Economic Value Added (EVA)
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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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Advanced Micro Devices Inc. pages available for free this week:
- Income Statement
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Selected Financial Data since 2005
- Return on Equity (ROE) since 2005
- Debt to Equity since 2005
- Analysis of Revenues
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Economic Profit
Advanced Micro Devices Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 28, 2024 | Dec 30, 2023 | Dec 31, 2022 | Dec 25, 2021 | Dec 26, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
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
= – × =
The analysis of the financial data over the five-year period reveals significant fluctuations in the company's operating performance, capital investment, and economic profitability.
- Net operating profit after taxes (NOPAT)
- NOPAT showed a strong increase from 1,330 million USD in 2020 to 3,517 million USD in 2021, indicating improved operational efficiency and profitability during this time. However, this positive trend reversed sharply in the subsequent years, with NOPAT turning negative to -138 million USD in 2022 and further declining to -201 million USD in 2023. A partial recovery is observed in 2024, with NOPAT rising to 621 million USD, although it remains substantially below the peak achieved in 2021.
- Cost of capital
- The cost of capital remained relatively stable throughout the period, fluctuating marginally between 20.96% and 21.27%. This stability suggests consistent financing conditions and risk expectations by investors despite changes in operational performance and invested capital.
- Invested capital
- Invested capital saw a substantial increase from 4,364 million USD in 2020 and 6,195 million USD in 2021 to an exceptionally high level of 58,525 million USD in 2022. It then slightly declined to 57,883 million USD in 2023 and marginally increased again to 58,227 million USD in 2024. This drastic rise in invested capital in 2022 and the following years indicates significant asset acquisition, expansion, or capital deployment activities.
- Economic profit
- Economic profit closely mirrors the trend in NOPAT but highlights the impact of the increased invested capital and associated cost of capital. While economic profit was positive at 404 million USD in 2020 and increased notably to 2,199 million USD in 2021, it experienced a dramatic decline to a substantial negative figure of -12,404 million USD in 2022. This negative economic profit persisted with -12,446 million USD in 2023 and somewhat improved to -11,691 million USD in 2024, reflecting losses when considering the cost of capital on the heavily increased invested capital bases.
In summary, the data suggest that the company experienced substantial growth in invested capital starting in 2022, which was not immediately matched by proportional improvements in operational profitability. Despite relatively stable financing conditions, the resulting economic profit turned sharply negative, indicating value destruction during this period. The slight recovery in NOPAT and economic profit in 2024 may signal an initial adjustment phase or improving returns on the expanded capital base, but overall profitability remains below earlier levels achieved in 2020 and 2021.
Net Operating Profit after Taxes (NOPAT)
Advanced Micro Devices Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in liability for product warranty.
3 Addition of increase (decrease) in liabilities related to the 2024 Restructuring Plan.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income.
8 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
The financial data reveals fluctuating profitability and operational efficiency over the five-year period under review.
- Net Income
- Net income experienced growth from 2020 to 2021, increasing from 2,490 million US dollars to 3,162 million US dollars. However, it sharply declined in 2022 to 1,320 million US dollars, and further decreased in 2023 to 854 million US dollars. In 2024, there was a recovery with net income rising to 1,641 million US dollars, though it remained below the peak values seen in 2020 and 2021.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT displayed a volatile pattern during the same period. It increased significantly from 1,330 million US dollars in 2020 to 3,517 million US dollars in 2021, indicating strong operational performance. However, in 2022 and 2023, NOPAT turned negative, with losses of 138 million US dollars and 201 million US dollars respectively, suggesting operational inefficiencies or extraordinary expenses. In 2024, NOPAT returned to a positive figure of 621 million US dollars, though this value remained substantially lower than the earlier years.
Overall, the data indicates that while the company demonstrated solid profitability growth through 2021, it subsequently faced challenges in maintaining operational profitability, as seen in the negative NOPAT values for two consecutive years. The partial recovery in 2024 suggests improvements but does not yet reflect a full return to previous performance levels. The divergence between net income and NOPAT in the recent years may warrant further examination to understand underlying causes such as non-operating items or tax impacts.
Cash Operating Taxes
Advanced Micro Devices Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
- Income Tax Provision (Benefit)
- The income tax provision exhibited considerable volatility over the reported periods. It began with a significant tax benefit of -$1,210 million in 2020, indicating a tax gain or credit. This shifted to a tax expense of $513 million in 2021. Subsequently, the tax provision returned to a benefit state in 2022 and 2023, with figures of -$122 million and -$346 million respectively, before moving back to a tax expense of $381 million in 2024. These fluctuations suggest variability in taxable income or changes in tax strategies and regulations, impacting the company’s tax obligations year over year.
- Cash Operating Taxes
- The cash operating taxes demonstrated an overall upward trend during the period under review. Starting from a relatively low base of $24 million in 2020, the amount escalated to $214 million in 2021. This increase continued sharply to $1,392 million in 2022, followed by a decline to $658 million in 2023. However, in the final period, cash taxes rose again to $1,531 million in 2024, marking the highest value recorded in the series. This pattern indicates increased cash tax payments despite the oscillation in reported tax provisions, which could reflect timing differences between accounting tax expense and actual tax payments or changes in the company’s taxable income and cash flows.
Invested Capital
Advanced Micro Devices Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of liability for product warranty.
4 Addition of liabilities related to the 2024 Restructuring Plan.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction in progress.
8 Subtraction of short-term investments.
- Total reported debt & leases
- The total reported debt and leases experienced a moderate increase from 572 million USD in 2020 to 732 million USD in 2021. However, there was a significant surge in 2022, reaching 2956 million USD, more than quadrupling the previous year's amount. Following this peak, the debt slightly increased to 3109 million USD in 2023 before declining to 2321 million USD in 2024. Overall, despite fluctuations, the values remain substantially elevated relative to the initial years, indicating increased financial leverage or obligations.
- Stockholders’ equity
- Stockholders' equity showed steady growth from 5837 million USD in 2020 to 7497 million USD in 2021. A substantial rise occurred in 2022, jumping dramatically to 54750 million USD, with continued growth in subsequent years reaching 55892 million USD in 2023 and 57568 million USD in 2024. This marked increase in equity suggests either significant retained earnings, capital infusions, or revaluation adjustments with an emphasis on strengthening the company's financial foundation over time.
- Invested capital
- Invested capital followed a similar trend to stockholders' equity, beginning at 4364 million USD in 2020 and increasing to 6195 million USD in 2021. A notable surge occurred in 2022, reaching 58525 million USD, which was maintained with a slight decrease to 57883 million USD in 2023 and a minor uptick to 58227 million USD in 2024. The fluctuations suggest strategic capital allocation or acquisitions that contributed to a substantial increase in the total capital invested in the business.
Cost of Capital
Advanced Micro Devices Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-28).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-25).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-26).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Advanced Micro Devices Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 28, 2024 | Dec 30, 2023 | Dec 31, 2022 | Dec 25, 2021 | Dec 26, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data over the five-year period reveals significant fluctuations and concerning trends.
- Economic Profit
- The economic profit shows an initial positive value of 404 million US dollars in 2020, followed by a substantial increase to 2,199 million in 2021. However, from 2022 onwards, there is a pronounced decline into negative territory, with losses exceeding 12 billion US dollars in 2022, 2023, and 2024. Although the negative economic profit slightly improves in 2024 compared to the prior two years, it remains significantly adverse.
- Invested Capital
- Invested capital exhibits a marked upward trend starting from 4,364 million US dollars in 2020 to 6,195 million in 2021, then surging dramatically to over 58 billion from 2022 through 2024. The invested capital remains relatively stable at this elevated level in the last three years, suggesting a large accumulation or revaluation of assets.
- Economic Spread Ratio
- The economic spread ratio indicates the return on invested capital relative to cost. It starts positively at 9.25% in 2020 and further rises substantially to 35.5% in 2021. However, from 2022 onward, the ratio deteriorates sharply into negative values, reaching below -20% for three consecutive years. This decline suggests that the returns generated have been insufficient to cover the cost of capital, leading to value destruction during this period.
Overall, despite growing invested capital, the company experienced a shift from modest economic profit and favorable spread ratios in 2020-2021 to significant economic losses and negative returns over the subsequent three years. This pattern points to challenges in generating adequate returns on the substantial capital invested, with potential implications for the company's financial sustainability in the analyzed timeframe.
Economic Profit Margin
Advanced Micro Devices Inc., economic profit margin calculation, comparison to benchmarks
| Dec 28, 2024 | Dec 30, 2023 | Dec 31, 2022 | Dec 25, 2021 | Dec 26, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Net revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
| Texas Instruments Inc. | ||||||
Based on: 10-K (reporting date: 2024-12-28), 10-K (reporting date: 2023-12-30), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-25), 10-K (reporting date: 2020-12-26).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Net revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited a significant fluctuation over the analyzed periods. Initially, it increased from 404 million USD in 2020 to a peak of 2,199 million USD in 2021. However, from 2022 onwards, there was a drastic decline into negative territory, with economic losses exceeding 12 billion USD in 2022 and 2023, and a slight improvement in 2024 though still deeply negative at approximately -11.7 billion USD.
- Net Revenue
- Net revenue demonstrated a generally positive trend over the years. It rose steadily from 9,763 million USD in 2020 to 23,601 million USD in 2022. There was a marginal decline in 2023 to 22,680 million USD, but revenue rebounded strongly in 2024 to reach 25,785 million USD, marking the highest value in the series.
- Economic Profit Margin
- The economic profit margin followed the pattern of economic profit, starting at a positive 4.13% in 2020 and improving substantially to 13.38% in 2021. Subsequently, it experienced a sharp deterioration into negative percentages, reaching -52.56% in 2022 and further declining to -54.88% in 2023. Although the margin improved slightly in 2024 to -45.34%, it remained deeply negative, indicating sustained economic losses relative to revenue.