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: 2026-07-25), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2026 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 15,250 – 17.65% × 97,313 = -1,923
The analysis of economic profit reveals a significant transition from value creation to value destruction beginning in the 2024 fiscal period. While the company generated positive economic value between 2021 and 2023, a substantial expansion in the invested capital base, which was not matched by a proportional increase in operating returns, led to a sustained period of negative economic value added.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT demonstrated moderate growth between 2021 and 2023, peaking at 12,636 million. A significant contraction occurred in 2025, where profit fell to 9,841 million, representing the lowest point in the analyzed period. A strong recovery followed in 2026, with NOPAT rising to 15,250 million, indicating a restoration of operating efficiency.
- Invested Capital and Cost of Capital
- Invested capital remained relatively stable through 2023 but experienced a sharp increase in 2024, jumping from 58,979 million to 91,785 million. This upward trend continued through 2026, reaching 97,313 million. The cost of capital remained comparatively stable throughout the period, fluctuating between a low of 16.57% in 2024 and a high of 18.04% in 2023.
- Economic Profit Dynamics
- Economic profit was positive and increasing from 2021 to 2023, reaching a high of 1,996 million. The pivot to negative economic profit in 2024 (-3,028 million) correlates directly with the spike in invested capital. The deficit widened to -5,903 million in 2025, driven by the simultaneous occurrence of peak invested capital and the lowest NOPAT. Although the 2026 recovery in NOPAT reduced the deficit to -1,923 million, the economic profit remains negative, indicating that the return on invested capital continues to fall below the cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Cisco Systems Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2026-07-25), 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).
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 2026 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 1,652 × 4.00% = 66
8 2026 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 1,536 × 21.00% = 323
9 Addition of after taxes interest expense to net income.
10 2026 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 852 × 21.00% = 179
11 Elimination of after taxes investment income.
The financial performance from July 2021 to July 2026 exhibits a cyclical trend characterized by initial growth, a mid-period contraction, and a projected significant recovery. Both Net Income and Net Operating Profit After Taxes (NOPAT) follow a similar trajectory, though their relationship diverges notably in the later years of the period.
- NOPAT Performance Trends
- A steady increase in NOPAT is observed from 2021 to 2023, rising from US$ 11,686 million to a peak of US$ 12,636 million. This growth is followed by a period of decline, with NOPAT falling to US$ 12,178 million in 2024 and reaching a period low of US$ 9,841 million in 2025. However, a substantial recovery is projected for 2026, with NOPAT increasing to US$ 15,250 million, representing the highest value in the analyzed timeframe.
- Net Income Correlation
- Net income mirrors the NOPAT trend with growth peaking in 2023 at US$ 12,613 million before declining through 2025 to US$ 10,180 million. The projected 2026 figure of US$ 13,267 million indicates a strong return to growth. The convergence of Net Income and NOPAT in 2023 suggests a period where operating profits were closely aligned with final bottom-line results.
- Operational Efficiency and Divergence
- For the majority of the period, NOPAT remains higher than Net Income, which is typical for firms with significant debt or non-operating expenses. A notable inversion occurs in July 2025, where NOPAT (US$ 9,841 million) drops below Net Income (US$ 10,180 million). This deviation indicates that non-operating income or tax adjustments may have temporarily offset a decline in core operating profitability. By 2026, the gap widens again, with NOPAT exceeding Net Income by US$ 1,983 million, signaling a projected return to robust operating performance.
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Cash Operating Taxes
Cisco Systems Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2026-07-25), 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).
The analysis of tax expenditures between 2021 and 2026 reveals a period of notable volatility in both accounting provisions and actual cash outflows, impacting the calculation of economic value added.
- Cash Operating Taxes Trends
- Cash operating taxes remained relatively stable between 2021 and 2022, followed by a substantial surge in 2023, where payments peaked at 4,688 million USD. This peak was followed by a corrective decline over the next two years, reaching a low of 2,211 million USD in 2025, before recovering to 2,660 million USD in 2026.
- Provision for Income Taxes Trends
- The provision for income taxes showed consistency from 2021 through 2023, hovering around 2,700 million USD. A significant downward trend emerged in 2024 and 2025, with the provision dropping sharply to 920 million USD in 2025. This trend reversed abruptly in 2026, with the provision returning to 2,742 million USD.
- Variance Analysis
- A significant divergence is observed in 2023, where cash operating taxes exceeded the provision for income taxes by approximately 1,983 million USD. In contrast, the relationship inverted by 2026, with the accounting provision exceeding the actual cash tax outflow. The widening gap between provisions and cash payments in 2024 and 2025 suggests a period of temporary tax deferrals or the utilization of tax assets before a return to normalized levels in 2026.
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Invested Capital
Cisco Systems Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2026-07-25), 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).
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 analysis of the capital structure reveals a substantial expansion of the total invested capital base over the observed period, characterized by a significant shift in financing composition between 2023 and 2024.
- Invested Capital Trajectory
- Invested capital remained relatively stable from July 2021 through July 2023, fluctuating within a narrow range between $57,460 million and $59,063 million. A sharp increase occurred in July 2024, where invested capital rose to $91,785 million, representing a growth of approximately 55.5% in a single year. This upward momentum continued toward the end of the period, reaching a peak of $97,313 million by July 2026.
- Debt and Lease Dynamics
- The primary driver of the surge in invested capital was a dramatic increase in total reported debt and leases. After a period of deleveraging between July 2021 ($12,694 million) and July 2023 ($9,411 million), debt obligations spiked to $32,232 million in July 2024. This more than threefold increase indicates a significant financing event or capital acquisition. Debt levels remained high through July 2026, concluding at $31,185 million.
- Equity Evolution
- Equity showed a consistent and steady upward trend following a minor contraction in July 2022. From a low of $39,773 million in 2022, equity grew incrementally each year to reach $50,285 million by July 2026. While the growth in equity contributed to the overall increase in invested capital, the rate of expansion was significantly more moderate compared to the volatility observed in debt levels.
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Cost of Capital
Cisco Systems Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 431,556) | 431,556) | ÷ | 462,571) | = | 0.93 | 0.93 | × | 18.65% | = | 17.40% | ||
| Debt3 | 29,363) | 29,363) | ÷ | 462,571) | = | 0.06 | 0.06 | × | 4.75% × (1 – 21.00%) | = | 0.24% | ||
| Operating lease liability4 | 1,652) | 1,652) | ÷ | 462,571) | = | 0.00 | 0.00 | × | 4.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 462,571) | 1.00 | 17.65% | ||||||||||
Based on: 10-K (reporting date: 2026-07-25).
1 US$ 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 | 267,513) | 267,513) | ÷ | 297,548) | = | 0.90 | 0.90 | × | 18.65% | = | 16.77% | ||
| 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 | 17.15% | ||||||||||
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 | × | 18.65% | = | 15.99% | ||
| 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 | 16.57% | ||||||||||
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 | × | 18.65% | = | 17.89% | ||
| 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 | 18.04% | ||||||||||
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 | × | 18.65% | = | 17.58% | ||
| 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 | 17.75% | ||||||||||
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 | × | 18.65% | = | 17.59% | ||
| 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 | 17.73% | ||||||||||
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 »
Economic Spread Ratio
Cisco Systems Inc., economic spread ratio calculation, comparison to benchmarks
| Jul 25, 2026 | Jul 26, 2025 | Jul 27, 2024 | Jul 29, 2023 | Jul 30, 2022 | Jul 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (1,923) | (5,903) | (3,028) | 1,996) | 1,984) | 1,496) | |
| Invested capital2 | 97,313) | 91,789) | 91,785) | 58,979) | 59,063) | 57,460) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -1.98% | -6.43% | -3.30% | 3.38% | 3.36% | 2.60% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Apple Inc. | 106.79% | 108.26% | 165.55% | 138.73% | 200.23% | 196.59% | |
| Arista Networks Inc. | — | 53.84% | 35.25% | 20.64% | 16.17% | 31.22% | |
| Dell Technologies Inc. | -0.23% | -9.73% | -8.36% | -0.70% | 3.17% | -1.36% | |
| Lumentum Holdings Inc. | -170.62% | -23.27% | -28.98% | -19.00% | -6.33% | 5.99% | |
| Super Micro Computer Inc. | -3.70% | -13.11% | -11.50% | -1.42% | -9.62% | -18.07% | |
Based on: 10-K (reporting date: 2026-07-25), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2026 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -1,923 ÷ 97,313 = -1.98%
4 Click competitor name to see calculations.
Analysis of the economic value added metrics reveals a distinct shift from value creation to value destruction over the observed period. Between July 2021 and July 2023, a positive economic profit was maintained, peaking at 1,996 million USD. However, a significant reversal occurred in July 2024, marking the onset of negative economic profit that persisted through July 2026.
- Economic Spread Ratio
- The economic spread ratio exhibited an initial upward trajectory, increasing from 2.60% in 2021 to a peak of 3.38% in 2023, indicating that the entity was generating returns in excess of its cost of capital. This trend inverted sharply in 2024, with the ratio falling to -3.30% and reaching a minimum of -6.43% in 2025. While the ratio improved to -1.98% by July 2026, it remained negative, signifying that the return on invested capital continued to trail the required rate of return.
- Invested Capital Trends
- Invested capital remained relatively stable between 2021 and 2023, fluctuating within a narrow range between 57,460 million USD and 59,063 million USD. A substantial expansion in the capital base occurred in July 2024, where invested capital increased to 91,785 million USD. This growth continued through July 2026, reaching 97,313 million USD. The timing of this capital increase coincides with the shift to negative economic profit, suggesting that the additional capital deployed did not generate sufficient returns to cover its associated cost.
- Economic Profit Trajectory
- Economic profit transitioned from a positive 1,996 million USD in 2023 to a deficit of 3,028 million USD in 2024, further declining to -5,903 million USD in 2025. A partial recovery was observed in July 2026, with the deficit narrowing to -1,923 million USD. Despite this late-period improvement, the overall trend since 2024 indicates a period of sustained economic value erosion.
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Economic Profit Margin
Cisco Systems Inc., economic profit margin calculation, comparison to benchmarks
| Jul 25, 2026 | Jul 26, 2025 | Jul 27, 2024 | Jul 29, 2023 | Jul 30, 2022 | Jul 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (1,923) | (5,903) | (3,028) | 1,996) | 1,984) | 1,496) | |
| Revenue | 63,325) | 56,654) | 53,803) | 56,998) | 51,557) | 49,818) | |
| Add: Increase (decrease) in deferred revenue | 1,002) | 304) | 2,925) | 2,286) | 1,100) | 1,718) | |
| Adjusted revenue | 64,327) | 56,958) | 56,728) | 59,284) | 52,657) | 51,536) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -2.99% | -10.36% | -5.34% | 3.37% | 3.77% | 2.90% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Apple Inc. | 23.95% | 23.08% | 21.16% | 21.82% | 23.66% | 22.84% | |
| Arista Networks Inc. | — | 33.27% | 24.96% | 15.58% | 11.14% | 18.28% | |
| Dell Technologies Inc. | -0.11% | -5.26% | -5.13% | -0.39% | 1.66% | -1.17% | |
| Lumentum Holdings Inc. | -267.83% | -43.04% | -65.24% | -31.18% | -9.25% | 6.75% | |
| Super Micro Computer Inc. | -2.31% | -6.76% | -5.84% | -0.48% | -4.09% | -6.51% | |
Based on: 10-K (reporting date: 2026-07-25), 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).
1 Economic profit. See details »
2 2026 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -1,923 ÷ 64,327 = -2.99%
3 Click competitor name to see calculations.
The financial performance from July 2021 to July 2026 is characterized by an initial period of economic value creation followed by a severe transition into value destruction, with a partial recovery emerging in the final year.
- Economic Profit Trends
- Economic profit remained positive and grew steadily between 2021 and 2023, reaching a peak of 1,996 million US dollars. A significant reversal occurred in 2024, as the figure shifted to a deficit of 3,028 million US dollars. This decline intensified in 2025, hitting a trough of negative 5,903 million US dollars, before moderating to negative 1,923 million US dollars by July 2026.
- Adjusted Revenue Trajectory
- Adjusted revenue demonstrated overall growth over the analyzed period, increasing from 51,536 million US dollars in 2021 to 64,327 million US dollars in 2026. Although a slight contraction was noted in 2024 and stability prevailed in 2025, the general upward trend in revenue suggests that the collapse in economic profit was not driven by a failure to generate sales, but likely by an increase in the cost of capital or a decline in operating efficiency.
- Economic Profit Margin Analysis
- The economic profit margin followed a volatile trajectory, peaking at 3.77% in 2022 before declining to 3.37% in 2023. A sharp downturn occurred in 2024, with the margin falling to -5.34%, and reaching a critical low of -10.36% in 2025. By 2026, the margin improved to -2.99%, signaling a reduction in the rate of economic loss relative to revenue, although value creation has not yet returned to positive levels.
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