Texas Instruments Inc. (NASDAQ:TXN)

The analysis of the financial ratios over the reported periods reveals notable trends in the company's leverage and interest coverage. A general decrease in leverage ratios is visible from early 2020 through 2021, followed by a gradual increase starting in late 2022 and continuing into 2025, albeit not reaching the previous highs observed in early 2020.

Debt to equity ratio

This ratio declined from 0.85 in March 2020 to a low around 0.51-0.55 in mid-2022, indicating reduced reliance on debt financing compared to equity. From this point onward, a moderate increase occurred, reaching approximately 0.78 by March 2025. Despite this upward movement, the ratio remained below early 2020 levels, suggesting cautious leverage deployment.

Debt to capital ratio

Mirroring the debt to equity trend, the debt to capital ratio decreased from 0.46 in March 2020 to about 0.34 by June 2022. The ratio then increased gradually, stabilizing around 0.44-0.45 in early 2025. This indicates a similar pattern of initial deleveraging followed by measured increases in debt financing relative to the overall capital structure.

Debt to assets ratio

The debt to assets ratio showed a decline from 0.38 in March 2020 to about 0.29 by mid-2022, reflecting less debt per unit of total assets. Subsequently, it rose modestly, peaking near 0.41 in March 2024 before slightly descending to 0.38 by March 2025. This ratio suggests that asset growth was accompanied by corresponding debt fluctuations over the periods.

Financial leverage ratio

Financial leverage decreased steadily from 2.23 in early 2020 to approximately 1.75 in mid-2022, indicating a reduced use of debt relative to equity. After mid-2022, the ratio exhibited an increasing trend, reaching about 2.06 by March 2025, reflecting a moderate increase in asset financing through debt or increased asset base relative to equity.

Interest coverage ratio

The interest coverage ratio data begins in December 2020 at a robust 32.67 and improves substantially, peaking at 52.00 in September 2022. This trend demonstrates increasing operational earnings relative to interest expenses, indicating strong earnings ability to cover debt costs. However, from late 2022 onward, coverage declined consistently to 11.45 by March 2025, signaling either increased interest expense, reduced earnings, or both, potentially reflecting higher debt levels or changes in operating performance.

Overall, the data portrays a company that initially undertook significant deleveraging from 2020 to 2022, decreasing debt ratios and enhancing interest coverage. This period suggests improved financial health and reduced risk. However, commencing in late 2022 through early 2025, a reversal occurs with rising leverage ratios and declining interest coverage, implying a strategic increase in debt or asset base and a concomitant impact on the company's ability to comfortably meet interest obligations. Close monitoring of this transition phase and underlying causes is warranted for further insight into the company's financial risk profile.

Total debt

The total debt exhibited fluctuations over the period analyzed. From March 2020 to December 2020, the debt remained relatively stable around 6,550 to 6,798 million US dollars. It decreased slightly in the first half of 2021 but then increased notably into late 2021 and through 2022. A significant rise occurred from early 2023, peaking at 14,189 million US dollars by March 2024. Following this peak, a gradual decline was observed up to March 2025, ending at 12,848 million US dollars.

Stockholders’ equity

Stockholders’ equity demonstrated a consistent upward trend from March 2020 through mid-2024, growing from 7,734 million US dollars to a peak of 17,268 million US dollars. After this peak, a mild decline was noted in the last four quarters, bringing equity down to 16,406 million US dollars by March 2025. Overall, equity growth remained steady and positive within the period.

Debt to equity ratio

The debt to equity ratio reflected changes in leverage connected to the variations in total debt and stockholders' equity. Initially, the ratio decreased from 0.85 in March 2020 to a low of 0.51 in June 2022, indicating reduced leverage resulting from both debt management and equity growth. From mid-2022 onward, the ratio rose again, peaking at 0.84 in March 2024, coinciding with the surge in total debt. Subsequently, the ratio stabilized slightly below 0.8 by March 2025, suggesting a modest reduction in leverage as compared to its recent peak.

Total Debt

The total debt exhibited a fluctuating trend over the analyzed periods. From March 31, 2020, to March 31, 2021, total debt showed a slight decline from 6,550 million US dollars to 6,250 million US dollars. However, beginning June 30, 2021, total debt steadily increased, peaking at 11,223 million US dollars by December 31, 2021, and continued rising to 14,189 million US dollars by March 31, 2024. After this peak, the total debt gradually decreased, ending at 12,848 million US dollars by March 31, 2025.

Total Capital

Total capital demonstrated a consistent upward trajectory throughout the period. Starting at 14,284 million US dollars on March 31, 2020, it increased continuously, with minor fluctuations, reaching 31,172 million US dollars by March 31, 2024. In the final observed quarter, total capital slightly decreased to 29,254 million US dollars by March 31, 2025.

Debt to Capital Ratio

The debt to capital ratio reflected changes in both debt and capital levels. Initially, the ratio decreased from 0.46 in March 2020 to its lowest point of 0.34 in June 2022, indicating a relative decrease in reliance on debt financing versus total capital. From this low point, the ratio reversed its trend, rising steadily to 0.46 by March 31, 2024, before decreasing slightly to 0.44 in the last recorded quarter. This pattern signifies a period of deleveraging followed by increased leverage and then a modest reduction.

Overall Analysis

The analyzed data highlights a period of debt reduction and capital growth from 2020 through mid-2022, which contributed to a lower debt-to-capital ratio and suggested improved financial leverage. Starting mid-2022, total debt increased significantly alongside total capital, leading to a rise in leverage. The peak debt levels observed in early 2024 suggest increased borrowing or financing activities in this period. However, the subsequent decline in total debt and a slight decrease in leverage in early 2025 may indicate efforts to manage or reduce debt levels after a period of expansion.

Total Debt

Total debt exhibits a general upward trend from March 2020 to March 2025. Initially, the debt increased steadily from $6,550 million in March 2020 to approximately $7,741 million by December 2021. Following this, there was a more pronounced rise, peaking at $14,189 million in March 2024, before declining to $12,848 million by March 2025. This pattern suggests an aggressive borrowing phase starting around late 2021 and continuing into early 2024, followed by a partial debt reduction towards the end of the observed period.

Total Assets

Total assets also showed consistent growth over the period, increasing from $17,283 million in March 2020 to a peak of $35,509 million in December 2024. However, there is a slight decline to $33,757 million in March 2025. The asset base more than doubled during the observed timeframe, indicating substantial expansion, possibly through investment or acquisition activities. This growth tends to moderate near the end of the period, as reflected by the slight decrease in assets.

Debt to Assets Ratio

The debt to assets ratio decreased from 0.38 in March 2020 to a low of 0.29 in June 2022, reflecting a period where asset growth outpaced debt increments, improving the company’s leverage position. After June 2022, the ratio increased again, reaching 0.41 by March 2024, which corresponds to the period of rising debt levels. Subsequently, the ratio declined to 0.38 by March 2025, indicating an improvement in leverage but still above the lows seen in mid-2022. Overall, the ratio fluctuated within a moderate range, showing cyclical changes in leverage aligned with the company’s debt and asset management strategies.

Summary of Financial Position Trends

Over the five-year period, debt levels rose significantly, especially from late 2021 through early 2024, supporting the expansion of total assets. Asset growth was sustained and robust, leading to an overall increase in the company’s scale. The leverage ratio movements suggest that the company initially improved its balance sheet strength by growing assets faster than debt, but later increased leverage to finance growth or other strategic initiatives. The recent partial debt reduction and slight asset decrease towards March 2025 may indicate a phase of consolidation or repositioning of financial structure.

Total Assets

The total assets show a general upward trend from March 31, 2020, to March 31, 2025, despite some fluctuations. Starting at approximately $17.3 billion, the value increased steadily to a peak around $35.5 billion in December 2024. However, there is a noticeable decline in the final reported quarter, ending at approximately $33.8 billion. This pattern indicates overall asset growth over the five-year period, with momentum slowing and slight reversal in the most recent quarter.

Stockholders’ Equity

Stockholders’ equity has consistently increased from $7.7 billion in early 2020 to a peak near $17.3 billion by late 2024. The trend shows steady growth through this timeframe with no significant drops. The equity value slightly decreases in the last two quarters, ending at approximately $16.4 billion by March 2025. The consistent increase in equity suggests ongoing profitability and retained earnings support, with marginal reduction toward the end indicating possible changes in net income or dividend payments.

Financial Leverage

The financial leverage ratio demonstrates a general decrease from a high of 2.28 in mid-2020 down to a low near 1.75 by mid-2022, indicating a reduction in debt relative to equity. Following this low point, the leverage ratio gradually rises again, reaching about 2.1 in late 2024, before slightly decreasing to 2.06 by early 2025. This movement suggests an initial deleveraging phase followed by a period of increased reliance on debt or slower equity growth, stabilizing toward the end of the period.

Overall Insights

The data reflects a period of asset growth accompanied by increasing shareholder equity, signaling strong operational performance and value creation. The fluctuations in financial leverage ratio highlight shifts in the company's capital structure strategies, moving from lower to higher leverage levels over time. The recent declines in both total assets and equity in the final quarters suggest a possible adjustment phase, which warrants monitoring to assess whether these trends continue or reverse.

The quarterly financial data indicates notable fluctuations in earnings before interest and tax (EBIT), interest and debt expense, and interest coverage ratios over the observed periods. A comprehensive analysis of these metrics reveals evolving operational performance and financial risk levels.

Earnings Before Interest and Tax (EBIT)

EBIT exhibited an overall upward trend from early 2020 through late 2021, starting at 1,269 million USD in March 2020 and peaking at 2,512 million USD by December 2021. This growth period reflects strengthening operational profitability. However, from early 2022 onward, EBIT shows a general decline, falling to 2,227 million USD by December 2022 and further to 1,404 million USD by March 2025. This downtrend indicates weakening earnings capacity or potential challenges impacting core operations in the most recent quarters.

Interest and Debt Expense

The interest and debt expense remained relatively stable and modest from March 2020 through March 2022, fluctuating between 44 and 53 million USD. After March 2022, a rising trend is apparent, with expenses climbing sharply to a peak of 131 million USD during several quarters between June 2023 and December 2024. This increase in interest expense could suggest higher debt levels, rising interest rates, or both, contributing to greater financial obligations.

Interest Coverage Ratio

The interest coverage ratio, measuring EBIT relative to interest expenses, was robust throughout the timeframe, reaching as high as approximately 52 in late 2021, implying strong ability to service debt from earnings. From early 2022 onwards, this ratio declined steadily, dropping to around 11.45 by the first quarter of 2025. The decreasing coverage ratio reflects reduced earnings relative to rising interest expenses, implying an escalation in financial risk and potential constraints on financial flexibility.

In summary, the data demonstrates a period of growing operational profitability through 2021 followed by declining EBIT and increasing interest expenses beginning in 2022. The combined effect is a marked reduction in the interest coverage ratio, highlighting elevated financial risk and a diminishing margin of safety for meeting interest obligations. These trends suggest a need to monitor financial leverage and operational efficiency closely moving forward.