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 – 18.79% × 310,780 = 82,124
The financial performance between 2021 and 2025 demonstrates a significant recovery and subsequent acceleration in economic value creation. After a notable contraction in 2022, the company transitioned into a period of robust growth, culminating in record levels of economic profit by the end of 2025.
- Net Operating Profit After Taxes (NOPAT)
- A volatile but ultimately upward trend is observed in NOPAT. Following a decline from 77,747 million USD in 2021 to 52,578 million USD in 2022, operating profits recovered steadily. This growth accelerated sharply in the final two years, reaching 93,781 million USD in 2024 and peaking at 140,506 million USD in 2025, indicating a substantial increase in operational efficiency and earnings power.
- Invested Capital and Capital Cost
- Invested capital showed a general expansion over the period, growing from 171,408 million USD in 2021 to 310,780 million USD in 2025. Despite this increase in the capital base, the cost of capital remained remarkably stable, fluctuating within a narrow range between 18.70% and 18.84%. This stability suggests a consistent risk profile and funding cost throughout the five-year window.
- Economic Profit Trends
- Economic profit closely mirrors the trajectory of NOPAT, exhibiting a sharp decline in 2022 to 14,727 million USD. However, a consistent recovery followed, with economic profit increasing to 29,729 million USD in 2023, 50,836 million USD in 2024, and 82,124 million USD in 2025. The fact that economic profit grew faster than invested capital in the latter years indicates that the returns on newly deployed capital significantly exceeded the cost of capital.
The overall analysis indicates that the company successfully navigated a period of diminished profitability in 2022 to achieve a state of high value creation. The substantial increase in economic profit by 2025 suggests that the expansion of the invested capital base was managed efficiently, driving returns that far outpaced the weighted average cost of capital.
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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$310,780 million. The fluctuations suggest potential shifts in capital allocation strategies or asset management.
The combined trends indicate a growing company, particularly in terms of equity. The significant increase in debt in 2025, coupled with the rising invested capital, warrants further investigation to determine the purpose of the increased leverage and its potential impact on future financial performance.
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Cost of Capital
Alphabet Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 4,008,099) | 4,008,099) | ÷ | 4,072,152) | = | 0.98 | 0.98 | × | 19.03% | = | 18.73% | ||
| Debt and finance lease liabilities3 | 48,100) | 48,100) | ÷ | 4,072,152) | = | 0.01 | 0.01 | × | 4.53% × (1 – 21.00%) | = | 0.04% | ||
| Operating lease liability4 | 15,953) | 15,953) | ÷ | 4,072,152) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 4,072,152) | 1.00 | 18.79% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | × | 19.03% | = | 18.81% | ||
| 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 | 18.84% | ||||||||||
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 | × | 19.03% | = | 18.74% | ||
| 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 | 18.78% | ||||||||||
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 | × | 19.03% | = | 18.66% | ||
| 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 | 18.70% | ||||||||||
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 | × | 19.03% | = | 18.76% | ||
| 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 | 18.79% | ||||||||||
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 | 82,124) | 50,836) | 29,729) | 14,727) | 45,532) | |
| Invested capital2 | 310,780) | 227,952) | 189,779) | 202,355) | 171,408) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 26.43% | 22.30% | 15.67% | 7.28% | 26.56% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Comcast Corp. | 1.84% | -1.37% | -3.26% | -7.72% | -2.73% | |
| Meta Platforms Inc. | 16.53% | 13.67% | 6.59% | 0.34% | 22.62% | |
| Netflix Inc. | 0.64% | -4.05% | -10.30% | -10.83% | -6.22% | |
| Trade Desk Inc. | 8.99% | -8.06% | -14.73% | -17.39% | -10.58% | |
| Walt Disney Co. | -12.64% | -16.04% | -17.56% | -15.36% | -18.36% | |
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 × 82,124 ÷ 310,780 = 26.43%
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by a significant volatility in economic value creation, marked by a sharp contraction in 2022 followed by a consistent and robust recovery phase. The data indicates a strong rebound in the company's ability to generate returns above its cost of capital, culminating in peak economic profit levels by the end of the period.
- Economic Profit Trends
- A substantial decline in economic profit is observed in 2022, where the value dropped to 14,727 million US dollars from 45,532 million US dollars in 2021. This downward movement was reversed starting in 2023, with a steady upward trajectory leading to 82,124 million US dollars by December 31, 2025. This represents a significant expansion in absolute economic value added over the five-year horizon.
- Invested Capital Deployment
- Invested capital exhibited a general upward trend, growing from 171,408 million US dollars in 2021 to 310,780 million US dollars in 2025. Although a slight contraction occurred in 2023, the subsequent years saw an aggressive increase in capital allocation, particularly between 2024 and 2025, suggesting a period of intensified investment in the business base.
- Economic Spread Ratio Analysis
- The economic spread ratio experienced a severe compression in 2022, falling to 7.28% from a high of 26.56% in 2021. This contraction suggests a temporary narrowing of the gap between the return on invested capital and the weighted average cost of capital. However, the ratio recovered systematically over the following three years, reaching 26.43% in 2025. The convergence of the 2025 ratio with the 2021 level, despite a significantly larger base of invested capital, indicates a successful scaling of economic 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 | 82,124) | 50,836) | 29,729) | 14,727) | 45,532) | |
| 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 | 20.26% | 14.48% | 9.65% | 5.19% | 17.62% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Comcast Corp. | 3.45% | -2.37% | -5.63% | -13.64% | -5.37% | |
| Meta Platforms Inc. | 17.74% | 13.79% | 6.89% | 0.30% | 17.77% | |
| Netflix Inc. | 0.62% | -4.22% | -11.53% | -12.92% | -7.27% | |
| Trade Desk Inc. | 6.56% | -8.10% | -13.35% | -20.56% | -13.61% | |
| Walt Disney Co. | -22.12% | -29.19% | -34.29% | -31.61% | -46.77% | |
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 × 82,124 ÷ 405,436 = 20.26%
3 Click competitor name to see calculations.
The financial trajectory from 2021 to 2025 is characterized by a significant contraction in economic value creation in 2022, followed by a consistent and accelerating recovery phase. While adjusted revenues exhibited steady year-over-year growth throughout the entire period, economic profit experienced high volatility, indicating fluctuating capital efficiency and operating performance relative to the cost of capital.
- Economic Profit Margin Volatility
- A sharp decline in the economic profit margin is observed between 2021 and 2022, dropping from 17.62% to 5.19%. This contraction indicates a period where the value generated over the required return on capital diminished substantially despite an increase in adjusted revenues. However, a sustained upward trend followed, with the margin recovering to 9.65% in 2023, 14.48% in 2024, and peaking at 20.26% by 2025.
- Revenue Growth and Scalability
- Adjusted revenues grew consistently from 258,436 million US dollars in 2021 to 405,436 million US dollars in 2025. The divergence between the steady revenue climb and the volatile economic profit in 2022 suggests that the initial dip in profitability was not driven by a lack of top-line growth, but rather by factors impacting the cost of capital or operational expenses during that specific fiscal year.
- Economic Profit Expansion
- Economic profit exhibited a V-shaped recovery, falling from 45,532 million US dollars in 2021 to a low of 14,727 million US dollars in 2022, before rising aggressively to reach 82,124 million US dollars by 2025. The final year of the period shows a substantial increase in absolute value creation, surpassing 2021 levels and demonstrating improved capacity to generate returns exceeding the company's cost of capital.
- Overall Efficiency Trend
- The progression from a 5.19% margin in 2022 to a 20.26% margin in 2025 reflects a significant enhancement in economic efficiency. This suggests that the organization successfully optimized its capital allocation and operational leverage to not only recover lost value but to achieve a higher rate of economic profit per dollar of revenue than was present at the start of the analyzed period.
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