Adobe Inc. (NASDAQ:ADBE)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibits an overall upward trend from 2019 to 2021, increasing from 3,448 million USD to 6,201 million USD. However, following the peak in 2021, there is a gradual decline observed over the next three years, decreasing to 5,235 million USD by 2024. This suggests that while operational profitability improved significantly initially, it experienced a reduction in the latter period.

Cost of Capital

The cost of capital remains relatively stable, fluctuating slightly between approximately 17.4% and 17.7% throughout the six-year period. This stability indicates that the company’s risk profile and the cost incurred to finance its operations have not experienced significant changes.

Invested Capital

Invested capital shows a consistent increase from 17,466 million USD in 2019 to 24,970 million USD in 2023, followed by a slight decrease to 24,709 million USD in 2024. This upward trend points to ongoing investments in the business or acquisition of assets, with a minor reduction noted in the final year.

Economic Profit

Economic profit demonstrates notable growth between 2019 and 2021, rising sharply from 389 million USD to 2,495 million USD. However, subsequent years show a marked decline, falling to 930 million USD by 2024. Despite the decline, economic profit remains positive, indicating value creation beyond the cost of capital, though at a reduced level compared to the peak period.

Net Income

The net income shows a notable overall increasing trend from 2019 to 2024. Starting at 2,951 million USD in 2019, it more than doubled by 2020 to 5,260 million USD, indicating a significant improvement in profitability. A slight decline is observed in 2021 and 2022, with net income values of 4,822 million USD and 4,756 million USD respectively. Nevertheless, from 2022 onward, net income resumes growth, reaching 5,428 million USD in 2023 and slightly increasing further to 5,560 million USD in 2024. This pattern suggests resilience and recovery after a brief downturn.

Net Operating Profit After Taxes (NOPAT)

The NOPAT figures demonstrate irregular fluctuations across the observed period. Initially, NOPAT increased steadily from 3,448 million USD in 2019 to 4,082 million USD in 2020. It then peaks sharply in 2021 at 6,201 million USD, representing a substantial rise in operating profit. This is followed by a decline in subsequent years: 5,690 million USD in 2022, 5,413 million USD in 2023, and further down to 5,235 million USD in 2024. Despite the decrease after 2021, the NOPAT values remain higher than the starting point in 2019, indicating a net improvement over the longer term.

Overall Insights

The comparison between net income and NOPAT reveals that while operating profitability experienced a pronounced peak in 2021, net income was highest in 2020 and showed more sustained growth in the latter years. The dip in both net income and NOPAT during 2021-2022 suggests external or internal factors affecting operational efficiency or market conditions during that period. The recovery in net income by 2023 and 2024 suggests successful adaptations or improvements, although NOPAT did not fully rebound to its peak levels. This indicates that while overall profitability has stabilized at a high level, operating profit margins may have tightened.

Provision for (benefit from) income taxes

The provision for income taxes exhibited notable fluctuations over the observed periods. Initially, in 2019, the provision was positive at 253 million USD. However, in 2020, there was a significant shift to a negative figure of -1084 million USD, indicating a tax benefit during that year. Following this, the provision returned to positive values, increasing to 883 million USD in 2021 and continuing to rise to 1252 million USD in 2022. The upward trend persisted in 2023 and 2024, stabilizing at 1371 million USD. This pattern suggests volatility in tax expenses or benefits, with a marked recovery and steady increase in tax provision in the latter years.

Cash operating taxes

Cash operating taxes have shown a consistent and robust upward trend throughout the entire period. Starting from 262 million USD in 2019, the figure increased substantially each year, reaching 435 million USD in 2020, then 710 million USD in 2021, and further rising to 943 million USD in 2022. The rate of increase accelerated in 2023 and 2024, with amounts jumping to 1761 and 1795 million USD respectively. This steady and significant growth in cash operating tax payments reflects increasing tax liabilities or higher cash outflows related to tax settlements over time.

The financial data exhibits notable trends in Adobe Inc.'s debt, equity, and invested capital over the six-year span.

Total reported debt & leases

The reported debt and lease obligations demonstrated a slight downward trend from November 2019 to December 2023, decreasing from 4,736 million USD to 4,080 million USD. However, a significant increase is observed in November 2024, rising sharply to 6,056 million USD. This suggests a considerable increase in the company's leverage or lease commitments in the most recent year under review.

Stockholders’ equity

Stockholders’ equity showed a consistent upward trajectory from 10,530 million USD in November 2019, peaking at 16,518 million USD by December 2023. In the latest period, November 2024, equity declined to 14,105 million USD, indicating a reduction in net asset value available to shareholders after several years of growth.

Invested capital

Invested capital steadily increased from 17,466 million USD in November 2019 to a high point of 24,970 million USD in December 2023. The figure slightly declined to 24,709 million USD in November 2024, reflecting a marginal contraction of the total capital utilized in the business operations after a prolonged expansion phase.

The analysis of the financial data reveals several important trends over the six-year period from 2019 to 2024.

Economic Profit

There was a substantial increase in economic profit from 2019 to 2021, rising from 389 million US dollars to a peak of 2495 million US dollars. However, this was followed by a declining trend over the next three years, with economic profit falling to 930 million US dollars by 2024. Despite the decrease, the economic profit remains significantly higher than the initial 2019 figure, indicating overall growth but with recent challenges or reduced profitability.

Invested Capital

The invested capital showed a steady increase over the entire period, moving from 17,466 million US dollars in 2019 to 24,709 million US dollars in 2024. This suggests continuous reinvestment or growth in assets, although the rate of growth appears to slow between 2023 and 2024. The increase in capital investment did not correspond with an increase in economic profit in the latter years.

Economic Spread Ratio

The economic spread ratio, which measures the return over the cost of capital, improved significantly from 2.23% in 2019 to a high of 11.84% in 2021. After reaching this peak, the ratio declined steadily to 3.76% by 2024. This trend indicates that the efficiency or profitability of the invested capital improved initially but experienced a considerable drop subsequently, reflecting possible pressure on margins or capital productivity.

In summary, the data show early strong growth and efficient capital use that peaked around 2021. Since then, economic profit and capital efficiency have both declined, despite ongoing increases in invested capital. This could suggest operational challenges, changing market conditions, or increased competition impacting profitability. The recent trends warrant further investigation to identify underlying causes and to strategize for improving returns on investment.

The financial data reveals several notable trends over the observed periods. Adjusted revenue shows a consistent increase year over year, starting at 11,618 million US dollars in 2019 and rising steadily to 21,814 million US dollars by 2024. This indicates robust revenue growth throughout the years.

Economic profit, however, exhibits more variability. It begins at 389 million US dollars in 2019, increases significantly to a peak of 2,495 million in 2021, then declines to 930 million by 2024. This pattern suggests fluctuating operational efficiency or profitability despite growing revenues.

The economic profit margin aligns with the economic profit trend. It rises from 3.35% in 2019 to a high of 14.76% in 2021, before decreasing to 4.26% in 2024. The peak margin in 2021 indicates an optimal period of converting revenue into economic profit, which subsequently diminished in the following years.

Revenue Trend

Consistent, year-on-year increase in adjusted revenue, nearly doubling over the six-year span.

Economic Profit Trend

Sharp increase until 2021 followed by a significant decline, indicating possible changes in costs, investments, or market conditions impacting profitability.

Economic Profit Margin Trend

Improvement up to 2021, followed by a decline, reflecting decreasing efficiency in generating profit from revenue after the peak year.

Overall, while revenue growth is strong and sustained, the decline in economic profit and its margin after 2021 suggests diminishing returns on this growth. This may signal rising expenses, competitive pressures, or investment shifts affecting economic profitability in recent years.