Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
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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- Balance Sheet: Assets
- Analysis of Solvency Ratios
- Analysis of Reportable Segments
- Common Stock Valuation Ratios
- Present Value of Free Cash Flow to Equity (FCFE)
- Selected Financial Data since 2005
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Total Asset Turnover since 2005
- Aggregate Accruals
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Economic Profit
Alphabet Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial trajectory from 2021 to 2025 reflects a period of initial volatility followed by a robust acceleration in value creation. Economic profit experienced a significant contraction in 2022 but has since maintained a consistent upward trend, indicating an improved capacity to generate returns exceeding the company's cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- A V-shaped recovery is evident in operating profitability. After a decline from 77,747 million in 2021 to 52,578 million in 2022, NOPAT grew steadily, reaching 140,506 million by 2025. This represents a substantial increase in operational efficiency and earnings power over the final three years of the period.
- Cost of Capital
- The cost of capital remained highly stable, fluctuating within a narrow range between 18.70% and 18.84%. This constancy ensures that changes in economic profit are driven by operational performance and capital investment levels rather than shifts in the required rate of return.
- Invested Capital
- An overall expansion in the capital base is observed, with invested capital rising from 171,408 million in 2021 to 310,780 million in 2025. While there was a slight reduction in 2023, the sharp increase in 2024 and 2025 suggests an aggressive deployment of resources to scale operations.
- Economic Profit
- Economic profit mirrors the trend of NOPAT, falling sharply in 2022 to 14,727 million before climbing to 82,124 million by 2025. The acceleration in economic profit indicates that the growth in NOPAT has significantly outpaced the growth in the capital charge, resulting in substantial economic value added during the latter part of the analyzed period.
Net Operating Profit after Taxes (NOPAT)
Alphabet Inc., NOPAT calculation
US$ in millions
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 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses on accounts receivable.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2025 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 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
Net income and net operating profit after taxes (NOPAT) experienced fluctuations over the five-year period. While both metrics moved in similar directions, the magnitude and timing of changes differed. A significant decrease in both net income and NOPAT was observed between 2021 and 2022, followed by periods of recovery and growth through 2025.
- NOPAT Trend
- NOPAT decreased substantially from US$77,747 million in 2021 to US$52,578 million in 2022, representing a decline of approximately 32.2%. A subsequent recovery occurred in 2023, with NOPAT reaching US$65,370 million. This upward trend continued into 2024, with NOPAT increasing to US$93,781 million, and accelerated further in 2025, reaching US$140,506 million. The 2025 value represents an increase of approximately 80.7% compared to 2023 and a 50.1% increase compared to 2024.
- Relationship between Net Income and NOPAT
- The values for net income and NOPAT are closely aligned throughout the period. The largest divergence occurred in 2022, where the decrease in NOPAT was more pronounced than the decrease in net income. This suggests potential changes in non-operating items or tax rates during that year. In 2024 and 2025, the growth rates of both metrics were similar, indicating a consistent relationship between core operating profitability and overall net earnings.
The substantial growth in both NOPAT and net income from 2022 to 2025 suggests improved operational efficiency, increased revenue, or a combination of both. The recovery from the 2022 decline indicates a successful response to whatever factors contributed to the initial downturn. Further investigation into the drivers of these changes would be beneficial for a more comprehensive understanding of the company’s financial performance.
Cash Operating Taxes
Alphabet Inc., cash operating taxes calculation
US$ in millions
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).
The provision for income taxes and cash operating taxes exhibited distinct patterns over the five-year period. The provision for income taxes generally increased, while cash operating taxes demonstrated more volatility.
- Provision for Income Taxes
- The provision for income taxes increased from US$14,701 million in 2021 to US$26,656 million in 2025. A decrease was observed in 2022, falling to US$11,356 million, before recovering and steadily increasing through 2025. This suggests a growing tax burden as reported income increased, with a temporary dip in 2022.
- Cash Operating Taxes
- Cash operating taxes showed considerable fluctuation. Beginning at US$12,624 million in 2021, it rose significantly to US$19,532 million in 2022. It remained relatively stable at US$19,318 million in 2023, then increased to US$24,384 million in 2024, before decreasing substantially to US$17,726 million in 2025. This volatility indicates potential changes in tax payments related to timing differences between reported income and actual cash outflows, or changes in tax planning strategies.
The divergence between the provision for income taxes and cash operating taxes is notable. While the provision for income taxes consistently trended upward (excluding the 2022 dip), cash operating taxes experienced more pronounced swings. This difference could be attributed to deferred tax assets or liabilities, tax credits utilized, or changes in the effective tax rate impacting actual cash payments. Further investigation into the components of these figures would be necessary to fully understand the underlying drivers.
- Relationship between Provision and Cash Taxes
- In 2021, cash operating taxes were approximately 86% of the provision for income taxes. This percentage increased to 172% in 2022, then decreased to 102% in 2023, 124% in 2024, and finally to 66% in 2025. This fluctuating ratio highlights the increasing disconnect between accounting income and cash tax payments over the period, particularly in 2025.
Invested Capital
Alphabet Inc., invested capital calculation (financing approach)
US$ in millions
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 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of deferred revenue.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of assets not yet in service.
8 Subtraction of marketable securities.
The reported figures reveal evolving trends in the company’s capital structure between 2021 and 2025. Total reported debt & leases exhibited a generally increasing pattern, with a significant jump occurring in 2025. Stockholders’ equity demonstrated consistent growth throughout the period, accelerating in the later years. Invested capital fluctuated, showing an initial increase followed by a decrease, and then resumed growth.
- Debt & Leases
- Total reported debt & leases increased from US$28,508 million in 2021 to US$29,977 million in 2022, representing a modest rise. It remained relatively stable in 2023 at US$29,867 million before increasing to US$30,437 million in 2024. A substantial increase is observed in 2025, reaching US$66,996 million, indicating a significant reliance on debt financing during that year.
- Stockholders’ Equity
- Stockholders’ equity experienced steady growth over the five-year period. It rose from US$251,635 million in 2021 to US$256,144 million in 2022. The rate of increase accelerated in subsequent years, reaching US$283,379 million in 2023, US$325,084 million in 2024, and culminating in US$415,265 million in 2025. This suggests increasing retained earnings and/or equity issuances.
- Invested Capital
- Invested capital initially increased from US$171,408 million in 2021 to US$202,355 million in 2022. However, a decrease was noted in 2023, with invested capital falling to US$189,779 million. The trend reversed in 2024, with invested capital rising to US$227,952 million, and continued its upward trajectory in 2025, reaching US$310,780 million. The fluctuations suggest potential shifts in capital allocation strategies or asset management.
The combined trends indicate a growing company, particularly in terms of equity. The significant increase in debt in 2025, coupled with the rising invested capital, warrants further investigation to determine the purpose of the increased leverage and its potential impact on future financial performance.
Cost of Capital
Alphabet Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Alphabet Inc., economic spread ratio 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) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
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 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial performance from 2021 through 2025 exhibits a cyclical pattern characterized by a significant contraction in 2022 followed by a consistent and robust recovery. Economic profitability and capital efficiency experienced a sharp decline in the second year of the period but rebounded strongly, with 2025 projections indicating a peak in both absolute economic profit and the efficiency of capital deployment.
- Economic Profit
- Significant volatility is observed in economic profit, which decreased from 45,532 million USD in 2021 to 14,727 million USD in 2022. Following this trough, a strong upward trajectory occurred, with profit rising to 29,729 million USD in 2023, 50,836 million USD in 2024, and reaching 82,124 million USD by 2025. This represents a substantial increase in the value generated above the cost of capital.
- Invested Capital
- The capital base shows a general expansion, growing from 171,408 million USD in 2021 to 310,780 million USD in 2025. While a slight contraction occurred in 2023, where capital fell to 189,779 million USD, the subsequent years saw accelerated investment, particularly between 2024 and 2025, indicating a significant increase in the scale of assets deployed.
- Economic Spread Ratio
- The spread ratio demonstrates a mirror image of the economic profit trend, collapsing from 26.56% in 2021 to 7.28% in 2022. A steady recovery is evident thereafter, with the ratio climbing to 15.67% in 2023, 22.30% in 2024, and returning to 26.43% by 2025. This trend indicates that the growth in economic profit has outpaced the expansion of invested capital, effectively restoring the company's capital efficiency to 2021 levels.
Economic Profit Margin
Alphabet Inc., economic profit margin 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) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
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 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial trajectory from 2021 to 2025 is characterized by a sharp contraction in economic value creation in 2022, followed by a consistent and accelerating recovery that culminated in peak performance levels by the end of the period.
- Adjusted Revenues
- A steady upward trend in adjusted revenues is observed, growing from 258,436 million US dollars in 2021 to 405,436 million US dollars by 2025. This represents a consistent expansion of the top line, providing a stable foundation for the recovery of economic profit.
- Economic Profit
- Economic profit experienced significant volatility, dropping from 45,532 million US dollars in 2021 to a period low of 14,727 million US dollars in 2022. However, a strong rebound followed, with values rising to 29,729 million in 2023 and 50,836 million in 2024, eventually reaching a high of 82,124 million US dollars in 2025. This indicates a substantial increase in value creation beyond the cost of capital in the latter years.
- Economic Profit Margin
- The economic profit margin mirrored the volatility of absolute profit, falling sharply from 17.62% in 2021 to 5.19% in 2022. A sustained recovery followed, with the margin improving to 9.65% in 2023 and 14.48% in 2024. By 2025, the margin reached 20.26%, surpassing the initial 2021 level. This progression suggests a marked improvement in capital efficiency and operational profitability relative to revenue growth.
The analysis indicates that while 2022 represented a period of diminished economic efficiency, the subsequent three-year period demonstrates a robust capacity for scaling economic profit faster than revenue, resulting in an enhanced overall economic profit margin.