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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

Western Digital Corp., economic profit calculation

US$ in millions

12 months ended:	Jun 30, 2023	Jul 1, 2022	Jul 2, 2021	Jul 3, 2020	Jun 28, 2019	Jun 29, 2018
Net operating profit after taxes (NOPAT)¹	(1,604)	1,840)	793)	38)	(15)	782)
Cost of capital²	14.21%	14.82%	14.40%	11.86%	13.35%	13.60%
Invested capital³	18,928)	19,768)	19,579)	19,684)	21,085)	22,667)

Economic profit⁴	(4,295)	(1,090)	(2,027)	(2,295)	(2,831)	(2,302)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= -1,604 – 14.21% × 18,928 = -4,295

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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.	Western Digital Corp. economic profit increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Western Digital Corp., NOPAT calculation

US$ in millions

12 months ended:	Jun 30, 2023	Jul 1, 2022	Jul 2, 2021	Jul 3, 2020	Jun 28, 2019	Jun 29, 2018
Net income (loss)	(1,706)	1,500)	821)	(250)	(754)	675)
Deferred income tax expense (benefit)¹	(34)	114)	(242)	(82)	374)	(348)
Increase (decrease) in warranty accrual²	(101)	(18)	(45)	58)	32)	7)
Increase (decrease) in equity equivalents³	(135)	96)	(287)	(24)	406)	(341)
Interest expense	312)	304)	326)	413)	469)	676)
Interest expense, operating lease liability⁴	12)	11)	9)	10)	9)	6)
Adjusted interest expense	324)	315)	335)	423)	478)	682)
Tax benefit of interest expense⁵	(68)	(66)	(70)	(89)	(100)	(191)
Adjusted interest expense, after taxes⁶	256)	249)	265)	334)	378)	491)
Interest income	(24)	(6)	(7)	(28)	(57)	(60)
Investment income, before taxes	(24)	(6)	(7)	(28)	(57)	(60)
Tax expense (benefit) of investment income⁷	5)	1)	1)	6)	12)	17)
Investment income, after taxes⁸	(19)	(5)	(6)	(22)	(45)	(43)
Net operating profit after taxes (NOPAT)	(1,604)	1,840)	793)	38)	(15)	782)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in warranty accrual.

³ Addition of increase (decrease) in equity equivalents to net income (loss).

⁴ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 284 × 4.20% = 12

⁵ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 324 × 21.00% = 68

⁶ Addition of after taxes interest expense to net income (loss).

⁷ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 24 × 21.00% = 5

⁸ 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.	Western Digital Corp. NOPAT increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Western Digital Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Jun 30, 2023	Jul 1, 2022	Jul 2, 2021	Jul 3, 2020	Jun 28, 2019	Jun 29, 2018
Income tax expense	146)	623)	106)	204)	467)	1,410)
Less: Deferred income tax expense (benefit)	(34)	114)	(242)	(82)	374)	(348)
Add: Tax savings from interest expense	68)	66)	70)	89)	100)	191)
Less: Tax imposed on investment income	5)	1)	1)	6)	12)	17)
Cash operating taxes	243)	574)	417)	369)	181)	1,932)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).

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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.	Western Digital Corp. cash operating taxes increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Western Digital Corp., invested capital calculation (financing approach)

US$ in millions

	Jun 30, 2023	Jul 1, 2022	Jul 2, 2021	Jul 3, 2020	Jun 28, 2019	Jun 29, 2018
Current portion of long-term debt	1,213)	—)	251)	286)	276)	179)
Long-term debt, less current portion	5,857)	7,022)	8,474)	9,289)	10,246)	10,993)
Operating lease liability¹	284)	317)	237)	245)	242)	172)
Total reported debt & leases	7,354)	7,339)	8,962)	9,820)	10,764)	11,344)
Shareholders’ equity	11,723)	12,221)	10,721)	9,551)	9,967)	11,531)
Net deferred tax (assets) liabilities²	(111)	(100)	(188)	45)	138)	(215)
Warranty accrual³	244)	345)	363)	408)	350)	318)
Equity equivalents⁴	133)	245)	175)	453)	488)	103)
Accumulated other comprehensive (income) loss, net of tax⁵	516)	554)	197)	157)	68)	39)
Adjusted shareholders’ equity	12,372)	13,020)	11,093)	10,161)	10,523)	11,673)
Construction-in-process⁶	(798)	(591)	(476)	(297)	(202)	(234)
Available-for-sale securities⁷	—)	—)	—)	—)	—)	(116)
Invested capital	18,928)	19,768)	19,579)	19,684)	21,085)	22,667)

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of warranty accrual.

⁴ Addition of equity equivalents to shareholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of construction-in-process.

⁷ Subtraction of available-for-sale securities.

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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.	Western Digital Corp. invested capital increased from 2021 to 2022 but then decreased significantly from 2022 to 2023.

Western Digital Corp., cost of capital calculations

Jun 30, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	13,011)	13,011)	÷	20,863)	=	0.62	0.62	×	20.40%	=	12.72%
Series A Convertible Perpetual Preferred Stock	876)	876)	÷	20,863)	=	0.04	0.04	×	6.25%	=	0.26%
Long-term debt, including current portion³	6,692)	6,692)	÷	20,863)	=	0.32	0.32	×	4.68% × (1 – 21.00%)	=	1.19%
Operating lease liability⁴	284)	284)	÷	20,863)	=	0.01	0.01	×	4.20% × (1 – 21.00%)	=	0.05%
Total:	20,863)					1.00					14.21%

Based on: 10-K (reporting date: 2023-06-30).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion. See details »

⁴ Operating lease liability. See details »

Jul 1, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	15,067)	15,067)	÷	22,051)	=	0.68	0.68	×	20.40%	=	13.94%
Series A Convertible Perpetual Preferred Stock	—)	—)	÷	22,051)	=	0.00	0.00	×	0.00%	=	0.00%
Long-term debt, including current portion³	6,667)	6,667)	÷	22,051)	=	0.30	0.30	×	3.53% × (1 – 21.00%)	=	0.84%
Operating lease liability⁴	317)	317)	÷	22,051)	=	0.01	0.01	×	3.40% × (1 – 21.00%)	=	0.04%
Total:	22,051)					1.00					14.82%

Based on: 10-K (reporting date: 2022-07-01).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion. See details »

⁴ Operating lease liability. See details »

Jul 2, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	19,525)	19,525)	÷	28,931)	=	0.67	0.67	×	20.40%	=	13.77%
Series A Convertible Perpetual Preferred Stock	—)	—)	÷	28,931)	=	0.00	0.00	×	0.00%	=	0.00%
Long-term debt, including current portion³	9,169)	9,169)	÷	28,931)	=	0.32	0.32	×	2.44% × (1 – 21.00%)	=	0.61%
Operating lease liability⁴	237)	237)	÷	28,931)	=	0.01	0.01	×	3.80% × (1 – 21.00%)	=	0.02%
Total:	28,931)					1.00					14.40%

Based on: 10-K (reporting date: 2021-07-02).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion. See details »

⁴ Operating lease liability. See details »

Jul 3, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	11,448)	11,448)	÷	21,317)	=	0.54	0.54	×	20.40%	=	10.95%
Series A Convertible Perpetual Preferred Stock	—)	—)	÷	21,317)	=	0.00	0.00	×	0.00%	=	0.00%
Long-term debt, including current portion³	9,624)	9,624)	÷	21,317)	=	0.45	0.45	×	2.42% × (1 – 21.00%)	=	0.86%
Operating lease liability⁴	245)	245)	÷	21,317)	=	0.01	0.01	×	4.20% × (1 – 21.00%)	=	0.04%
Total:	21,317)					1.00					11.86%

Based on: 10-K (reporting date: 2020-07-03).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion. See details »

⁴ Operating lease liability. See details »

Jun 28, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	15,588)	15,588)	÷	26,260)	=	0.59	0.59	×	20.40%	=	12.11%
Series A Convertible Perpetual Preferred Stock	—)	—)	÷	26,260)	=	0.00	0.00	×	0.00%	=	0.00%
Long-term debt, including current portion³	10,430)	10,430)	÷	26,260)	=	0.40	0.40	×	3.88% × (1 – 21.00%)	=	1.22%
Operating lease liability⁴	242)	242)	÷	26,260)	=	0.01	0.01	×	3.88% × (1 – 21.00%)	=	0.03%
Total:	26,260)					1.00					13.35%

Based on: 10-K (reporting date: 2019-06-28).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion. See details »

⁴ Operating lease liability. See details »

Jun 29, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	18,591)	18,591)	÷	30,114)	=	0.62	0.62	×	20.40%	=	12.59%
Series A Convertible Perpetual Preferred Stock	—)	—)	÷	30,114)	=	0.00	0.00	×	0.00%	=	0.00%
Long-term debt, including current portion³	11,351)	11,351)	÷	30,114)	=	0.38	0.38	×	3.67% × (1 – 28.00%)	=	1.00%
Operating lease liability⁴	172)	172)	÷	30,114)	=	0.01	0.01	×	3.67% × (1 – 28.00%)	=	0.02%
Total:	30,114)					1.00					13.60%

Based on: 10-K (reporting date: 2018-06-29).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion. See details »

⁴ Operating lease liability. See details »

Western Digital Corp., economic spread ratio calculation, comparison to benchmarks

	Jun 30, 2023	Jul 1, 2022	Jul 2, 2021	Jul 3, 2020	Jun 28, 2019	Jun 29, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	(4,295)	(1,090)	(2,027)	(2,295)	(2,831)	(2,302)
Invested capital²	18,928)	19,768)	19,579)	19,684)	21,085)	22,667)
Performance Ratio
Economic spread ratio³	-22.69%	-5.51%	-10.35%	-11.66%	-13.43%	-10.15%
Benchmarks
Economic Spread Ratio, Competitors⁴
Apple Inc.	140.10%	201.59%	197.94%	145.87%	89.95%	—
Arista Networks Inc.	27.59%	23.05%	38.04%	20.39%	25.89%	—
Cisco Systems Inc.	8.50%	8.38%	7.63%	11.85%	6.07%	—
Dell Technologies Inc.	1.16%	5.33%	0.73%	-0.60%	-5.99%	—
Super Micro Computer Inc.	9.26%	-0.28%	-7.81%	-10.62%	-5.53%	-3.06%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -4,295 ÷ 18,928 = -22.69%

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.	Western Digital Corp. economic spread ratio improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Western Digital Corp., economic profit margin calculation, comparison to benchmarks

	Jun 30, 2023	Jul 1, 2022	Jul 2, 2021	Jul 3, 2020	Jun 28, 2019	Jun 29, 2018
Selected Financial Data (US$ in millions)
Economic profit¹	(4,295)	(1,090)	(2,027)	(2,295)	(2,831)	(2,302)
Revenue, net	12,318)	18,793)	16,922)	16,736)	16,569)	20,647)
Performance Ratio
Economic profit margin²	-34.86%	-5.80%	-11.98%	-13.72%	-17.09%	-11.15%
Benchmarks
Economic Profit Margin, Competitors³
Apple Inc.	22.04%	23.82%	23.00%	19.12%	17.56%	—
Arista Networks Inc.	20.87%	15.91%	22.34%	15.94%	19.04%	—
Cisco Systems Inc.	8.46%	9.40%	8.51%	12.37%	6.40%	—
Dell Technologies Inc.	0.64%	2.79%	0.63%	-0.51%	-5.13%	—
Super Micro Computer Inc.	3.14%	-0.12%	-2.82%	-3.94%	-1.79%	-0.99%

Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-07-01), 10-K (reporting date: 2021-07-02), 10-K (reporting date: 2020-07-03), 10-K (reporting date: 2019-06-28), 10-K (reporting date: 2018-06-29).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Revenue, net
= 100 × -4,295 ÷ 12,318 = -34.86%

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.	Western Digital Corp. economic profit margin improved from 2021 to 2022 but then deteriorated significantly from 2022 to 2023.

Western Digital Corp. (NASDAQ:WDC)

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