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.
Economic Profit
AbbVie Inc., economic profit 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 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
= 5,919 – 9.11% × 61,356 = 329
The financial performance from 2021 to 2025 is characterized by a period of significant volatility in value creation. The period began with substantial economic profit, followed by a transition into value destruction between 2023 and 2024, before returning to a marginally positive state by 2025.
- Net Operating Profit After Taxes (NOPAT)
- A severe contraction in operational profitability is observed, with NOPAT falling from US$ 12,362 million in 2021 to a low of US$ 3,292 million in 2023. Following this trough, a recovery phase is evident, as figures rose to US$ 4,563 million in 2024 and further to US$ 5,919 million by 2025.
- Cost of Capital
- The cost of capital exhibits a consistent and steady upward trend over the five-year period. Starting at 8.18% in 2021, it increased annually to reach 9.11% by 2025, effectively raising the hurdle rate required for the organization to generate economic value.
- Invested Capital
- A general downward trajectory in invested capital is noted, decreasing from US$ 95,922 million in 2021 to US$ 61,356 million in 2025. This reduction suggests a contraction of the capital base or a strategic shift toward asset optimization and divestment.
- Economic Profit
- The economic profit transitioned from a strong positive position of US$ 4,518 million in 2021 to significant losses in 2023 (US$ -2,803 million) and 2024 (US$ -1,659 million), indicating a period where the cost of capital exceeded the operating returns. A return to value creation occurred in 2025, with the economic profit recovering to US$ 329 million.
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Net Operating Profit after Taxes (NOPAT)
AbbVie 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 restructuring reserve.
3 Addition of increase (decrease) in equity equivalents to net earnings attributable to AbbVie Inc..
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 883 × 3.50% = 31
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 2,924 × 21.00% = 614
6 Addition of after taxes interest expense to net earnings attributable to AbbVie Inc..
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 266 × 21.00% = 56
8 Elimination of after taxes investment income.
Net earnings attributable to AbbVie Inc. exhibited an initial increase from 2021 to 2022, followed by a substantial decline in 2023 and a slight recovery in 2024 and 2025. However, the trend in net operating profit after taxes (NOPAT) presents a different pattern. NOPAT decreased from 2021 to 2023, then increased significantly in 2024 and 2025.
- NOPAT Trend
- NOPAT began at US$12,362 million in 2021, decreasing to US$11,543 million in 2022, representing a decline of approximately 6.7%. A more pronounced decrease occurred in 2023, with NOPAT falling to US$3,292 million. This represents a substantial reduction of over 71% from the 2022 value. A recovery is then observed in 2024, with NOPAT rising to US$4,563 million, and continuing upward in 2025 to reach US$5,919 million. The 2025 value, while representing a significant improvement from 2023, remains below the levels seen in 2021 and 2022.
The divergence between the trends in net earnings and NOPAT suggests potential shifts in the company’s capital structure or non-operating items. While net earnings decreased significantly in 2023, the NOPAT decline was even more substantial, indicating that factors beyond core operating profitability contributed to the reduction in net income. The subsequent recovery in NOPAT, exceeding the recovery in net earnings, suggests improvements in operational efficiency or changes in the cost of capital may be influencing the results.
- Relationship between NOPAT and Net Earnings
- In 2021 and 2022, NOPAT was consistently higher than net earnings attributable to AbbVie Inc. However, this relationship changed in 2023 and 2024, where net earnings exceeded NOPAT. By 2025, net earnings and NOPAT were relatively close, but net earnings remained slightly higher. This difference could be attributed to items such as interest expense, taxes, and other non-operating income or expenses.
The substantial fluctuations in NOPAT warrant further investigation to understand the underlying drivers. A detailed analysis of the components of NOPAT, including operating revenue, operating expenses, and tax rates, would be necessary to pinpoint the specific factors contributing to these changes.
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Cash Operating Taxes
AbbVie Inc., cash operating taxes calculation
US$ 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 reported income tax expense and cash operating taxes exhibit distinct trends over the five-year period. Income tax expense fluctuates considerably, while cash operating taxes generally increase, though with notable variations.
- Income Tax Expense
- Income tax expense increased from US$1,440 million in 2021 to US$1,632 million in 2022, representing a rise of approximately 13.3%. A subsequent decrease was observed in 2023, with expense falling to US$1,377 million. A significant shift occurred in 2024, resulting in a tax benefit of US$570 million. This was followed by a substantial increase in expense to US$2,364 million in 2025. The volatility suggests potential impacts from changes in tax laws, deferred tax asset adjustments, or significant shifts in pre-tax income.
- Cash Operating Taxes
- Cash operating taxes demonstrate an overall upward trend, although not consistently. The amount rose from US$2,843 million in 2021 to US$3,997 million in 2022, an increase of approximately 40.6%. Further growth was seen in 2023, reaching US$4,625 million. A considerable decline occurred in 2024, with cash taxes decreasing to US$1,339 million. The final year, 2025, shows a recovery to US$3,414 million. The fluctuations in cash taxes are likely influenced by timing differences between income tax expense and actual cash payments, as well as potential tax planning strategies.
- Relationship between Income Tax Expense and Cash Operating Taxes
- A divergence is apparent between the two measures. While income tax expense is reported on the income statement based on accounting standards, cash operating taxes reflect the actual cash outflows for taxes. The significant difference in 2024, where an income tax benefit is recorded alongside a cash outflow, indicates substantial deferred tax impacts or tax credits being utilized. The generally higher level of cash taxes compared to income tax expense throughout the period suggests the company may be utilizing tax loss carryforwards or experiencing temporary differences that result in higher cash payments than reported expense.
The observed patterns warrant further investigation into the underlying drivers of these fluctuations, particularly the significant changes in 2024 and 2025, to fully understand their implications for the company’s financial position and future cash flows.
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Invested Capital
AbbVie Inc., invested capital calculation (financing approach)
US$ 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 restructuring reserve.
4 Addition of equity equivalents to stockholders’ equity (deficit).
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of available-for-sale investment securities.
The reported invested capital demonstrates a declining trend over the five-year period. Total reported debt & leases and stockholders’ equity both contribute to the calculation of invested capital, and changes in these components influence the overall trend.
- Invested Capital Trend
- Invested capital decreased from US$95,922 million in 2021 to US$61,356 million in 2025. The most significant decrease occurred between 2022 and 2023, falling from US$82,134 million to US$68,204 million. A smaller decrease was observed between 2021 and 2022. A slight increase occurred between 2023 and 2024, followed by a further decrease in 2025.
- Debt & Leases
- Total reported debt & leases decreased from US$77,575 million in 2021 to US$64,191 million in 2022, continuing to US$60,286 million in 2023. An increase to US$68,019 million was noted in 2024, followed by a marginal increase to US$68,379 million in 2025. While fluctuating, the level of debt remained relatively stable between 2024 and 2025.
- Stockholders’ Equity
- Stockholders’ equity increased from US$15,408 million in 2021 to US$17,254 million in 2022. However, a substantial decline was observed in subsequent years, decreasing to US$10,360 million in 2023, US$3,325 million in 2024, and ultimately reaching a deficit of US$-3,270 million in 2025. This negative equity position in the final year represents a significant shift.
The decrease in invested capital appears to be primarily driven by the substantial reduction in stockholders’ equity, particularly in the later years of the period. While debt levels decreased initially, they stabilized and even increased slightly in the most recent years, suggesting that debt reduction is not the primary driver of the overall decline in invested capital. The transition to negative stockholders’ equity in 2025 is a notable development that warrants further investigation.
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Cost of Capital
AbbVie Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 397,502) | 397,502) | ÷ | 463,020) | = | 0.86 | 0.86 | × | 10.07% | = | 8.64% | ||
| Debt and finance lease obligations3 | 64,635) | 64,635) | ÷ | 463,020) | = | 0.14 | 0.14 | × | 4.21% × (1 – 21.00%) | = | 0.46% | ||
| Operating lease liability4 | 883) | 883) | ÷ | 463,020) | = | 0.00 | 0.00 | × | 3.50% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 463,020) | 1.00 | 9.11% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 340,484) | 340,484) | ÷ | 404,066) | = | 0.84 | 0.84 | × | 10.07% | = | 8.48% | ||
| Debt and finance lease obligations3 | 62,707) | 62,707) | ÷ | 404,066) | = | 0.16 | 0.16 | × | 4.05% × (1 – 21.00%) | = | 0.50% | ||
| Operating lease liability4 | 875) | 875) | ÷ | 404,066) | = | 0.00 | 0.00 | × | 3.30% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 404,066) | 1.00 | 8.98% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 310,458) | 310,458) | ÷ | 367,703) | = | 0.84 | 0.84 | × | 10.07% | = | 8.50% | ||
| Debt and finance lease obligations3 | 56,344) | 56,344) | ÷ | 367,703) | = | 0.15 | 0.15 | × | 3.57% × (1 – 21.00%) | = | 0.43% | ||
| Operating lease liability4 | 901) | 901) | ÷ | 367,703) | = | 0.00 | 0.00 | × | 3.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 367,703) | 1.00 | 8.94% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 267,728) | 267,728) | ÷ | 326,497) | = | 0.82 | 0.82 | × | 10.07% | = | 8.25% | ||
| Debt and finance lease obligations3 | 57,849) | 57,849) | ÷ | 326,497) | = | 0.18 | 0.18 | × | 3.42% × (1 – 21.00%) | = | 0.48% | ||
| Operating lease liability4 | 920) | 920) | ÷ | 326,497) | = | 0.00 | 0.00 | × | 2.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 326,497) | 1.00 | 8.74% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 254,754) | 254,754) | ÷ | 339,401) | = | 0.75 | 0.75 | × | 10.07% | = | 7.56% | ||
| Debt and finance lease obligations3 | 83,756) | 83,756) | ÷ | 339,401) | = | 0.25 | 0.25 | × | 3.17% × (1 – 21.00%) | = | 0.62% | ||
| Operating lease liability4 | 891) | 891) | ÷ | 339,401) | = | 0.00 | 0.00 | × | 2.40% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 339,401) | 1.00 | 8.18% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease obligations. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
AbbVie 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 | 329) | (1,659) | (2,803) | 4,366) | 4,518) | |
| Invested capital2 | 61,356) | 69,263) | 68,204) | 82,134) | 95,922) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 0.54% | -2.40% | -4.11% | 5.32% | 4.71% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Amgen Inc. | 6.11% | -0.67% | 2.15% | 6.66% | 6.66% | |
| Bristol-Myers Squibb Co. | 5.48% | -22.18% | 1.38% | -1.40% | 0.91% | |
| Danaher Corp. | -10.72% | -10.89% | -11.66% | -6.65% | -5.82% | |
| Eli Lilly & Co. | 29.94% | 14.28% | 1.21% | 8.31% | 9.99% | |
| Gilead Sciences Inc. | 12.42% | -10.66% | 2.68% | -0.45% | 6.60% | |
| Johnson & Johnson | 11.34% | 1.67% | -0.18% | 5.09% | 10.15% | |
| Merck & Co. Inc. | 10.27% | 13.14% | -9.17% | 11.01% | 11.20% | |
| Pfizer Inc. | -3.81% | -3.50% | -9.60% | 17.82% | 10.99% | |
| Regeneron Pharmaceuticals Inc. | 13.62% | 16.44% | 13.24% | 18.61% | 62.36% | |
| Thermo Fisher Scientific Inc. | -7.47% | -8.27% | -8.74% | -6.99% | -4.97% | |
| Vertex Pharmaceuticals Inc. | 20.56% | -23.09% | 10.85% | 13.60% | 14.81% | |
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 × 329 ÷ 61,356 = 0.54%
4 Click competitor name to see calculations.
The period between 2021 and 2025 is characterized by significant volatility in economic value creation, marked by a sharp transition from wealth generation to value destruction, followed by a marginal recovery. The metrics indicate a period of substantial financial stress between 2023 and 2024 where the returns on invested capital failed to meet the company's cost of capital.
- Economic Spread Ratio Trends
- The economic spread ratio initially demonstrated an upward trajectory, increasing from 4.71% in 2021 to 5.32% in 2022. This positive momentum was abruptly reversed in 2023, with the ratio plunging to -4.11%. While the ratio improved to -2.40% in 2024 and eventually returned to positive territory at 0.54% in 2025, the recovery remains modest compared to the levels observed at the start of the period.
- Economic Profit Performance
- Economic profit transitioned from a positive position of 4,518 million US$ in 2021 to a significant deficit of 2,803 million US$ in 2023. This represents a period of economic value destruction. Although the deficit narrowed to 1,659 million US$ in 2024 and returned to a positive 329 million US$ by 2025, the overall capacity to generate excess returns has diminished substantially over the five-year horizon.
- Invested Capital Dynamics
- A general contraction in the capital base is observed, with invested capital decreasing from 95,922 million US$ in 2021 to 61,356 million US$ in 2025. A brief deviation from this downward trend occurred in 2024, where invested capital rose to 69,263 million US$ before declining again. This overall reduction in invested capital suggests a strategic downsizing or a reallocation of assets during a period of declining economic profitability.
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Economic Profit Margin
AbbVie 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 | 329) | (1,659) | (2,803) | 4,366) | 4,518) | |
| Net revenues | 61,160) | 56,334) | 54,318) | 58,054) | 56,197) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 0.54% | -2.95% | -5.16% | 7.52% | 8.04% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Amgen Inc. | 10.18% | -1.32% | 5.60% | 10.67% | 11.04% | |
| Bristol-Myers Squibb Co. | 6.74% | -28.77% | 2.07% | -2.18% | 1.57% | |
| Danaher Corp. | -32.86% | -33.60% | -38.27% | -16.51% | -14.53% | |
| Eli Lilly & Co. | 22.79% | 11.35% | 1.04% | 7.07% | 9.22% | |
| Gilead Sciences Inc. | 18.38% | -16.51% | 4.56% | -0.76% | 11.67% | |
| Johnson & Johnson | 16.64% | 2.01% | -0.21% | 6.10% | 10.61% | |
| Merck & Co. Inc. | 15.48% | 16.26% | -10.67% | 13.73% | 16.26% | |
| Pfizer Inc. | -8.52% | -7.44% | -24.97% | 19.50% | 11.73% | |
| Regeneron Pharmaceuticals Inc. | 12.58% | 14.42% | 12.08% | 18.73% | 42.17% | |
| Thermo Fisher Scientific Inc. | -15.79% | -15.83% | -17.45% | -12.89% | -10.11% | |
| Vertex Pharmaceuticals Inc. | 18.13% | -18.96% | 14.56% | 20.07% | 18.36% | |
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 ÷ Net revenues
= 100 × 329 ÷ 61,160 = 0.54%
3 Click competitor name to see calculations.
The financial performance regarding economic value creation exhibits a volatile trajectory from 2021 through 2025, characterized by a period of significant value destruction followed by a return to positive economic profit.
- Economic Profit Trends
- Economic profit remained positive through 2022, though it declined from US$ 4,518 million in 2021 to US$ 4,366 million. A substantial reversal occurred in 2023, where economic profit dropped to -US$ 2,803 million. This negative trend continued into 2024, albeit with a narrowed deficit of -US$ 1,659 million, before the company returned to a positive economic profit of US$ 329 million by the end of 2025.
- Net Revenue Performance
- Net revenues demonstrated relative stability with an overall upward trend toward the end of the period. Revenues increased from US$ 56,197 million in 2021 to US$ 58,054 million in 2022, followed by a dip to US$ 54,318 million in 2023. Growth resumed in 2024 and peaked in 2025 at US$ 61,160 million, indicating that revenue growth persisted even during the years of negative economic profit.
- Economic Profit Margin Analysis
- The economic profit margin highlights a period of inefficiency where returns failed to cover the cost of capital. From a high of 8.04% in 2021, the margin contracted to 7.52% in 2022 and fell sharply to -5.16% in 2023. The margin remained negative in 2024 at -2.95%, before recovering to a marginal positive value of 0.54% in 2025. This sequence suggests a recovery in the ability to generate value above the required threshold of capital return.
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