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: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
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
= 3,398,738 – 15.81% × 5,869,309 = 2,470,520
The financial data indicates a strong upward trend in several key performance metrics over the observed period.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT has exhibited consistent growth year-over-year, increasing from approximately 676 million USD in 2020 to nearly 3.4 billion USD by the end of 2024. This represents a substantial increase in operational profitability, with the most significant jump occurring between 2022 and 2023.
- Cost of Capital
- The cost of capital remained relatively stable, fluctuating marginally around 15.78% to 15.81% throughout the period. This consistency suggests that the firm's risk profile and financing environment experienced little volatility during these years.
- Invested Capital
- Invested capital expanded significantly, growing from about 1.87 billion USD in 2020 to nearly 5.87 billion USD in 2024. The most substantial increases were noted between 2021 to 2022 and continuing into 2023, indicating aggressive capital deployment or expansion efforts.
- Economic Profit
- Economic profit, which represents the value created above the cost of capital, showed a robust upward trajectory. Starting at approximately 382 million USD in 2020, it more than sextupled to around 2.47 billion USD in 2024. This substantial growth reflects efficient use of invested capital and improving operational performance that generated increasing shareholder value.
Overall, the company demonstrated strong financial health with considerable growth in profitability and invested capital, while maintaining a stable cost of capital. The increasing economic profit highlights effective capital utilization and increasing economic value creation over the period analyzed.
Net Operating Profit after Taxes (NOPAT)
Arista Networks Inc., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
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 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 59,642 × 0.00% = 0
5 2024 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 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 311,045 × 21.00% = 65,319
8 Elimination of after taxes investment income.
- Net Income Trend
- The net income of the company has demonstrated a consistent upward trajectory over the five-year period. Starting at $634.6 million in 2020, it increased by approximately 32.5% to $840.9 million in 2021. The growth accelerated further in 2022 with net income reaching $1.35 billion, representing a notable increase of around 60.7% year over year. This positive momentum sustained into 2023 and 2024, with net income rising to $2.09 billion and $2.85 billion respectively, indicating continued strong profitability expansion.
- Net Operating Profit After Taxes (NOPAT) Trend
- NOPAT exhibited a similarly positive trend, reflecting improving operational efficiency and profitability. The initial value of approximately $676.2 million in 2020 increased to $1.02 billion in 2021, a growth rate of about 50.6%. Although the growth rate slightly moderated in 2022 with NOPAT at $1.20 billion, the figure surged significantly to $2.07 billion in 2023 and further to $3.40 billion in 2024. These figures indicate a robust enhancement in the company's operational profit generation after tax consideration.
- Comparative Analysis Between Net Income and NOPAT
- Both net income and NOPAT demonstrate strong and consistent growth patterns, with NOPAT generally exceeding net income in absolute terms throughout the period, which may suggest an increasingly efficient core business operation after taxes. The gap between NOPAT and net income widened notably towards the end of the period, highlighting enhanced operational earnings relative to net income, potentially due to improvements in non-operating factors or tax effects over time.
- Overall Financial Performance Insights
- The data reflects significant and accelerating growth in profitability metrics, indicating a successful expansion and improved operational performance. The company’s ability to nearly triple its net income within four years, alongside a more than fivefold increase in NOPAT, points to strong financial health and effective management strategies. This upward trend suggests solid prospects for continued business success if the current growth drivers are sustained.
Cash Operating Taxes
Arista Networks Inc., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
- Provision for Income Taxes
- Over the five-year period, the provision for income taxes demonstrates a substantial upward trend. Starting at $104,306 thousand in 2020, it slightly decreased to $90,025 thousand in 2021, marking a minor decline in the second year. However, from 2021 onward, there is a notable acceleration in growth, with the provision increasing significantly to $229,350 thousand in 2022, then further rising to $334,705 thousand in 2023, and reaching $412,980 thousand by 2024. This pattern suggests a rising tax expense potentially linked to increased profitability or changes in tax legislation or accounting practices.
- Cash Operating Taxes
- Cash operating taxes exhibit a strong and consistent upward trajectory throughout the observed period. Starting at $106,136 thousand in 2020, cash operating taxes almost doubled by 2021, reaching $188,364 thousand. This growth momentum continued sharply in subsequent years, with values increasing to $468,759 thousand in 2022, $675,037 thousand in 2023, and ultimately $840,462 thousand in 2024. The sharp escalation in cash operating taxes compared to the provision for income taxes may reflect timing differences in tax payments or increased effective tax rates, or a combination of operational scale expansion and higher taxable income.
- Comparative Insights
- Both provision for income taxes and cash operating taxes have risen notably over the five years, with cash operating taxes growing at an even faster rate than the provision. The disparity between these two tax-related figures suggests potential differences in deferred tax accounting or changes in the company’s tax payment schedule. The steady increase across both metrics implies growing taxable income levels or evolving tax obligations. This consistent increase in tax-related expenses may impact the company’s net earnings and cash flows, indicating the necessity for careful tax planning going forward.
Invested Capital
Arista Networks Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
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.
- Total Reported Debt & Leases
- The total reported debt and leases demonstrate a declining trend over the five-year period. Starting at $90,170 thousand in 2020, the figure decreases each year, reaching $59,642 thousand by 2024. This consistent reduction indicates a deliberate effort to lower debt levels and manage lease obligations effectively, improving the company’s leverage position.
- Stockholders’ Equity
- Stockholders’ equity shows a strong upward trend, more than tripling from $3,320,291 thousand in 2020 to $9,994,807 thousand in 2024. This significant increase suggests robust retained earnings, possibly combined with equity financing activities, contributing to a solid expansion of the company’s net asset base over the period.
- Invested Capital
- Invested capital rises steadily from $1,866,365 thousand in 2020 to $5,869,309 thousand in 2024. The growth accelerates particularly after 2021, indicating increased investment in operating assets or growth initiatives. The expansion of invested capital alongside rising equity suggests an aggressive strategy focused on scaling operations or asset acquisition.
- Overall Financial Trends
- The combined trends reflect a company that is strengthening its financial foundation by reducing debt, significantly increasing equity, and expanding invested capital. The reduction in total debt coupled with substantial equity growth suggests an improved capital structure and financial stability. The growth in invested capital points to reinvestment and expansion efforts, which may support future growth and operational capacity.
Cost of Capital
Arista Networks Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 131,055,860) | 131,055,860) | ÷ | 131,115,502) | = | 1.00 | 1.00 | × | 15.82% | = | 15.81% | ||
| 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 | 15.81% | ||||||||||
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 | × | 15.82% | = | 15.81% | ||
| 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 | 15.81% | ||||||||||
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 | × | 15.82% | = | 15.80% | ||
| 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 | 15.80% | ||||||||||
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 | × | 15.82% | = | 15.79% | ||
| 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 | 15.80% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 23,742,172) | 23,742,172) | ÷ | 23,832,342) | = | 1.00 | 1.00 | × | 15.82% | = | 15.76% | ||
| Operating lease liability3 | 90,170) | 90,170) | ÷ | 23,832,342) | = | 0.00 | 0.00 | × | 5.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 23,832,342) | 1.00 | 15.78% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
Economic Spread Ratio
Arista Networks Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 2,470,520) | 1,311,861) | 712,023) | 719,032) | 381,746) | |
| Invested capital2 | 5,869,309) | 4,774,714) | 3,095,800) | 1,889,936) | 1,866,365) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 42.09% | 27.48% | 23.00% | 38.05% | 20.45% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | 167.21% | 140.37% | 201.87% | 198.21% | 146.14% | |
| Cisco Systems Inc. | 1.27% | 8.50% | 8.38% | 7.63% | 11.85% | |
| Dell Technologies Inc. | -5.96% | 0.87% | 4.99% | 0.40% | -0.80% | |
| Super Micro Computer Inc. | -2.79% | 7.49% | -1.83% | -9.52% | -12.37% | |
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 2,470,520 ÷ 5,869,309 = 42.09%
4 Click competitor name to see calculations.
Over the observed period, economic profit demonstrated a volatile yet overall strong upward trend. Initially, economic profit rose significantly from $381.7 million to $719.0 million between the years 2020 and 2021. The following year saw a slight decline to $712.0 million in 2022. However, from 2022 onward, economic profit experienced a steep increase, reaching $1.31 billion in 2023 and then nearly doubling to approximately $2.47 billion in 2024.
Invested capital increased steadily and sharply during the period. Starting at $1.87 billion in 2020, it grew moderately to $1.89 billion by 2021. Thereafter, it surged to $3.10 billion in 2022, followed by substantial growth in 2023 and 2024, ending at $5.87 billion. This pattern highlights substantial investments or asset accumulation over time.
The economic spread ratio, which measures the efficiency of capital use in generating economic profit, showed considerable fluctuation but a generally positive trend. It started at 20.45% in 2020, nearly doubled to 38.05% in 2021, and then declined to 23.00% in 2022. From 2022 to 2024, the ratio increased again, rising to 27.48% in 2023 and peaking at 42.09% by 2024, indicating improved profitability relative to capital invested.
- Economic Profit
- Consistent growth with a temporary decline in 2022; significant gains in later years suggest strong value creation.
- Invested Capital
- Marked and accelerating increase, signaling substantial deployment of resources or growth in asset base.
- Economic Spread Ratio
- Variable trend with a high point in 2024, reflecting enhanced capital efficiency despite mid-period fluctuations.
Overall, the data reflects a capacity for increasing economic profit supported by growing invested capital, with improving economic spreads indicating rising operational effectiveness and value generation over the years.
Economic Profit Margin
Arista Networks Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 2,470,520) | 1,311,861) | 712,023) | 719,032) | 381,746) | |
| Revenue | 7,003,146) | 5,860,168) | 4,381,310) | 2,948,037) | 2,317,512) | |
| Add: Increase (decrease) in deferred revenue | 1,285,211) | 464,958) | 111,934) | 278,485) | 75,539) | |
| Adjusted revenue | 8,288,357) | 6,325,126) | 4,493,244) | 3,226,522) | 2,393,051) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 29.81% | 20.74% | 15.85% | 22.29% | 15.95% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | 21.37% | 22.08% | 23.86% | 23.03% | 19.15% | |
| Cisco Systems Inc. | 2.06% | 8.45% | 9.40% | 8.51% | 12.36% | |
| Dell Technologies Inc. | -3.66% | 0.48% | 2.61% | 0.35% | -0.68% | |
| Super Micro Computer Inc. | -1.42% | 2.54% | -0.78% | -3.43% | -4.59% | |
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 2,470,520 ÷ 8,288,357 = 29.81%
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibits a significant upward trend over the five-year period. Starting at approximately 381.7 million US dollars in 2020, it nearly doubled by 2021 to 719 million, maintaining a similar level in 2022 at around 712 million. A stronger growth phase is evident in 2023, with economic profit reaching over 1.31 billion, and then more than doubling again in 2024 to approximately 2.47 billion. This pattern indicates increasing profitability on a value-added basis across the years.
- Adjusted Revenue
- Adjusted revenue has consistently increased each year, reflecting strong top-line growth. From around 2.39 billion US dollars in 2020, it grew to 3.23 billion in 2021, followed by a substantial increase to 4.49 billion in 2022. The growth accelerated further in subsequent years, reaching 6.33 billion in 2023 and peaking at about 8.29 billion in 2024. This continuous upward trend suggests expanding sales or service income contributing to the firm's scale and market presence.
- Economic Profit Margin
- The economic profit margin shows some volatility but overall improvement across the period analyzed. Initially at roughly 15.95% in 2020, it increased sharply to 22.29% in 2021. In 2022, there was a drop to 15.85%, indicating possibly higher costs or less efficient capital utilization that year. However, the margin rebounded strongly to 20.74% in 2023 and improved further to 29.81% in 2024, suggesting enhanced operational efficiency, better cost control, or higher value generation per unit of revenue.
- Summary of Trends
- The financial indicators collectively reveal robust growth in both economic profit and revenue over the five years, with economic profit margin demonstrating resilience despite some fluctuation. The sharp increases in economic profit and revenues in the last two years underscore a period of accelerated expansion and increasing profitability. The improving profit margin towards the end of the timeline suggests an optimal balance being achieved between growth and operational efficiency.