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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.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Palo Alto Networks Inc., economic profit calculation

US$ in thousands

12 months ended:	Jul 31, 2024	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019
Net operating profit after taxes (NOPAT)¹	2,501,707)	2,610,314)	1,717,615)	845,076)	696,422)	536,434)
Cost of capital²	14.52%	14.02%	13.30%	13.73%	13.18%	13.88%
Invested capital³	10,841,500)	9,129,500)	8,704,600)	7,360,500)	7,029,200)	3,879,623)

Economic profit⁴	927,519)	1,330,160)	560,022)	(165,731)	(229,692)	(2,011)

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

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
= 2,501,707 – 14.52% × 10,841,500 = 927,519

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Palo Alto Networks Inc. economic profit increased from 2022 to 2023 but then slightly decreased from 2023 to 2024 not reaching 2022 level.

Palo Alto Networks Inc., NOPAT calculation

US$ in thousands

12 months ended:	Jul 31, 2024	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019
Net income (loss)	2,577,600)	439,700)	(267,000)	(498,900)	(267,000)	(81,900)
Deferred income tax expense (benefit)¹	(2,033,800)	12,500)	(3,100)	(12,400)	(9,100)	(18,000)
Increase (decrease) in allowance for credit losses²	(300)	(1,100)	(2,300)	8,900)	1,500)	(400)
Increase (decrease) in deferred revenue³	2,184,100)	2,302,400)	1,970,000)	1,213,800)	921,500)	609,400)
Increase (decrease) in equity equivalents⁴	150,000)	2,313,800)	1,964,600)	1,210,300)	913,900)	591,000)
Interest expense	8,300)	27,200)	27,400)	163,300)	88,700)	83,900)
Interest expense, operating lease liability⁵	23,659)	15,952)	13,536)	14,410)	15,386)	20,500)
Adjusted interest expense	31,959)	43,152)	40,936)	177,710)	104,086)	104,400)
Tax benefit of interest expense⁶	(6,711)	(9,062)	(8,597)	(37,319)	(21,858)	(21,924)
Adjusted interest expense, after taxes⁷	25,248)	34,090)	32,339)	140,391)	82,228)	82,476)
Interest income	(317,900)	(224,400)	(15,600)	(8,500)	(41,400)	(69,800)
Investment income, before taxes	(317,900)	(224,400)	(15,600)	(8,500)	(41,400)	(69,800)
Tax expense (benefit) of investment income⁸	66,759)	47,124)	3,276)	1,785)	8,694)	14,658)
Investment income, after taxes⁹	(251,141)	(177,276)	(12,324)	(6,715)	(32,706)	(55,142)
Net operating profit after taxes (NOPAT)	2,501,707)	2,610,314)	1,717,615)	845,076)	696,422)	536,434)

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for credit losses.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in equity equivalents to net income (loss).

⁵ 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 446,400 × 5.30% = 23,659

⁶ 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 31,959 × 21.00% = 6,711

⁷ Addition of after taxes interest expense to net income (loss).

⁸ 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 317,900 × 21.00% = 66,759

⁹ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Palo Alto Networks Inc. NOPAT increased from 2022 to 2023 but then slightly decreased from 2023 to 2024.

Palo Alto Networks Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Jul 31, 2024	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019
Provision for (benefit from) income taxes	(1,589,300)	126,600)	59,800)	33,900)	35,200)	7,300)
Less: Deferred income tax expense (benefit)	(2,033,800)	12,500)	(3,100)	(12,400)	(9,100)	(18,000)
Add: Tax savings from interest expense	6,711)	9,062)	8,597)	37,319)	21,858)	21,924)
Less: Tax imposed on investment income	66,759)	47,124)	3,276)	1,785)	8,694)	14,658)
Cash operating taxes	384,452)	76,038)	68,221)	81,834)	57,464)	32,566)

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Palo Alto Networks Inc. cash operating taxes increased from 2022 to 2023 and from 2023 to 2024.

Palo Alto Networks Inc., invested capital calculation (financing approach)

US$ in thousands

	Jul 31, 2024	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019
Current portion of convertible senior notes, net	963,900)	1,991,500)	3,676,800)	1,557,900)	—)	—)
Convertible senior notes, net, excluding current portion	—)	—)	—)	1,668,100)	3,084,100)	1,430,000)
Operating lease liability¹	446,400)	339,400)	338,400)	379,200)	394,500)	394,223)
Total reported debt & leases	1,410,300)	2,330,900)	4,015,200)	3,605,200)	3,478,600)	1,824,223)
Stockholders’ equity	5,169,700)	1,748,400)	210,000)	634,500)	1,101,800)	1,586,300)
Net deferred tax (assets) liabilities²	(2,011,300)	5,400)	(11,200)	(9,100)	(9,000)	(7,000)
Allowance for credit losses³	7,500)	7,800)	8,900)	11,200)	2,300)	800)
Deferred revenue⁴	11,480,500)	9,296,400)	6,994,000)	5,024,000)	3,810,200)	2,888,700)
Equity equivalents⁵	9,476,700)	9,309,600)	6,991,700)	5,026,100)	3,803,500)	2,882,500)
Accumulated other comprehensive (income) loss, net of tax⁶	1,600)	43,200)	55,600)	9,900)	(10,500)	3,700)
Adjusted stockholders’ equity	14,648,000)	11,101,200)	7,257,300)	5,670,500)	4,894,800)	4,472,500)
Available-for-sale investments⁷	(5,216,800)	(4,302,600)	(2,567,900)	(1,915,200)	(1,344,200)	(2,417,100)
Invested capital	10,841,500)	9,129,500)	8,704,600)	7,360,500)	7,029,200)	3,879,623)

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

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 available-for-sale investments.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Palo Alto Networks Inc. invested capital increased from 2022 to 2023 and from 2023 to 2024.

Palo Alto Networks Inc., cost of capital calculations

Jul 31, 2024

	Capital (fair value)¹	Weights					Cost of capital
Equity²	109,342,992)	109,342,992)	÷	112,989,392)	=	0.97	0.97	×	14.97%	=	14.49%
Convertible Senior Notes³	3,200,000)	3,200,000)	÷	112,989,392)	=	0.03	0.03	×	0.60% × (1 – 21.00%)	=	0.01%
Operating lease liability⁴	446,400)	446,400)	÷	112,989,392)	=	0.00	0.00	×	5.30% × (1 – 21.00%)	=	0.02%
Total:	112,989,392)					1.00					14.52%

Based on: 10-K (reporting date: 2024-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Jul 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	74,902,082)	74,902,082)	÷	80,241,482)	=	0.93	0.93	×	14.97%	=	13.98%
Convertible Senior Notes³	5,000,000)	5,000,000)	÷	80,241,482)	=	0.06	0.06	×	0.60% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	339,400)	339,400)	÷	80,241,482)	=	0.00	0.00	×	4.70% × (1 – 21.00%)	=	0.02%
Total:	80,241,482)					1.00					14.02%

Based on: 10-K (reporting date: 2023-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Jul 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	52,915,962)	52,915,962)	÷	59,954,362)	=	0.88	0.88	×	14.97%	=	13.22%
Convertible Senior Notes³	6,700,000)	6,700,000)	÷	59,954,362)	=	0.11	0.11	×	0.74% × (1 – 21.00%)	=	0.07%
Operating lease liability⁴	338,400)	338,400)	÷	59,954,362)	=	0.01	0.01	×	4.00% × (1 – 21.00%)	=	0.02%
Total:	59,954,362)					1.00					13.30%

Based on: 10-K (reporting date: 2022-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Jul 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	45,606,516)	45,606,516)	÷	51,485,716)	=	0.89	0.89	×	14.97%	=	13.26%
Convertible Senior Notes³	5,500,000)	5,500,000)	÷	51,485,716)	=	0.11	0.11	×	5.30% × (1 – 21.00%)	=	0.45%
Operating lease liability⁴	379,200)	379,200)	÷	51,485,716)	=	0.01	0.01	×	3.80% × (1 – 21.00%)	=	0.02%
Total:	51,485,716)					1.00					13.73%

Based on: 10-K (reporting date: 2021-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Jul 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	22,710,367)	22,710,367)	÷	27,204,867)	=	0.83	0.83	×	14.97%	=	12.50%
Convertible Senior Notes³	4,100,000)	4,100,000)	÷	27,204,867)	=	0.15	0.15	×	5.30% × (1 – 21.00%)	=	0.63%
Operating lease liability⁴	394,500)	394,500)	÷	27,204,867)	=	0.01	0.01	×	3.90% × (1 – 21.00%)	=	0.04%
Total:	27,204,867)					1.00					13.18%

Based on: 10-K (reporting date: 2020-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Jul 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	20,481,480)	20,481,480)	÷	22,775,702)	=	0.90	0.90	×	14.97%	=	13.46%
Convertible Senior Notes³	1,900,000)	1,900,000)	÷	22,775,702)	=	0.08	0.08	×	5.20% × (1 – 21.00%)	=	0.34%
Operating lease liability⁴	394,223)	394,223)	÷	22,775,702)	=	0.02	0.02	×	5.20% × (1 – 21.00%)	=	0.07%
Total:	22,775,702)					1.00					13.88%

Based on: 10-K (reporting date: 2019-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Palo Alto Networks Inc., economic spread ratio calculation, comparison to benchmarks

	Jul 31, 2024	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit¹	927,519)	1,330,160)	560,022)	(165,731)	(229,692)	(2,011)
Invested capital²	10,841,500)	9,129,500)	8,704,600)	7,360,500)	7,029,200)	3,879,623)
Performance Ratio
Economic spread ratio³	8.56%	14.57%	6.43%	-2.25%	-3.27%	-0.05%
Benchmarks
Economic Spread Ratio, Competitors⁴
Accenture PLC	4.84%	5.63%	8.48%	10.32%	10.88%	9.61%
Adobe Inc.	—	5.20%	10.64%	13.05%	5.32%	3.43%
Autodesk Inc.	-10.63%	1.73%	-2.84%	-3.00%	4.64%	-16.38%
Cadence Design Systems Inc.	—	10.41%	9.79%	10.02%	10.82%	5.30%
CrowdStrike Holdings Inc.	-2.67%	0.98%	-2.28%	-4.55%	6.33%	—
International Business Machines Corp.	—	-1.57%	-9.42%	-4.43%	-4.15%	-0.43%
Intuit Inc.	-4.40%	-6.46%	-5.39%	2.34%	5.68%	19.34%
Microsoft Corp.	13.03%	16.07%	24.02%	33.03%	31.05%	26.17%
Oracle Corp.	-0.31%	-1.36%	-1.05%	7.01%	1.33%	4.01%
Salesforce Inc.	-10.04%	-12.32%	-9.89%	-7.59%	-10.63%	-6.61%
ServiceNow Inc.	—	8.74%	4.20%	5.41%	7.04%	6.45%
Synopsys Inc.	—	-3.88%	2.70%	-3.32%	-3.14%	-6.13%

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 927,519 ÷ 10,841,500 = 8.56%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Palo Alto Networks Inc. economic spread ratio improved from 2022 to 2023 but then slightly deteriorated from 2023 to 2024 not reaching 2022 level.

Palo Alto Networks Inc., economic profit margin calculation, comparison to benchmarks

	Jul 31, 2024	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019
Selected Financial Data (US$ in thousands)
Economic profit¹	927,519)	1,330,160)	560,022)	(165,731)	(229,692)	(2,011)

Revenue	8,027,500)	6,892,700)	5,501,500)	4,256,100)	3,408,400)	2,899,600)
Add: Increase (decrease) in deferred revenue	2,184,100)	2,302,400)	1,970,000)	1,213,800)	921,500)	609,400)
Adjusted revenue	10,211,600)	9,195,100)	7,471,500)	5,469,900)	4,329,900)	3,509,000)
Performance Ratio
Economic profit margin²	9.08%	14.47%	7.50%	-3.03%	-5.30%	-0.06%
Benchmarks
Economic Profit Margin, Competitors³
Accenture PLC	2.74%	2.90%	4.08%	5.29%	5.54%	4.44%
Adobe Inc.	—	6.51%	12.39%	16.26%	7.63%	5.15%
Autodesk Inc.	-15.03%	2.21%	-4.02%	-4.14%	6.13%	-26.70%
Cadence Design Systems Inc.	—	10.37%	9.77%	10.18%	10.90%	5.14%
CrowdStrike Holdings Inc.	-4.20%	1.31%	-3.56%	-9.45%	5.56%	—
International Business Machines Corp.	—	-2.79%	-16.36%	-8.44%	-7.22%	-0.73%
Intuit Inc.	-6.76%	-10.58%	-10.38%	2.96%	6.39%	12.88%
Microsoft Corp.	18.22%	18.30%	23.02%	27.42%	23.05%	19.36%
Oracle Corp.	-0.59%	-2.63%	-1.93%	13.86%	3.02%	7.31%
Salesforce Inc.	-23.22%	-31.38%	-27.46%	-17.40%	-26.15%	-13.01%
ServiceNow Inc.	—	7.03%	3.38%	4.68%	5.74%	4.72%
Synopsys Inc.	—	-5.47%	3.81%	-5.28%	-5.39%	-10.59%

Based on: 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31).

¹ Economic profit. See details »

² 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 927,519 ÷ 10,211,600 = 9.08%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Palo Alto Networks Inc. economic profit margin improved from 2022 to 2023 but then slightly deteriorated from 2023 to 2024 not reaching 2022 level.

Palo Alto Networks Inc. (NASDAQ:PANW)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin