Analog Devices Inc. (NASDAQ:ADI)

Net Operating Profit After Taxes (NOPAT)

Over the observed periods, the net operating profit after taxes displayed significant fluctuations. Initially, there was a decline from approximately 1.27 billion in 2020 to about 1.12 billion in 2021. This was followed by a sharp increase to over 2.59 billion in 2022 and further growth to around 3.14 billion in 2023. However, subsequent years experienced a considerable decrease to approximately 1.34 billion in 2024, before rebounding to nearly 2.19 billion in 2025.

Cost of Capital

The cost of capital remained relatively stable across the examined timeline, fluctuating slightly within a narrow range from 14.17% in 2020 to approximately 14.73% in 2025. This indicates a consistent cost structure related to financing the company's investments.

Invested Capital

Invested capital displayed an atypical movement, beginning at about 18.2 billion in 2020 and sharply increasing to approximately 47.0 billion in 2021. After this peak, a gradual decrease was noted over subsequent periods ending at around 42.1 billion by 2025. This trend suggests significant investment activities or adjustments in asset base followed by a reduction phase.

Economic Profit

Economic profit remained negative throughout all periods, reflecting the company’s returns were insufficient to cover the cost of capital. The negative economic profit worsened from around -1.32 billion in 2020 to a low of approximately -5.07 billion in 2024. There was some improvement in 2025 when the economic profit increased to about -4.01 billion, still representing a substantial shortfall relative to the cost of invested capital.

Overall Insights

Despite fluctuations in net operating profit, the persistently negative economic profit underscores ongoing challenges in generating returns above the company’s cost of capital. The marked increase and subsequent decline in invested capital, alongside steady cost of capital, suggest dynamic capital allocation strategies but limited success in value creation. The data indicates a need for enhanced efficiency or strategic adjustments to improve economic profitability.

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 demonstrates considerable volatility over the examined periods. Initially, it recorded a negative value near -1.32 billion USD, which worsened significantly to approximately -5.73 billion USD in the subsequent year. Although some recovery is observed thereafter, with values significantly less negative around -4.02 billion and -3.34 billion USD in the following years, fluctuations persist. Later periods show a renewed decline again crossing beyond -5 billion USD before improving to approximately -4.01 billion USD. Overall, the company consistently experienced negative economic profit, indicating operational returns below the cost of capital each year.

Invested Capital

The invested capital experienced a substantial increase early on, rising sharply from about 18.2 billion USD to 47.0 billion USD between 2020 and 2021. Subsequently, it showed a gradual downward trend, decreasing over the following years to reach approximately 42.1 billion USD by 2025. The reduction after the initial surge suggests possible divestments or reduced investments, although the capital base remains significantly higher than the initial level six years prior.

Economic Spread Ratio

The economic spread ratio remains negative across all periods, indicating that the company’s returns on invested capital consistently fell short of its cost of capital. Starting at -7.23% in 2020, it further deteriorated to a low of -12.2% in 2021. The ratio improves slightly in the next two years but remains deeply negative, reflecting sustained inefficiencies. Fluctuations continue with a marked dip again near -11.65% in 2024 before a less severe decline to -9.53% in 2025. This persistent negative spread corroborates the underlying trend of economic profit losses observed over the same timeframe.

Revenue Trends

Revenue displayed a significant upward trajectory over the examined periods, rising from approximately 5.6 billion US dollars in 2020 to a peak just above 12.3 billion US dollars in 2023. Following this peak, there was a decline to around 9.4 billion US dollars in 2024, then a rebound to over 11 billion US dollars in 2025. This suggests a period of strong growth followed by increased volatility in later years.

Economic Profit Overview

Economic profit was consistently negative throughout all years. The losses increased dramatically between 2020 and 2021, reaching over 5.7 billion US dollars in losses. Although the loss magnitude decreased somewhat in the next years, oscillating between approximately -3.3 billion and -5.0 billion US dollars, it remained substantial. This persistent negative economic profit indicates that the company did not create value above its cost of capital in any given year.

Economic Profit Margin

The economic profit margin followed a pattern corresponding to the economic profit values, and remained negative in all periods. The margin worsened significantly from -23.49% in 2020 to nearly -78.35% in 2021, before recovering partially to around -27% in 2023. However, it deteriorated again, reaching -53.79% in 2024 before improving somewhat to -36.39% in 2025. These large fluctuations suggest volatility in profitability relative to revenue, with no period showing positive returns above capital costs.

Overall Analysis

Despite strong revenue growth through 2023, the company consistently generated substantial economic losses, indicating challenges in cost management or capital efficiency. The volatile economic profit margin and persistent negative economic profit suggest the business struggled to convert revenue gains into value creation. The rebound in revenue in 2025, accompanied by a reduced loss margin compared to 2024, may signal early signs of operational improvement, but the firm remains far from generating a positive economic profit.