Texas Instruments Inc. (NASDAQ:TXN)

The financial performance, as indicated by Return on Equity (ROE) and its components, demonstrates a clear shift over the observed period. Initially, the metrics exhibited strength, followed by a consistent decline and a potential stabilization towards the end of the period.

Return on Assets (ROA)

Return on Assets experienced a peak in the second quarter of 2022 at 34.69%. A subsequent, consistent downward trend was observed through the fourth quarter of 2023, reaching a low of 20.12%. From the first quarter of 2024 through the second quarter of 2025, ROA exhibited relative stability, fluctuating between 13.51% and 14.46%. This suggests a diminishing ability to generate earnings from its asset base over time, followed by a period of consolidation.

Financial Leverage

Financial Leverage generally increased over the period. Starting at 1.80 in the first quarter of 2022, it rose to a high of 2.13 in the fourth quarter of 2025, with some fluctuation. The increase in financial leverage indicates a greater reliance on debt financing. This trend partially offset the decline in ROA, contributing to the observed changes in ROE.

Return on Equity (ROE)

Return on Equity mirrored the trend in ROA, initially strong at 60.86% in the second quarter of 2022, but declining steadily to 30.73% by the fourth quarter of 2025. The initial decline was more pronounced, with a significant drop between the second quarter of 2022 and the fourth quarter of 2023. While the decline slowed in later periods, ROE did not demonstrate a clear recovery. The increasing financial leverage partially mitigated the impact of the declining ROA on ROE, but was insufficient to maintain initial levels.

The interplay between ROA and Financial Leverage reveals that the decrease in ROE is primarily driven by the declining profitability of assets (ROA). While increased leverage amplified returns to equity holders, it did not compensate for the diminishing asset efficiency. The recent stabilization in ROA, coupled with continued leverage, suggests a potential bottoming out of the ROE decline, though further monitoring is warranted to confirm this trend.

The three-component DuPont analysis reveals a declining trend in Return on Equity (ROE) over the observed period. This decline is attributable to shifts in Net Profit Margin, Asset Turnover, and Financial Leverage, though their individual contributions vary. Initially, ROE demonstrates strength, peaking in the second quarter of 2022, before a consistent downward trajectory emerges.

Net Profit Margin

The Net Profit Margin exhibits a clear decreasing trend throughout the period. Starting at 43.34% in March 2022, it steadily declines to 28.28% by December 2025. The rate of decline appears to accelerate in the latter half of the observation window, suggesting increasing pressure on profitability. While remaining positive, the diminishing margin significantly impacts overall ROE.

Asset Turnover

Asset Turnover also demonstrates a consistent decline. Beginning at 0.75 in March 2022, it falls to 0.51 by December 2025. This indicates a decreasing efficiency in utilizing assets to generate revenue. The decline is relatively steady, with a slight moderation in the rate of decrease towards the end of the period. This reduction in asset utilization contributes to the overall decrease in ROE.

Financial Leverage

Financial Leverage generally increases over the period, though not consistently. It rises from 1.80 in March 2022 to a peak of 2.13 in both June 2025 and December 2025. Prior to this, there is fluctuation, but a general upward trend is apparent. While increased leverage can amplify ROE, its positive effect is offset by the declines in Net Profit Margin and Asset Turnover. The increasing leverage does provide some mitigation against the declining profitability and asset efficiency, but is insufficient to maintain the initial ROE levels.

The combined effect of these three components results in a substantial decrease in ROE, from 58.62% in March 2022 to 30.73% in December 2025. The most significant driver of this decline appears to be the reduction in Net Profit Margin, followed by the decreasing Asset Turnover. While Financial Leverage increases, its impact is not enough to counteract the negative trends in the other two components. The observed trends suggest a weakening operational performance and potentially increasing financial risk.

The five-component DuPont analysis reveals a declining trend in Return on Equity (ROE) over the observed period. This decline is attributable to shifts in several key profitability and efficiency ratios, partially offset by changes in financial leverage. The analysis indicates a consistent erosion of core profitability, coupled with decreasing asset utilization, which are the primary drivers of the ROE reduction.

Tax Burden

The tax burden demonstrates relative stability, fluctuating within a narrow range between 0.86 and 0.90. A slight upward trend is observed towards the end of the period, suggesting a marginally increased effective tax rate. This change has a limited impact on overall ROE.

Interest Burden

The interest burden exhibits a gradual, though consistent, decline from 0.98 to 0.91. This indicates an improving ability to cover interest expenses, potentially due to debt restructuring or lower interest rates. The positive effect of this trend on ROE is relatively small, as the burden remains consistently high.

EBIT Margin

The EBIT margin demonstrates a significant and consistent downward trend, decreasing from 51.14% in March 2022 to 35.36% in December 2025. This substantial decline in operating profitability is the most significant factor contributing to the overall reduction in ROE. The rate of decline appears to accelerate in the later periods.

Asset Turnover

Asset turnover also shows a consistent decline, falling from 0.75 to 0.51 over the period. This indicates decreasing efficiency in utilizing assets to generate revenue. The decreasing asset turnover exacerbates the impact of the declining EBIT margin on ROE, as the company generates less revenue per dollar of assets.

Financial Leverage

Financial leverage generally increases over the period, rising from 1.80 to 2.13. This suggests a greater reliance on debt financing. While increased leverage can amplify ROE, its positive effect is insufficient to offset the negative impacts of declining profitability and asset turnover. A slight decrease is observed in the most recent period, but the overall trend remains upward.

In summary, the declining ROE is primarily driven by the substantial decrease in the EBIT margin and the decreasing efficiency of asset utilization. While increased financial leverage provides some offset, it is not enough to counteract the negative trends in profitability and efficiency. The observed patterns suggest a weakening operational performance and a potential need for strategic adjustments to improve profitability and asset management.

The financial performance, as indicated by the provided metrics, reveals a consistent decline in profitability and efficiency over the observed period. A notable downward trend is evident in both Net Profit Margin and Asset Turnover, ultimately impacting Return on Assets (ROA). The analysis below details these trends.

Net Profit Margin

The Net Profit Margin experienced a gradual decrease from 43.34% in March 2022 to 28.28% in December 2025. While the margin remained relatively high initially, a consistent erosion is observed throughout the period. The rate of decline appears to accelerate in the latter half of the observation window, with the most significant drops occurring between September 2023 and December 2025. This suggests increasing cost pressures or decreasing pricing power.

Asset Turnover

Asset Turnover demonstrates a similar declining pattern, moving from 0.75 in March 2022 to 0.51 in December 2025. The decrease is not strictly linear, with some quarterly fluctuations, but the overall trajectory is definitively downward. This indicates a decreasing ability to generate sales revenue from the company’s asset base, potentially due to inventory build-up, underutilized capacity, or declining sales. The rate of decline slows somewhat between March 2024 and December 2025, but remains negative.

Return on Assets (ROA)

Consequently, Return on Assets has decreased substantially, falling from 32.51% in March 2022 to 14.46% in December 2025. This decline directly reflects the combined effect of the decreasing Net Profit Margin and Asset Turnover. The most pronounced decrease in ROA occurs between March 2023 and December 2025, mirroring the accelerated decline in Net Profit Margin. The ROA appears to stabilize somewhat in the final two quarters, but at a significantly lower level than the beginning of the period.

The consistent decline across all three metrics suggests a weakening operational performance. The interplay between decreasing profitability and decreasing asset utilization is particularly concerning, as it indicates fundamental challenges in both cost management and revenue generation. Further investigation into the underlying drivers of these trends is warranted.

The financial performance, as indicated by the four-component DuPont analysis, reveals a consistent decline in Return on Assets (ROA) over the observed period. This decrease is primarily driven by a significant reduction in Asset Turnover, partially offset by changes in profitability margins and tax/interest burdens.

Tax Burden

The Tax Burden demonstrates relative stability, fluctuating within a narrow range between 0.86 and 0.90. A slight increasing trend is observed from 2022 to 2025, suggesting a modestly increasing effective tax rate. This change, however, appears to have a limited impact on overall ROA.

Interest Burden

The Interest Burden exhibits a gradual, though consistent, decline from 0.98 in early 2022 to 0.91 by the end of 2025. This indicates an improving ability to cover interest expenses, potentially due to debt management or lower interest rates. The impact of this improvement is to slightly bolster ROA.

EBIT Margin

The EBIT Margin experienced a peak in the first three quarters of 2022, ranging from 51.14% to 52.16%. Subsequently, a clear downward trend is evident, decreasing to 35.36% by December 2025. This substantial decline in profitability is a major contributor to the overall reduction in ROA. The rate of decline appears to accelerate in the latter half of the period.

Asset Turnover

Asset Turnover demonstrates the most pronounced decline among the analyzed ratios. Starting at 0.75 in March 2022, it steadily decreases to 0.51 by December 2025. This indicates a decreasing efficiency in utilizing assets to generate revenue, and is the primary driver of the observed ROA decline. The rate of decrease is particularly notable after June 2023.

Return on Assets (ROA)

ROA began at 32.51% in March 2022 and experienced a consistent decline, reaching 14.46% by December 2025. This substantial decrease reflects the combined effects of the declining EBIT Margin and, more significantly, the decreasing Asset Turnover. While the Interest and Tax Burdens exhibited minor offsetting effects, they were insufficient to counteract the negative trends in profitability and asset utilization.

In summary, the analysis suggests a weakening operational efficiency and profitability. The substantial decline in Asset Turnover is a key area of concern, and the decreasing EBIT Margin further exacerbates the negative trend in ROA. Continued monitoring of these ratios is recommended to assess the sustainability of the current performance and the effectiveness of any implemented corrective measures.

The financial performance metrics reveal discernible trends over the observed period. A consistent decline in profitability is evident when examining the disaggregation of net profit margin through its constituent components. The tax burden demonstrates relative stability, while the interest burden exhibits a gradual decrease, though these changes do not fully offset the decline in the EBIT margin, ultimately impacting the net profit margin.

Tax Burden

The tax burden remained consistently high, fluctuating minimally between 0.86 and 0.90. This indicates a stable effective tax rate throughout the period, with a slight increase towards the end of the observed timeframe. The impact of this burden on net income appears consistent.

Interest Burden

The interest burden experienced a gradual, though consistent, reduction from 0.98 to 0.91. This suggests improved efficiency in managing interest-bearing liabilities or a decrease in overall debt. While beneficial, this reduction was insufficient to counteract the more significant decline in the EBIT margin.

EBIT Margin

A pronounced downward trend is observed in the EBIT margin, decreasing from 51.14% in March 2022 to 35.36% in December 2025. This represents a substantial erosion of operating profitability and is the primary driver of the decline in net profit margin. The rate of decline appears to accelerate in the later periods.

Net Profit Margin

The net profit margin mirrors the trend in the EBIT margin, declining from 43.34% to 28.28% over the period. This indicates that the combined effect of the stable tax burden, decreasing interest burden, and declining EBIT margin resulted in a significant reduction in overall profitability. The decline is consistent across all observed quarters, with a more pronounced decrease in the latter half of the period.

In summary, the observed trends suggest a weakening of core operating profitability, as evidenced by the declining EBIT margin. While improvements in interest expense management were noted, they were insufficient to offset this decline, leading to a substantial reduction in the net profit margin. The tax burden remained relatively constant, contributing consistently to the reduction in net income.