Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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- Balance Sheet: Assets
- Common-Size Balance Sheet: Assets
- Analysis of Profitability Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Current Ratio since 2019
- Price to Book Value (P/BV) since 2019
- Analysis of Revenues
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Return on Invested Capital (ROIC)
Datadog Inc., ROIC 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings 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 NOPAT. See details »
2 Invested capital. See details »
3 2025 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis reveals fluctuations in Return on Invested Capital (ROIC) over the five-year period. Net operating profit after taxes (NOPAT) and invested capital both demonstrate increasing values, though not consistently year-over-year, impacting the overall ROIC performance.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT decreased from US$159,659 thousand in 2021 to US$111,620 thousand in 2022, representing a significant decline. However, NOPAT rebounded strongly in 2023, reaching US$215,965 thousand, and continued to grow to US$278,126 thousand in 2024. A slight decrease to US$257,877 thousand is observed in 2025.
- Invested Capital
- Invested capital exhibited a consistent upward trend from 2021 to 2024. It increased from US$958,101 thousand in 2021 to US$1,276,252 thousand in 2022, then to US$1,475,035 thousand in 2023, and peaked at US$2,616,203 thousand in 2024. A decrease to US$2,198,274 thousand is noted in 2025.
- Return on Invested Capital (ROIC)
- ROIC began at 16.66% in 2021, then experienced a substantial decrease to 8.75% in 2022, coinciding with the decline in NOPAT. The ratio recovered to 14.64% in 2023, driven by the increase in NOPAT. In 2024, ROIC decreased to 10.63%, despite the higher NOPAT, due to a larger increase in invested capital. ROIC increased slightly to 11.73% in 2025, despite a decrease in NOPAT, as the decrease in invested capital partially offset the NOPAT decline.
The fluctuations in ROIC suggest that while the company is generally increasing its profitability and capital base, the efficiency with which capital is deployed to generate profits varies. The significant increase in invested capital in 2024, without a proportional increase in NOPAT, resulted in a lower ROIC. The slight recovery in 2025 indicates a potential stabilization, but continued monitoring of the relationship between NOPAT and invested capital is warranted.
Decomposition of ROIC
Datadog Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2025 | = | × | × | ||||
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × |
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The period under review demonstrates fluctuating performance in key profitability and efficiency metrics. Return on Invested Capital (ROIC) experienced volatility, influenced by changes in operating profitability, capital efficiency, and tax effects. A detailed examination of the components reveals specific trends.
- Operating Profit Margin (OPM)
- The Operating Profit Margin exhibited a significant decline from 13.48% in 2021 to 6.57% in 2022. A partial recovery was observed in 2023, reaching 8.91%, followed by a further increase to 9.47% in 2024. However, the metric decreased again in 2025, settling at 6.59%. This suggests potential challenges in maintaining consistent profitability amidst changing operational conditions.
- Turnover of Capital (TO)
- The Turnover of Capital, a measure of capital efficiency, generally increased from 1.26 in 2021 to 1.60 in 2023, indicating improved asset utilization. A decrease to 1.10 was noted in 2024, before rebounding to 1.69 in 2025. This fluctuation suggests varying levels of effectiveness in generating revenue from the company’s invested capital.
- Effective Cash Tax Rate Adjustment (1 – CTR)
- The factor representing one minus the Effective Cash Tax Rate remained relatively high throughout the period, starting at 98.17% in 2021 and increasing to 105.69% in 2025. The values above 100% indicate a tax benefit or a reduction in cash taxes paid relative to reported income. The increase over time suggests a growing impact from tax-related benefits.
- Return on Invested Capital (ROIC)
- ROIC mirrored the combined effects of the other metrics. The decline in OPM in 2022 contributed to a substantial decrease in ROIC to 8.75%. The subsequent improvements in both OPM and TO led to a recovery in ROIC to 14.64% in 2023. The decrease in TO in 2024, coupled with a slight decrease in OPM, resulted in a lower ROIC of 10.63%. The increase in TO in 2025, alongside a decrease in OPM, resulted in an ROIC of 11.73%. The impact of the increasing (1 – CTR) factor partially offset the effects of changes in OPM and TO on ROIC.
In summary, the ROIC performance appears sensitive to changes in operating margin and capital turnover. While tax benefits have provided a positive influence, maintaining consistent profitability and efficient capital utilization are crucial for sustained improvements in ROIC.
Operating Profit Margin (OPM)
Datadog Inc., OPM 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings 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 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenue
= 100 × ÷ =
4 Click competitor name to see calculations.
The operating profit margin exhibited fluctuations over the five-year period. Net operating profit before taxes also demonstrated variability, influencing the overall margin performance. Revenue consistently increased year-over-year, providing context for the margin changes.
- Operating Profit Margin (OPM)
- The operating profit margin began at 13.48% in 2021. A substantial decrease was observed in 2022, falling to 6.57%. The margin then showed improvement in 2023, reaching 8.91%, and continued to rise in 2024 to 9.47%. However, in 2025, the operating profit margin declined again, settling at 6.59%.
- Net Operating Profit Before Taxes (NOPBT) and Revenue Relationship
- In 2022, despite a significant increase in adjusted revenue, NOPBT decreased, contributing to the lower operating profit margin. Both NOPBT and adjusted revenue increased from 2022 to 2024, with NOPBT increasing at a faster rate than revenue, resulting in margin expansion. The decrease in operating profit margin in 2025 coincided with a slower growth rate in NOPBT relative to the substantial increase in adjusted revenue.
The observed pattern suggests that while revenue growth is consistent, profitability, as measured by NOPBT, does not always scale proportionally. This indicates potential fluctuations in cost management or pricing strategies that impact the operating profit margin. The margin’s sensitivity to changes in NOPBT, even with increasing revenue, is a key observation.
Turnover of Capital (TO)
Datadog Inc., TO 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) | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings 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 Invested capital. See details »
2 2025 Calculation
TO = Adjusted revenue ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The turnover of capital exhibits fluctuating performance over the observed period. While generally increasing, a notable dip occurred in the most recent year for which information is available.
- Turnover of Capital (TO) - Trend Analysis
- The turnover of capital ratio increased from 1.26 in 2021 to 1.60 in 2023, indicating improving efficiency in generating revenue from invested capital. This suggests the company was becoming more effective at utilizing its capital base to drive sales growth during this timeframe.
- However, in 2024, the ratio decreased significantly to 1.10. This represents a decline in the efficiency of capital utilization, potentially due to increased investment in capital without a corresponding increase in revenue, or a slowdown in revenue growth relative to the capital employed.
- A substantial recovery is observed in 2025, with the ratio rising to 1.69. This suggests a renewed improvement in capital efficiency, potentially stemming from increased revenue generation or more effective capital management practices.
- Relationship to Revenue and Invested Capital
- The increase in turnover of capital from 2021 to 2023 aligns with the growth in adjusted revenue, which rose from US$1,206,390 thousand to US$2,359,336 thousand. Invested capital also increased during this period, but at a slower rate than revenue, contributing to the improved ratio.
- The decrease in the ratio in 2024 coincides with a significant increase in invested capital (to US$2,616,203 thousand) while revenue growth slowed relative to the prior year. This suggests that the increased capital investment did not immediately translate into proportional revenue gains.
- The 2025 increase in the ratio is supported by a substantial rise in adjusted revenue (to US$3,704,969 thousand) coupled with a decrease in invested capital (to US$2,198,274 thousand), indicating a more efficient use of capital to generate revenue.
Overall, the turnover of capital demonstrates a pattern of improvement followed by a temporary setback and subsequent recovery. The fluctuations highlight the importance of monitoring both revenue generation and capital investment to maintain optimal capital efficiency.
Effective Cash Tax Rate (CTR)
Datadog Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings 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 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
The effective cash tax rate exhibits significant fluctuation over the observed period. Initially, the rate was low but increased substantially before becoming negative and remaining so through the end of the period. This behavior is closely linked to movements in cash operating taxes and net operating profit before taxes.
- Effective Cash Tax Rate (CTR)
- In 2021, the CTR was 1.83%. This increased to 7.98% in 2022, representing a substantial rise. A reversal occurred in 2023, with the CTR becoming negative at -2.78%. This negative trend continued, reaching -1.95% in 2024 and further declining to -5.69% in 2025. The consistent negativity in recent years suggests the company is benefiting from tax benefits exceeding its cash tax obligations.
The movement in cash operating taxes appears to be the primary driver of the CTR fluctuations. While net operating profit before taxes generally increased over the period, the cash taxes paid exhibited a different pattern. The increase in CTR from 2021 to 2022 correlates with a significant increase in cash operating taxes. The subsequent negative CTR values are directly attributable to negative cash operating taxes, which began in 2023 and worsened through 2025.
- Cash Operating Taxes
- Cash operating taxes were positive in 2021 and 2022, at US$2,982 thousand and US$9,682 thousand respectively. However, they became negative in 2023 at -US$5,834 thousand, and continued to decrease, reaching -US$13,884 thousand in 2025. This indicates increasing tax refunds or credits relative to operating profits.
- Net Operating Profit Before Taxes (NOPBT)
- NOPBT decreased from US$162,641 thousand in 2021 to US$121,302 thousand in 2022. It then increased significantly to US$210,131 thousand in 2023, peaking at US$272,806 thousand in 2024 before decreasing slightly to US$243,993 thousand in 2025. While NOPBT generally trended upward after 2022, the CTR was more heavily influenced by the cash tax component.
The divergence between NOPBT and cash operating taxes suggests the company is utilizing tax strategies, such as carryforwards or credits, that result in cash tax benefits. The increasing magnitude of negative cash taxes warrants further investigation to understand the sustainability and nature of these benefits.