Economic Value Added (EVA)
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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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Advanced Micro Devices Inc. pages available for free this week:
- Statement of Comprehensive Income
- Cash Flow Statement
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
- Enterprise Value to FCFF (EV/FCFF)
- Selected Financial Data since 2005
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Sales (P/S) since 2005
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Economic Profit
Advanced Micro Devices Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 28, 2024 | Dec 30, 2023 | Dec 31, 2022 | Dec 25, 2021 | Dec 26, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data reveals several significant trends in the company's performance over the analyzed periods.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed robust growth from 2020 to 2021, increasing sharply from 1,330 million US dollars to 3,517 million US dollars. However, this positive trajectory reversed in the following years, with NOPAT turning negative in 2022 and 2023, recording values of -138 million and -201 million US dollars, respectively. A recovery is noted in 2024, with NOPAT returning to a positive figure of 621 million US dollars, though it remains significantly below the levels seen in 2020 and 2021.
- Cost of Capital
- The cost of capital exhibited minor fluctuations during the period, remaining relatively stable around 21.5% to 21.6%. This indicates a consistent required return rate, with a slight decrease observed in 2022, followed by a marginal increase thereafter.
- Invested Capital
- There is a marked increase in invested capital between 2021 and 2022, surging from 6,195 million to 58,525 million US dollars. After this substantial rise, the invested capital slightly declined in 2023 and remained relatively stable into 2024, with values of 57,883 million and 58,227 million US dollars, respectively. This suggests significant investments or asset acquisitions occurred in 2022, which have largely been maintained.
- Economic Profit
- Economic profit followed a pattern similar to NOPAT, beginning with positive figures in 2020 and 2021, notably increasing to 2,176 million US dollars in 2021 from 388 million US dollars in 2020. From 2022 onward, economic profit declined sharply into deep negative territory, with losses exceeding 12,000 million US dollars in both 2022 and 2023. A slight improvement is visible in 2024, with a reduction in negative economic profit to -11,905 million US dollars, yet it remains substantially negative.
Overall, the data indicates that the company experienced strong profitability and positive economic profit through 2021, followed by a significant deterioration in operational performance and value creation from 2022 onwards. The considerable increase in invested capital in 2022 did not translate into immediate profitability or economic profit, suggesting inefficiencies or delays in the generation of returns from these investments. While there are early signs of recovery in 2024, profitability and economic profit remain well below earlier peak levels, reflecting ongoing challenges in generating returns above the cost of capital.
Net Operating Profit after Taxes (NOPAT)
Advanced Micro Devices Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in liability for product warranty.
3 Addition of increase (decrease) in liabilities related to the 2024 Restructuring Plan.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income.
8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
The financial data reveals fluctuating profitability and operational efficiency over the five-year period under review.
- Net Income
- Net income experienced growth from 2020 to 2021, increasing from 2,490 million US dollars to 3,162 million US dollars. However, it sharply declined in 2022 to 1,320 million US dollars, and further decreased in 2023 to 854 million US dollars. In 2024, there was a recovery with net income rising to 1,641 million US dollars, though it remained below the peak values seen in 2020 and 2021.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT displayed a volatile pattern during the same period. It increased significantly from 1,330 million US dollars in 2020 to 3,517 million US dollars in 2021, indicating strong operational performance. However, in 2022 and 2023, NOPAT turned negative, with losses of 138 million US dollars and 201 million US dollars respectively, suggesting operational inefficiencies or extraordinary expenses. In 2024, NOPAT returned to a positive figure of 621 million US dollars, though this value remained substantially lower than the earlier years.
Overall, the data indicates that while the company demonstrated solid profitability growth through 2021, it subsequently faced challenges in maintaining operational profitability, as seen in the negative NOPAT values for two consecutive years. The partial recovery in 2024 suggests improvements but does not yet reflect a full return to previous performance levels. The divergence between net income and NOPAT in the recent years may warrant further examination to understand underlying causes such as non-operating items or tax impacts.
Cash Operating Taxes
Advanced Micro Devices Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
- Income Tax Provision (Benefit)
- The income tax provision exhibited considerable volatility over the reported periods. It began with a significant tax benefit of -$1,210 million in 2020, indicating a tax gain or credit. This shifted to a tax expense of $513 million in 2021. Subsequently, the tax provision returned to a benefit state in 2022 and 2023, with figures of -$122 million and -$346 million respectively, before moving back to a tax expense of $381 million in 2024. These fluctuations suggest variability in taxable income or changes in tax strategies and regulations, impacting the company’s tax obligations year over year.
- Cash Operating Taxes
- The cash operating taxes demonstrated an overall upward trend during the period under review. Starting from a relatively low base of $24 million in 2020, the amount escalated to $214 million in 2021. This increase continued sharply to $1,392 million in 2022, followed by a decline to $658 million in 2023. However, in the final period, cash taxes rose again to $1,531 million in 2024, marking the highest value recorded in the series. This pattern indicates increased cash tax payments despite the oscillation in reported tax provisions, which could reflect timing differences between accounting tax expense and actual tax payments or changes in the company’s taxable income and cash flows.
Invested Capital
Advanced Micro Devices Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of liability for product warranty.
4 Addition of liabilities related to the 2024 Restructuring Plan.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of short-term investments.
- Total reported debt & leases
- The total reported debt and leases experienced a moderate increase from 572 million USD in 2020 to 732 million USD in 2021. However, there was a significant surge in 2022, reaching 2956 million USD, more than quadrupling the previous year's amount. Following this peak, the debt slightly increased to 3109 million USD in 2023 before declining to 2321 million USD in 2024. Overall, despite fluctuations, the values remain substantially elevated relative to the initial years, indicating increased financial leverage or obligations.
- Stockholders’ equity
- Stockholders' equity showed steady growth from 5837 million USD in 2020 to 7497 million USD in 2021. A substantial rise occurred in 2022, jumping dramatically to 54750 million USD, with continued growth in subsequent years reaching 55892 million USD in 2023 and 57568 million USD in 2024. This marked increase in equity suggests either significant retained earnings, capital infusions, or revaluation adjustments with an emphasis on strengthening the company's financial foundation over time.
- Invested capital
- Invested capital followed a similar trend to stockholders' equity, beginning at 4364 million USD in 2020 and increasing to 6195 million USD in 2021. A notable surge occurred in 2022, reaching 58525 million USD, which was maintained with a slight decrease to 57883 million USD in 2023 and a minor uptick to 58227 million USD in 2024. The fluctuations suggest strategic capital allocation or acquisitions that contributed to a substantial increase in the total capital invested in the business.
Cost of Capital
Advanced Micro Devices Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-28).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-25).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-26).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Advanced Micro Devices Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 28, 2024 | Dec 30, 2023 | Dec 31, 2022 | Dec 25, 2021 | Dec 26, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis of the financial trends reveals notable shifts in key performance indicators over the observed periods.
- Economic profit
- Economic profit exhibited a significant increase from 388 million US dollars in 2020 to 2,176 million US dollars in 2021, indicating a period of strong value creation. However, starting from 2022, there was a marked decline, with economic profit turning negative, reaching -12,618 million US dollars in 2022 and maintaining substantial negative values in the subsequent years through 2024, suggesting persistent challenges in generating returns above the cost of capital.
- Invested capital
- The amount of invested capital showed a consistent upward trend from 4,364 million US dollars in 2020 to 6,195 million US dollars in 2021, followed by a dramatic increase to over 58,000 million US dollars from 2022 onward. This sharp rise indicates substantial capital deployment or revaluation of assets, potentially impacting profitability metrics.
- Economic spread ratio
- In 2020, the economic spread ratio was positive at 8.88%, improving significantly to 35.13% in 2021, demonstrating enhanced efficiency in generating returns above the cost of capital. From 2022 onwards, however, this ratio turned negative, with values around -21% persisting through 2024, reflecting diminished performance and inefficiency in utilizing invested capital to create value.
Overall, the data highlights a transition from a period of strong economic profit and positive spreads in 2020 and 2021 to substantial declines in profitability and value creation from 2022 forward, concurrent with a large increase in invested capital. This suggests that despite increasing investment, the company faced significant difficulties in maintaining positive returns relative to capital costs during the latter periods.
Economic Profit Margin
Advanced Micro Devices Inc., economic profit margin calculation, comparison to benchmarks
| Dec 28, 2024 | Dec 30, 2023 | Dec 31, 2022 | Dec 25, 2021 | Dec 26, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The annual financial data reveal significant fluctuations in key performance measures over the examined five-year period.
- Net Revenue
- Net revenue demonstrated a strong upward trend overall, growing from $9,763 million in 2020 to $25,785 million in 2024. This reflects considerable expansion, with a peak increase occurring between 2020 and 2022, and a slight dip reported in 2023 before the highest recorded revenue in 2024.
- Economic Profit
- Economic profit initially improved substantially from $388 million in 2020 to $2,176 million in 2021, indicating enhanced value creation during this period. However, this positive trend reversed sharply starting in 2022, plummeting into negative territory with losses exceeding $12 billion in 2022, 2023, and 2024. The economic profit remained markedly negative through the last three years, though there was a modest improvement in 2024 compared to the prior two years.
- Economic Profit Margin
- The economic profit margin mirrored the trajectory of economic profit, rising from 3.97% in 2020 to 13.24% in 2021, suggesting improved profitability relative to revenue. Subsequently, the margin collapsed profoundly to negative figures starting 2022, signaling that the company incurred economic losses relative to its revenue base. The margin remained negative but showed slight recovery in 2024 compared to the lowest points recorded in 2022 and 2023.
Overall, while revenue steadily increased over the five-year span, the company's economic profit and associated margin deteriorated sharply post-2021 and remained in significant deficit. This indicates rising costs or other economic factors undermining profitability despite top-line growth. The partial recovery in 2024 suggests some stabilization, yet the persistently negative economic profit raises concerns regarding long-term value generation.