Enterprise Value to FCFF (EV/FCFF)
Free Cash Flow to The Firm (FCFF)
Alphabet Inc., FCFF 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).
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The financial information indicates a fluctuating pattern in free cash flow to the firm (FCFF) over the five-year period. While net cash provided by operating activities demonstrates a consistent upward trend, FCFF exhibits a more complex trajectory.
- Net Cash from Operations
- Net cash provided by operating activities increased steadily from US$91,652 million in 2021 to US$164,713 million in 2025. This represents a substantial overall growth, suggesting improving operational efficiency and profitability. The increase from 2023 to 2024 and 2024 to 2025 is particularly notable.
- Free Cash Flow to the Firm (FCFF)
- FCFF experienced a decline from US$67,439 million in 2021 to US$59,841 million in 2022, representing a decrease of approximately 11.2%. A subsequent recovery was observed in 2023, with FCFF reaching US$69,352 million. Further increases followed in 2024 (US$72,837 million) and 2025 (US$72,644 million). However, the growth rate slowed considerably between 2024 and 2025, with a slight decrease in absolute value.
The divergence between the trends in operating cash flow and FCFF suggests that factors beyond core operations are influencing the amount of cash available to the firm’s investors. These factors could include changes in capital expenditures, working capital requirements, or other non-operating cash flows. While operating performance is strengthening, the stabilization of FCFF in the most recent year warrants further investigation to understand the underlying drivers and potential implications for future value creation.
- FCFF Trend Analysis
- The initial decline in FCFF, followed by recovery and subsequent stabilization, indicates a period of adjustment. The relatively flat FCFF between 2024 and 2025, despite continued growth in operating cash flow, could be due to increased investment in growth initiatives or a shift in capital allocation strategy. A detailed examination of capital expenditure and working capital changes would be necessary to confirm this.
Interest Paid, Net of Tax
Alphabet Inc., interest paid, net of tax calculation
US$ 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).
2 2025 Calculation
Cash paid for interest, net of amounts capitalized, tax = Cash paid for interest, net of amounts capitalized × EITR
= 736 × 16.80% = 124
3 2025 Calculation
Interest capitalized, tax = Interest capitalized × EITR
= 447 × 16.80% = 75
The analysis reveals fluctuations in interest expense and related tax impacts over the five-year period. The effective income tax rate exhibits relative stability with a slight increasing trend towards the end of the period, while cash paid for interest, net of tax, demonstrates more pronounced variability. Interest capitalized, net of tax, also shows significant changes year-over-year.
- Effective Income Tax Rate (EITR)
- The effective income tax rate decreased from 16.20% in 2021 to 13.90% in 2023, before increasing to 16.40% in 2024 and further to 16.80% in 2025. This suggests a moderate increase in the proportion of income allocated to taxes in the latter two years of the observed period, potentially due to changes in tax laws or the geographic distribution of income.
- Cash Paid for Interest, Net of Tax
- Cash paid for interest, net of tax, initially increased from US$290 million in 2021 to US$300 million in 2022. A subsequent decrease was observed, falling to US$265 million in 2023 and US$224 million in 2024. However, a substantial increase occurred in 2025, reaching US$612 million. This significant jump warrants further investigation to determine the underlying causes, such as increased borrowing or changes in interest rates.
- Interest Capitalized, Net of Tax
- Interest capitalized, net of tax, decreased from US$137 million in 2021 to US$108 million in 2022. It then rose to US$156 million in 2023 and US$162 million in 2024, before experiencing a considerable increase to US$372 million in 2025. This trend parallels the increase in cash paid for interest in 2025, suggesting a potential correlation between the two, possibly linked to larger capital projects nearing completion or changes in capitalization policies.
The combined trends indicate a period of relatively stable interest expense followed by a notable increase in both cash paid for interest and interest capitalized in 2025. The increase in capitalized interest suggests ongoing investment in projects, while the rise in cash paid for interest could be a result of higher debt levels or increased borrowing costs. The increasing effective income tax rate in the final two years should also be monitored for potential impacts on future profitability.
Enterprise Value to FCFF Ratio, Current
Alphabet Inc., current EV/FCFF calculation, comparison to benchmarks
| Selected Financial Data (US$ in millions) | |
| Enterprise value (EV) | 3,832,741) |
| Free cash flow to the firm (FCFF) | 72,644) |
| Valuation Ratio | |
| EV/FCFF | 52.76 |
| Benchmarks | |
| EV/FCFF, Competitors1 | |
| Comcast Corp. | 9.13 |
| Meta Platforms Inc. | 35.62 |
| Netflix Inc. | 35.08 |
| Trade Desk Inc. | 17.62 |
| Walt Disney Co. | 19.56 |
| EV/FCFF, Sector | |
| Media & Entertainment | 38.65 |
| EV/FCFF, Industry | |
| Communication Services | 32.56 |
Based on: 10-K (reporting date: 2025-12-31).
1 Click competitor name to see calculations.
If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.
Enterprise Value to FCFF Ratio, Historical
Alphabet Inc., historical EV/FCFF 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) | ||||||
| Enterprise value (EV)1 | 3,932,299) | 2,276,529) | 1,666,699) | 1,248,790) | 1,832,285) | |
| Free cash flow to the firm (FCFF)2 | 72,644) | 72,837) | 69,352) | 59,841) | 67,439) | |
| Valuation Ratio | ||||||
| EV/FCFF3 | 54.13 | 31.26 | 24.03 | 20.87 | 27.17 | |
| Benchmarks | ||||||
| EV/FCFF, Competitors4 | ||||||
| Comcast Corp. | 8.87 | 14.03 | 17.60 | 17.93 | 15.77 | |
| Meta Platforms Inc. | 39.82 | 30.96 | 26.42 | 24.09 | 15.40 | |
| Netflix Inc. | 36.73 | 56.17 | 33.80 | 77.11 | 335.37 | |
| Trade Desk Inc. | — | 53.43 | 65.52 | 68.00 | 119.98 | |
| Walt Disney Co. | 19.53 | 23.13 | 31.55 | 90.23 | 78.66 | |
| EV/FCFF, Sector | ||||||
| Media & Entertainment | — | 30.17 | 24.97 | 23.94 | 25.02 | |
| EV/FCFF, Industry | ||||||
| Communication Services | — | 26.41 | 22.50 | 23.56 | 31.71 | |
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).
3 2025 Calculation
EV/FCFF = EV ÷ FCFF
= 3,932,299 ÷ 72,644 = 54.13
4 Click competitor name to see calculations.
The Enterprise Value to Free Cash Flow to the Firm (EV/FCFF) ratio exhibits a fluctuating pattern over the five-year period. Initial observations indicate a decrease followed by an increase, culminating in a substantial rise in the most recent year.
- Enterprise Value (EV)
- Enterprise Value decreased significantly from 2021 to 2022, falling from US$1,832,285 million to US$1,248,790 million. A subsequent recovery was observed through 2023 and 2024, reaching US$1,666,699 million and US$2,276,529 million respectively. The most substantial increase occurred between 2024 and 2025, with EV reaching US$3,932,299 million.
- Free Cash Flow to the Firm (FCFF)
- Free Cash Flow to the Firm experienced a slight decline from US$67,439 million in 2021 to US$59,841 million in 2022. FCFF then demonstrated growth, increasing to US$69,352 million in 2023 and US$72,837 million in 2024. A marginal decrease was noted in 2025, with FCFF reported at US$72,644 million.
- EV/FCFF Ratio
- The EV/FCFF ratio began at 27.17 in 2021, decreased to 20.87 in 2022, and then rose to 24.03 in 2023. A further increase to 31.26 was observed in 2024. The most pronounced change occurred in 2025, with the ratio reaching 54.13. This substantial increase suggests that the enterprise value is growing at a considerably faster rate than the free cash flow generated by the firm.
The increasing EV/FCFF ratio in the later years indicates that the market valuation of the firm is becoming more sensitive to its future cash flow potential. The significant jump in 2025 warrants further investigation to determine the underlying drivers, such as changes in growth expectations, risk assessment, or capital structure.