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.
Economic Profit
Cadence Design Systems Inc., economic profit 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 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
= 1,283,777 – 17.20% × 8,067,529 = -103,649
An analysis of the economic performance indicates a significant transition from value creation to value destruction starting in 2024. While operational profitability demonstrated consistent growth throughout the period, a substantial increase in the capital base led to a negative economic profit in the final two years of the observation period.
- Net Operating Profit After Taxes (NOPAT)
- A continuous upward trajectory is observed in NOPAT, rising from 761,220 thousand US$ in 2021 to 1,283,777 thousand US$ by 2025. This represents a steady increase in the company's ability to generate operating earnings after accounting for taxes, suggesting strong fundamental operational growth.
- Invested Capital and Capital Expenditure
- Invested capital grew moderately between 2021 and 2023, moving from 3,138,367 thousand US$ to 4,056,689 thousand US$. However, a sharp escalation occurred in 2024, where invested capital increased by approximately 78% to 7,246,546 thousand US$, further climbing to 8,067,529 thousand US$ in 2025. This suggests a period of aggressive expansion or significant acquisition activity.
- Cost of Capital Stability
- The cost of capital remained remarkably stable over the five-year period, fluctuating within a narrow range between 17.15% and 17.52%. This stability indicates that the hurdle rate for investments remained constant, meaning the decline in economic profit was driven by the volume of capital deployed rather than an increase in the cost of funding.
- Economic Profit Trends
- Economic profit was positive and expanding from 2021 through 2023, peaking at 290,852 thousand US$. The trend reversed sharply in 2024, falling to -208,814 thousand US$, and remained negative in 2025 at -103,649 thousand US$. This shift indicates that the return on the newly invested capital failed to meet the cost of capital, resulting in a destruction of economic value despite the continued growth in absolute NOPAT.
The overall financial pattern suggests that the scale of investment implemented in 2024 outweighed the incremental gains in operating profit. Although economic profit began to recover slightly in 2025, the company has yet to return to a state of positive economic value added.
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Net Operating Profit after Taxes (NOPAT)
Cadence Design Systems Inc., NOPAT calculation
US$ 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 allowance for doubtful accounts.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in restructuring plans balance.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 186,178 × 5.00% = 9,309
7 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 125,850 × 21.00% = 26,428
8 Addition of after taxes interest expense to net income.
9 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 101,584 × 21.00% = 21,333
10 Elimination of after taxes investment income.
Net income and net operating profit after taxes (NOPAT) both demonstrate a consistent upward trajectory over the five-year period. While net income shows steady growth, NOPAT exhibits a more pronounced increase, particularly in the later years of the observed timeframe. This suggests improving operational efficiency and profitability relative to the company’s total capital employed.
- NOPAT Trend
- NOPAT increased from US$761.22 million in 2021 to US$1,283.78 million in 2025. The growth was not linear; the increase from 2021 to 2022 was US$121.36 million, from 2022 to 2023 was US$118.95 million, from 2023 to 2024 was US$32.66 million, and from 2024 to 2025 was US$249.59 million. This indicates accelerating profitability in the most recent period.
- Relationship between Net Income and NOPAT
- While both metrics increased, NOPAT consistently exceeded net income throughout the period. This difference likely reflects non-operating items impacting net income, such as interest expense or gains/losses on investments. The gap between NOPAT and net income widened from approximately US$65.27 million in 2021 to approximately US$274.89 million in 2025, further supporting the notion of increasing operational performance relative to overall profitability.
The substantial growth in NOPAT, especially between 2024 and 2025, warrants further investigation to identify the key drivers. Potential factors could include increased sales volume, improved pricing strategies, cost reductions, or enhanced operational efficiencies. The consistent positive trend in both net income and NOPAT suggests a healthy and improving financial performance.
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Cash Operating Taxes
Cadence Design Systems Inc., cash operating taxes calculation
US$ 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 income taxes and cash operating taxes both demonstrate significant fluctuations over the five-year period. Both metrics increased substantially from 2021 to 2022, then exhibited varied movements in subsequent years.
- Provision for Income Taxes
- The provision for income taxes increased markedly from US$72.48 million in 2021 to US$196.41 million in 2022, representing a more than 170% increase. This was followed by a moderate increase to US$240.78 million in 2023. Further growth was observed in 2024, reaching US$340.34 million, before increasing again to US$413.16 million in 2025. This indicates a consistent, overall upward trend in reported income tax expense.
- Cash Operating Taxes
- Cash operating taxes also experienced a substantial rise from 2021 to 2022, increasing from US$119.67 million to US$308.19 million. However, unlike the provision for income taxes, cash operating taxes decreased in 2023 to US$279.99 million. A significant increase occurred in 2024, reaching US$473.17 million, before declining to US$352.20 million in 2025. The volatility in cash operating taxes suggests potential timing differences between taxable income and reported income, or changes in tax payment schedules.
The divergence between the provision for income taxes and cash operating taxes is notable. While the provision for income taxes consistently increased, cash operating taxes experienced a decrease in 2023 and again in 2025. This difference could be attributable to deferred tax assets or liabilities, tax credits utilized, or changes in the effective tax rate impacting cash flows. Further investigation into the underlying causes of these discrepancies would be beneficial for a complete understanding of the company’s tax position.
- Comparative Trends
- The ratio of cash operating taxes to the provision for income taxes varied over the period. In 2021, cash operating taxes were approximately 1.65 times the provision for income taxes. This ratio decreased to 1.57 in 2022, increased to 1.16 in 2023, rose to 1.39 in 2024, and fell to 0.85 in 2025. This fluctuating ratio reinforces the observation of differing trends between the two tax-related items.
The observed trends suggest a growing tax burden as indicated by the provision for income taxes, but the actual cash outflow for taxes is subject to more variability. The fluctuations in cash operating taxes warrant further scrutiny to determine the factors driving these changes and their impact on the company’s liquidity.
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Invested Capital
Cadence Design Systems Inc., invested capital calculation (financing approach)
US$ 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 allowance for doubtful accounts receivable.
4 Addition of deferred revenue.
5 Addition of restructuring plans balance.
6 Addition of equity equivalents to stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of in-process capital assets.
9 Subtraction of short-term investments.
The invested capital of the company demonstrates a consistent upward trend over the five-year period. Simultaneously, significant fluctuations are observed in the components contributing to invested capital, namely total reported debt & leases and stockholders’ equity.
- Invested Capital Trend
- Invested capital increased from US$3,138,367 thousand in 2021 to US$8,067,529 thousand in 2025. This represents a cumulative increase of approximately 157% over the period. The rate of increase accelerated notably between 2023 and 2025.
- Debt & Leases
- Total reported debt & leases experienced a substantial increase from US$479,980 thousand in 2021 to US$924,152 thousand in 2022, representing a nearly 93% increase. It then decreased to US$806,033 thousand in 2023 before rising dramatically to US$2,626,630 thousand in 2024 and US$2,666,328 thousand in 2025. This suggests a period of increased borrowing followed by a temporary reduction, and then a significant re-increase in debt financing.
- Stockholders’ Equity
- Stockholders’ equity exhibited a more moderate, but consistent, growth pattern. It increased from US$2,740,675 thousand in 2021 to US$5,474,181 thousand in 2025, representing a cumulative increase of approximately 100%. The growth rate in stockholders’ equity appears to have accelerated in the later years of the period.
- Relationship between Components and Invested Capital
- While both debt and equity contribute to invested capital, the substantial increase in debt in 2024 and 2025 appears to be a primary driver of the accelerated growth in overall invested capital during those years. The contribution of equity to the overall invested capital is also increasing, but at a slower pace than the recent increases in debt.
The observed trends suggest a shift in the company’s capital structure towards greater reliance on debt financing, particularly in the most recent years. Further investigation into the reasons behind these financing decisions and their impact on financial performance would be warranted.
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Cost of Capital
Cadence Design Systems Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 80,865,560) | 80,865,560) | ÷ | 83,554,738) | = | 0.97 | 0.97 | × | 17.65% | = | 17.08% | ||
| Outstanding debt3 | 2,503,000) | 2,503,000) | ÷ | 83,554,738) | = | 0.03 | 0.03 | × | 4.44% × (1 – 21.00%) | = | 0.11% | ||
| Operating lease liability4 | 186,178) | 186,178) | ÷ | 83,554,738) | = | 0.00 | 0.00 | × | 5.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 83,554,738) | 1.00 | 17.20% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 70,813,061) | 70,813,061) | ÷ | 73,398,508) | = | 0.96 | 0.96 | × | 17.65% | = | 17.03% | ||
| Outstanding debt3 | 2,435,000) | 2,435,000) | ÷ | 73,398,508) | = | 0.03 | 0.03 | × | 4.44% × (1 – 21.00%) | = | 0.12% | ||
| Operating lease liability4 | 150,447) | 150,447) | ÷ | 73,398,508) | = | 0.00 | 0.00 | × | 4.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 73,398,508) | 1.00 | 17.15% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 81,873,157) | 81,873,157) | ÷ | 82,677,105) | = | 0.99 | 0.99 | × | 17.65% | = | 17.48% | ||
| Outstanding debt3 | 646,971) | 646,971) | ÷ | 82,677,105) | = | 0.01 | 0.01 | × | 5.22% × (1 – 21.00%) | = | 0.03% | ||
| Operating lease liability4 | 156,977) | 156,977) | ÷ | 82,677,105) | = | 0.00 | 0.00 | × | 4.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 82,677,105) | 1.00 | 17.52% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 50,684,958) | 50,684,958) | ÷ | 51,608,391) | = | 0.98 | 0.98 | × | 17.65% | = | 17.34% | ||
| Outstanding debt3 | 747,359) | 747,359) | ÷ | 51,608,391) | = | 0.01 | 0.01 | × | 4.71% × (1 – 21.00%) | = | 0.05% | ||
| Operating lease liability4 | 176,074) | 176,074) | ÷ | 51,608,391) | = | 0.00 | 0.00 | × | 4.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 51,608,391) | 1.00 | 17.40% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 37,498,601) | 37,498,601) | ÷ | 38,007,393) | = | 0.99 | 0.99 | × | 17.65% | = | 17.42% | ||
| Outstanding debt3 | 376,400) | 376,400) | ÷ | 38,007,393) | = | 0.01 | 0.01 | × | 4.38% × (1 – 21.00%) | = | 0.03% | ||
| Operating lease liability4 | 132,392) | 132,392) | ÷ | 38,007,393) | = | 0.00 | 0.00 | × | 3.60% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 38,007,393) | 1.00 | 17.46% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Outstanding debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Cadence Design Systems Inc., 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 | (103,649) | (208,814) | 290,852) | 242,202) | 213,268) | |
| Invested capital2 | 8,067,529) | 7,246,546) | 4,056,689) | 3,680,162) | 3,138,367) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | -1.28% | -2.88% | 7.17% | 6.58% | 6.80% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | 0.60% | 0.24% | 1.02% | 3.89% | 5.71% | |
| Adobe Inc. | 13.08% | 0.80% | 0.97% | 6.46% | 8.84% | |
| AppLovin Corp. | 28.27% | 0.55% | -20.58% | -26.78% | -30.15% | |
| Datadog Inc. | -8.87% | -9.56% | -6.08% | -11.83% | -4.01% | |
| International Business Machines Corp. | -0.73% | -7.57% | -3.53% | -11.28% | -6.14% | |
| Intuit Inc. | -2.92% | -6.59% | -8.64% | -7.53% | 0.10% | |
| Microsoft Corp. | 5.58% | 7.47% | 10.51% | 18.50% | 27.54% | |
| Oracle Corp. | -8.07% | -7.92% | -8.73% | -7.70% | 0.51% | |
| Palantir Technologies Inc. | 41.58% | -12.34% | -9.06% | -32.80% | -40.26% | |
| Palo Alto Networks Inc. | -3.85% | 5.34% | 11.47% | 3.50% | -5.19% | |
| Salesforce Inc. | -12.51% | -14.32% | -17.76% | -14.64% | -12.49% | |
| ServiceNow Inc. | 2.67% | 5.94% | 5.24% | 0.73% | 1.95% | |
| Synopsys Inc. | -12.43% | -8.18% | -7.48% | -0.88% | -6.91% | |
| Workday Inc. | -11.67% | -13.07% | -19.29% | -14.12% | -19.37% | |
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 × -103,649 ÷ 8,067,529 = -1.28%
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by an initial period of value creation followed by a significant shift toward economic value destruction beginning in 2024.
- Economic Profit
- A growth trend was evident between 2021 and 2023, with economic profit rising from 213,268 thousand USD to a peak of 290,852 thousand USD. This positive trajectory reversed sharply in 2024, resulting in a deficit of 208,814 thousand USD. Although the loss narrowed to 103,649 thousand USD by 2025, the figures indicate a sustained period of negative economic profit in the latter two years.
- Invested Capital
- Invested capital experienced consistent growth throughout the analyzed period. A moderate increase occurred from 2021 to 2023, followed by a substantial surge in 2024, where capital expanded from 4,056,689 thousand USD to 7,246,546 thousand USD. This upward trend continued into 2025, reaching 8,067,529 thousand USD, suggesting a significant expansion of the capital base.
- Economic Spread Ratio
- The economic spread ratio remained positive and stable between 6.58% and 7.17% from 2021 to 2023, signifying that the return on capital exceeded the cost of capital. A critical decline was recorded in 2024, with the ratio falling to -2.88%, coinciding with the rapid increase in invested capital. A slight recovery to -1.28% was observed in 2025, yet the ratio remains negative, indicating that the company is not currently generating returns sufficient to cover its cost of capital.
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Economic Profit Margin
Cadence Design Systems Inc., 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 | (103,649) | (208,814) | 290,852) | 242,202) | 213,268) | |
| Revenue | 5,296,759) | 4,641,264) | 4,089,986) | 3,561,718) | 2,988,244) | |
| Add: Increase (decrease) in deferred revenue | 81,851) | 88,626) | (18,107) | 126,972) | 101,169) | |
| Adjusted revenue | 5,378,610) | 4,729,890) | 4,071,879) | 3,688,690) | 3,089,413) | |
| Performance Ratio | ||||||
| Economic profit margin2 | -1.93% | -4.41% | 7.14% | 6.57% | 6.90% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | 0.39% | 0.13% | 0.52% | 1.87% | 2.93% | |
| Adobe Inc. | 11.83% | 0.90% | 1.21% | 7.53% | 11.02% | |
| AppLovin Corp. | 29.05% | 0.54% | -28.17% | -50.15% | -60.37% | |
| Datadog Inc. | -5.26% | -8.68% | -3.80% | -8.19% | -3.19% | |
| International Business Machines Corp. | -1.30% | -13.38% | -6.28% | -19.53% | -11.67% | |
| Intuit Inc. | -3.77% | -10.13% | -14.15% | -14.50% | 0.13% | |
| Microsoft Corp. | 8.33% | 10.44% | 11.97% | 17.73% | 22.86% | |
| Oracle Corp. | -16.18% | -15.08% | -16.89% | -14.14% | 1.01% | |
| Palantir Technologies Inc. | 21.54% | -10.70% | -4.86% | -55.03% | -66.31% | |
| Palo Alto Networks Inc. | -4.56% | 5.67% | 11.39% | 4.08% | -6.99% | |
| Salesforce Inc. | -27.01% | -33.09% | -44.91% | -40.63% | -28.65% | |
| ServiceNow Inc. | 2.94% | 4.89% | 4.22% | 0.59% | 1.69% | |
| Synopsys Inc. | -72.52% | -13.71% | -10.55% | -1.24% | -10.99% | |
| Workday Inc. | -12.39% | -14.55% | -23.67% | -19.14% | -25.28% | |
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 × -103,649 ÷ 5,378,610 = -1.93%
3 Click competitor name to see calculations.
The financial trajectory of the entity exhibits a significant divergence between consistent top-line revenue growth and the generation of economic value over the five-year period ending December 31, 2025.
- Revenue Performance
- Adjusted revenue demonstrates a steady and uninterrupted upward trend, increasing from 3.09 billion US dollars in 2021 to 5.38 billion US dollars in 2025. This indicates a consistent expansion in the scale of operations.
- Economic Profit Trends
- Economic profit experienced an initial growth phase from 2021 to 2023, peaking at 290.85 million US dollars. A sharp reversal occurred in 2024, as the figure plummeted to a deficit of -208.81 million US dollars. Although the negative value improved to -103.65 million US dollars in 2025, the entity remained in a state of value destruction during the final two years of the period.
- Economic Profit Margin Analysis
- The economic profit margin remained positive and relatively stable between 2021 and 2023, fluctuating within a narrow range of 6.57% to 7.14%. A severe contraction is observed in 2024, with the margin falling to -4.41%. By 2025, the margin recovered slightly to -1.93%, indicating a narrowing gap between the operating returns and the cost of capital, despite remaining below the break-even threshold.
Overall, the data reveals that the increase in adjusted revenue did not translate into sustained economic value. The transition from a value-creating position in 2023 to a value-destroying position in 2024 and 2025 suggests that the cost of capital exceeded the net operating profit after tax during this interval. However, the improvement in the economic profit margin from 2024 to 2025 indicates a positive trend toward restoring economic profitability.
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