Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Dividend Discount Model (DDM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2012
- Current Ratio since 2012
- Price to Operating Profit (P/OP) since 2012
- Price to Book Value (P/BV) since 2012
- Price to Sales (P/S) since 2012
- Aggregate Accruals
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Return on Invested Capital (ROIC)
ServiceNow Inc., ROIC calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2025 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The period under review demonstrates a generally positive trajectory in financial performance, as indicated by the Return on Invested Capital (ROIC). Net operating profit after taxes (NOPAT) and invested capital both increased consistently over the five-year period, though the ROIC itself exhibited some fluctuation.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced consistent year-over-year growth, starting at US$1,108 million in 2021 and reaching US$3,210 million in 2025. This represents a substantial increase, indicating improved operational efficiency and profitability. The rate of growth appears to have accelerated between 2022 and 2023, and again between 2023 and 2024.
- Invested Capital
- Invested capital also showed a consistent upward trend, rising from US$5,871 million in 2021 to US$16,322 million in 2025. This growth suggests ongoing investment in the business, potentially supporting the expansion of operations and future revenue generation. The increase in invested capital was particularly pronounced between 2024 and 2025.
- Return on Invested Capital (ROIC)
- The ROIC began at 18.88% in 2021, decreased to 17.69% in 2022, then increased significantly to 22.31% in 2023 and 23.07% in 2024. While the ROIC remained strong, it experienced a decline to 19.66% in 2025. This suggests that while profitability improved overall, the rate of return on invested capital did not keep pace with the growth in invested capital in the final year of the period. The peak ROIC values in 2023 and 2024 indicate a period of particularly efficient capital allocation.
Overall, the observed trends suggest a company experiencing growth in both profitability and investment. The slight decrease in ROIC in 2025 warrants further investigation to determine if it represents a temporary fluctuation or a potential shift in capital efficiency.
Decomposition of ROIC
ServiceNow Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2025 | = | × | × | ||||
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The period demonstrates fluctuating performance in key profitability and efficiency metrics, ultimately impacting return on invested capital. Operating profit margin exhibited an initial decline followed by a substantial recovery and continued growth, while capital turnover showed a different pattern, peaking and then decreasing. The effective cash tax rate remained remarkably stable throughout the analyzed timeframe.
- Operating Profit Margin (OPM)
- The operating profit margin decreased from 17.20% in 2021 to 14.87% in 2022. A significant increase was then observed, reaching 18.76% in 2023, and continued to climb to 20.13% in 2024 and 22.90% in 2025. This indicates improving operational efficiency and pricing power over the latter part of the period.
- Turnover of Capital (TO)
- The turnover of capital increased from 1.16 in 2021 to 1.24 in both 2022 and 2023, suggesting improved efficiency in utilizing capital to generate revenue. However, it then decreased slightly to 1.22 in 2024 and experienced a more pronounced decline to 0.91 in 2025. This suggests a potential slowdown in revenue generation relative to the capital employed in the later years.
- Effective Cash Tax Rate (CTR)
- The (1 – Effective cash tax rate) remained consistently high, fluctuating between 94.97% and 95.68% throughout the period. This indicates a relatively stable tax burden and minimal impact from tax-related factors on overall profitability.
- Return on Invested Capital (ROIC)
- Return on invested capital followed a trajectory influenced by the other factors. It decreased from 18.88% in 2021 to 17.69% in 2022, coinciding with the initial decline in operating profit margin. The subsequent improvements in operating profit margin, coupled with the initial increase in capital turnover, drove ROIC up to 22.31% in 2023 and 23.07% in 2024. However, the decrease in capital turnover in 2025 contributed to a decline in ROIC to 19.66% despite the continued high operating profit margin.
The interplay between operating profit margin and capital turnover is evident in the ROIC trend. While improvements in profitability were consistently observed from 2023 onwards, the declining capital turnover in the final year partially offset these gains, resulting in a lower ROIC compared to the peak values in 2023 and 2024.
Operating Profit Margin (OPM)
ServiceNow Inc., OPM calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenues
= 100 × ÷ =
4 Click competitor name to see calculations.
The operating profit margin exhibited a fluctuating, yet generally positive, trend over the five-year period. Net operating profit before taxes also demonstrated consistent growth throughout the period, coinciding with increases in adjusted revenues.
- Operating Profit Margin (OPM)
- The operating profit margin decreased from 17.20% in 2021 to 14.87% in 2022. This represents a contraction in profitability relative to revenue. However, a subsequent recovery began in 2023, with the OPM rising to 18.76%. This upward trajectory continued into 2024, reaching 20.13%, and further accelerated in 2025, culminating in a margin of 22.90%. This indicates improving operational efficiency and/or pricing power over the latter part of the analyzed period.
- Net Operating Profit Before Taxes (NOPBT) & Adjusted Revenues
- Net operating profit before taxes increased steadily from US$1,167 million in 2021 to US$3,389 million in 2025. Adjusted revenues mirrored this growth, rising from US$6,787 million in 2021 to US$14,798 million in 2025. The consistent growth in both metrics suggests a strong correlation between revenue generation and profitability.
The observed increase in the operating profit margin, coupled with the growth in both net operating profit before taxes and adjusted revenues, suggests improving financial performance. The initial dip in OPM in 2022 warrants further investigation, but the subsequent recovery and continued improvement indicate a positive trend in operational profitability.
Turnover of Capital (TO)
ServiceNow Inc., TO calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Invested capital. See details »
2 2025 Calculation
TO = Adjusted revenues ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The period under review demonstrates a generally positive trend in adjusted revenues, coupled with increasing invested capital. However, the turnover of capital exhibits a more nuanced pattern. Initial increases are followed by a notable decline in the most recent year.
- Adjusted Revenues
- Adjusted revenues consistently increased throughout the observed period, moving from 6,787 US$ millions in 2021 to 14,798 US$ millions in 2025. This represents substantial growth over the five-year timeframe, indicating strong performance in revenue generation.
- Invested Capital
- Invested capital also increased steadily from 5,871 US$ millions in 2021 to 16,322 US$ millions in 2025. This growth suggests ongoing investment in the business, potentially to support revenue expansion and future opportunities.
- Turnover of Capital (TO)
- The turnover of capital ratio initially improved, rising from 1.16 in 2021 to 1.24 in both 2022 and 2023. This indicates increasing efficiency in generating revenue from invested capital during those years. However, the ratio decreased to 1.22 in 2024 and then experienced a more significant decline to 0.91 in 2025. This recent decrease suggests a reduced ability to generate revenue relative to the capital employed, potentially warranting further investigation into the underlying causes.
The divergence between the continued growth in revenues and the declining turnover of capital in 2025 is a key observation. While revenue is increasing, the efficiency with which capital is being utilized to generate that revenue is diminishing. This could be due to a number of factors, including increased investment in less immediately productive assets, or a slowdown in the rate of revenue growth relative to capital investment.
Effective Cash Tax Rate (CTR)
ServiceNow Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
The effective cash tax rate exhibited a generally stable pattern over the five-year period, with some fluctuation. Cash operating taxes increased consistently throughout the period, while net operating profit before taxes also demonstrated a strong upward trend, particularly from 2022 onwards. These movements influenced the observed changes in the effective cash tax rate.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate began at 5.03% in 2021. A slight decrease was observed in 2022, falling to 4.41%. This downward trend continued modestly in 2023, reaching 4.32%, representing the lowest point in the observed period. A notable increase occurred in 2024, with the rate rising to 5.72%. The rate experienced a slight decline in 2025, settling at 5.30%.
The increase in cash operating taxes from US$59 million in 2021 to US$180 million in 2025 is substantial. However, the net operating profit before taxes experienced a more significant increase, growing from US$1,167 million to US$3,389 million over the same period. This larger increase in pre-tax profit partially offset the impact of higher cash taxes on the effective cash tax rate, preventing a more dramatic rise in the percentage.
The fluctuation in the effective cash tax rate suggests potential changes in the composition of taxable income or the utilization of tax benefits. The increase in 2024 warrants further investigation to determine the underlying drivers, such as changes in tax legislation, jurisdictional mix of earnings, or the expiration of tax credits. The slight decrease in 2025 may indicate a partial reversal of these factors.