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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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
= – × =
The financial performance, as measured by economic profit, demonstrates a significant shift over the observed period. Initially, the entity experienced substantial economic losses, which gradually diminished before culminating in a considerable economic profit. This evolution is closely tied to fluctuations in net operating profit after taxes, the cost of capital, and invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a volatile pattern. A substantial negative value was recorded in 2022, followed by a strong recovery and consistent growth through 2025. The increase from US$508,977 thousand in 2023 to US$3,602,355 thousand in 2025 indicates improving operational profitability.
- Cost of Capital
- The cost of capital fluctuated between 24.00% and 36.34% over the period. It decreased in 2022 before rising again in subsequent years, stabilizing around 36% in 2024 and 2025. This suggests potential changes in the entity’s risk profile or capital structure, and ultimately, the returns required by investors.
- Invested Capital
- Invested capital decreased from US$5,576,322 thousand in 2021 to US$4,514,462 thousand in 2023, before experiencing a modest increase to US$5,644,387 thousand in 2025. This suggests a period of capital efficiency followed by reinvestment, potentially supporting the growth in NOPAT observed in later years.
- Economic Profit
- Economic profit initially reflected substantial losses, peaking at a negative US$1,718,619 thousand in 2021 and remaining negative, though decreasing, through 2023. A turning point occurred in 2024, with a minimal loss of US$10,031 thousand, followed by a significant positive economic profit of US$1,551,325 thousand in 2025. This positive shift indicates that the entity generated returns exceeding its cost of capital in the final year of the observed period.
The progression from negative to positive economic profit highlights a successful turnaround. The substantial growth in NOPAT, coupled with a managed cost of capital and strategic adjustments to invested capital, contributed to this outcome. Continued monitoring of these factors will be crucial to sustaining profitability and shareholder value.
Net Operating Profit after Taxes (NOPAT)
AppLovin Corp., NOPAT calculation
US$ 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.
The economic spread ratio demonstrates a significant improvement over the observed period. Initially negative, the ratio transitions to a positive value, indicating a shift in value creation for invested capital.
- Economic Spread Ratio Trend
- The economic spread ratio began at -30.82% in 2021 and exhibited a consistent, though decelerating, improvement through 2023, reaching -21.27%. This suggests a narrowing gap between the return on invested capital and the cost of capital. A substantial increase is then observed in 2024, with the ratio nearly reaching parity at -0.22%. By 2025, the ratio becomes positive at 27.48%, signifying that the company’s returns exceed its cost of capital.
The progression of the economic spread ratio correlates with the trend in economic profit. While economic profit remained negative through 2023, its magnitude decreased each year. The near-zero economic profit in 2024 aligns with the economic spread ratio approaching zero. The positive economic profit reported in 2025 is directly reflected in the positive economic spread ratio.
- Invested Capital Relationship
- Invested capital decreased from 2021 to 2023, from US$5,576,322 thousand to US$4,514,462 thousand. It remained relatively stable between 2023 and 2024, then increased to US$5,644,387 thousand in 2025. The increase in invested capital in 2025 occurred concurrently with the shift to positive economic profit and a substantial increase in the economic spread ratio, suggesting efficient capital allocation during that period.
The observed trend suggests a strengthening of the company’s financial performance and an increasing ability to generate returns above the cost of capital. The substantial improvement in the economic spread ratio from negative to positive values indicates a positive change in the company’s value creation capabilities.
Economic Profit Margin
AppLovin Corp., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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.
The economic profit margin demonstrates a significant improvement over the observed period. Initially negative, the metric transitions to positive territory, indicating a strengthening of the company’s ability to generate returns exceeding its cost of capital.
- Economic Profit Margin Trend
- In 2021, the economic profit margin stood at -61.71%. This represents a substantial shortfall in returns relative to the capital employed. A notable, though incomplete, recovery is seen in 2022, with the margin improving to -51.05%. The upward trend continues into 2023, reaching -29.12%, suggesting increasing efficiency in capital allocation and profitability. By 2024, the margin nearly reaches breakeven at -0.21%, indicating a substantial reduction in the gap between returns and the cost of capital. Finally, in 2025, the economic profit margin becomes positive, reaching 28.25%, signifying that the company is generating economic value.
The progression of the economic profit margin closely mirrors the trend in economic profit. The initial negative economic profits are reflected in the deeply negative margins. As economic profit moves towards positive values, the margin correspondingly improves. The substantial increase in adjusted revenue, particularly between 2023 and 2025, appears to be a key driver of this positive shift, alongside potential improvements in operational efficiency or cost of capital management.
- Relationship to Adjusted Revenue
- Adjusted revenue increased from US$2,785,148 thousand in 2021 to US$5,491,346 thousand in 2025. This growth in revenue, coupled with the improving economic profit margin, suggests that the company is not only increasing sales but also becoming more effective at converting those sales into economic profit. The most significant revenue increase occurs between 2023 and 2024, coinciding with a dramatic improvement in the economic profit margin.
The movement from negative to positive economic profit margin indicates a fundamental shift in the company’s financial performance. The trend suggests successful implementation of strategies aimed at improving profitability and capital efficiency.