Cisco Systems Inc. (NASDAQ:CSCO)

Debt to Equity

The debt to equity ratio exhibits a declining trend from October 2019 through July 2023, decreasing from 0.54 to 0.19, indicating a reduction in leverage relative to equity. This suggests a strengthening equity base or reduced reliance on debt over this period. However, starting from January 2024, there is a significant reversal with the ratio rising sharply to 0.7 by October 2024 and remaining elevated through mid-2025. This indicates increased leverage and higher debt levels relative to equity in recent quarters.

Debt to Capital

There is a gradual decline in the debt to capital ratio from 0.35 in late 2019 to a low of approximately 0.14 in October 2023, reflecting a lower proportion of debt in the company’s overall capital structure. This is consistent with the trends seen in debt to equity. Beginning January 2024, the ratio more than doubles to around 0.41 and stabilizes near that level through mid-2025, signifying a notable increase in the share of debt within total capital.

Debt to Assets

This ratio follows a similar pattern to the previous leverage measures, decreasing steadily from 0.20 in late 2019 to about 0.08 by July 2023, indicating reduced debt burden relative to the company’s total assets. Afterward, it increases abruptly to approximately 0.26 by January 2024 and remains relatively stable around this level through mid-2025, confirming that debt has increased as a proportion of total assets recently.

Financial Leverage

Financial leverage shows a moderate downward trend from 2.69 in October 2019 to around 2.18 by October 2023, consistent with decreasing debt levels and improving capital structure. Following this period, a marked rise occurs starting January 2024, reaching approximately 2.74 by early 2025, suggesting increased use of debt financing or a decrease in equity, thereby raising the overall leverage once again.

Interest Coverage

Interest coverage appears only from April 2020, demonstrating a generally strong capacity to meet interest obligations, rising steadily from about 25 to a peak near 41 in mid-2022. From this peak, the ratio declines progressively through early 2024, dropping sharply to around 7 to 8 by mid-2025. This substantial decline indicates a reduced ability to cover interest expenses, likely tied to the increased leverage observed in that same timeframe, suggesting increased financial risk and potential pressure on earnings or cash flow.

Total Debt

The total debt shows a general declining trend from October 2019 through July 2023, decreasing from approximately 18,497 million USD to about 7,650 million USD. This indicates a consistent reduction in debt levels over this period. However, starting January 2024, total debt rises sharply, peaking above 31,993 million USD in April 2024 and remaining elevated with slight fluctuations through July 2025. This sharp increase in debt during 2024 contrasts notably with the prior downward trend.

Total Equity

Total equity demonstrates an overall upward trajectory from October 2019 to July 2025. Starting near 34,423 million USD, equity grows steadily with minor fluctuations, reaching approximately 46,843 million USD by July 2025. The equity growth appears consistent even during the period when total debt markedly increases, suggesting ongoing capital accumulation or retained earnings growth.

Debt to Equity Ratio

The debt to equity ratio declines consistently from 0.54 in October 2019 to a low point of 0.17 by July 2023, reflecting decreasing leverage and an improving capital structure with reduced reliance on debt relative to equity. Notably, beginning in January 2024, the ratio escalates sharply, peaking at 0.71 in April 2024 and maintaining elevated levels around 0.60 to 0.68 through mid-2025. This upward movement corresponds with the rapid increase in total debt and indicates a higher degree of financial leverage in this recent period.

Summary Insights

Over the majority of the analyzed period, the financial metrics reflect a strategy of debt reduction coupled with equity growth, enhancing financial stability and lowering leverage risk. The dramatic increase in debt and corresponding rise in the debt to equity ratio starting in early 2024 suggests a shift in financial policy or capital structure, potentially driven by increased borrowing for investments, acquisitions, or other strategic initiatives. Despite the increase in debt, equity continued to grow, which may indicate balanced growth or strong operational performance supporting equity levels. The change in leverage dynamics warrants attention in terms of risk management and interest obligations going forward.

The financial data reveals evolving leverage dynamics over the analyzed periods. Total debt exhibits fluctuations with a notable decline from October 2019 through mid-2023, followed by a marked increase beginning in early 2024. Specifically, total debt decreases from approximately $18.5 billion in late 2019 to a low near $7.65 billion by October 2023, then sharply rises again exceeding $31 billion in early 2024 before gradually moderating to around $28 billion by mid-2025.

Total capital, representing the sum of debt and equity, remains relatively stable with minor fluctuations from 2019 through 2023, generally oscillating around the $50 billion mark. However, from early 2024 onward, total capital rises significantly, peaking near $77.8 billion, before stabilizing slightly below this peak by mid-2025. This upward movement in capital coincides with the rapid growth in total debt during the same time frame.

The debt-to-capital ratio follows a downward trend from 0.35 in late 2019 to around 0.14-0.16 by mid-2023, reflecting a general reduction in leverage and potentially a strengthening of the equity base or deleveraging efforts. From early 2024, this ratio reverses direction sharply, surging to about 0.41 and persisting at elevated levels through mid-2025. The rising ratio corresponds to the increasing proportion of debt relative to total capital, indicating a notable shift toward higher leverage in the company's capital structure.

Total Debt Trends

Declined steadily from late 2019 to mid-2023, reaching a minimum, then increased sharply starting in early 2024, before slightly tapering off in mid-2025.

Total Capital Trends

Stable around $50 billion through 2019-2023 with minor variation; experienced a substantial increase alongside debt in 2024, maintaining elevated levels thereafter.

Debt-to-Capital Ratio Trends

Steady decrease from 0.35 to approximately 0.14-0.16 by mid-2023, indicating deleveraging; reversed sharply in 2024, rising to about 0.41 and remaining high through mid-2025, showing increased leverage.

Overall Implications

The period from late 2019 to mid-2023 suggests a strategic reduction in financial leverage, potentially enhancing financial stability. The significant increase in debt and corresponding leverage beginning in early 2024 points to a shift in capital structure strategy, possibly driven by new financing requirements, capital expenditures, acquisitions, or other strategic initiatives necessitating increased borrowing.

Total Debt

The total debt exhibits a general declining trend from October 2019 through July 2023, decreasing from approximately $18.5 billion to about $8.4 billion. This reduction suggests a consistent effort in deleveraging over this period. However, beginning in January 2024, there is a marked reversal with total debt sharply increasing to nearly $32 billion by April 2024 and remaining elevated through July 2025, although showing slight fluctuations. This significant surge after a prolonged decrease indicates a strategic shift in capital structure or increased borrowing activities.

Total Assets

Total assets display moderate fluctuations but generally trend upward over the full time horizon. Starting around $92.5 billion in late 2019, assets increase steadily with occasional short-term declines, reaching a peak near $124.4 billion in January 2025. A notable growth phase is observed in 2023 and early 2024, coinciding with the rise in total debt. The asset base remains robust and growing, reflecting expansion or accumulation of resources during this period.

Debt to Assets Ratio

The debt-to-assets ratio correlates closely with the movements in total debt relative to assets. Initially, the ratio decreases from 0.20 in late 2019 to as low as 0.08 by July 2023, indicating improved leverage and reduced financial risk. From early 2024 onward, the ratio undergoes a sharp increase to a peak of approximately 0.26, maintained through mid-2025, evidencing a significant rise in leverage. The ratio's rebound to previous higher levels suggests a change in financing strategy or increased reliance on debt financing concurrent with asset growth.

Overall Analysis

The data reveals a two-phase approach to balance sheet management: an initial period of debt reduction paired with stable asset growth, followed by a phase of increased borrowing alongside continued asset expansion. The pronounced increase in debt and leverage starting in early 2024 raises considerations regarding risk profile and capital structure optimization. This pattern may reflect strategic repositioning, new investment initiatives, or changes in market conditions influencing financing decisions.

Total Assets

Over the observed periods, total assets exhibited fluctuations with an overall modest upward trend. Initially, the values hovered around the mid-90,000 million US dollar range, with minor variations. Notably, a peak occurred during the third quarter of 2024, reaching approximately 123,000 million US dollars. However, this was followed by a slight decrease in subsequent quarters. The asset base showed a recovery and growth trajectory especially from early 2023 onwards, indicating potential expansion or increased investments during this later phase.

Total Equity

Total equity generally trended upwards through the timeline, starting near 34,400 million US dollars and increasing steadily to reach over 46,800 million US dollars by the first quarter of 2025. One exception was the quarter ending in January 2022, when equity dipped below earlier values before resuming its upward movement. The gradual equity growth suggests improving retained earnings or capital injections, reinforcing the company's financial foundation over time.

Financial Leverage Ratio

The financial leverage ratio displayed relative stability with moderate variation. Early on, the ratio was around 2.6-2.7, showing a slight decline through mid-2022 to hover near 2.3 to 2.4, implying a modest reduction in reliance on debt compared to equity. However, starting in early 2024, the leverage ratio increased again, peaking near 2.7 before easing slightly, which may indicate a strategic shift towards higher debt levels or other restructuring activities. Overall, the leverage ratio reflects a balanced approach to financing, maintaining moderate leverage throughout most of the reviewed period.

Earnings before interest and tax (EBIT)

The EBIT values show a fluctuating trend over the analyzed periods. Initially, there is a decline from 3,864 million US$ in October 2019 to 2,793 million US$ in October 2020, indicating a contraction in operating profitability. Subsequently, EBIT recovers and rises steadily, reaching a peak of 4,582 million US$ by July 2023. However, from this peak, there is a noticeable decline to approximately 2,592 million US$ by January 2024, followed by a modest increase, stabilizing around the mid-3,000 million US$ range towards July 2025. Overall, the data suggests periods of volatility with two significant troughs around late 2020 and early 2024, separated by a strong recovery phase between 2021 and mid-2023.

Interest expense

Interest expense exhibits a largely stable trend initially, starting at 178 million US$ in October 2019 and gradually declining to around 89 million US$ by the end of 2021. However, beginning in early 2022, a distinct increase is observed, with interest expense climbing sharply to a high of 418 million US$ by January and April 2024, followed by a slight decrease to 368 million US$ by mid-2025. This sudden increase in interest expense in the 2023–2024 timeframe marks a significant change in the company's financial cost structure, potentially due to increased borrowing or rising interest rates.

Interest coverage ratio

The interest coverage ratio, reflecting the company's ability to meet interest obligations from EBIT, shows a significant improvement from the earliest available data point at 24.88 to a peak of 41.54 in October 2021. This indicates increasing operating income relative to interest costs during this period. Following this peak, the ratio trends downward sharply, particularly from January 2023 onward, falling to single-digit values by mid-2024 (7.13 in July 2024), which aligns with the concurrent reduction in EBIT and surge in interest expense. The interest coverage then shows a slight recovery but remains below earlier high levels, suggesting weakened capacity to cover interest payments as compared to prior years.

Overall analysis

The financial data reveals that operating profitability experienced notable fluctuations with a recovery period after a low in late 2020, followed by another decline in early 2024. Interest expenses were relatively controlled for several years but increased markedly beginning in 2023, which significantly impacted the interest coverage ratio. The sharp decline in the interest coverage ratio during this period signals increased financial risk and reduced cushion against interest obligations. These trends highlight the need for monitoring of debt levels and interest costs, alongside efforts to stabilize or grow EBIT to maintain healthy coverage ratios in the future.