Oracle Corp. (NYSE:ORCL)

The period under review demonstrates fluctuating financial performance as measured by economic profit. Net operating profit after taxes (NOPAT) exhibited volatility, while the cost of capital consistently increased. Invested capital also showed a general upward trend, though not without interim declines. These factors combined to produce consistently negative economic profit throughout the analyzed timeframe.

NOPAT Trend

Net operating profit after taxes increased significantly from US$10,144 million in 2020 to US$14,348 million in 2021. However, a substantial decrease was observed in 2022, falling to US$7,492 million. NOPAT recovered to US$10,160 million in 2023 and continued to rise, reaching US$11,940 million in 2024 and US$14,158 million in 2025. This indicates a cyclical pattern with periods of strong growth followed by contraction and subsequent recovery.

Cost of Capital Trend

The cost of capital experienced a steady increase throughout the period, rising from 11.86% in 2020 to 14.52% in 2025. This consistent upward trend suggests increasing financing costs or perceived risk associated with the company’s operations.

Invested Capital Trend

Invested capital decreased from US$87,978 million in 2020 to US$77,262 million in 2022. A significant increase then occurred, reaching US$98,251 million in 2023, and continued to grow to US$101,930 million in 2024 and US$115,423 million in 2025. This suggests periods of capital reallocation or investment followed by expansion.

Economic Profit Trend

Economic profit was negative for all years examined. It began at -US$289 million in 2020, improved substantially to US$4,315 million in 2021, but then reverted to negative values, reaching -US$2,182 million in 2022, -US$3,265 million in 2023, -US$2,381 million in 2024, and -US$2,604 million in 2025. Despite increases in NOPAT in later years, the rising cost of capital and increasing invested capital consistently outweighed the operating profits, resulting in continued economic losses.

The consistent negative economic profit suggests that the company’s returns are not exceeding its cost of capital, indicating potential inefficiencies in capital allocation or operational performance. While NOPAT demonstrates positive trends in some years, the increasing cost of capital and invested capital prevent the generation of positive economic profit.

Net Income Trend

The net income showed a rising trend from 2020 to 2021, increasing from 10,135 million USD to 13,746 million USD. However, there was a significant decline in 2022, with net income dropping to 6,717 million USD. Following this decline, the net income gradually increased over the next three years, reaching 8,503 million USD in 2023, 10,467 million USD in 2024, and 12,443 million USD in 2025. Overall, despite the dip in 2022, the net income demonstrates recovery and growth toward the latter years.

Net Operating Profit After Taxes (NOPAT) Trend

NNOPAT also increased from 10,144 million USD in 2020 to a peak of 14,348 million USD in 2021. It similarly experienced a large decrease in 2022 to 7,492 million USD. From 2023 onward, NOPAT consistently rose, reaching 10,160 million USD in 2023, 11,940 million USD in 2024, and culminating at 14,158 million USD in 2025. This suggests a strong rebound in operational profitability and effective tax management.

Comparative Insights

The patterns for both net income and NOPAT are aligned, with a peak in 2021, a notable downturn in 2022, and a steady recovery through the following years. NOPAT values are consistently close to net income values, indicating relatively stable operating efficiency and tax impact. The data imply that the company managed to improve operating results over time despite the intermediate disturbance in 2022.

Provision for (benefit from) income taxes

The provision for income taxes displays a fluctuating trend over the periods observed. It started at a positive amount of 1928 million USD in May 31, 2020, then dropped sharply to a negative value of -747 million USD in May 31, 2021, suggesting a tax benefit for that year. This was followed by a return to positive values with 932 million USD in 2022 and steady increases in subsequent years, reaching 1717 million USD in May 31, 2025. The data indicates variability but an overall upward trend after the negative dip.

Cash operating taxes

Cash operating taxes present a generally increasing trajectory from May 31, 2020, through May 31, 2025. Starting at 3101 million USD in 2020, the amount decreased in 2021 to 2197 million USD, but then steadily increased each year thereafter, reaching a peak of 4137 million USD in 2024, with a slight decrease to 4134 million USD in 2025. This suggests progressively higher cash tax outflows during the later years, indicative of either higher taxable income or changes in tax payments.

Total reported debt & leases

The total reported debt and leases exhibited an overall increasing trend from 2020 through 2025. Starting at $73,695 million in 2020, the amount rose to $87,027 million in 2021, followed by a decline to $79,517 million in 2022. Thereafter, a consistent upward movement occurred, reaching $95,330 million in 2023, slightly declining to $94,414 million in 2024, and finally increasing substantially to $108,952 million in 2025. This pattern indicates fluctuating debt exposures with a notable increase in the last reported period.

Total Oracle Corporation stockholders’ equity (deficit)

Stockholders’ equity showed significant volatility and a considerable turnaround over the years. Initially, equity stood at $12,074 million in 2020, sharply declining to $5,238 million in 2021 and turning into a deficit of -$6,220 million by 2022. Subsequently, equity recovered to a positive $1,073 million in 2023, then improved substantially to $8,704 million in 2024, and reached $20,451 million in 2025. This indicates a transition from financial distress or negative equity toward a stronger equity position, reflecting improved capital structure and retained earnings or other comprehensive income gains.

Invested capital

Invested capital decreased from $87,978 million in 2020 to $77,262 million in 2022, indicating reductions or restructuring in capital allocation during this period. However, from 2022 onward, invested capital rose markedly to $98,251 million in 2023, continuing to $101,930 million in 2024, and further to $115,423 million in 2025. This evolution suggests renewed investment activities and potentially greater operational scale or asset acquisition in the latter years. The confluence of rising invested capital and improving equity alongside increasing debt points to an expansion phase with leveraged financing.

The economic spread ratio exhibits considerable fluctuation over the observed period. Initially negative in 2020, it experienced a substantial increase in 2021 before returning to negative territory and remaining so through 2025. This pattern is closely linked to the performance of economic profit and the changes in invested capital.

Economic Spread Ratio Trend

In 2020, the economic spread ratio was -0.33%, indicating that the company’s return on invested capital was less than its cost of capital. A significant improvement occurred in 2021, with the ratio reaching 5.28%, demonstrating a period where returns exceeded the cost of capital. However, this positive trend was short-lived. The ratio declined to -2.82% in 2022 and further to -3.32% in 2023. A slight recovery was observed in 2024 (-2.34%) and 2025 (-2.26%), but the ratio remained negative, suggesting continued underperformance relative to the cost of capital.

The economic spread ratio’s movement mirrors the fluctuations in economic profit. The substantial increase in the ratio in 2021 corresponds with the significant positive economic profit reported for that year. Conversely, the negative economic profit figures for 2020, 2022, 2023, 2024, and 2025 are reflected in the corresponding negative economic spread ratios.

Invested Capital and Economic Spread

Invested capital generally increased over the period, from US$87,978 million in 2020 to US$115,423 million in 2025. Despite this growth in invested capital, the economic spread ratio remained negative for the majority of the years, indicating that the increase in capital employed did not translate into commensurate returns exceeding the cost of that capital. The largest increase in invested capital occurred between 2022 and 2025, yet the economic spread ratio only showed marginal improvement.

The consistent negative economic spread ratio from 2020 to 2025, excluding 2021, suggests a potential issue with capital allocation or operational efficiency. While invested capital grew, the company struggled to generate returns sufficient to cover its cost of capital for most of the period. The slight upward trend in the ratio towards the end of the period may indicate early signs of improvement, but further monitoring is necessary to confirm a sustained positive trend.

The economic profit margin exhibits considerable fluctuation over the observed period. Initially negative in 2020, it experienced a substantial increase in 2021 before reverting to negative values for the subsequent years. Adjusted revenues demonstrate a consistent upward trajectory throughout the period, contrasting with the volatile performance of economic profit and its margin.

Economic Profit Margin

In 2020, the economic profit margin stood at -0.75%. A significant improvement occurred in 2021, with the margin reaching 10.44%. However, this positive performance was not sustained, as the margin declined to -5.18% in 2022 and further to -6.43% in 2023. The margin remained negative in 2024 and 2025, registering at -4.44% and -4.52% respectively. This suggests a weakening ability to generate returns exceeding the cost of capital in the later years, despite increasing revenues.

Adjusted Revenues

Adjusted revenues increased from US$38,624 million in 2020 to US$41,334 million in 2021, representing a growth rate of approximately 7.0%. Continued growth was observed in 2022, reaching US$42,096 million. A more substantial increase occurred between 2022 and 2023, with revenues rising to US$50,782 million. This upward trend continued into 2024 and 2025, with revenues reaching US$53,569 million and US$57,586 million respectively. The consistent revenue growth indicates a strong market position and increasing sales volume.

The divergence between the increasing adjusted revenues and the fluctuating, predominantly negative, economic profit margin suggests that while the company is successfully growing its top line, it is struggling to translate that revenue growth into economic profit. This could be due to rising costs, inefficient capital allocation, or a combination of factors. The stabilization of the economic profit margin around -4.5% in the final two years may indicate a consistent level of underperformance relative to the cost of capital, despite continued revenue expansion.