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
Cisco Systems Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2025-07-26), 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25).
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
= 9,841 – 14.44% × 91,789 = -3,412
The financial trajectory over the analyzed period indicates a significant erosion of economic value, shifting from substantial value creation to value destruction. Economic profit peaked in July 2020 at 5,223 million USD and experienced a consistent decline, culminating in a deficit of 3,412 million USD by July 2025.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT remained relatively stable between July 2020 and July 2024, fluctuating within a narrow range between 11,686 million USD and 12,905 million USD. However, a notable contraction occurred in July 2025, where NOPAT fell to 9,841 million USD, representing the lowest operating performance in the six-year period.
- Invested Capital and Capital Efficiency
- Invested capital exhibited stability from 2020 to 2023, hovering between 53,498 million USD and 59,063 million USD. A critical shift occurred in July 2024, where invested capital surged to 91,785 million USD, an increase of approximately 55% within a single year. This elevated capital base persisted into July 2025 at 91,789 million USD.
- Cost of Capital
- The cost of capital remained consistently high, oscillating between 13.98% and 15.14%. This stability in the percentage rate amplified the impact of the increased invested capital, as the absolute dollar cost of financing the asset base rose sharply.
- Economic Profit Transition
- The transition to negative economic profit in July 2024 resulted from the imbalance between stagnant NOPAT and the rapid expansion of the invested capital base. The capital charge—the product of invested capital and the cost of capital—exceeded the operating returns, leading to a loss of 652 million USD in 2024. This trend accelerated in July 2025, as declining NOPAT combined with a high capital charge widened the economic loss to 3,412 million USD.
The overall data suggests that the expansion of the capital base did not yield proportional increases in operating profit, leading to a deterioration in economic value added. The current trend reflects an inability to generate returns that exceed the cost of the capital employed.
AI Ask an analyst for more
Net Operating Profit after Taxes (NOPAT)
Cisco Systems Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-07-26), 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit loss.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in product warranty liability.
5 Addition of increase (decrease) in restructuring liability.
6 Addition of increase (decrease) in equity equivalents to net income.
7 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,550 × 4.10% = 64
8 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,657 × 21.00% = 348
9 Addition of after taxes interest expense to net income.
10 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 901 × 21.00% = 189
11 Elimination of after taxes investment income.
- Net Income
- The net income experienced a slight decline from 11,214 million USD in 2020 to 10,591 million USD in 2021, followed by an increase to a peak of 12,613 million USD in 2023. However, after this peak, net income decreased significantly in the subsequent years, reaching 10,320 million USD in 2024 and further down to 10,180 million USD in 2025. Overall, the trend demonstrates volatility with a general downward movement in the last two years.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT showed a declining trend from 12,905 million USD in 2020 to 11,686 million USD in 2021, then rose to 12,468 million USD in 2022 and stabilized somewhat in 2023 at 12,636 million USD. However, similar to net income, NOPAT decreased notably in 2024 and more sharply in 2025, falling to 12,178 million USD and 9,841 million USD respectively. This indicates decreasing operational profitability over the last two years examined.
- Summary
- Both net income and NOPAT exhibited fluctuations over the six-year period, with initial declines, mid-period recoveries, and then a marked decline in the most recent years. The declining net income and operating profit in 2024 and 2025 suggest challenges affecting profitability and operational efficiency. Such trends may warrant further investigation into factors impacting earnings and operational costs during these years.
AI Ask an analyst for more
Cash Operating Taxes
Cisco Systems Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-07-26), 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25).
- Provision for Income Taxes
- The provision for income taxes exhibits a downward trend over the analyzed period. Starting at $2,756 million in July 2020, the provision declines slightly to $2,671 million in July 2021 and remains relatively stable through July 2023, fluctuating marginally around the mid-2600s. A notable decrease occurs in July 2024 to $1,914 million, followed by a further significant reduction to $920 million in July 2025. This consistent decrease in income tax provision suggests either improved tax efficiency, changes in taxable income, or tax planning strategies reducing tax liabilities.
- Cash Operating Taxes
- Cash operating taxes demonstrate more variability across the same time frame. Beginning at $2,718 million in July 2020, the cash taxes increase steadily to peak at $4,688 million in July 2023, marking the highest point within the observed period. After this peak, cash operating taxes sharply decline to $2,835 million in July 2024 and further decrease to $2,211 million in July 2025. The increase through mid-2023, followed by a rapid fall, may reflect timing differences in tax payments, changes in cash tax obligations, or alterations in tax regulations impacting cash outflows.
- Comparative Insights
- While both provision for income taxes and cash operating taxes show declines in the latter years, the disparity in their patterns is notable. The provision decreases steadily, whereas cash taxes rise considerably before dropping. This divergence could indicate differences in accrued tax liabilities versus actual cash payments, highlighting potential timing differences, deferred tax impacts, or effective tax rate adjustments. The divergence may warrant further examination of tax expense recognition versus cash tax payments and their drivers.
AI Ask an analyst for more
Invested Capital
Cisco Systems Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-07-26), 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25).
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 product warranty liability.
6 Addition of restructuring liability.
7 Addition of equity equivalents to equity.
8 Removal of accumulated other comprehensive income.
9 Subtraction of marketable securities.
The financial data reveals several notable trends over the examined periods.
- Total reported debt & leases
- This item shows a generally decreasing trend from July 2020 through July 2023, declining from 15,585 million US dollars to 9,411 million US dollars. However, there is a significant increase observed in the subsequent two years, with the value rising sharply to 32,232 million US dollars in July 2024, before slightly decreasing to 29,643 million US dollars in July 2025. This suggests a considerable increase in debt and lease obligations in the more recent years after a prior period of debt reduction.
- Equity
- Equity exhibits a consistent upward trend throughout the entire timeframe. Starting at 37,920 million US dollars in July 2020, it gradually increases with minor fluctuations to reach 46,843 million US dollars by July 2025. This progression indicates steady growth in shareholders' equity, reflecting either retained earnings accumulation or capital infusions over the years.
- Invested capital
- Invested capital remains relatively stable from July 2020 through July 2023, fluctuating moderately between approximately 53,498 million to 58,979 million US dollars. A marked increase occurs in July 2024, where invested capital jumps sharply to approximately 91,785 million US dollars, maintaining this level into July 2025. This significant upsurge aligns with the increase in total debt and leases, implying increased investment possibly funded by the higher debt levels.
Overall, the data reflects a strategic shift starting in 2024 characterized by elevated leverage and invested capital, while equity continues a steady growth path throughout the entire period. The increased debt suggests augmented financing activity, potentially for expansion or acquisition purposes, supported by the rise in invested capital. The stability and growth in equity throughout the years provide a positive signal regarding the company’s financial foundation.
AI Ask an analyst for more
Cost of Capital
Cisco Systems Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 267,513) | 267,513) | ÷ | 297,548) | = | 0.90 | 0.90 | × | 15.63% | = | 14.05% | ||
| Debt3 | 28,485) | 28,485) | ÷ | 297,548) | = | 0.10 | 0.10 | × | 4.88% × (1 – 21.00%) | = | 0.37% | ||
| Operating lease liability4 | 1,550) | 1,550) | ÷ | 297,548) | = | 0.01 | 0.01 | × | 4.10% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 297,548) | 1.00 | 14.44% | ||||||||||
Based on: 10-K (reporting date: 2025-07-26).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 196,065) | 196,065) | ÷ | 228,591) | = | 0.86 | 0.86 | × | 15.63% | = | 13.41% | ||
| Debt3 | 31,256) | 31,256) | ÷ | 228,591) | = | 0.14 | 0.14 | × | 5.14% × (1 – 21.00%) | = | 0.56% | ||
| Operating lease liability4 | 1,270) | 1,270) | ÷ | 228,591) | = | 0.01 | 0.01 | × | 4.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 228,591) | 1.00 | 13.98% | ||||||||||
Based on: 10-K (reporting date: 2024-07-27).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 230,275) | 230,275) | ÷ | 239,995) | = | 0.96 | 0.96 | × | 15.63% | = | 15.00% | ||
| Debt3 | 8,700) | 8,700) | ÷ | 239,995) | = | 0.04 | 0.04 | × | 4.78% × (1 – 21.00%) | = | 0.14% | ||
| Operating lease liability4 | 1,020) | 1,020) | ÷ | 239,995) | = | 0.00 | 0.00 | × | 3.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 239,995) | 1.00 | 15.14% | ||||||||||
Based on: 10-K (reporting date: 2023-07-29).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 186,418) | 186,418) | ÷ | 197,764) | = | 0.94 | 0.94 | × | 15.63% | = | 14.73% | ||
| Debt3 | 10,300) | 10,300) | ÷ | 197,764) | = | 0.05 | 0.05 | × | 3.98% × (1 – 21.00%) | = | 0.16% | ||
| Operating lease liability4 | 1,046) | 1,046) | ÷ | 197,764) | = | 0.01 | 0.01 | × | 2.20% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 197,764) | 1.00 | 14.91% | ||||||||||
Based on: 10-K (reporting date: 2022-07-30).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 247,159) | 247,159) | ÷ | 262,027) | = | 0.94 | 0.94 | × | 15.63% | = | 14.74% | ||
| Debt3 | 13,700) | 13,700) | ÷ | 262,027) | = | 0.05 | 0.05 | × | 3.36% × (1 – 21.00%) | = | 0.14% | ||
| Operating lease liability4 | 1,168) | 1,168) | ÷ | 262,027) | = | 0.00 | 0.00 | × | 1.70% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 262,027) | 1.00 | 14.89% | ||||||||||
Based on: 10-K (reporting date: 2021-07-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 173,359) | 173,359) | ÷ | 191,761) | = | 0.90 | 0.90 | × | 15.63% | = | 14.13% | ||
| Debt3 | 17,400) | 17,400) | ÷ | 191,761) | = | 0.09 | 0.09 | × | 3.11% × (1 – 21.00%) | = | 0.22% | ||
| Operating lease liability4 | 1,002) | 1,002) | ÷ | 191,761) | = | 0.01 | 0.01 | × | 1.50% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 191,761) | 1.00 | 14.36% | ||||||||||
Based on: 10-K (reporting date: 2020-07-25).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Cisco Systems Inc., economic spread ratio calculation, comparison to benchmarks
| Jul 26, 2025 | Jul 27, 2024 | Jul 29, 2023 | Jul 30, 2022 | Jul 31, 2021 | Jul 25, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (3,412) | (652) | 3,704) | 3,665) | 3,132) | 5,223) | |
| Invested capital2 | 91,789) | 91,785) | 58,979) | 59,063) | 57,460) | 53,498) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -3.72% | -0.71% | 6.28% | 6.20% | 5.45% | 9.76% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Apple Inc. | 107.01% | 164.31% | 137.50% | 199.01% | 195.38% | 143.35% | |
| Arista Networks Inc. | 53.73% | 35.14% | 20.53% | 16.06% | 31.11% | — | |
| Dell Technologies Inc. | -9.77% | -8.40% | -0.73% | 3.13% | -1.39% | — | |
| Lumentum Holdings Inc. | -21.55% | -26.69% | -17.24% | -5.33% | 7.09% | -4.40% | |
| Super Micro Computer Inc. | -8.01% | -5.95% | 4.14% | -4.76% | -12.73% | -15.68% | |
Based on: 10-K (reporting date: 2025-07-26), 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -3,412 ÷ 91,789 = -3.72%
4 Click competitor name to see calculations.
The financial performance from 2020 to 2025 is characterized by a transition from positive economic value creation to significant value destruction. While the initial period showed stable, positive returns above the cost of capital, a sharp reversal occurred in 2024 and 2025, driven by a substantial increase in the capital base that was not matched by corresponding gains in economic profit.
- Economic Profit
- A volatile downward trend is observed in economic profit. After peaking at 5,223 million US$ in 2020, the figure declined to 3,132 million US$ in 2021 before experiencing a period of relative stability between 2022 and 2023. However, a critical inflection point occurred in 2024, when economic profit turned negative at -652 million US$, further deteriorating to -3,412 million US$ by 2025. This trajectory indicates a failure to generate returns exceeding the cost of capital in the final two years of the period.
- Invested Capital
- Invested capital exhibited moderate growth between 2020 and 2023, rising from 53,498 million US$ to 58,979 million US$. A significant expansion occurred in 2024, with invested capital jumping to 91,785 million US$, representing a substantial increase in the company's asset base. This level remained nearly constant into 2025 at 91,789 million US$, suggesting a large-scale acquisition or capital investment that fundamentally altered the capital structure.
- Economic Spread Ratio
- The economic spread ratio provides a clear indication of diminishing efficiency in capital utilization. The ratio began at a high of 9.76% in 2020 and stabilized around 6% between 2022 and 2023. Following the surge in invested capital in 2024, the ratio collapsed to -0.71% and continued to decline to -3.72% in 2025. The correlation between the increase in invested capital and the negative spread suggests that the additional capital deployed did not generate sufficient operating income to cover its associated cost, resulting in a net destruction of economic value.
AI Ask an analyst for more
Economic Profit Margin
Cisco Systems Inc., economic profit margin calculation, comparison to benchmarks
| Jul 26, 2025 | Jul 27, 2024 | Jul 29, 2023 | Jul 30, 2022 | Jul 31, 2021 | Jul 25, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (3,412) | (652) | 3,704) | 3,665) | 3,132) | 5,223) | |
| Revenue | 56,654) | 53,803) | 56,998) | 51,557) | 49,818) | 49,301) | |
| Add: Increase (decrease) in deferred revenue | 304) | 2,925) | 2,286) | 1,100) | 1,718) | 1,979) | |
| Adjusted revenue | 56,958) | 56,728) | 59,284) | 52,657) | 51,536) | 51,280) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -5.99% | -1.15% | 6.25% | 6.96% | 6.08% | 10.19% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Apple Inc. | 22.81% | 21.00% | 21.63% | 23.52% | 22.70% | 18.79% | |
| Arista Networks Inc. | 33.20% | 24.89% | 15.50% | 11.06% | 18.22% | — | |
| Dell Technologies Inc. | -5.28% | -5.16% | -0.40% | 1.64% | -1.19% | — | |
| Lumentum Holdings Inc. | -39.87% | -60.07% | -28.29% | -7.78% | 8.00% | -4.19% | |
| Super Micro Computer Inc. | -4.13% | -3.02% | 1.40% | -2.02% | -4.59% | -5.82% | |
Based on: 10-K (reporting date: 2025-07-26), 10-K (reporting date: 2024-07-27), 10-K (reporting date: 2023-07-29), 10-K (reporting date: 2022-07-30), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-25).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -3,412 ÷ 56,958 = -5.99%
3 Click competitor name to see calculations.
The financial performance regarding economic value creation exhibits a significant downward trajectory over the six-year period ending July 26, 2025. While the company initially generated substantial economic profit, there is a clear transition from value creation to value destruction, as evidenced by the shift into negative economic profit territory in the final two years of the period.
- Economic Profit Trends
- A substantial decline in economic profit is observed, starting from a peak of 5,223 million USD in July 2020. After a period of volatility and relative stabilization between 2021 and 2023, where figures ranged from 3,132 million USD to 3,704 million USD, a sharp reversal occurred. By July 2024, economic profit fell to negative 652 million USD, further deteriorating to negative 3,412 million USD by July 2025. This indicates that the company's net operating profit after taxes is no longer sufficient to cover its cost of capital.
- Adjusted Revenue Performance
- Adjusted revenue demonstrated a general upward trend for the first four years, growing from 51,280 million USD in 2020 to a peak of 59,284 million USD in July 2023. However, this revenue growth failed to translate into sustained economic value. Despite revenue remaining relatively stable between 56,728 million USD and 56,958 million USD in 2024 and 2025, economic profit collapsed, suggesting that the cost of generating this revenue has increased or that the return on invested capital has fallen below the required threshold.
- Economic Profit Margin Analysis
- The economic profit margin reflects a severe erosion of efficiency. The margin began at 10.19% in 2020, decreased to a range of approximately 6.08% to 6.96% between 2021 and 2023, and then plummeted into negative figures. The margin reached negative 1.15% in July 2024 and reached a low of negative 5.99% by July 2025. The disconnect between stable revenue and a crashing margin points toward significant pressure on profitability or a substantial increase in the weighted average cost of capital.
AI Ask an analyst for more