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.
Paying user area
Try for free
Alphabet Inc. pages available for free this week:
- Income Statement
- Balance Sheet: Assets
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Net Profit Margin since 2005
- Return on Assets (ROA) since 2005
- Analysis of Revenues
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to Alphabet Inc. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
Alphabet Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The financial trajectory from 2021 to 2025 is characterized by a period of initial volatility followed by a robust acceleration in value creation. Despite a notable contraction in 2022, the subsequent years demonstrate a significant expansion in both operational profitability and the scale of invested capital.
- Net Operating Profit After Taxes (NOPAT)
- A V-shaped recovery is observed, with NOPAT declining from US$ 77,747 million in 2021 to a low of US$ 52,578 million in 2022. Following this dip, a strong growth trend emerged, with figures rising consistently to reach US$ 140,506 million by 2025, indicating a substantial increase in operational earning power.
- Cost of Capital
- The cost of capital remained exceptionally stable throughout the five-year period, fluctuating within a very narrow range between 18.75% and 18.88%. This suggests that the entity's risk profile and the market's required rate of return remained constant despite fluctuations in profit and investment levels.
- Invested Capital
- An overall upward trend in invested capital is evident, growing from US$ 171,408 million in 2021 to US$ 310,780 million in 2025. Although a marginal decrease occurred in 2023, the subsequent expansion in 2024 and 2025 suggests an aggressive reinvestment strategy to support long-term growth.
- Economic Profit
- Economic profit remained positive throughout the analyzed period, confirming that the entity consistently generated returns above its cost of capital. After a sharp decline to US$ 14,637 million in 2022, economic profit entered a phase of rapid growth, peaking at US$ 81,984 million in 2025. The acceleration in economic profit indicates that the growth in NOPAT significantly outpaced the increase in capital charges resulting from the expanded invested capital base.
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
= × =
6 2025 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 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
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$140,506 million. The 2025 value represents an increase of approximately 80.7% compared to 2023 and a 50.1% increase compared to 2024.
- Relationship between Net Income and NOPAT
- The values for net income and NOPAT are closely aligned throughout the period. The largest divergence occurred in 2022, where the decrease in NOPAT was more pronounced than the decrease in net income. This suggests potential changes in non-operating items or tax rates during that year. In 2024 and 2025, the growth rates of both metrics were similar, indicating a consistent relationship between core operating profitability and overall net earnings.
The substantial growth in both NOPAT and net income from 2022 to 2025 suggests improved operational efficiency, increased revenue, or a combination of both. The recovery from the 2022 decline indicates a successful response to whatever factors contributed to the initial downturn. Further investigation into the drivers of these changes would be beneficial for a more comprehensive understanding of the company’s financial performance.
Cash Operating Taxes
Alphabet Inc., cash operating taxes calculation
US$ 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$17,726 million in 2025. This volatility indicates potential changes in tax payments related to timing differences between reported income and actual cash outflows, or changes in tax planning strategies.
The divergence between the provision for income taxes and cash operating taxes is notable. While the provision for income taxes consistently trended upward (excluding the 2022 dip), cash operating taxes experienced more pronounced swings. This difference could be attributed to deferred tax assets or liabilities, tax credits utilized, or changes in the effective tax rate impacting actual cash payments. Further investigation into the components of these figures would be necessary to fully understand the underlying drivers.
- Relationship between Provision and Cash Taxes
- In 2021, cash operating taxes were approximately 86% of the provision for income taxes. This percentage increased to 172% in 2022, then decreased to 102% in 2023, 124% in 2024, and finally to 66% in 2025. This fluctuating ratio highlights the increasing disconnect between accounting income and cash tax payments over the period, particularly in 2025.
Invested Capital
Alphabet Inc., invested capital calculation (financing approach)
US$ 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$310,780 million. The fluctuations suggest potential shifts in capital allocation strategies or asset management.
The combined trends indicate a growing company, particularly in terms of equity. The significant increase in debt in 2025, coupled with the rising invested capital, warrants further investigation to determine the purpose of the increased leverage and its potential impact on future financial performance.
Cost of Capital
Alphabet Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (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 and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by an initial period of volatility followed by a sustained recovery and expansion in value creation. A significant contraction occurred in 2022, where both economic profit and the economic spread ratio declined sharply, suggesting a period of reduced capital efficiency or an increase in the cost of capital relative to returns. However, the subsequent three years demonstrate a strong recovery trend, with metrics returning to or exceeding 2021 levels.
- Economic Spread Ratio Trends
- The economic spread ratio experienced a sharp decline from 26.52% in 2021 to a low of 7.23% in 2022. This was followed by a consistent recovery, rising to 15.62% in 2023 and 22.26% in 2024, eventually reaching 26.38% by 2025. The return to near-peak levels indicates that the return on invested capital has once again significantly decoupled from the cost of capital.
- Economic Profit Analysis
- Economic profit followed a V-shaped trajectory, dropping from US$ 45,455 million in 2021 to US$ 14,637 million in 2022. From 2023 onward, a period of accelerated growth is observed, with profit increasing to US$ 29,644 million in 2023, US$ 50,732 million in 2024, and peaking at US$ 81,984 million in 2025. This trajectory reflects a substantial increase in the absolute amount of value generated over and above the required return.
- Invested Capital and Scaling Efficiency
- Invested capital grew from US$ 171,408 million in 2021 to US$ 310,780 million in 2025, despite a minor dip in 2023. The data indicates a successful scaling of operations; while the capital base expanded by approximately 81% over the period, the economic spread ratio was maintained at a level nearly identical to the 2021 baseline. This suggests that the additional capital deployed was utilized efficiently to drive proportional increases in economic profit.
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 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Netflix Inc. | ||||||
| Trade Desk Inc. | ||||||
| Walt Disney Co. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by a period of significant volatility followed by a robust recovery and acceleration in value creation. While adjusted revenues maintained a consistent upward trajectory, economic profit experienced a sharp contraction before reaching a five-year peak.
- Adjusted Revenue Growth
- A steady and uninterrupted increase in adjusted revenues is observed, rising from 258,436 million US$ in 2021 to 405,436 million US$ by 2025. This represents a consistent expansion of the operational scale throughout the analyzed period.
- Economic Profit Volatility and Recovery
- Economic profit exhibited a substantial decline in 2022, falling from 45,455 million US$ to 14,637 million US$. However, a strong recovery trend followed, with values increasing progressively in 2023 and 2024, ultimately peaking at 81,984 million US$ in 2025. The 2025 figure represents an 80% increase over the 2021 baseline, indicating a significant improvement in the company's ability to generate returns above its cost of capital.
- Economic Profit Margin Trends
- The economic profit margin mirrored the volatility of the absolute profit figures, dropping sharply from 17.59% in 2021 to a low of 5.16% in 2022. From 2023 onward, the margin expanded steadily, reaching 20.22% by 2025. This trend indicates that the growth in economic profit began to outpace the growth in adjusted revenues in the latter years, reflecting enhanced capital efficiency and operational profitability.
Overall, the data indicates a V-shaped recovery in economic value creation. The transition from a 5.16% margin in 2022 to 20.22% in 2025 suggests a successful realignment of returns relative to the capital employed.