Intuit Inc. (NASDAQ:INTU)

The financial performance, as measured by economic profit, exhibits a declining trend over the observed period. Initially positive, economic profit transitions to negative values and, while showing some improvement in later years, remains consistently below zero. This analysis details the observed patterns in net operating profit after taxes, cost of capital, and invested capital, and their combined impact on economic profit.

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrates an initial increase from US$1,795 million in 2020 to US$2,300 million in 2022. A subsequent decrease to US$2,022 million is noted in 2023, followed by a recovery to US$2,668 million in 2024 and a further increase to US$3,531 million in 2025. This indicates fluctuating operational profitability, with a strong upward trend in the most recent two years.

Cost of Capital

The cost of capital remains relatively stable throughout the period, fluctuating between 19.12% and 19.93%. A slight upward trend is observable from 2020 to 2024, with minimal change in the final year. This consistency suggests a stable risk profile and financing structure.

Invested Capital

Invested capital experiences a significant increase from US$8,690 million in 2020 to US$24,726 million in 2022. While decreasing slightly to US$23,712 million in 2023, it recovers to US$24,948 million in 2024 and remains at US$24,521 million in 2025. This substantial growth in invested capital suggests considerable investment in operations or acquisitions.

Economic Profit

Economic profit begins at US$102 million in 2020, indicating value creation. However, it quickly becomes negative, reaching -US$280 million in 2021 and further declining to -US$2,426 million in 2022. While the negative economic profit lessens to -US$2,600 million in 2023 and -US$2,227 million in 2024, it remains negative, ultimately reaching -US$1,289 million in 2025. The consistent negative economic profit suggests that the returns generated from invested capital are insufficient to cover the cost of that capital, despite the increasing NOPAT.

The divergence between NOPAT and economic profit is primarily driven by the substantial increase in invested capital, coupled with a relatively stable cost of capital. While NOPAT demonstrates positive growth, the growth in invested capital outpaces it, resulting in a diminishing economic profit. The recent improvement in economic profit in 2024 and 2025, despite remaining negative, suggests a potential shift in capital efficiency or a more favorable relationship between profitability and investment.

Net income

The net income shows an overall upward trend from 2020 to 2025. Starting at 1,826 million USD in 2020, it increases steadily each year, reaching 3,869 million USD in 2025. The yearly increments indicate consistent growth, with a notable acceleration from 2023 to 2025 where the net income rises by approximately 577 million USD between 2023 and 2024, and by 906 million USD between 2024 and 2025.

Net operating profit after taxes (NOPAT)

NOPAT also follows an increasing trajectory over the period, starting at 1,795 million USD in 2020 and rising to 3,531 million USD in 2025. However, the trend is less smooth compared to net income. After an increase from 2020 to 2022, there is a dip in 2023 to 2,022 million USD. Following this dip, the figures recover and grow substantially in 2024 and 2025. The increase from 2023 to 2025 is significant, indicating enhanced operational efficiency or profitability after taxes during the later years.

Comparison and insights

Both net income and NOPAT demonstrate growth over the six-year period, with net income growing slightly more consistently. The dip in NOPAT in 2023 suggests possible operational challenges or non-recurring expenses that affected operating profits during that year. The recovery and strong growth in subsequent years for both metrics imply successful strategic adjustments or improved market conditions. Overall, the data suggests increasing profitability and operational effectiveness over time, with particularly strong momentum in the last two years.

Provision for income taxes

The provision for income taxes showed a fluctuating trend over the analyzed periods. Starting at 372 million US dollars in July 2020, it increased to 494 million in July 2021. This was followed by a slight decrease to 476 million in July 2022. Subsequently, the provision rose again to 605 million in July 2023, then decreased slightly to 587 million in July 2024. A significant increase was observed in July 2025, reaching 965 million. Overall, the provision demonstrated an upward trajectory with occasional declines, suggesting variability in taxable income or tax rates but a general rise in tax expenses over time.

Cash operating taxes

The cash operating taxes exhibited considerable volatility throughout the period. Beginning at 477 million US dollars in July 2020, it increased moderately to 545 million in July 2021. However, a sharp decline occurred in July 2022, with the value dropping to 398 million. This was followed by a dramatic increase in July 2023 to 1,320 million and a further slight decrease to 1,276 million in July 2024. The upward movement continued into July 2025, reaching 1,538 million. This pattern indicates significant fluctuations in actual cash tax payments, possibly driven by changes in profitability, tax planning strategies, or timing differences in tax payments.

The financial data presents a multi-year view of key financial metrics, namely total reported debt and leases, stockholders’ equity, and invested capital, spanning from fiscal years ending July 31, 2020 through July 31, 2025.

Total Reported Debt & Leases

This liability measure showed a decline from 3,636 million USD in 2020 to 2,480 million USD in 2021, indicating a reduction in debt obligations or lease liabilities during that period. However, it then rose sharply to 7,540 million USD by 2022, suggesting a significant incurrence of additional liabilities. After 2022, the value decreased slightly to 6,689 million USD in 2023 and then remained relatively stable, hovering around 6,500 to 6,600 million USD through the forecasted years 2024 and 2025. This pattern reveals an initial debt reduction, followed by a rapid increase and subsequent stabilization at a higher level than the starting point.

Stockholders’ Equity

Stockholders’ equity exhibited a consistent and significant upward trajectory throughout the period. Starting from 5,106 million USD in 2020, equity nearly doubled to 9,869 million USD by 2021, then continued to increase sharply to 16,441 million USD in 2022. The growth persisted through 2023 and into the projections for 2024 and 2025, reaching a forecasted 19,710 million USD. This steady increase reflects improvements in net assets attributable to shareholders, potentially driven by retained earnings growth, capital infusion, or favorable market valuations.

Invested Capital

Invested capital rose from 8,690 million USD in 2020 to 12,248 million USD in 2021, aligning with the growth trend seen in equity. A pronounced jump occurred in 2022 to 24,726 million USD, more than doubling the prior year, which parallels the spike in total reported debt and leases, indicating significant new capital investment potentially funded by increased liabilities. There was a marginal decline to 23,712 million USD in 2023, followed by a moderate increase to 24,948 million USD in 2024, before a slight reduction to 24,521 million USD in the final forecast year. Overall, invested capital has more than doubled from the start to the end of the period, reflecting substantial asset base growth likely supporting operational expansion or strategic acquisitions.

In summary, the data points to a period marked by substantial balance sheet expansion, with stockholders’ equity and invested capital growing robustly. The pattern of debt indicates strategic leveraging after an initial reduction, stabilizing at higher levels consistent with increased invested capital. Together, these trends suggest an aggressive growth phase involving capital acquisition and financing moves to support organizational objectives.

The economic spread ratio exhibits a consistently declining trend over the observed period. Initially positive, the ratio transitions to negative values and demonstrates increasing negativity before showing signs of improvement in the later years.

Economic Spread Ratio

In July 2020, the economic spread ratio stood at 1.17%. This indicates that the company generated returns exceeding its cost of capital. However, the ratio decreased significantly to -2.28% by July 2021, signaling that returns fell below the cost of capital. This negative trend accelerated through July 2022 (-9.81%) and July 2023 (-10.96%), representing the lowest point in the observed period. A modest recovery is then apparent, with the ratio improving to -8.93% in July 2024 and further to -5.26% in July 2025. While still negative, the improvement suggests a narrowing gap between returns and the cost of capital.

The economic profit mirrors the trend in the economic spread ratio, initially positive but becoming increasingly negative. The magnitude of the negative economic profit grows substantially from 2021 onwards, peaking in 2022 and 2023 before showing some reduction in absolute terms.

Economic Profit

Economic profit was US$102 million in July 2020. This decreased to a loss of US$280 million by July 2021. The losses then expanded dramatically to US$2,426 million in July 2022 and US$2,600 million in July 2023. A reduction in the magnitude of the loss is observed in July 2024 (US$2,227 million) and July 2025 (US$1,289 million), aligning with the improvement in the economic spread ratio.

Invested capital increased substantially from July 2020 to July 2022, then stabilized with minor fluctuations. This increase in invested capital, coupled with declining economic profit, likely contributed to the worsening economic spread ratio during those years.

Invested Capital

Invested capital rose from US$8,690 million in July 2020 to US$12,248 million in July 2021, and further to US$24,726 million in July 2022. It then decreased slightly to US$23,712 million in July 2023 before increasing again to US$24,948 million in July 2024 and settling at US$24,521 million in July 2025. The relatively stable invested capital in the later periods, combined with the improving economic spread ratio, suggests a more efficient utilization of capital in those years.

Overall, the analysis indicates a period of declining financial performance, as measured by economic spread and economic profit, followed by a potential stabilization and modest improvement in the most recent periods. The substantial increase in invested capital during the initial period appears to have exacerbated the decline in economic spread.

The economic profit margin exhibits a significant downward trend over the observed period. Initially positive, the margin transitions to substantial negative values, although the magnitude of the negative margin appears to be decreasing in the later years.

Economic Profit Margin Trend

In July 2020, the economic profit margin stood at 1.32%. This represents a positive return on revenue, indicating that the company generated economic profit. However, the margin declined sharply to -2.90% in July 2021, signaling a shift to economic loss. This negative trend accelerated in subsequent years, reaching -18.89% in July 2022 and -17.95% in July 2023. While remaining negative, the margin shows signs of improvement in the final two years, moving to -13.72% in July 2024 and -6.79% in July 2025.

The economic profit itself mirrors this trend. Starting at US$102 million in July 2020, it becomes negative in July 2021 at -US$280 million, and then experiences a substantial decrease to -US$2,426 million in July 2022 and -US$2,600 million in July 2023. Similar to the margin, the absolute value of economic profit begins to lessen, reaching -US$2,227 million in July 2024 and -US$1,289 million in July 2025.

Relationship between Revenue and Economic Profit

Adjusted net revenue consistently increased throughout the period, rising from US$7,721 million in July 2020 to US$18,978 million in July 2025. Despite this revenue growth, the economic profit margin remained largely negative, suggesting that the cost of capital, or other adjustments made to net income to arrive at economic profit, grew at a faster rate than revenue. The narrowing of the negative margin in the final two years coincides with a moderation in the rate of decline of economic profit, indicating a potential improvement in capital efficiency or cost management relative to revenue growth.

The observed pattern suggests a growing disparity between accounting profits and true economic profits. While the company is increasing its revenue, it is not generating sufficient returns to cover its cost of capital, at least based on the calculations underlying the economic profit metric. The recent trend towards a less negative economic profit margin offers a potential indication of future improvement, but continued monitoring is warranted.