Analog Devices Inc. (NASDAQ:ADI)

The analysis of the financial data over the indicated periods reveals several noteworthy trends across key performance indicators.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits notable fluctuations over the years. It initially declines from approximately $1.27 billion in 2020 to about $1.12 billion in 2021. Following this, there is a substantial increase in 2022 and 2023, reaching a peak at over $3.14 billion in 2023. However, the profit sharply decreases in 2024 to roughly $1.34 billion before increasing again to approximately $2.19 billion in 2025. This pattern suggests periods of significant operational profitability volatility.

Cost of Capital

The cost of capital remains relatively stable across the years, fluctuating narrowly between 14.19% and 14.75%. This consistency suggests that the company's weighted average cost of capital does not experience major changes, providing a predictable benchmark for capital evaluation.

Invested Capital

Invested capital shows a marked increase from about $18.2 billion in 2020 to a peak of approximately $47.0 billion in 2021. After this peak, there is a gradual decline over subsequent years, reaching roughly $42.1 billion in 2025. This significant jump followed by steady reduction could indicate a major investment or acquisition in 2021, with subsequent divestitures or amortization over the following years.

Economic Profit

Economic profit remains negative throughout the entire period, indicating that the company consistently fails to generate returns above its cost of capital. The negative economic profit widens sharply in 2021 to approximately -$5.74 billion from about -$1.32 billion in 2020, then partially recovers in 2022 and 2023 but remains deeply negative. The economic profit dips again in 2024 and slightly improves in 2025 but stays significantly below zero. This persistent negative economic profit despite fluctuations in NOPAT and invested capital suggests ongoing challenges in value creation relative to the company's cost of capital.

Net Income Trend

The net income exhibits a generally positive trend with some fluctuations over the analyzed periods. From October 31, 2020, to October 30, 2021, net income increased moderately from approximately $1.22 billion to $1.39 billion. A significant surge is observed in the following year ending October 29, 2022, where net income almost doubles to about $2.75 billion. This upward trajectory continues into October 28, 2023, peaking near $3.31 billion. However, there is a notable decline in the subsequent year on November 2, 2024, with net income dropping to approximately $1.64 billion. The final period, November 1, 2025, sees a recovery with net income rising again to around $2.27 billion, though it remains below the peak of 2023.

NOPAT Trend

Net Operating Profit After Taxes (NOPAT) shows a trend broadly aligned with net income, suggesting operational performance closely mirrors overall profitability. Initially, NOPAT decreases from about $1.27 billion in 2020 to approximately $1.12 billion in 2021. This is followed by a marked increase in 2022 to roughly $2.59 billion and continues to rise to around $3.14 billion by 2023. Similar to net income, NOPAT experiences a decline in November 2024, falling to about $1.34 billion, before recovering to approximately $2.19 billion in November 2025.

Comparative Insights

The parallel movements in net income and NOPAT imply that variations in profitability are largely driven by operating performance rather than shifts in non-operating activities or tax impacts. Both metrics demonstrate substantial growth between 2021 and 2023, reflecting a period of strong operational efficiency or favorable market conditions. The decrease seen in 2024 may indicate operational challenges, increased costs, or external factors adversely affecting profitability, followed by partial recovery in 2025.

Overall Observations

Over the six-year span, the company experienced significant growth in profitability metrics with a peak in 2023. The subsequent dip in 2024 suggests some volatility or transitional challenges that warrant further investigation. The recovery in 2025 indicates resilience and improvement but does not reach prior peak levels by the end of the observed period. Continued monitoring of operational efficiency and market conditions would be advisable to sustain or improve profitability.

Provision for (benefit from) income tax

The provision for income tax exhibits significant volatility across the observed periods. In the fiscal year ending October 31, 2020, the provision was a positive amount of approximately $90.9 million, suggesting a recorded tax expense. However, in the subsequent year, there was a notable reversal to a tax benefit of approximately $61.7 million. Following this, the provision returned to a substantial tax expense, peaking at about $350.2 million in 2022 and sustaining relatively high values through 2023 and beyond, with figures of approximately $293.4 million, $142.1 million, and $444.8 million for the years ending October 28, 2023, November 2, 2024, and November 1, 2025, respectively. This fluctuation might indicate changes in taxable income, tax planning strategies, or adjustments in deferred tax assets and liabilities.

Cash operating taxes

Cash paid for operating taxes has shown a consistent upward trend over the reported years, indicating increasing cash outflows related to tax payments. Starting at approximately $246.6 million for the fiscal year ending October 31, 2020, it rose to $385.9 million in 2021 and then nearly doubled to about $720.3 million in 2022. The upward trajectory continued, reaching $796.5 million in 2023. There is a slight dip in the following year to $563.8 million in 2024, but the amount increases again to around $739.0 million in 2025. This pattern suggests that while some years experienced a temporary reduction, the overall cash tax burden has increased substantially, potentially reflecting higher taxable earnings or changes in tax legislation or company operations affecting cash tax payments.

The analysis of the financial data reveals distinct trends in the company's capital structure over the six-year period under review. The total reported debt and leases demonstrate a consistent upward trajectory, increasing from approximately $5.47 billion in late 2020 to nearly $8.95 billion by late 2025. This growth indicates an increasing reliance on debt financing or lease commitments over time, reflecting either an expansion in operations, capital expenditures, or refinancing activities.

Conversely, shareholders’ equity experienced a notable surge between 2020 and 2021, rising sharply from roughly $12.0 billion to nearly $38.0 billion. However, following this spike, equity levels have gradually declined each subsequent year, decreasing to about $33.8 billion by 2025. This downward trend could suggest factors such as dividend distributions exceeding net income, share repurchases, or accumulated losses, which have eroded equity after its initial increase.

Invested capital, representing the total funds invested in the company’s operations, similarly rose steeply from $18.2 billion in 2020 to $47.0 billion in 2021. Following this peak, invested capital steadily declined year-over-year, falling to approximately $42.1 billion in 2025. The decrease in invested capital alongside the declining equity suggests a strategic reduction or reallocation of invested resources, possibly through asset divestitures or operational efficiencies.

Total Reported Debt & Leases

Displays a steady increase, implying greater leverage or lease commitments over the analyzed period.

Shareholders’ Equity

Exhibits a significant increase followed by a gradual but persistent decline, indicating shifts in retained earnings, dividends, or capital management strategies.

Invested Capital

Rises sharply early on, then decreases gradually, reflecting changes in asset base investment and capital deployment.

Overall, the data suggest a financial strategy characterized by increased debt utilization, initial capital accumulation or revaluation, and subsequent capital base contraction. This pattern should be further examined in the context of profitability, cash flow, and market conditions to assess sustainability and risk implications.

Economic Profit

The economic profit remained negative throughout the observed periods, indicating consistent value erosion. The magnitude of losses significantly increased from approximately -1.3 million in 2020 to a peak loss of around -5.7 million in 2021. Although there were some improvements in the subsequent years, economic profit continued to reflect large negative figures, suggesting ongoing challenges in generating returns above the cost of capital.

Invested Capital

Invested capital showed a marked increase from around 18.2 million in 2020 to a peak of about 47 million in 2021. Following this peak, the invested capital experienced a gradual decline over the next years, ending at approximately 42.1 million in 2025. This trend may indicate a strategic reduction of capital employed or asset base over time after a significant expansion.

Economic Spread Ratio

The economic spread ratio remained negative across all periods, reflecting persistent returns below the firm's cost of capital. The ratio deteriorated from -7.24% in 2020 to its lowest point of -12.21% in 2021, aligning with the pattern of economic profit losses. Although there was some recovery afterwards, the spread ratio consistently stayed in the negative range, fluctuating between approximately -9.55% and -11.67% in the later years, underscoring ongoing efficiency or profitability challenges.

Revenue Trends

The revenue experienced significant growth between 2020 and 2023, increasing from approximately 5.6 billion to over 12.3 billion US dollars. However, after peaking in 2023, revenue declined in 2024 to around 9.4 billion, before experiencing a partial recovery to approximately 11.0 billion in 2025. This indicates some volatility in revenue over the latter years, following a strong growth phase.

Economic Profit Trends

The company consistently reported negative economic profit throughout the six-year period. The economic losses deepened sharply from about -1.3 billion in 2020 to -5.7 billion in 2021. Thereafter, the economic losses fluctuated but remained substantial, with figures around -4.0 billion in both 2022 and 2025, -3.4 billion in 2023, and again worsening to approximately -5.1 billion in 2024. This pattern suggests ongoing challenges in generating returns above the cost of capital despite revenue growth.

Economic Profit Margin Analysis

The economic profit margin, which measures economic profit relative to revenue, was negative throughout the observed period. The margin worsened considerably in 2021, reaching nearly -78%, indicating significant inefficiency or high costs relative to revenue that year. While there was some improvement in subsequent years, with margins ranging from approximately -27% to -54%, the margin remained markedly negative, indicating persistent economic losses as a percentage of revenue.

Overall Insights

The data reveals a company that has achieved considerable revenue growth but continues to struggle with generating positive economic profit and maintaining an adequate economic profit margin. The fluctuations in revenue and economic profit margins alongside the substantial negative economic profit suggest structural challenges related to cost management, investment returns, or competitive pressures. The trend underscores the need to address profitability despite top-line expansion to improve overall financial health.