Intuit Inc. (NASDAQ:INTU)

The financial performance, as measured by economic profit, exhibits a notable shift over the observed period. Initially positive, economic profit transitions to negative values and demonstrates a fluctuating, yet generally improving, trend towards the end of the period. This analysis details the observed trends in net operating profit after taxes, cost of capital, invested capital, and their combined impact on economic profit.

Net Operating Profit After Taxes (NOPAT)

NOPAT increased from US$1,795 million in 2020 to US$2,161 million in 2021, representing growth. A further increase to US$2,300 million was observed in 2022. However, NOPAT decreased to US$2,022 million in 2023 before recovering significantly to US$2,668 million in 2024 and reaching US$3,531 million in 2025. This indicates a period of volatility followed by substantial growth.

Cost of Capital

The cost of capital remained relatively stable throughout the period, fluctuating between 16.53% and 17.22%. A slight increasing trend is discernible from 2020 to 2025, moving from 16.84% to 17.00%, though the changes are incremental.

Invested Capital

Invested capital experienced significant growth from US$8,690 million in 2020 to US$12,248 million in 2021. A substantial increase was then observed in 2022, reaching US$24,726 million. While decreasing slightly to US$23,712 million in 2023, it rebounded to US$24,948 million in 2024 and settled at US$24,521 million in 2025. This suggests a period of aggressive investment followed by stabilization.

Economic Profit

Economic profit began at US$331 million in 2020, declining to US$52 million in 2021. A significant downturn occurred in 2022 and 2023, resulting in negative economic profits of US$-1,786 million and US$-1,974 million, respectively. While remaining negative, economic profit improved to US$-1,565 million in 2024 and further to US$-637 million in 2025. The negative economic profit in the majority of the observed period suggests that the returns generated from invested capital were insufficient to cover the cost of that capital. The improvement in 2024 and 2025 indicates a narrowing of the gap between returns and the cost of capital, driven primarily by the increase in NOPAT.

The interplay between NOPAT, cost of capital, and invested capital is critical. The initial decline in economic profit, despite increasing NOPAT, is attributable to the substantial growth in invested capital outpacing the increase in profitability. The subsequent recovery in economic profit is linked to the more pronounced growth in NOPAT observed in the later years, partially offsetting the high level of invested capital and the relatively stable cost of capital.

Net income

The net income shows an overall upward trend from 2020 to 2025. Starting at 1,826 million USD in 2020, it increases steadily each year, reaching 3,869 million USD in 2025. The yearly increments indicate consistent growth, with a notable acceleration from 2023 to 2025 where the net income rises by approximately 577 million USD between 2023 and 2024, and by 906 million USD between 2024 and 2025.

Net operating profit after taxes (NOPAT)

NOPAT also follows an increasing trajectory over the period, starting at 1,795 million USD in 2020 and rising to 3,531 million USD in 2025. However, the trend is less smooth compared to net income. After an increase from 2020 to 2022, there is a dip in 2023 to 2,022 million USD. Following this dip, the figures recover and grow substantially in 2024 and 2025. The increase from 2023 to 2025 is significant, indicating enhanced operational efficiency or profitability after taxes during the later years.

Comparison and insights

Both net income and NOPAT demonstrate growth over the six-year period, with net income growing slightly more consistently. The dip in NOPAT in 2023 suggests possible operational challenges or non-recurring expenses that affected operating profits during that year. The recovery and strong growth in subsequent years for both metrics imply successful strategic adjustments or improved market conditions. Overall, the data suggests increasing profitability and operational effectiveness over time, with particularly strong momentum in the last two years.

Provision for income taxes

The provision for income taxes showed a fluctuating trend over the analyzed periods. Starting at 372 million US dollars in July 2020, it increased to 494 million in July 2021. This was followed by a slight decrease to 476 million in July 2022. Subsequently, the provision rose again to 605 million in July 2023, then decreased slightly to 587 million in July 2024. A significant increase was observed in July 2025, reaching 965 million. Overall, the provision demonstrated an upward trajectory with occasional declines, suggesting variability in taxable income or tax rates but a general rise in tax expenses over time.

Cash operating taxes

The cash operating taxes exhibited considerable volatility throughout the period. Beginning at 477 million US dollars in July 2020, it increased moderately to 545 million in July 2021. However, a sharp decline occurred in July 2022, with the value dropping to 398 million. This was followed by a dramatic increase in July 2023 to 1,320 million and a further slight decrease to 1,276 million in July 2024. The upward movement continued into July 2025, reaching 1,538 million. This pattern indicates significant fluctuations in actual cash tax payments, possibly driven by changes in profitability, tax planning strategies, or timing differences in tax payments.

The financial data presents a multi-year view of key financial metrics, namely total reported debt and leases, stockholders’ equity, and invested capital, spanning from fiscal years ending July 31, 2020 through July 31, 2025.

Total Reported Debt & Leases

This liability measure showed a decline from 3,636 million USD in 2020 to 2,480 million USD in 2021, indicating a reduction in debt obligations or lease liabilities during that period. However, it then rose sharply to 7,540 million USD by 2022, suggesting a significant incurrence of additional liabilities. After 2022, the value decreased slightly to 6,689 million USD in 2023 and then remained relatively stable, hovering around 6,500 to 6,600 million USD through the forecasted years 2024 and 2025. This pattern reveals an initial debt reduction, followed by a rapid increase and subsequent stabilization at a higher level than the starting point.

Stockholders’ Equity

Stockholders’ equity exhibited a consistent and significant upward trajectory throughout the period. Starting from 5,106 million USD in 2020, equity nearly doubled to 9,869 million USD by 2021, then continued to increase sharply to 16,441 million USD in 2022. The growth persisted through 2023 and into the projections for 2024 and 2025, reaching a forecasted 19,710 million USD. This steady increase reflects improvements in net assets attributable to shareholders, potentially driven by retained earnings growth, capital infusion, or favorable market valuations.

Invested Capital

Invested capital rose from 8,690 million USD in 2020 to 12,248 million USD in 2021, aligning with the growth trend seen in equity. A pronounced jump occurred in 2022 to 24,726 million USD, more than doubling the prior year, which parallels the spike in total reported debt and leases, indicating significant new capital investment potentially funded by increased liabilities. There was a marginal decline to 23,712 million USD in 2023, followed by a moderate increase to 24,948 million USD in 2024, before a slight reduction to 24,521 million USD in the final forecast year. Overall, invested capital has more than doubled from the start to the end of the period, reflecting substantial asset base growth likely supporting operational expansion or strategic acquisitions.

In summary, the data points to a period marked by substantial balance sheet expansion, with stockholders’ equity and invested capital growing robustly. The pattern of debt indicates strategic leveraging after an initial reduction, stabilizing at higher levels consistent with increased invested capital. Together, these trends suggest an aggressive growth phase involving capital acquisition and financing moves to support organizational objectives.

The economic spread ratio exhibits a significant declining trend over the observed period. Initially positive, the ratio transitions to negative values and demonstrates a gradual, albeit fluctuating, improvement towards the end of the analyzed timeframe.

Economic Spread Ratio

In July 2020, the economic spread ratio stood at 3.81%. This indicates that the company generated returns on invested capital exceeding its cost of capital. However, a substantial decrease is observed in July 2021, with the ratio falling to 0.42%, suggesting a narrowing gap between returns and cost of capital.

The ratio becomes negative in July 2022, reaching -7.22%, and further deteriorates to -8.32% in July 2023. These values signify that the company’s returns on invested capital were insufficient to cover its cost of capital during these periods.

A modest recovery is apparent in the subsequent years. The economic spread ratio improves to -6.27% in July 2024 and further to -2.60% in July 2025. While still negative, this represents a lessening of the shortfall between returns and cost of capital.

The movement in the economic spread ratio closely mirrors the fluctuations in economic profit. The initial positive economic profit in 2020 corresponds with the high spread ratio. As economic profit declines and becomes negative, the spread ratio follows suit. The partial recovery in economic profit from 2023 to 2025 is reflected in the improving, though still negative, economic spread ratio.

Invested Capital

Invested capital increased significantly from July 2020 to July 2022, rising from US$8,690 million to US$24,726 million. This substantial increase in capital employed did not translate into corresponding improvements in economic profit, contributing to the declining economic spread ratio.

From July 2022 to July 2025, invested capital remained relatively stable, fluctuating between US$23,712 million and US$24,948 million. The stabilization of invested capital, coupled with the partial recovery in economic profit, appears to have contributed to the observed improvement in the economic spread ratio during this period.

Overall, the analysis suggests a period of diminishing value creation, followed by a potential stabilization. The company experienced a decline in its ability to generate returns exceeding its cost of capital, but recent trends indicate a possible, though incomplete, reversal of this pattern.

The economic profit margin demonstrates a significant shift over the observed period. Initially positive, it transitioned to negative values and then exhibited a trend toward improvement, albeit remaining negative. A detailed examination of the economic profit margin and its underlying components reveals key performance dynamics.

Economic Profit Margin Trend

In fiscal year 2020, the economic profit margin stood at 4.29%. This represents a period of positive economic profit relative to adjusted net revenue. However, a substantial decline occurred in 2021, with the margin falling to 0.54%. The following two years, 2022 and 2023, witnessed negative economic profit margins of -13.90% and -13.63% respectively, indicating that the company’s economic profit was significantly lower than the cost of capital. A gradual improvement is then observed in 2024 and 2025, with the margin increasing to -9.64% and -3.36% respectively. This suggests a lessening of the gap between economic profit and the cost of capital, though economic profit remains negative.

Relationship to Economic Profit

The economic profit margin directly correlates with the absolute value of economic profit. The decline in the margin from 2020 to 2023 mirrors the decreasing economic profit, culminating in substantial losses in 2022 and 2023. The subsequent increase in the margin in 2024 and 2025 is consistent with the reduced magnitude of economic loss during those periods. The economic profit itself moved from a positive US$331 million in 2020 to negative US$1,786 million in 2022, then to negative US$1,974 million in 2023, before improving to negative US$1,565 million in 2024 and negative US$637 million in 2025.

Relationship to Adjusted Net Revenue

Adjusted net revenue consistently increased throughout the period, rising from US$7,721 million in 2020 to US$18,978 million in 2025. However, this revenue growth was not sufficient to offset the decline in economic profit during the initial years, resulting in the negative economic profit margins. The improvement in the margin in 2024 and 2025 is partially attributable to the continued revenue growth, but primarily driven by the lessening of economic losses.

In summary, the economic profit margin experienced a period of deterioration followed by a gradual recovery. While revenue continued to grow, the company faced challenges in generating economic profit, as evidenced by the sustained negative margins. The trend in later years suggests a potential stabilization and improvement, but further monitoring is warranted to assess the sustainability of this positive shift.