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.
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Advanced Micro Devices Inc. pages available for free this week:
- Balance Sheet: Assets
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- Analysis of Reportable Segments
- Enterprise Value to EBITDA (EV/EBITDA)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Total Asset Turnover since 2005
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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
= – × =
Analysis of the financial data reveals several important trends in profitability and capital utilization over the observed periods.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT experienced a significant increase from $1,330 million in 2020 to $3,517 million in 2021, indicating strong operational performance during that period. However, it sharply declined afterward, turning negative in 2022 (-$138 million) and further decreasing in 2023 (-$201 million). By 2024, there is a partial recovery to a positive $621 million, though it remains substantially below the peak achieved in 2021.
- Cost of Capital
- The cost of capital remained relatively stable across all years, fluctuating narrowly between 20.83% and 21.13%. This consistency suggests a stable assessment of the company’s risk and cost structure in terms of capital investment, without significant volatility affecting capital expenses.
- Invested Capital
- The invested capital exhibits a dramatic increase from $4,364 million in 2020 and $6,195 million in 2021 to an exceptionally high level of approximately $58,525 million in 2022. Following this sharp rise, the invested capital remains relatively stable, marginally decreasing to $57,883 million in 2023, and then slightly increasing again to $58,227 million in 2024. This substantial growth in invested capital during 2022 raises questions regarding capital deployment strategies or possibly accounting considerations in that period.
- Economic Profit
- Economic profit moves in parallel with NOPAT trends but with more pronounced negative outcomes following the substantial capital increase. From positive values of $410 million in 2020 and $2,208 million in 2021, economic profit declines steeply into significant negative territory, showing losses exceeding $12 billion in both 2022 and 2023. Although the loss decreases slightly to around -$11.6 billion in 2024, it remains highly negative, indicating that despite recorded profits in 2024, the returns are insufficient to cover the high cost of capital applied to the elevated invested capital base.
Overall, the data reflects a period of strong operating profitability and manageable capital levels until 2021, followed by a phase characterized by a large expansion in invested capital without corresponding profit growth, resulting in substantial negative economic profits. The partial recovery in NOPAT by 2024 suggests operational improvements, but persistent negative economic profits imply ongoing challenges in generating returns above the cost of capital on the enhanced capital base.
Net Operating Profit after Taxes (NOPAT)
Advanced Micro Devices Inc., NOPAT calculation
US$ 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 analysis of the annual financial data reveals significant fluctuations in the company's economic performance and capital structure over the reviewed periods.
- Economic Profit
- The economic profit exhibited a strong positive value of US$ 410 million in 2020, which surged significantly to US$ 2,208 million in 2021. However, from 2022 onwards, the economic profit turned negative, with substantial losses recorded: approximately US$ -12,327 million in 2022, US$ -12,368 million in 2023, and US$ -11,613 million in 2024. This shift indicates a marked deterioration in profitability starting in 2022, persisting through to the latest period.
- Invested Capital
- Invested capital showed consistent growth from 2020 through 2021, increasing from US$ 4,364 million to US$ 6,195 million. In 2022, invested capital surged sharply to US$ 58,525 million, maintaining comparable levels in 2023 and 2024, with minor fluctuations to US$ 57,883 million and US$ 58,227 million respectively. This dramatic increase starting in 2022 suggests significant capital investments or acquisitions.
- Economic Spread Ratio
- The economic spread ratio, representing the return on invested capital minus the cost of capital, followed a positive trend initially, rising from 9.38% in 2020 to a peak of 35.63% in 2021. From 2022 onward, this ratio turned negative, reaching -21.06% in 2022 and remaining at similar negative levels in 2023 and 2024, registering -21.37% and -19.94% respectively. This negative spread aligns with the negative economic profit observed, indicating that returns generated were insufficient to cover the cost of capital during these years.
Overall, while the company demonstrated strong economic profitability and efficient capital use up to 2021, from 2022 a sharp increase in invested capital coincided with large negative economic profits and negative economic spread ratios. This pattern suggests challenges in generating adequate returns on new investments, negatively impacting overall financial performance during the final three years of the period analyzed.
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.
- Net Revenue Trends
- The net revenue demonstrated consistent growth from 2020 through 2024. Starting at $9.763 billion in 2020, it increased substantially to $16.434 billion in 2021 and continued to grow to $23.601 billion in 2022. Despite a slight decline in 2023 to $22.680 billion, revenue rebounded to $25.785 billion in 2024, marking an overall impressive upward trajectory over the five-year period.
- Economic Profit Trends
- The economic profit experienced a significant shift during the period. In 2020, the economic profit was positive at $410 million, then surged to $2.208 billion in 2021, indicating robust profitability enhancements. However, this positive trend reversed dramatically beginning in 2022, with economic profit turning negative at -$12.327 billion and remaining substantially negative in 2023 and 2024, showing only a marginal improvement in the latter year.
- Economic Profit Margin Trends
- The economic profit margin pattern aligns closely with economic profit figures. The margin rose from 4.19% in 2020 to 13.43% in 2021, reflecting strong profitability relative to revenue during that period. From 2022 onwards, there was a sharp decline into negative territory with margins of -52.23% in 2022, -54.53% in 2023, and a slight recovery to -45.04% in 2024, indicating that despite increasing revenues, the company encountered considerable inefficiencies or costs surpassing revenues during the latter three years.
- Overall Observations
- While net revenue steadily increased over the five-year window, the transition from positive to significantly negative economic profit and economic profit margins from 2022 onwards suggests challenges in cost management or capital efficiency. The substantial negative economic profit values imply that the company may have been investing heavily or facing operational difficulties, which eroded economic value despite top-line growth. The slight improvement in economic profit and margin in 2024 compared to 2023 may indicate early signs of recovering profitability or improved operational metrics.