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
Arista Networks Inc., economic profit calculation
US$ in thousands
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
= 5,477,356 – 22.51% × 7,160,800 = 3,865,654
The financial performance from 2021 to 2025 demonstrates a period of significant scaling, characterized by an aggressive increase in operational profitability that outpaced the expansion of the capital base. While the cost of capital remained virtually constant, the substantial growth in net operating profit after taxes (NOPAT) drove a marked acceleration in economic profit, indicating a high level of value creation over the analyzed period.
- Net Operating Profit After Taxes (NOPAT)
- A consistent and accelerating upward trend is observed, with NOPAT increasing from 1,017,627 thousand USD in 2021 to 5,477,356 thousand USD by 2025. The most significant growth occurred between 2022 and 2025, where profitability more than quadrupled, reflecting strong operational leverage and revenue growth.
- Invested Capital and Cost of Capital
- Invested capital expanded steadily from 1,889,936 thousand USD in 2021 to 7,160,800 thousand USD in 2025. This growth indicates a sustained investment in the business's asset base. Throughout this expansion, the cost of capital remained exceptionally stable, fluctuating minimally around the 22.5% threshold, which provided a predictable baseline for calculating the capital charge.
- Economic Profit Trends
- Economic profit exhibited a slight contraction between 2021 and 2022, decreasing from 592,711 thousand USD to 505,013 thousand USD. This decline occurred because the increase in invested capital during that period outpaced the growth in NOPAT, thereby increasing the capital charge relative to the profit generated. However, from 2023 onward, a sharp reversal occurred. By 2025, economic profit reached 3,865,654 thousand USD, signifying that the company successfully transitioned into a phase where operational returns significantly exceeded the cost of the capital employed.
The overall trajectory suggests a successful scaling phase where the returns on invested capital increased substantially. The transition from a slight dip in economic profit in 2022 to exponential growth by 2025 confirms that the investments made in the capital base are yielding high marginal returns, effectively maximizing shareholder value.
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Net Operating Profit after Taxes (NOPAT)
Arista Networks Inc., NOPAT calculation
US$ in thousands
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 deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 90,500 × 0.00% = 0
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 0 × 21.00% = 0
6 Addition of after taxes interest expense to net income.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 383,600 × 21.00% = 80,556
8 Elimination of after taxes investment income.
Net income and net operating profit after taxes (NOPAT) both demonstrate a consistent upward trajectory over the five-year period. However, the rate of growth differs between the two metrics. NOPAT exhibits a more substantial increase, particularly in the later years of the observed period.
- Overall Trend
- Both net income and NOPAT increased year-over-year from 2021 to 2025. The growth appears to accelerate from 2022 onwards, with the most significant gains occurring between 2023 and 2025.
- Net Income Analysis
- Net income increased from US$840,854 thousand in 2021 to US$3,511,400 thousand in 2025. The growth rate, while positive each year, shows some moderation between 2021 and 2022 before resuming a higher pace of increase.
- NOPAT Analysis
- NOPAT began at US$1,017,627 thousand in 2021 and rose to US$5,477,356 thousand in 2025. The increase from 2022 to 2023 was notable, and the growth continued strongly into 2024 and 2025. The magnitude of NOPAT consistently exceeds that of net income throughout the period.
- Relationship between Net Income and NOPAT
- The difference between NOPAT and net income suggests a significant impact from financing and accounting adjustments. The widening gap between the two metrics over time indicates that these adjustments are becoming increasingly substantial relative to core operating profitability. This could be due to factors such as changes in depreciation methods, interest expense, or tax rates. Further investigation into these specific items would be necessary to understand the drivers of this divergence.
The substantial growth in NOPAT suggests strong underlying operational performance. The increasing difference between NOPAT and net income warrants further scrutiny to fully understand the company’s profitability and capital structure dynamics.
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Cash Operating Taxes
Arista Networks Inc., cash operating taxes calculation
US$ in thousands
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 both demonstrate a consistent upward trend over the five-year period. However, the magnitude of increase differs between the two measures. Cash operating taxes consistently exceed the provision for income taxes, and the gap between them widens over time.
- Provision for Income Taxes
- The provision for income taxes increased from US$90.025 million in 2021 to US$738.300 million in 2025. This represents a substantial increase, with the largest year-over-year change occurring between 2022 and 2023 (US$105.355 million). The rate of increase appears to accelerate in later years, with a US$325.320 million increase between 2023 and 2025.
- Cash Operating Taxes
- Cash operating taxes also exhibited a significant increase, rising from US$188.364 million in 2021 to US$969.744 million in 2025. Similar to the provision for income taxes, the largest single-year increase occurred between 2022 and 2023 (US$206.278 million). The increase between 2024 and 2025 was US$129.282 million, indicating a continued, though slightly moderated, growth rate.
- Relationship between Provision and Cash Taxes
- In 2021, cash operating taxes were approximately twice the provision for income taxes. This ratio increased over the period, with cash operating taxes being more than three times the provision for income taxes in 2025. This divergence suggests a growing difference between reported taxable income and actual cash outflows for taxes. Potential reasons for this difference could include timing differences related to deferred taxes, tax credits, or changes in tax laws impacting the cash tax rate.
The consistent increases in both measures indicate growing profitability and/or a higher effective tax rate. Further investigation into the specific drivers of these increases, particularly the widening gap between the provision for income taxes and cash operating taxes, would be beneficial for a comprehensive understanding of the company’s tax position.
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Invested Capital
Arista Networks Inc., invested capital calculation (financing approach)
US$ in thousands
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 deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction-in-process.
7 Subtraction of marketable securities.
The reported invested capital demonstrates a consistent upward trend over the five-year period. Simultaneously, changes are observed in the components contributing to this invested capital, namely total reported debt & leases and stockholders’ equity.
- Invested Capital Trend
- Invested capital increased significantly from US$1,889,936 thousand in 2021 to US$7,160,800 thousand in 2025. This represents a substantial cumulative growth, indicating increasing financial resources committed to the business. The growth rate appears to accelerate between 2022 and 2023, and continues at a strong pace through 2025.
- Debt & Leases
- Total reported debt & leases decreased from US$76,825 thousand in 2021 to US$59,642 thousand in 2024, suggesting a reduction in reliance on debt financing during this period. However, a notable increase to US$90,500 thousand is observed in 2025, potentially indicating a new financing strategy or significant capital expenditure.
- Stockholders’ Equity
- Stockholders’ equity exhibited a consistent and substantial increase throughout the period, rising from US$3,978,600 thousand in 2021 to US$12,370,500 thousand in 2025. This growth suggests strong profitability and/or successful equity fundraising activities. The rate of increase in stockholders’ equity appears to be the primary driver of the overall increase in invested capital.
- Relationship between Components and Invested Capital
- While debt & leases initially decreased, the significant growth in stockholders’ equity consistently outweighed any impact from debt fluctuations, resulting in the overall upward trend in invested capital. The 2025 increase in debt, however, contributes more substantially to the invested capital increase than in prior years, though stockholders’ equity continues to be the dominant component.
The observed patterns suggest a company increasingly funded by equity, with a recent shift towards incorporating more debt into its capital structure. Further investigation into the reasons behind the 2025 debt increase would be beneficial.
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Cost of Capital
Arista Networks Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 179,157,175) | 179,157,175) | ÷ | 179,247,675) | = | 1.00 | 1.00 | × | 22.52% | = | 22.51% | ||
| Operating lease liability3 | 90,500) | 90,500) | ÷ | 179,247,675) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 179,247,675) | 1.00 | 22.51% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 131,055,860) | 131,055,860) | ÷ | 131,115,502) | = | 1.00 | 1.00 | × | 22.52% | = | 22.51% | ||
| Operating lease liability3 | 59,642) | 59,642) | ÷ | 131,115,502) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 131,115,502) | 1.00 | 22.51% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 83,010,477) | 83,010,477) | ÷ | 83,075,996) | = | 1.00 | 1.00 | × | 22.52% | = | 22.50% | ||
| Operating lease liability3 | 65,519) | 65,519) | ÷ | 83,075,996) | = | 0.00 | 0.00 | × | 5.40% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 83,075,996) | 1.00 | 22.50% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 43,348,819) | 43,348,819) | ÷ | 43,412,661) | = | 1.00 | 1.00 | × | 22.52% | = | 22.49% | ||
| Operating lease liability3 | 63,842) | 63,842) | ÷ | 43,412,661) | = | 0.00 | 0.00 | × | 5.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 43,412,661) | 1.00 | 22.49% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,997,344) | 39,997,344) | ÷ | 40,074,169) | = | 1.00 | 1.00 | × | 22.52% | = | 22.48% | ||
| Operating lease liability3 | 76,825) | 76,825) | ÷ | 40,074,169) | = | 0.00 | 0.00 | × | 5.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 40,074,169) | 1.00 | 22.48% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
Economic Spread Ratio
Arista Networks 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 thousands) | ||||||
| Economic profit1 | 3,865,654) | 2,077,650) | 992,366) | 505,013) | 592,711) | |
| Invested capital2 | 7,160,800) | 5,869,309) | 4,774,714) | 3,095,800) | 1,889,936) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 53.98% | 35.40% | 20.78% | 16.31% | 31.36% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | 107.15% | 164.44% | 137.63% | 199.15% | 195.51% | |
| Cisco Systems Inc. | -6.40% | -3.27% | 3.42% | 3.39% | 2.64% | |
| Dell Technologies Inc. | -9.74% | -8.37% | -0.71% | 3.15% | -1.37% | |
| Lumentum Holdings Inc. | -23.21% | -28.94% | -18.96% | -6.28% | 6.04% | |
| Super Micro Computer Inc. | -12.87% | -11.23% | -1.14% | -9.37% | -17.80% | |
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 × 3,865,654 ÷ 7,160,800 = 53.98%
4 Click competitor name to see calculations.
The analysis of economic value added indicates a period of significant expansion and increasing efficiency in capital utilization between 2021 and 2025. While a brief contraction in economic profit occurred in 2022, the subsequent trajectory demonstrates an accelerating ability to generate value exceeding the cost of capital, culminating in a substantial increase in both absolute profit and relative efficiency by the end of the period.
- Economic Profit Trajectory
- Economic profit experienced a marginal decline in 2022, decreasing to 505,013 thousand US dollars from 592,711 thousand US dollars in 2021. This was followed by a period of rapid growth, with profits rising to 992,366 thousand US dollars in 2023 and accelerating further to 3,865,654 thousand US dollars by 2025. This trend indicates a powerful acceleration in the company's capacity to create economic value.
- Invested Capital Expansion
- A consistent upward trend is observed in invested capital throughout the analyzed timeframe. The capital base grew from 1,889,936 thousand US dollars in 2021 to 7,160,800 thousand US dollars in 2025. This steady increase suggests a systematic expansion of the asset base and strategic investments to support scaling operations.
- Economic Spread Ratio Performance
- The economic spread ratio showed initial volatility, falling from 31.36% in 2021 to a low of 16.31% in 2022. However, the ratio rebounded strongly over the following three years, climbing to 20.78% in 2023, 35.40% in 2024, and reaching a peak of 53.98% in 2025. The significant widening of this spread suggests that the returns on invested capital are increasing at a rate far exceeding the cost of capital, reflecting a high degree of operational efficiency and superior value creation relative to the investment deployed.
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Economic Profit Margin
Arista Networks 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 thousands) | ||||||
| Economic profit1 | 3,865,654) | 2,077,650) | 992,366) | 505,013) | 592,711) | |
| Revenue | 9,005,700) | 7,003,146) | 5,860,168) | 4,381,310) | 2,948,037) | |
| Add: Increase (decrease) in deferred revenue | 2,581,000) | 1,285,211) | 464,958) | 111,934) | 278,485) | |
| Adjusted revenue | 11,586,700) | 8,288,357) | 6,325,126) | 4,493,244) | 3,226,522) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 33.36% | 25.07% | 15.69% | 11.24% | 18.37% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | 22.84% | 21.02% | 21.65% | 23.54% | 22.72% | |
| Cisco Systems Inc. | -10.31% | -5.29% | 3.40% | 3.80% | 2.94% | |
| Dell Technologies Inc. | -5.26% | -5.14% | -0.39% | 1.65% | -1.17% | |
| Lumentum Holdings Inc. | -42.94% | -65.14% | -31.11% | -9.17% | 6.82% | |
| Super Micro Computer Inc. | -6.64% | -5.71% | -0.39% | -3.98% | -6.42% | |
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 revenue
= 100 × 3,865,654 ÷ 11,586,700 = 33.36%
3 Click competitor name to see calculations.
The analysis of economic value creation reveals a significant acceleration in financial performance and capital efficiency from 2022 through 2025. While there was a brief contraction in economic profit and margin in 2022, the subsequent period is characterized by exponential growth in absolute economic profit and a substantial expansion of the economic profit margin.
- Economic Profit Trends
- Economic profit experienced a decline in 2022, falling to $505.01 million from $592.71 million in the previous year. However, this was followed by a period of rapid growth, reaching $3.87 billion by the end of 2025. The most significant acceleration occurred between 2023 and 2025, where economic profit increased nearly fourfold, indicating a strong ability to generate returns significantly above the cost of capital.
- Adjusted Revenue Growth
- Adjusted revenue demonstrated a consistent upward trajectory throughout the analyzed period. Starting at $3.23 billion in 2021, revenue grew steadily each year to reach $11.59 billion by 2025. This sustained expansion provided the necessary scale to support the subsequent surge in economic value.
- Economic Profit Margin Analysis
- The economic profit margin exhibited a V-shaped recovery followed by aggressive expansion. After decreasing from 18.37% in 2021 to a low of 11.24% in 2022, the margin recovered to 15.69% in 2023. From 2023 to 2025, the margin expanded rapidly, peaking at 33.36%. This trend indicates that the company is generating increasing amounts of economic profit per dollar of revenue, reflecting enhanced operational leverage and superior capital efficiency as the business scales.
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