between them, which suggests that deferred income tax adjustments have a limited impact on asset measurement and turnover calculations.

Asset Growth Trends

The reported total assets showed a consistent upward trajectory, increasing from US$19,351 million in 2020 to US$35,509 million in 2024. Similarly, adjusted total assets followed a comparable growth pattern, rising from US$19,008 million in 2020 to US$34,573 million in 2024. This reflects a solid expansion of asset base over the five-year period.

Equity Developments

Reported stockholders’ equity exhibited a strong positive trend, growing from US$9,187 million in 2020 to US$16,903 million in 2024. Adjusted stockholders’ equity also increased steadily, moving from US$8,934 million in 2020 to US$16,020 million in 2024. The difference between reported and adjusted equity values remains relatively stable, indicating consistent adjustments related to deferred income tax impacts.

Financial Leverage Behavior

Reported financial leverage, defined as the ratio of total assets to stockholders’ equity, decreased from 2.11 in 2020 to 1.85 in 2021, signifying a reduction in leverage, then experienced a gradual increase to 2.10 by 2024. Adjusted financial leverage mirrored this trend closely, dropping from 2.13 in 2020 to 1.86 in 2021, before rising to 2.16 in 2024. This indicates a moderate increase in reliance on debt financing relative to equity towards the end of the period.

Comparison of Reported versus Adjusted Figures

The adjusted values for assets and equity are consistently slightly lower than the reported figures throughout the periods analyzed, suggesting that deferred income tax adjustments have a reducing effect on these balances. The patterns of growth and leverage trends remain essentially the same between the two sets of data, reflecting that tax adjustments do not materially alter the overall financial profile but do ensure a more conservative representation.

Over the observed five-year period, several financial trends emerge with respect to income, equity, and returns on equity, considering both reported and adjusted figures related to annual reported and deferred income tax adjustments.

Net Income

Both reported and adjusted net income demonstrate an overall increasing trend from 2020 through 2022, peaking in 2022 at $8,749 million (reported) and $8,558 million (adjusted). Subsequently, there is a noticeable decline in 2023 and 2024. By the end of 2024, reported net income decreases to $4,799 million and adjusted net income falls slightly further to $4,589 million, reflecting a significant reduction compared to the peak years.

Stockholders’ Equity

Stockholders’ equity shows a consistent upward trajectory throughout the entire period under both reporting methods. Reported equity rises from $9,187 million in 2020 to $16,903 million in 2024, while adjusted equity also climbs from $8,934 million to $16,020 million during the same time frame. The growth rate appears more pronounced between 2020 and 2023, with a relative plateau occurring towards 2024 where reported equity increases marginally and adjusted equity slightly decreases.

Return on Equity (ROE)

ROE values, reported and adjusted, maintain relatively high levels initially, ranging around 58% to 61% from 2020 through 2022. However, there is a marked decline beginning in 2023 and continuing into 2024. By 2024, reported ROE decreases to 28.39% and adjusted ROE is comparable at 28.65%. This downward trend in ROE corresponds with the reduction in net income and reflects diminishing profitability relative to the equity base, despite the increasing equity.

Comparisons Between Reported and Adjusted Measures

The adjusted figures for net income, stockholders’ equity, and ROE closely mirror the reported values throughout the period, indicating that adjustments for deferred and annual income taxes do not significantly distort the financial results. The differences remain relatively small, reinforcing the reliability of the reported results with respect to these metrics.

Net Income Trends

The reported net income exhibited a rising trend from 2020 through 2022, increasing substantially from 5595 million US dollars to a peak of 8749 million in 2022. However, after this peak, there was a notable decline in the following two years, dropping to 6510 million in 2023 and further to 4799 million in 2024. The adjusted net income follows a similar pattern with a rise from 5458 million in 2020 to 8558 million in 2022, followed by a decrease to 6211 million in 2023 and 4589 million in 2024. This pattern suggests that the company experienced a period of growth until 2022, after which profitability decreased significantly.

Total Assets Evolution

Both reported and adjusted total assets display consistent growth throughout the entire period. Reported total assets increased from 19351 million US dollars in 2020 to 35509 million in 2024. Adjusted total assets also grew steadily from 19008 million in 2020 to 34573 million in 2024. This continuous increase suggests ongoing asset accumulation or investments despite the fluctuations in net income.

Return on Assets (ROA) Analysis

The reported ROA percentage rose from 28.91% in 2020 to a high of 32.16% in 2022, indicating improving efficiency in generating profits from assets during that timeframe. However, a sharp decline occurred afterward, decreasing to 20.12% in 2023 and further down to 13.51% in 2024. The adjusted ROA mirrors this trend closely, peaking at 32.01% in 2022 and falling to 19.66% and 13.27% in the subsequent years. This decline in ROA likely reflects diminished profitability and possibly less efficient use of the asset base in recent years.

Overall Insights

The data illustrate a period of growth in net income and asset efficiency up to 2022, followed by a downturn in profitability from 2023 onward despite continued asset growth. The juxtaposition of increasing assets with decreasing net income and ROA suggests potential challenges in maintaining operational efficiency or external factors impacting earnings. The adjusted figures generally align closely with reported values, indicating tax adjustments had minimal effect on the overall trends.