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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- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Liquidity Ratios
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- Common Stock Valuation Ratios
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2021
- Price to Book Value (P/BV) since 2021
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Economic Profit
AppLovin Corp., economic profit calculation
US$ in thousands
| 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
= – × =
An analysis of the financial performance reveals a significant transition from economic value destruction to substantial value creation over the five-year period. The organization shifted from reporting negative economic profit between 2021 and 2023 to achieving a positive economic profit by 2024, culminating in a sharp increase in 2025.
- Net Operating Profit After Taxes (NOPAT)
- A volatile but aggressively upward trajectory is observed. Following a contraction in 2022, where NOPAT fell to negative US$ 171.5 million, the figure grew exponentially to US$ 508.9 million in 2023, US$ 1.6 billion in 2024, and reached US$ 3.6 billion by 2025. This rapid growth in operating profitability served as the primary catalyst for the improvement in economic profit.
- Cost of Capital
- The cost of capital remained high throughout the period, fluctuating between 23.56% and 35.64%. After a dip in 2022, there was a consistent upward trend, with the rate climbing to 35.64% by 2025, indicating a higher threshold for the returns required to generate economic value.
- Invested Capital
- Invested capital demonstrated relative stability with a slight U-shaped pattern. A gradual decrease is noted from US$ 5.57 billion in 2021 to a low of US$ 4.51 billion in 2023, followed by a moderate increase to US$ 5.64 billion by the end of 2025.
- Economic Profit Inflection
- The organization experienced persistent negative economic profit from 2021 through 2023, with the deficit narrowing from US$ 1.68 billion to US$ 932.2 million. A critical inflection point occurred in 2024, when the organization first achieved a positive economic profit of US$ 21.5 million. This trend accelerated sharply in 2025, reaching US$ 1.59 billion, signifying that NOPAT grew sufficiently to exceed the high charge of capital.
Net Operating Profit after Taxes (NOPAT)
AppLovin Corp., NOPAT calculation
US$ in thousands
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 deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income (loss) attributable to AppLovin.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2025 Calculation
Tax benefit of interest expense and loss on settlement of debt = Adjusted interest expense and loss on settlement of debt × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income (loss) attributable to AppLovin.
7 Elimination of discontinued operations.
Net income attributable to AppLovin and net operating profit after taxes (NOPAT) demonstrate significant fluctuations over the five-year period. Both metrics exhibit a substantial shift from positive values in 2021 to negative values in 2022, followed by a strong recovery and continued growth through 2025.
- NOPAT Trend
- NOPAT began at US$46.321 million in 2021. A considerable decline occurred in 2022, resulting in a loss of US$171.497 million. This represents a substantial negative swing. Subsequent years show a marked improvement, with NOPAT reaching US$508.977 million in 2023, US$1.628 billion in 2024, and further increasing to US$3.602 billion in 2025. This indicates a strong recovery and accelerating growth in operating profitability after taxes.
- Relationship between Net Income and NOPAT
- The trends in net income and NOPAT are closely aligned. Both metrics experienced a loss in 2022 and subsequent gains in 2023, 2024, and 2025. The magnitude of the fluctuations is similar for both, suggesting that changes in core operating profitability are a primary driver of overall net income. The values for NOPAT are consistently higher than those for net income, which is expected as NOPAT excludes the impact of financing costs and accounting adjustments.
The substantial growth in both NOPAT and net income from 2022 to 2025 suggests a significant turnaround in the company’s financial performance. The 2022 results appear to be an outlier, and the subsequent years demonstrate a positive trajectory. Further investigation would be required to understand the specific factors driving these changes, such as revenue growth, cost management, and changes in the tax rate.
Cash Operating Taxes
AppLovin Corp., cash operating taxes calculation
US$ in thousands
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 (benefit from) income taxes exhibits significant volatility over the observed period. A positive value of US$10,973 thousand was recorded in 2021, followed by a substantial negative value of US$12,230 thousand in 2022, indicating a tax benefit. This was reversed in 2023 with a positive provision of US$23,859 thousand, before decreasing to a benefit of US$3,771 thousand in 2024. A dramatic increase to US$519,715 thousand was then observed in 2025.
Cash operating taxes demonstrate a consistent upward trend throughout the period, albeit with varying rates of increase. The values increased from US$99,248 thousand in 2021 to US$126,764 thousand in 2022, representing a growth of approximately 27.7%. Further growth was observed in 2023, reaching US$164,738 thousand, a 30.0% increase from the prior year. The rate of increase continued in 2024, with cash operating taxes reaching US$259,656 thousand, a 57.7% increase. This upward trajectory continued into 2025, with cash operating taxes reaching US$569,851 thousand, a 119.7% increase from 2024.
- Relationship between Provision for Income Taxes and Cash Operating Taxes
- The provision for income taxes and cash operating taxes do not consistently move in the same direction. While cash operating taxes consistently increased, the provision for income taxes fluctuated between positive and negative values. This suggests that non-cash tax items, such as deferred tax assets or liabilities, significantly impact the reported provision for income taxes. The large positive provision in 2025, coupled with the substantial increase in cash operating taxes, suggests a potentially significant increase in taxable income in that year.
- Growth Rates
- The growth rate of cash operating taxes accelerated significantly from 2022 to 2025. The increase from 2024 to 2025 is particularly noteworthy, indicating a substantial rise in the company’s tax obligations. This acceleration warrants further investigation to determine the underlying drivers, such as increased profitability or changes in the tax jurisdiction.
The substantial fluctuations in the provision for income taxes, contrasted with the steady increase in cash operating taxes, indicate a complex tax position. Further analysis, including a review of the company’s deferred tax assets and liabilities, is recommended to fully understand the implications of these trends.
Invested Capital
AppLovin Corp., invested capital calculation (financing approach)
US$ in thousands
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 deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of marketable equity securities.
The invested capital of the company exhibited a fluctuating pattern over the five-year period. Initially decreasing, it shows signs of recovery towards the end of the observed timeframe. A detailed examination of the components contributing to invested capital reveals further insights into these trends.
- Total Invested Capital
- Invested capital decreased from US$5,576,322 thousand in 2021 to US$4,514,462 thousand in 2023, representing a cumulative decline of approximately 19.1%. A slight increase to US$4,539,074 thousand was noted in 2024, followed by a more substantial rise to US$5,644,387 thousand in 2025, exceeding the 2021 level.
- Debt & Leases
- Total reported debt and leases remained relatively stable between 2021 and 2023, fluctuating around US$3,350,000 thousand. An increase was observed in 2024, reaching US$3,712,634 thousand, before decreasing slightly to US$3,667,394 thousand in 2025. This suggests a potential shift in the company’s financing strategy during 2024.
- Stockholders’ Equity
- Stockholders’ equity demonstrated a consistent downward trend from 2021 to 2024. It decreased from US$2,138,090 thousand in 2021 to US$1,089,818 thousand in 2024, representing a decline of approximately 49.2%. However, a significant recovery occurred in 2025, with equity increasing to US$2,134,671 thousand, nearly returning to the 2021 level. This recovery likely contributed to the overall increase in invested capital observed in 2025.
The interplay between debt and equity significantly influences the overall invested capital. The decline in equity between 2021 and 2024 was partially offset by relatively stable debt levels, resulting in the observed decrease in invested capital. The substantial recovery in equity during 2025, coupled with stable debt, drove the increase in invested capital to surpass the 2021 figure.
Further investigation into the factors driving the fluctuations in stockholders’ equity, such as profitability, dividend payments, and share repurchases, would be beneficial for a more comprehensive understanding of the company’s financial position.
Cost of Capital
AppLovin Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt and finance lease liabilities3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in thousands
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 thousands
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 thousands
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 thousands
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 thousands
2 Equity. See details »
3 Debt and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
AppLovin Corp., 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 thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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.
An analysis of the financial performance from 2021 to 2025 reveals a significant transition from economic value destruction to substantial value creation. The company experienced a consistent recovery in its ability to generate returns above its cost of capital, culminating in a strong positive trajectory by the end of the period.
- Economic Profit Trends
- A steady upward trend is observed in economic profit, which began at a deficit of US$ 1.69 billion in 2021. The losses narrowed progressively through 2022 and 2023, reaching a critical inflection point in 2024 when the company achieved its first positive economic profit of US$ 21.56 million. This growth accelerated sharply in 2025, with economic profit rising to US$ 1.59 billion, indicating a robust shift toward generating wealth beyond the required return on capital.
- Invested Capital Dynamics
- Invested capital exhibited a period of contraction between 2021 and 2023, decreasing from US$ 5.58 billion to US$ 4.51 billion. This suggests a phase of capital optimization or divestment during a period of economic loss. After remaining relatively stable in 2024, invested capital increased to US$ 5.64 billion in 2025, coinciding with the surge in economic profit, which implies that new capital deployments during this final period were highly accretive.
- Economic Spread Ratio Performance
- The economic spread ratio mirrors the recovery seen in economic profit, moving from a deep negative of -30.22% in 2021 to a positive 28.19% by 2025. The consistent year-over-year improvement indicates a narrowing gap between the return on invested capital and the cost of capital. The transition to a positive ratio in 2024 (0.47%) marks the point where the company began creating economic value, followed by a dramatic expansion of the spread in 2025, signaling high operational efficiency and superior capital utilization.
Economic Profit Margin
AppLovin Corp., 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 thousands) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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 revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
A significant financial turnaround is evident in the economic value added metrics from 2021 through 2025. The trajectory indicates a transition from substantial value destruction to consistent value creation, characterized by a reversal of negative economic profit and a steady expansion of the economic profit margin.
- Economic Profit Performance
- A consistent upward trend in economic profit is observed. The period began with a deficit of approximately 1.69 billion USD in 2021, which narrowed steadily over the following two years. A critical inflection point occurred in 2024, when the figure turned positive at 21.56 million USD, followed by a surge to 1.59 billion USD by the end of 2025.
- Adjusted Revenue Growth
- Revenue exhibited an accelerating growth pattern. While growth was marginal between 2021 and 2022, a notable increase began in 2023. Adjusted revenue grew from 2.79 billion USD in 2021 to 5.49 billion USD in 2025, representing a near doubling of the top-line figures over the analyzed timeframe.
- Economic Profit Margin Analysis
- The economic profit margin demonstrates a sharp recovery and substantial expansion. The margin improved from -60.51% in 2021 to -28.27% in 2023, eventually crossing the break-even threshold in 2024 at 0.46%. By 2025, the margin reached 28.97%, indicating that operational returns have significantly exceeded the cost of capital.