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 – 18.67% × 310,780 = 82,486
The financial trajectory between 2021 and 2025 is characterized by an initial period of volatility followed by a sustained acceleration in value creation. While economic profit experienced a significant contraction in 2022, the subsequent years demonstrate a robust recovery and an expansion of the surplus generated above the cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- A substantial decline in NOPAT was recorded in 2022, falling from 77,747 million to 52,578 million. This trend reversed starting in 2023, with a consistent upward trajectory that culminated in a peak of 140,506 million by 2025. The growth from 2023 to 2025 indicates a significant strengthening of operational profitability.
- Invested Capital
- Invested capital increased from 171,408 million in 2021 to 310,780 million in 2025. Despite a marginal contraction in 2023, the overall trend shows a strategic expansion of the capital base, particularly in the final two years of the period, suggesting aggressive investment in growth assets.
- Cost of Capital
- The cost of capital remained remarkably stable throughout the analyzed period, maintaining a tight range between 18.59% and 18.72%. This lack of volatility suggests a consistent risk profile and a stable required rate of return for investors.
- Economic Profit
- Economic profit reached a low of 14,963 million in 2022, coinciding with the dip in NOPAT and a simultaneous increase in invested capital. However, a strong recovery trend is evident from 2023 through 2025, with economic profit rising to 82,486 million. This indicates that the growth in operational profits far exceeded the incremental cost of the capital deployed, resulting in enhanced shareholder value creation.
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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$310,780 million. The fluctuations suggest potential shifts in capital allocation strategies or asset management.
The combined trends indicate a growing company, particularly in terms of equity. The significant increase in debt in 2025, coupled with the rising invested capital, warrants further investigation to determine the purpose of the increased leverage and its potential impact on future financial performance.
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Cost of Capital
Alphabet Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 4,008,099) | 4,008,099) | ÷ | 4,072,152) | = | 0.98 | 0.98 | × | 18.91% | = | 18.62% | ||
| Debt and finance lease liabilities3 | 48,100) | 48,100) | ÷ | 4,072,152) | = | 0.01 | 0.01 | × | 4.53% × (1 – 21.00%) | = | 0.04% | ||
| Operating lease liability4 | 15,953) | 15,953) | ÷ | 4,072,152) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 4,072,152) | 1.00 | 18.67% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | × | 18.91% | = | 18.69% | ||
| 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 | 18.72% | ||||||||||
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 | × | 18.91% | = | 18.62% | ||
| 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 | 18.66% | ||||||||||
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 | × | 18.91% | = | 18.54% | ||
| 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 | 18.59% | ||||||||||
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 | × | 18.91% | = | 18.65% | ||
| 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 | 18.68% | ||||||||||
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 | 82,486) | 51,103) | 29,951) | 14,963) | 45,732) | |
| Invested capital2 | 310,780) | 227,952) | 189,779) | 202,355) | 171,408) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 26.54% | 22.42% | 15.78% | 7.39% | 26.68% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Comcast Corp. | 1.83% | -1.38% | -3.27% | -7.74% | -2.74% | |
| Meta Platforms Inc. | 16.71% | 13.86% | 6.77% | 0.52% | 22.81% | |
| Netflix Inc. | 1.00% | -3.69% | -9.95% | -10.48% | -5.88% | |
| Walt Disney Co. | -12.40% | -15.81% | -17.33% | -15.13% | -18.12% | |
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 × 82,486 ÷ 310,780 = 26.54%
4 Click competitor name to see calculations.
The financial performance over the analyzed five-year period is characterized by a significant contraction in value creation in 2022, followed by a consistent and robust recovery through 2025. The relationship between invested capital and economic profit indicates an improving ability to generate returns above the cost of capital after a period of volatility.
- Economic Spread Ratio
- A sharp decline is observed in the economic spread ratio, which dropped from 26.68% in 2021 to a low of 7.39% in 2022. This indicates a substantial narrowing of the margin between the return on invested capital and the cost of capital. However, a strong recovery trend followed, with the ratio ascending to 15.78% in 2023 and 22.42% in 2024, eventually returning to near-baseline levels at 26.54% by the end of 2025.
- Economic Profit
- Economic profit exhibited a V-shaped trajectory. After a steep decrease from 45,732 million USD in 2021 to 14,963 million USD in 2022, the figures grew steadily. Profitability increased to 29,951 million USD in 2023 and 51,103 million USD in 2024, culminating in a peak of 82,486 million USD in 2025, representing a significant expansion in absolute economic value added.
- Invested Capital
- Invested capital demonstrated a general expansionary trend over the period. While there was a slight reduction from 202,355 million USD in 2022 to 189,779 million USD in 2023, capital deployment accelerated rapidly thereafter. The amount of invested capital reached 227,952 million USD in 2024 and climbed to 310,780 million USD in 2025. The fact that the economic spread ratio increased simultaneously with this capital expansion suggests that the additional investments were highly accretive.
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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 | 82,486) | 51,103) | 29,951) | 14,963) | 45,732) | |
| 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 | 20.35% | 14.56% | 9.73% | 5.28% | 17.70% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Comcast Corp. | 3.43% | -2.39% | -5.65% | -13.66% | -5.40% | |
| Meta Platforms Inc. | 17.94% | 13.98% | 7.09% | 0.46% | 17.92% | |
| Netflix Inc. | 0.97% | -3.84% | -11.13% | -12.50% | -6.87% | |
| Walt Disney Co. | -21.70% | -28.77% | -33.84% | -31.15% | -46.18% | |
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 × 82,486 ÷ 405,436 = 20.35%
3 Click competitor name to see calculations.
The analysis of economic value creation between 2021 and 2025 reveals a period of initial contraction followed by an aggressive recovery and expansion. While revenue growth remained linear and positive, the efficiency of value generation fluctuated significantly before achieving a period of high performance.
- Revenue Growth Patterns
- Adjusted revenues exhibited consistent year-over-year growth, ascending from US$ 258,436 million in 2021 to US$ 405,436 million in 2025. This steady increase indicates a stable expansion of the business scale throughout the observed period.
- Economic Profit Volatility and Recovery
- Economic profit witnessed a sharp decrease in 2022, dropping to US$ 14,963 million from a 2021 level of US$ 45,732 million. This downturn was followed by a sustained upward trend, with figures rising to US$ 29,951 million in 2023, US$ 51,103 million in 2024, and reaching a maximum of US$ 82,486 million by the end of 2025.
- Economic Profit Margin Dynamics
- The economic profit margin experienced significant compression in 2022, falling to 5.28%. Subsequently, a strong recovery trend was observed, with the margin increasing to 9.73% in 2023 and 14.56% in 2024. The period concluded with a margin of 20.35% in 2025, representing the highest level of value creation efficiency across the analyzed timeframe and exceeding the 17.70% recorded in 2021.
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