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.
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Economic Profit
Intuitive Surgical Inc., economic profit calculation
US$ in thousands
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
The analysis of economic profit reveals a period of significant volatility and a challenging relationship between capital expansion and operational returns. While the entity returned to positive economic profit by 2024, the trend indicates that value creation has struggled to keep pace with the aggressive growth of the invested capital base.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT experienced a notable decline in 2022, dropping to 1,187,823 thousand US dollars from 1,700,018 thousand US dollars in 2021. However, a consistent recovery followed, with a compound growth trajectory leading to 2,976,548 thousand US dollars by 2025. This suggests a strengthening of core operational profitability over the latter half of the period.
- Invested Capital Expansion
- There is a continuous and substantial increase in invested capital, rising from 4,517,800 thousand US dollars in 2021 to 11,374,500 thousand US dollars in 2025. This represents a total increase of approximately 151%, indicating a heavy investment phase in assets or infrastructure intended to drive future growth.
- Cost of Capital Impact
- The cost of capital remained virtually static at approximately 25.30% throughout the entire period. This high hurdle rate necessitates significant operating profits to achieve a positive economic profit, meaning any increase in invested capital requires a proportionally high increase in NOPAT to avoid destroying shareholder value.
- Economic Profit Dynamics
- Economic profit transitioned from a positive position in 2021 to negative values in 2022 and 2023, signaling that the returns on invested capital were insufficient to cover the cost of capital during those years. Although economic profit returned to positive territory in 2024 at 268,559 thousand US dollars, it declined sharply to 98,771 thousand US dollars in 2025. This decline in 2025 occurred despite an increase in NOPAT, revealing that the surge in invested capital in the final year outpaced the growth in operational earnings, thereby eroding the net economic value created.
Net Operating Profit after Taxes (NOPAT)
Intuitive Surgical 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 allowances.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income attributable to Intuitive Surgical, Inc..
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income attributable to Intuitive Surgical, Inc..
8 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
9 Elimination of after taxes investment income.
Net income attributable to Intuitive Surgical, Inc. and Net Operating Profit After Taxes (NOPAT) both demonstrate fluctuating performance over the five-year period. While both metrics generally trend upwards, significant variations are observed, particularly in 2022.
- NOPAT Trend
- NOPAT experienced a notable decrease from US$1,700,018 thousand in 2021 to US$1,187,823 thousand in 2022, representing a substantial decline. A subsequent recovery is evident in 2023, with NOPAT reaching US$1,596,933 thousand. Continued growth is observed in 2024 and 2025, with NOPAT increasing to US$2,242,154 thousand and US$2,976,548 thousand respectively. This indicates a strong upward trajectory in recent years following the 2022 dip.
- Relationship between Net Income and NOPAT
- The values for Net Income and NOPAT are closely aligned throughout the period. The difference between the two metrics remains relatively consistent, suggesting minimal adjustments are being made between net income and operating profit after taxes. This consistency implies that non-operating items or accounting adjustments have a limited impact on the overall profitability picture.
- Growth Rates
- The largest percentage increase in NOPAT occurred between 2024 and 2025, with a growth rate of approximately 32.7%. The decline in 2022 represents the most significant percentage decrease in NOPAT over the observed period. The recovery from 2022 to 2023 shows a growth rate of approximately 34.4%.
Overall, the observed trends suggest a period of disruption in 2022 followed by a robust recovery and continued expansion in subsequent years. The strong correlation between net income and NOPAT indicates that core operating performance is the primary driver of overall profitability.
Cash Operating Taxes
Intuitive Surgical Inc., cash operating taxes calculation
US$ 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 reported income tax expense and cash operating taxes demonstrate distinct patterns over the five-year period. Income tax expense fluctuates, while cash operating taxes exhibit a more complex trend with an initial increase followed by stabilization and a slight decline.
- Income Tax Expense
- Income tax expense increased significantly from 2021 to 2022, rising from US$162.2 million to US$262.4 million. A substantial decrease was then observed in 2023, with expense falling to US$141.6 million. This was followed by increases in both 2024 and 2025, reaching US$336.3 million and US$434.8 million respectively. The overall trend indicates volatility, with a clear upward movement in the latter two years of the observed period.
- Cash Operating Taxes
- Cash operating taxes show a pronounced increase from 2021 to 2022, moving from US$226.7 million to US$448.3 million. The rate of increase slowed in 2023, with taxes reported at US$423.0 million. Values for 2024 and 2025 are US$472.97 million and US$417.4 million, respectively. While remaining relatively high, the 2025 figure represents a slight decrease from the 2024 level, suggesting a potential stabilization or minor reduction in cash tax outflows.
The difference between income tax expense and cash operating taxes is notable throughout the period. Cash operating taxes consistently exceed income tax expense, indicating the presence of timing differences or non-cash tax effects. The magnitude of this difference varies annually, potentially impacting the calculation of economic value added (EVA) and requiring further investigation into the underlying causes of these discrepancies.
- Relationship between Income Tax Expense and Cash Taxes
- The consistent difference between the two measures suggests the influence of deferred tax assets or liabilities. The larger cash tax payments relative to reported income tax expense could be due to factors such as accelerated depreciation for tax purposes, or the recognition of taxable temporary differences. Understanding these factors is crucial for accurate EVA calculation and financial performance assessment.
The observed trends in both income tax expense and cash operating taxes warrant continued monitoring to assess their impact on future financial performance and the company’s ability to generate economic value.
Invested Capital
Intuitive Surgical Inc., invested capital calculation (financing approach)
US$ 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 equity equivalents to total Intuitive Surgical, Inc. stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of construction-in-process.
8 Subtraction of available-for-sale marketable securities.
The invested capital of the company demonstrates a consistent upward trend over the five-year period. Simultaneously, the composition of capital sources has shifted, with a notable increase in reported debt and leases alongside growth in stockholders’ equity.
- Invested Capital Trend
- Invested capital increased from US$4,517.8 million in 2021 to US$11,374.5 million in 2025. This represents a cumulative increase of 151.8% over the period. The growth rate appears to be accelerating, with larger absolute increases observed in the later years of the period, particularly between 2023 and 2025.
- Debt & Leases
- Total reported debt and leases exhibited an overall increasing trend. While a slight decrease was observed between 2022 and 2023, the amount rose significantly from US$87.0 million in 2021 to US$170.9 million in 2025, representing a 96.4% increase. The most substantial increase occurred between 2023 and 2024, jumping from US$89.8 million to US$146.0 million.
- Stockholders’ Equity
- Total stockholders’ equity also increased over the period, moving from US$11,901.1 million in 2021 to US$17,824.0 million in 2025, a 49.8% increase. There was a decrease between 2021 and 2022, but equity then increased consistently through 2025. The rate of increase in equity appears to be relatively stable compared to the more volatile changes in debt.
- Capital Structure Shift
- The relative contribution of debt to invested capital has increased. In 2021, debt and leases represented approximately 2.0% of invested capital. By 2025, this proportion had risen to approximately 1.5%. While the percentage appears small, the absolute increase in debt suggests a growing reliance on debt financing to fund growth, despite a larger overall increase in equity.
The observed trends suggest the company is actively investing in its operations and expansion, funded by a combination of debt and equity. The increasing reliance on debt warrants further investigation to assess associated financial risks and sustainability.
Cost of Capital
Intuitive Surgical Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
Economic Spread Ratio
Intuitive Surgical 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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group 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 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by significant volatility in value creation and a consistent, aggressive expansion of the capital base.
- Economic Spread Ratio Trends
- A sharp contraction is observed in the economic spread ratio, which plummeted from a peak of 12.33% in 2021 to negative values in 2022 (-3.28%) and 2023 (-3.00%). This indicates a period where the return on invested capital was insufficient to cover the cost of capital. Although a recovery occurred in 2024, reaching 3.44%, the ratio declined again to 0.87% by the end of 2025, suggesting a continuing challenge in generating a significant spread over the cost of capital.
- Invested Capital Expansion
- Invested capital shows a consistent and steep upward trajectory, increasing from US$ 4,517,800 thousand in 2021 to US$ 11,374,500 thousand in 2025. The total invested capital more than doubled over the five-year period, indicating substantial investments in the company's asset base or operational infrastructure.
- Economic Profit Volatility
- Economic profit transitioned from a strong positive position of US$ 556,918 thousand in 2021 to negative territory in 2022 and 2023, reaching a low of -US$ 214,981 thousand. While the company returned to a positive economic profit of US$ 268,559 thousand in 2024, this figure dropped to US$ 98,771 thousand in 2025. The inability to maintain economic profit growth in proportion to the rapid increase in invested capital explains the overall compression of the economic spread ratio.
Economic Profit Margin
Intuitive Surgical 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 | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Abbott Laboratories | ||||||
| Elevance Health Inc. | ||||||
| Medtronic PLC | ||||||
| UnitedHealth Group 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 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The analysis of economic performance between 2021 and 2025 reveals a divergence between consistent revenue growth and the volatility of economic value creation. While the top line expanded steadily, the ability to generate returns in excess of the cost of capital fluctuated significantly, indicating periods of both value creation and value destruction.
- Revenue Growth Trajectory
- Adjusted revenue demonstrated a continuous and uninterrupted upward trend throughout the analyzed period. Starting at 5,741,800 thousand USD in 2021, revenue increased annually, reaching 10,139,900 thousand USD by 2025. This indicates a sustained expansion in market scale or pricing power.
- Economic Profit Fluctuations
- Economic profit exhibited a non-linear trend. A strong positive result of 556,918 thousand USD in 2021 was followed by two years of negative economic profit, reaching a trough of -214,981 thousand USD in 2023. Although a recovery was observed in 2024 with a return to 268,559 thousand USD, the figure declined again to 98,771 thousand USD in 2025.
- Economic Profit Margin Dynamics
- The economic profit margin reflects the efficiency of value creation relative to revenue. The margin peaked at 9.70% in 2021 before collapsing to -2.84% in 2022 and -3.00% in 2023, signifying that the cost of capital exceeded operating profits during this timeframe. A recovery to 3.20% occurred in 2024, but the margin contracted sharply to 0.97% in 2025. The decline in margin in 2025, occurring despite the highest recorded revenue, suggests that the growth in the capital base or the cost of capital outweighed the incremental gains in operating profit.