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.
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- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value to FCFF (EV/FCFF)
- Total Asset Turnover since 2005
- Price to Operating Profit (P/OP) since 2005
- Price to Book Value (P/BV) since 2005
- Analysis of Revenues
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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 between 2021 and 2025 is characterized by a significant recovery and subsequent acceleration in economic value creation following a contraction in 2022. While the cost of capital remained stable, the growth in net operating profit after taxes (NOPAT) outpaced the expansion of invested capital, resulting in a substantial increase in economic profit by the end of the period.
- Net Operating Profit After Taxes (NOPAT)
- A volatile but generally upward trend is observed. After a decline from 77,747 million USD in 2021 to 52,578 million USD in 2022, NOPAT entered a phase of rapid growth, reaching 140,506 million USD by 2025. The most pronounced increase occurred between 2024 and 2025, indicating a significant improvement in operational profitability.
- Invested Capital and Cost of Capital
- Invested capital exhibited a general upward trend, increasing from 171,408 million USD in 2021 to 310,780 million USD in 2025, despite a slight contraction in 2023. Throughout this period, the cost of capital remained remarkably consistent, fluctuating minimally between 18.57% and 18.71%, which suggests a stable risk profile and constant weighted average cost of capital.
- Economic Profit Performance
- Economic profit mirrored the volatility of NOPAT, experiencing a sharp decrease in 2022 to 14,997 million USD. However, a strong recovery followed, with the figure climbing to 82,540 million USD by 2025. This indicates that the company successfully generated returns well in excess of its required cost of capital, effectively increasing shareholder wealth over the five-year horizon.
The synthesis of these metrics reveals that the increase in economic profit from 2023 onward was driven by operational efficiency and profit growth rather than a reduction in the cost of capital. The substantial rise in invested capital in 2025 was supported by an even more aggressive increase in NOPAT, maintaining a positive and expanding economic profit margin.
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 exhibits a distinct V-shaped recovery pattern, marked by a significant contraction in 2022 followed by a period of aggressive expansion in both absolute profitability and capital deployment.
- Economic Profit
- A substantial decline occurred in 2022, where economic profit fell from 45,762 million US$ to 14,997 million US$. This downturn was followed by a consistent three-year growth trajectory, with values increasing to 29,983 million US$ in 2023, 51,142 million US$ in 2024, and reaching a peak of 82,540 million US$ by the end of 2025. This progression indicates a strong recovery in the capacity to generate value in excess of the cost of capital.
- Invested Capital
- Invested capital demonstrated a general upward trend, growing from 171,408 million US$ in 2021 to 310,780 million US$ in 2025. While a slight contraction was noted in 2023, where capital decreased to 189,779 million US$, the subsequent years saw rapid expansion. The sharp increase between 2024 and 2025 suggests a significant intensification of capital investment during the final period of the analysis.
- Economic Spread Ratio
- The economic spread ratio experienced a severe compression in 2022, dropping from 26.70% to 7.41%. A steady recovery ensued, with the ratio rising to 15.80% in 2023, 22.44% in 2024, and ultimately returning to 26.56% in 2025. The fact that the spread ratio returned to its 2021 level while the total invested capital nearly doubled indicates a significant improvement in the efficiency of the expanded capital base.
Economic Profit Margin
Alphabet Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 demonstrates a consistent expansion in adjusted revenues accompanied by a volatile yet ultimately positive trajectory in economic profit and its corresponding margin.
- Adjusted Revenues
- A sustained upward trend is observed, with revenues increasing from 258,436 million US dollars in 2021 to 405,436 million US dollars by 2025. This indicates a steady growth in the scale of operations throughout the analyzed period.
- Economic Profit
- Economic profit experienced a significant contraction in 2022, falling from 45,762 million US dollars to 14,997 million US dollars. Following this trough, a strong recovery occurred, with values increasing annually to reach a period high of 82,540 million US dollars in 2025.
- Economic Profit Margin
- The economic profit margin exhibits a V-shaped recovery pattern. After a sharp decline from 17.71% in 2021 to a low of 5.29% in 2022, the margin improved steadily over the subsequent three years. By December 31, 2025, the margin reached 20.36%, surpassing the 2021 baseline and suggesting a marked increase in the efficiency of value creation relative to adjusted revenues.