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.
Economic Profit
Alphabet Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 140,506 – 18.71% × 310,780 = 82,358
The analysis of economic profit from 2021 to 2025 reveals a period of initial volatility followed by a phase of aggressive value creation. After a significant contraction in 2022, the company entered a sustained recovery trajectory, culminating in a peak in economic profit by the end of the observed period.
- Net Operating Profit After Taxes (NOPAT)
- A notable decline in NOPAT occurred in 2022, falling to 52,578 million US$ from 77,747 million US$ in 2021. This downturn was reversed in subsequent years, with a steady climb to 65,370 million US$ in 2023, followed by an acceleration to 93,781 million US$ in 2024 and 140,506 million US$ in 2025. This trend indicates a strong recovery in operational profitability and an expansion of earnings capacity.
- Cost and Base of Invested Capital
- The cost of capital remained highly stable over the five-year duration, maintaining a narrow range between 18.63% and 18.76%. Simultaneously, invested capital exhibited an overall upward trend, increasing from 171,408 million US$ in 2021 to 310,780 million US$ in 2025, despite a slight reduction in 2023. The stability of the cost of capital suggests a consistent risk profile and financing environment despite the increasing scale of the capital base.
- Economic Profit Performance
- Economic profit followed a trajectory closely aligned with NOPAT, dropping from 45,661 million US$ in 2021 to a low of 14,879 million US$ in 2022. However, a robust recovery ensued, with economic profit rising to 29,872 million US$ in 2023, 51,008 million US$ in 2024, and reaching 82,358 million US$ in 2025. The consistent positivity of these figures confirms that the company generated returns exceeding its cost of capital throughout the entire period.
The data suggests that from 2023 onward, the growth in operational profits significantly outpaced the growth in the associated capital charges. This divergence resulted in a substantial increase in economic value added, demonstrating an enhanced ability to convert invested capital into surplus value.
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Net Operating Profit after Taxes (NOPAT)
Alphabet Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses on accounts receivable.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 15,953 × 3.60% = 574
6 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,310 × 21.00% = 275
7 Addition of after taxes interest expense to net income.
8 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 4,550 × 21.00% = 956
9 Elimination of after taxes investment income.
Net income and net operating profit after taxes (NOPAT) experienced fluctuations over the five-year period. While both metrics moved in similar directions, the magnitude and timing of changes differed. A significant decrease in both net income and NOPAT was observed between 2021 and 2022, followed by periods of recovery and growth through 2025.
- NOPAT Trend
- NOPAT decreased substantially from US$77,747 million in 2021 to US$52,578 million in 2022, representing a decline of approximately 32.2%. A subsequent recovery occurred in 2023, with NOPAT reaching US$65,370 million. This upward trend continued into 2024, with NOPAT increasing to US$93,781 million, and accelerated further in 2025, reaching US$140,506 million. The 2025 value represents an increase of approximately 80.7% compared to 2023 and a 50.1% increase compared to 2024.
- Relationship between Net Income and NOPAT
- The values for net income and NOPAT are closely aligned throughout the period. The largest divergence occurred in 2022, where the decrease in NOPAT was more pronounced than the decrease in net income. This suggests potential changes in non-operating items or tax rates during that year. In 2024 and 2025, the growth rates of both metrics were similar, indicating a consistent relationship between core operating profitability and overall net earnings.
The substantial growth in both NOPAT and net income from 2022 to 2025 suggests improved operational efficiency, increased revenue, or a combination of both. The recovery from the 2022 decline indicates a successful response to whatever factors contributed to the initial downturn. Further investigation into the drivers of these changes would be beneficial for a more comprehensive understanding of the company’s financial performance.
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Cash Operating Taxes
Alphabet Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
The provision for income taxes and cash operating taxes exhibited distinct patterns over the five-year period. The provision for income taxes generally increased, while cash operating taxes demonstrated more volatility.
- Provision for Income Taxes
- The provision for income taxes increased from US$14,701 million in 2021 to US$26,656 million in 2025. A decrease was observed in 2022, falling to US$11,356 million, before recovering and steadily increasing through 2025. This suggests a growing tax burden as reported income increased, with a temporary dip in 2022.
- Cash Operating Taxes
- Cash operating taxes showed considerable fluctuation. Beginning at US$12,624 million in 2021, it rose significantly to US$19,532 million in 2022. It remained relatively stable at US$19,318 million in 2023, then increased to US$24,384 million in 2024, before decreasing substantially to US$17,726 million in 2025. This volatility indicates potential changes in tax payments related to timing differences between reported income and actual cash outflows, or changes in tax planning strategies.
The divergence between the provision for income taxes and cash operating taxes is notable. While the provision for income taxes consistently trended upward (excluding the 2022 dip), cash operating taxes experienced more pronounced swings. This difference could be attributed to deferred tax assets or liabilities, tax credits utilized, or changes in the effective tax rate impacting actual cash payments. Further investigation into the components of these figures would be necessary to fully understand the underlying drivers.
- Relationship between Provision and Cash Taxes
- In 2021, cash operating taxes were approximately 86% of the provision for income taxes. This percentage increased to 172% in 2022, then decreased to 102% in 2023, 124% in 2024, and finally to 66% in 2025. This fluctuating ratio highlights the increasing disconnect between accounting income and cash tax payments over the period, particularly in 2025.
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Invested Capital
Alphabet Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of allowance for doubtful accounts receivable.
4 Addition of deferred revenue.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of assets not yet in service.
8 Subtraction of marketable securities.
The reported figures reveal evolving trends in the company’s capital structure between 2021 and 2025. Total reported debt & leases exhibited a generally increasing pattern, with a significant jump occurring in 2025. Stockholders’ equity demonstrated consistent growth throughout the period, accelerating in the later years. Invested capital fluctuated, showing an initial increase followed by a decrease, and then resumed growth.
- Debt & Leases
- Total reported debt & leases increased from US$28,508 million in 2021 to US$29,977 million in 2022, representing a modest rise. It remained relatively stable in 2023 at US$29,867 million before increasing to US$30,437 million in 2024. A substantial increase is observed in 2025, reaching US$66,996 million, indicating a significant reliance on debt financing during that year.
- Stockholders’ Equity
- Stockholders’ equity experienced steady growth over the five-year period. It rose from US$251,635 million in 2021 to US$256,144 million in 2022. The rate of increase accelerated in subsequent years, reaching US$283,379 million in 2023, US$325,084 million in 2024, and culminating in US$415,265 million in 2025. This suggests increasing retained earnings and/or equity issuances.
- Invested Capital
- Invested capital initially increased from US$171,408 million in 2021 to US$202,355 million in 2022. However, a decrease was noted in 2023, with invested capital falling to US$189,779 million. The trend reversed in 2024, with invested capital rising to US$227,952 million, and continued its upward trajectory in 2025, reaching US$310,780 million. The fluctuations suggest potential shifts in capital allocation strategies or asset management.
The combined trends indicate a growing company, particularly in terms of equity. The significant increase in debt in 2025, coupled with the rising invested capital, warrants further investigation to determine the purpose of the increased leverage and its potential impact on future financial performance.
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Cost of Capital
Alphabet Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 4,008,099) | 4,008,099) | ÷ | 4,072,152) | = | 0.98 | 0.98 | × | 18.96% | = | 18.66% | ||
| Debt and finance lease liabilities3 | 48,100) | 48,100) | ÷ | 4,072,152) | = | 0.01 | 0.01 | × | 4.53% × (1 – 21.00%) | = | 0.04% | ||
| Operating lease liability4 | 15,953) | 15,953) | ÷ | 4,072,152) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 4,072,152) | 1.00 | 18.71% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 2,356,327) | 2,356,327) | ÷ | 2,383,882) | = | 0.99 | 0.99 | × | 18.96% | = | 18.74% | ||
| Debt and finance lease liabilities3 | 12,977) | 12,977) | ÷ | 2,383,882) | = | 0.01 | 0.01 | × | 2.71% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 14,578) | 14,578) | ÷ | 2,383,882) | = | 0.01 | 0.01 | × | 3.40% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 2,383,882) | 1.00 | 18.76% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 1,762,999) | 1,762,999) | ÷ | 1,790,296) | = | 0.98 | 0.98 | × | 18.96% | = | 18.67% | ||
| Debt and finance lease liabilities3 | 12,046) | 12,046) | ÷ | 1,790,296) | = | 0.01 | 0.01 | × | 3.38% × (1 – 21.00%) | = | 0.02% | ||
| Operating lease liability4 | 15,251) | 15,251) | ÷ | 1,790,296) | = | 0.01 | 0.01 | × | 3.10% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 1,790,296) | 1.00 | 18.70% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 1,347,553) | 1,347,553) | ÷ | 1,374,573) | = | 0.98 | 0.98 | × | 18.96% | = | 18.58% | ||
| Debt and finance lease liabilities3 | 12,042) | 12,042) | ÷ | 1,374,573) | = | 0.01 | 0.01 | × | 3.38% × (1 – 21.00%) | = | 0.02% | ||
| Operating lease liability4 | 14,978) | 14,978) | ÷ | 1,374,573) | = | 0.01 | 0.01 | × | 2.80% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 1,374,573) | 1.00 | 18.63% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 1,957,004) | 1,957,004) | ÷ | 1,985,068) | = | 0.99 | 0.99 | × | 18.96% | = | 18.69% | ||
| Debt and finance lease liabilities3 | 14,486) | 14,486) | ÷ | 1,985,068) | = | 0.01 | 0.01 | × | 3.38% × (1 – 21.00%) | = | 0.02% | ||
| Operating lease liability4 | 13,578) | 13,578) | ÷ | 1,985,068) | = | 0.01 | 0.01 | × | 2.30% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 1,985,068) | 1.00 | 18.72% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Alphabet Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 82,358) | 51,008) | 29,872) | 14,879) | 45,661) | |
| Invested capital2 | 310,780) | 227,952) | 189,779) | 202,355) | 171,408) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 26.50% | 22.38% | 15.74% | 7.35% | 26.64% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AppLovin Corp. | 28.42% | 0.70% | -20.45% | -26.69% | -30.02% | |
| Comcast Corp. | 1.86% | -1.34% | -3.23% | -7.70% | -2.70% | |
| Meta Platforms Inc. | 16.62% | 13.77% | 6.68% | 0.43% | 22.71% | |
| Netflix Inc. | 0.78% | -3.92% | -10.17% | -10.70% | -6.10% | |
| Walt Disney Co. | -12.54% | -15.95% | -17.46% | -15.27% | -18.26% | |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 82,358 ÷ 310,780 = 26.50%
4 Click competitor name to see calculations.
The financial performance between December 31, 2021, and December 31, 2025, is characterized by a significant volatility event in 2022 followed by a period of sustained recovery and growth. While there was a sharp contraction in value creation efficiency in the second year, the subsequent three years demonstrate a consistent upward trajectory in both absolute economic profit and the relative spread ratio.
- Economic Spread Ratio
- The economic spread ratio experienced a precipitous decline from 26.64% in 2021 to a low of 7.35% in 2022. Following this trough, a steady recovery is observed, with the ratio climbing to 15.74% in 2023, 22.38% in 2024, and reaching 26.50% by the end of 2025. This indicates that the company successfully restored its ability to generate returns above its cost of capital to levels nearly identical to those seen at the start of the period.
- Economic Profit
- Economic profit followed a similar V-shaped pattern, falling from US$ 45,661 million in 2021 to US$ 14,879 million in 2022. A robust recovery trend ensued, with profits increasing to US$ 29,872 million in 2023, US$ 51,008 million in 2024, and peaking at US$ 82,358 million in 2025. The final value represents a substantial increase over the 2021 baseline, suggesting a significant expansion in absolute value creation.
- Invested Capital
- Invested capital shows a general trend of expansion, moving from US$ 171,408 million in 2021 to US$ 310,780 million in 2025. Although a slight contraction occurred in 2023, where capital decreased to US$ 189,779 million, the growth accelerated sharply in 2024 and 2025. The fact that the economic spread ratio increased while invested capital expanded suggests that the growth in returns significantly outpaced the growth in the capital base during the latter part of the period.
In summary, the data reflects a period of temporary inefficiency in 2022 that was effectively mitigated. The simultaneous increase in invested capital and economic spread ratio from 2023 through 2025 indicates an improving scale of operations paired with increasing capital efficiency.
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Economic Profit Margin
Alphabet Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | 82,358) | 51,008) | 29,872) | 14,879) | 45,661) | |
| Revenues | 402,836) | 350,018) | 307,394) | 282,836) | 257,637) | |
| Add: Increase (decrease) in deferred revenue | 2,600) | 952) | 541) | 684) | 799) | |
| Adjusted revenues | 405,436) | 350,970) | 307,935) | 283,520) | 258,436) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 20.31% | 14.53% | 9.70% | 5.25% | 17.67% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AppLovin Corp. | 29.21% | 0.68% | -27.99% | -49.97% | -60.11% | |
| Comcast Corp. | 3.49% | -2.33% | -5.58% | -13.59% | -5.32% | |
| Meta Platforms Inc. | 17.84% | 13.88% | 6.99% | 0.38% | 17.84% | |
| Netflix Inc. | 0.75% | -4.08% | -11.38% | -12.76% | -7.12% | |
| Walt Disney Co. | -21.95% | -29.02% | -34.10% | -31.42% | -46.53% | |
Based on: 10-K (reporting date: 2025-12-31), 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 82,358 ÷ 405,436 = 20.31%
3 Click competitor name to see calculations.
The financial performance between December 31, 2021, and December 31, 2025, is characterized by consistent revenue expansion coupled with a volatile yet ultimately strong recovery in economic value generation. While adjusted revenues grew steadily every year, economic profit experienced a significant contraction in 2022 before entering a period of accelerated growth.
- Adjusted Revenue Growth
- A consistent upward trajectory is observed in adjusted revenues, which increased from 258,436 million US dollars in 2021 to 405,436 million US dollars by 2025. This represents a steady expansion of the top-line base, providing the necessary scale for potential economic profit growth.
- Economic Profit Volatility and Recovery
- Economic profit exhibited a sharp decline in 2022, falling from 45,661 million US dollars to 14,879 million US dollars. However, a strong recovery trend followed, with profit increasing to 29,872 million US dollars in 2023, 51,008 million US dollars in 2024, and peaking at 82,358 million US dollars in 2025. This indicates that the company successfully overcame the 2022 downturn to achieve a level of economic value added significantly higher than the 2021 baseline.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute profit figures, dropping precipitously from 17.67% in 2021 to a low of 5.25% in 2022. Subsequently, a consistent recovery phase occurred, with the margin rising to 9.70% in 2023, 14.53% in 2024, and reaching a five-year high of 20.31% in 2025. The fact that the margin growth outpaced the revenue growth in the final three years suggests an improvement in capital efficiency and operational profitability relative to the cost of capital.
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