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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.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Alphabet Inc., economic profit calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net operating profit after taxes (NOPAT)¹	63,082)	52,578)	77,747)	41,262)	32,894)
Cost of capital²	14.06%	14.01%	14.07%	14.00%	14.05%
Invested capital³	189,763)	174,698)	148,237)	122,733)	100,542)

Economic profit⁴	36,397)	28,106)	56,889)	24,077)	18,771)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 63,082 – 14.06% × 189,763 = 36,397

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Alphabet Inc. economic profit decreased from 2021 to 2022 but then slightly increased from 2022 to 2023.

Alphabet Inc., NOPAT calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net income	73,795)	59,972)	76,033)	40,269)	34,343)
Deferred income tax expense (benefit)¹	(7,729)	(8,198)	1,883)	1,337)	145)
Increase (decrease) in allowance for credit losses on accounts receivable²	17)	204)	(239)	514)	24)
Increase (decrease) in deferred revenue³	541)	684)	799)	758)	86)
Increase (decrease) in severance charges and related accruals⁴	77)	—)	—)	—)	—)
Increase (decrease) in equity equivalents⁵	(7,094)	(7,310)	2,443)	2,609)	255)
Interest expense	308)	357)	346)	135)	100)
Interest expense, operating lease liability⁶	473)	419)	312)	334)	320)
Adjusted interest expense	781)	776)	658)	469)	420)
Tax benefit of interest expense⁷	(164)	(163)	(138)	(98)	(88)
Adjusted interest expense, after taxes⁸	617)	613)	520)	370)	331)
(Gain) loss on marketable securities	(1,497)	1,291)	(82)	(650)	(149)
Interest income	(3,865)	(2,174)	(1,499)	(1,865)	(2,427)
Investment income, before taxes	(5,362)	(883)	(1,581)	(2,515)	(2,576)
Tax expense (benefit) of investment income⁹	1,126)	185)	332)	528)	541)
Investment income, after taxes¹⁰	(4,236)	(698)	(1,249)	(1,987)	(2,035)
Net operating profit after taxes (NOPAT)	63,082)	52,578)	77,747)	41,262)	32,894)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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 severance charges and related accruals.

⁵ Addition of increase (decrease) in equity equivalents to net income.

⁶ 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 15,251 × 3.10% = 473

⁷ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 781 × 21.00% = 164

⁸ Addition of after taxes interest expense to net income.

⁹ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 5,362 × 21.00% = 1,126

¹⁰ Elimination of after taxes investment income.

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Alphabet Inc. NOPAT decreased from 2021 to 2022 but then slightly increased from 2022 to 2023.

Alphabet Inc., cash operating taxes calculation

US$ in millions

12 months ended:	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Provision for income taxes	11,922)	11,356)	14,701)	7,813)	5,282)
Less: Deferred income tax expense (benefit)	(7,729)	(8,198)	1,883)	1,337)	145)
Add: Tax savings from interest expense	164)	163)	138)	98)	88)
Less: Tax imposed on investment income	1,126)	185)	332)	528)	541)
Cash operating taxes	18,689)	19,532)	12,624)	6,046)	4,684)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Alphabet Inc. cash operating taxes increased from 2021 to 2022 but then slightly decreased from 2022 to 2023.

Alphabet Inc., invested capital calculation (financing approach)

US$ in millions

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Current portion of long-term notes	1,000)	—)	—)	999)	—)
Current portion of future finance lease payments, net and other current debt	363)	298)	113)	101)	115)
Long-term debt, excluding current portion	13,253)	14,701)	14,817)	13,932)	4,554)
Operating lease liability¹	15,251)	14,978)	13,578)	12,840)	11,413)
Total reported debt & leases	29,867)	29,977)	28,508)	27,872)	16,082)
Stockholders’ equity	283,379)	256,144)	251,635)	222,544)	201,442)
Net deferred tax (assets) liabilities²	(11,684)	(4,747)	3,973)	2,477)	980)
Allowance for credit losses on accounts receivable³	771)	754)	550)	789)	753)
Deferred revenue⁴	5,048)	4,507)	3,823)	3,024)	2,266)
Severance charges and related accruals⁵	77)	—)	—)	—)	—)
Equity equivalents⁶	(5,788)	514)	8,346)	6,290)	3,999)
Accumulated other comprehensive (income) loss, net of tax⁷	4,402)	7,603)	1,623)	(633)	1,232)
Adjusted stockholders’ equity	281,993)	264,261)	261,604)	228,201)	206,673)
Construction in progress⁸	(35,229)	(27,657)	(23,171)	(23,111)	(21,036)
Marketable securities⁹	(86,868)	(91,883)	(118,704)	(110,229)	(101,177)
Invested capital	189,763)	174,698)	148,237)	122,733)	100,542)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

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 severance charges and related accruals.

⁶ Addition of equity equivalents to stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction in progress.

⁹ Subtraction of marketable securities.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Alphabet Inc. invested capital increased from 2021 to 2022 and from 2022 to 2023.

Alphabet Inc., cost of capital calculations

Dec 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	1,762,999)	1,762,999)	÷	1,790,296)	=	0.98	0.98	×	14.24%	=	14.02%
Debt³	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					14.06%

Based on: 10-K (reporting date: 2023-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	1,347,553)	1,347,553)	÷	1,374,573)	=	0.98	0.98	×	14.24%	=	13.96%
Debt³	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					14.01%

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 »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	1,957,004)	1,957,004)	÷	1,985,068)	=	0.99	0.99	×	14.24%	=	14.04%
Debt³	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					14.07%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	1,395,463)	1,395,463)	÷	1,423,504)	=	0.98	0.98	×	14.24%	=	13.96%
Debt³	15,201)	15,201)	÷	1,423,504)	=	0.01	0.01	×	2.73% × (1 – 21.00%)	=	0.02%
Operating lease liability⁴	12,840)	12,840)	÷	1,423,504)	=	0.01	0.01	×	2.60% × (1 – 21.00%)	=	0.02%
Total:	1,423,504)					1.00					14.00%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	994,503)	994,503)	÷	1,010,727)	=	0.98	0.98	×	14.24%	=	14.01%
Debt³	4,811)	4,811)	÷	1,010,727)	=	0.00	0.00	×	2.89% × (1 – 21.00%)	=	0.01%
Operating lease liability⁴	11,413)	11,413)	÷	1,010,727)	=	0.01	0.01	×	2.80% × (1 – 21.00%)	=	0.02%
Total:	1,010,727)					1.00					14.05%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in millions

² Equity. See details »

³ Debt. See details »

⁴ Operating lease liability. See details »

Alphabet Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	36,397)	28,106)	56,889)	24,077)	18,771)
Invested capital²	189,763)	174,698)	148,237)	122,733)	100,542)
Performance Ratio
Economic spread ratio³	19.18%	16.09%	38.38%	19.62%	18.67%
Benchmarks
Economic Spread Ratio, Competitors⁴
Comcast Corp.	-2.25%	-6.73%	-1.70%	-3.36%	-1.31%
Meta Platforms Inc.	12.53%	6.16%	28.62%	19.83%	12.93%
Netflix Inc.	0.36%	-0.91%	3.41%	-1.98%	-3.81%
Walt Disney Co.	-11.30%	-9.17%	-11.94%	-14.23%	-4.03%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 36,397 ÷ 189,763 = 19.18%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Alphabet Inc. economic spread ratio deteriorated from 2021 to 2022 but then slightly improved from 2022 to 2023.

Alphabet Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	36,397)	28,106)	56,889)	24,077)	18,771)

Revenues	307,394)	282,836)	257,637)	182,527)	161,857)
Add: Increase (decrease) in deferred revenue	541)	684)	799)	758)	86)
Adjusted revenues	307,935)	283,520)	258,436)	183,285)	161,943)
Performance Ratio
Economic profit margin²	11.82%	9.91%	22.01%	13.14%	11.59%
Benchmarks
Economic Profit Margin, Competitors³
Comcast Corp.	-3.90%	-11.89%	-3.34%	-7.25%	-2.60%
Meta Platforms Inc.	13.11%	5.38%	22.48%	18.65%	11.97%
Netflix Inc.	0.41%	-1.09%	3.98%	-2.34%	-4.52%
Walt Disney Co.	-22.07%	-18.87%	-30.44%	-38.27%	-9.64%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × 36,397 ÷ 307,935 = 11.82%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Alphabet Inc. economic profit margin deteriorated from 2021 to 2022 but then slightly improved from 2022 to 2023.

Alphabet Inc. (NASDAQ:GOOG)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin