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.
Paying user area
Try for free
Arista Networks Inc. pages available for free this week:
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Arista Networks Inc. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
Arista Networks Inc., economic profit calculation
US$ in thousands
| 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 performance, as measured by economic profit, demonstrates a positive and accelerating trend over the five-year period. Net operating profit after taxes (NOPAT) and invested capital both increased substantially, contributing to the growth in economic profit. The cost of capital remained relatively stable throughout the period.
- NOPAT Trend
- Net operating profit after taxes exhibited consistent growth, increasing from US$1,017,627 thousand in 2021 to US$5,477,356 thousand in 2025. The rate of increase accelerated over time, with the largest absolute increase occurring between 2022 and 2023, and again between 2023 and 2024.
- Cost of Capital Stability
- The cost of capital remained remarkably consistent, fluctuating only slightly between 22.75% and 22.77% across the five years. This stability suggests a consistent risk profile and financing structure for the company.
- Invested Capital Growth
- Invested capital increased significantly, rising from US$1,889,936 thousand in 2021 to US$7,160,800 thousand in 2025. This growth indicates substantial reinvestment in the business or significant acquisitions, supporting the expansion of operations.
- Economic Profit Progression
- Economic profit increased from US$587,751 thousand in 2021 to US$3,846,834 thousand in 2025. While economic profit decreased slightly from 2021 to 2022, it has since experienced robust growth, mirroring the trends in NOPAT and invested capital. The increase in economic profit suggests the company is generating returns exceeding its cost of capital.
The consistent growth in NOPAT, coupled with a stable cost of capital and increasing invested capital, has resulted in a substantial and positive trend in economic profit. This indicates improving financial performance and value creation over the analyzed period.
Net Operating Profit after Taxes (NOPAT)
Arista Networks Inc., NOPAT calculation
US$ 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
= × =
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
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$5,477,356 thousand in 2025. The increase from 2022 to 2023 was notable, and the growth continued strongly into 2024 and 2025. The magnitude of NOPAT consistently exceeds that of net income throughout the period.
- Relationship between Net Income and NOPAT
- The difference between NOPAT and net income suggests a significant impact from financing and accounting adjustments. The widening gap between the two metrics over time indicates that these adjustments are becoming increasingly substantial relative to core operating profitability. This could be due to factors such as changes in depreciation methods, interest expense, or tax rates. Further investigation into these specific items would be necessary to understand the drivers of this divergence.
The substantial growth in NOPAT suggests strong underlying operational performance. The increasing difference between NOPAT and net income warrants further scrutiny to fully understand the company’s profitability and capital structure dynamics.
Cash Operating Taxes
Arista Networks Inc., cash operating taxes calculation
US$ 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$129.282 million, indicating a continued, though slightly moderated, growth rate.
- Relationship between Provision and Cash Taxes
- In 2021, cash operating taxes were approximately twice the provision for income taxes. This ratio increased over the period, with cash operating taxes being more than three times the provision for income taxes in 2025. This divergence suggests a growing difference between reported taxable income and actual cash outflows for taxes. Potential reasons for this difference could include timing differences related to deferred taxes, tax credits, or changes in tax laws impacting the cash tax rate.
The consistent increases in both measures indicate growing profitability and/or a higher effective tax rate. Further investigation into the specific drivers of these increases, particularly the widening gap between the provision for income taxes and cash operating taxes, would be beneficial for a comprehensive understanding of the company’s tax position.
Invested Capital
Arista Networks Inc., invested capital calculation (financing approach)
US$ 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.
Cost of Capital
Arista Networks Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
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 economic spread ratio demonstrates a notable upward trend over the observed period. Initially, the ratio stood at 31.10% in 2021, decreased to 16.05% in 2022, and then exhibited consistent growth through 2025, reaching 53.72%.
- Economic Spread Ratio Trend
- A decline in the economic spread ratio is evident between 2021 and 2022. This suggests a reduced difference between the return on invested capital and the cost of capital during that year. However, subsequent years show a strong recovery and acceleration, indicating an increasing ability to generate returns exceeding the cost of capital.
- Relationship to Economic Profit
- The increasing economic spread ratio correlates with the growth in economic profit. While economic profit increased steadily throughout the period, the rate of increase accelerated alongside the economic spread ratio, particularly from 2022 onwards. This suggests that improvements in the economic spread ratio are directly contributing to higher overall economic profit.
- Relationship to Invested Capital
- Invested capital increased consistently throughout the period. Despite this increase, the economic spread ratio’s growth indicates that the company is becoming more efficient at deploying capital and generating returns. The ability to maintain and improve the economic spread ratio while increasing invested capital is a positive sign.
- Overall Assessment
- The observed trend suggests improving financial performance and increasing value creation. The substantial increase in the economic spread ratio from 2022 to 2025 indicates a strengthening competitive advantage and enhanced profitability relative to the capital employed.
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 | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Super Micro Computer Inc. | ||||||
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 Click competitor name to see calculations.
The economic profit margin demonstrates a clear upward trend over the five-year period. While fluctuations are present, the overall movement indicates increasing profitability from an economic value perspective. Initial values are followed by substantial growth, suggesting improving efficiency in capital allocation and revenue generation.
- Economic Profit
- Economic profit exhibits a volatile but generally positive trajectory. A decrease is observed from 2021 to 2022, followed by significant increases in subsequent years. The largest absolute increase occurs between 2023 and 2024, continuing into 2025. This suggests a strengthening ability to generate returns exceeding the cost of capital.
- Adjusted Revenue
- Adjusted revenue consistently increases year-over-year. The rate of growth accelerates over time, with the largest absolute increase occurring between 2024 and 2025. This consistent revenue expansion provides a foundation for the observed improvements in economic profit.
- Economic Profit Margin
- The economic profit margin begins at 18.22% in 2021, declines to 11.06% in 2022, and then recovers, reaching 15.49% in 2023. A substantial increase is then noted, with the margin reaching 24.88% in 2024 and further expanding to 33.20% in 2025. This indicates that the company is becoming increasingly effective at converting revenue into economic profit, suggesting improved operational efficiency and/or pricing power. The margin’s growth outpaces revenue growth in the later years, indicating enhanced profitability.
The combined trends suggest a positive relationship between revenue growth and economic profit generation. The increasing economic profit margin indicates that the company is not only growing revenue but also improving its ability to generate returns above its cost of capital, which is a favorable sign for long-term value creation.