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
Netflix Inc., economic profit 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 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
= 11,242,756 – 24.74% × 43,678,946 = 438,567
The financial performance between 2021 and 2025 is characterized by a transition from persistent economic value destruction to the attainment of positive economic profit. While the company maintained a high cost of capital and steadily increased its invested capital base throughout the period, a significant acceleration in Net Operating Profit After Taxes (NOPAT) in the final two years facilitated a reversal of the negative economic profit trend.
- Net Operating Profit After Taxes (NOPAT) Trends
- A volatile but ultimately upward trajectory is observed in NOPAT. After a decline from 6,078,640 thousand US$ in 2021 to 4,988,408 thousand US$ in 2022, operating profits entered a phase of rapid expansion. By 2024, NOPAT rose to 8,600,341 thousand US$, eventually reaching 11,242,756 thousand US$ by 2025, representing a substantial increase in operational efficiency and earnings power.
- Capital Investment and Cost of Capital
- Invested capital demonstrated a consistent growth pattern, rising from 34,785,312 thousand US$ in 2021 to 43,678,946 thousand US$ in 2025. Parallel to this expansion, the cost of capital remained elevated and slightly climbed from 23.36% in 2021 to a peak of 24.81% in 2024, before marginally stabilizing at 24.74% in 2025. The combination of a growing capital base and a high cost of capital created a significant financial hurdle for the company to overcome to achieve economic profitability.
- Economic Profit Evolution
- Economic profit remained negative for the majority of the analyzed period, indicating that the generated NOPAT was insufficient to cover the imputed cost of the invested capital. The economic loss deepened in 2022 to 3,960,409 thousand US$, but a recovery trend began in 2023. The narrowing of losses in 2024 to 1,501,452 thousand US$ culminated in a pivot to positive economic profit of 438,567 thousand US$ in 2025. This shift signifies that the company has moved from destroying shareholder value to creating it, as the operational returns finally exceeded the total cost of capital.
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Net Operating Profit after Taxes (NOPAT)
Netflix 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 deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 2,513,001 × 3.80% = 95,494
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 872,004 × 21.00% = 183,121
6 Addition of after taxes interest expense to net income.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 295,121 × 21.00% = 61,975
8 Elimination of after taxes investment income.
Net income and net operating profit after taxes (NOPAT) exhibited fluctuating performance over the five-year period. While both metrics moved in similar directions, NOPAT consistently reported higher values than net income throughout the observed timeframe.
- Overall Trend
- Both net income and NOPAT demonstrate a general upward trend when considering the beginning and end of the period. However, this progression was not linear, with a notable dip in 2022 before recovering and accelerating in subsequent years.
- 2021 to 2022
- A decrease is observed in both net income and NOPAT from 2021 to 2022. Net income declined from US$5,116,228 thousand to US$4,491,924 thousand, representing a decrease of approximately 12.1%. NOPAT experienced a more substantial decrease, falling from US$6,078,640 thousand to US$4,988,408 thousand, a reduction of roughly 18.2%. This suggests a potential weakening of core operational profitability relative to overall net earnings during this period.
- 2022 to 2023
- Both metrics showed recovery from 2022 to 2023. Net income increased to US$5,407,990 thousand, while NOPAT rose to US$5,437,546 thousand. The increase in NOPAT was more pronounced than the increase in net income, indicating improved operational efficiency or a shift in the composition of earnings.
- 2023 to 2025
- A period of strong growth is evident from 2023 to 2025. Net income increased significantly, reaching US$10,981,201 thousand in 2025. NOPAT mirrored this growth, reaching US$11,242,756 thousand in 2025. The rate of increase accelerated in these years, suggesting successful strategic initiatives or favorable market conditions. The difference between NOPAT and net income widened during this period, potentially due to changes in non-operating items or tax implications.
- NOPAT vs. Net Income
- Throughout the entire period, NOPAT values consistently exceeded net income values. This difference likely reflects the impact of items such as interest expense and taxes, which are subtracted from NOPAT to arrive at net income. The widening gap between NOPAT and net income in later years warrants further investigation to understand the underlying drivers.
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Cash Operating Taxes
Netflix Inc., cash operating taxes calculation
US$ 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 provision for income taxes and cash operating taxes both demonstrate a consistent upward trend over the five-year period. However, the magnitude of increase differs between the two metrics, and the relationship between them evolves over time.
- Provision for Income Taxes
- The provision for income taxes increased from US$723.875 million in 2021 to US$1.741 billion in 2025. The growth was relatively steady from 2021 to 2023, increasing by approximately 7% and 3% respectively. A significant acceleration in growth is observed between 2023 and 2024, with an increase of 57%, and continues at a substantial rate into 2025, growing by 39%.
- Cash Operating Taxes
- Cash operating taxes exhibited a similar upward trajectory, rising from US$702.867 million in 2021 to US$2.311 billion in 2025. The increase from 2021 to 2022 was substantial, at 51%. Growth continued at a strong pace from 2022 to 2023 (36%) and 2023 to 2024 (35%). The rate of increase slows slightly from 2024 to 2025, at 18%.
- Relationship between Provision and Cash Taxes
- In 2021, the difference between the provision for income taxes and cash operating taxes was relatively small, at approximately US$21 million. This difference widened considerably in 2022, reaching US$356.559 million. The gap continued to expand in 2023, reaching US$647.772 million, and further increased to US$701.707 million in 2024. However, the difference narrowed somewhat in 2025 to US$570.000 million. This suggests a changing dynamic in the timing of tax payments relative to reported income tax expense.
The accelerating growth in both the provision for income taxes and cash operating taxes, particularly from 2023 onwards, warrants further investigation. The widening, then slight narrowing, gap between these two figures suggests potential shifts in deferred tax assets or liabilities, or changes in the utilization of tax credits or loss carryforwards. The substantial increases in both metrics indicate a growing tax burden, which could impact future profitability and cash flow.
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Invested Capital
Netflix Inc., invested capital calculation (financing approach)
US$ 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 deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of capital work-in-progress.
7 Subtraction of short-term investments.
The reported invested capital demonstrates a consistent upward trend over the five-year period. Total reported debt & leases and stockholders’ equity both contribute to this increase, though with differing patterns. An examination of these components reveals insights into the company’s capital structure evolution.
- Invested Capital
- Invested capital increased from US$34,785,312 thousand in 2021 to US$43,678,946 thousand in 2025. This represents a cumulative growth of approximately 25.6% over the period. The growth rate appears to be accelerating, with larger absolute increases observed in later years.
- Total Reported Debt & Leases
- Total reported debt & leases initially decreased from US$18,116,570 thousand in 2021 to US$16,931,564 thousand in 2022. However, it subsequently increased to US$17,994,974 thousand in 2024 before decreasing slightly to US$16,975,837 thousand in 2025. While fluctuations are present, the level remains relatively stable, fluctuating within a range of approximately US$1.1 million thousand over the five years.
- Stockholders’ Equity
- Stockholders’ equity exhibited a consistent upward trajectory, increasing from US$15,849,248 thousand in 2021 to US$26,615,488 thousand in 2025. This represents a cumulative growth of approximately 68.1%. The rate of increase appears to be accelerating, particularly between 2023 and 2025.
The increasing invested capital, coupled with the growth in stockholders’ equity and relatively stable debt levels, suggests a reliance on equity financing to fund growth. The acceleration in both invested capital and stockholders’ equity in the later years of the period indicates potentially increased investment activity or profitability contributing to retained earnings. The slight decrease in debt in the final year could indicate a strategic decision to reduce leverage or optimize the capital structure.
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Cost of Capital
Netflix Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 363,612,604) | 363,612,604) | ÷ | 381,076,605) | = | 0.95 | 0.95 | × | 25.75% | = | 24.57% | ||
| Senior Notes3 | 14,951,000) | 14,951,000) | ÷ | 381,076,605) | = | 0.04 | 0.04 | × | 4.76% × (1 – 21.00%) | = | 0.15% | ||
| Operating lease liability4 | 2,513,001) | 2,513,001) | ÷ | 381,076,605) | = | 0.01 | 0.01 | × | 3.80% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 381,076,605) | 1.00 | 24.74% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in thousands
2 Equity. See details »
3 Senior Notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 415,737,125) | 415,737,125) | ÷ | 434,097,295) | = | 0.96 | 0.96 | × | 25.75% | = | 24.66% | ||
| Senior Notes3 | 15,948,000) | 15,948,000) | ÷ | 434,097,295) | = | 0.04 | 0.04 | × | 4.76% × (1 – 21.00%) | = | 0.14% | ||
| Operating lease liability4 | 2,412,170) | 2,412,170) | ÷ | 434,097,295) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 434,097,295) | 1.00 | 24.81% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in thousands
2 Equity. See details »
3 Senior Notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 246,846,067) | 246,846,067) | ÷ | 264,294,180) | = | 0.93 | 0.93 | × | 25.75% | = | 24.05% | ||
| Senior Notes3 | 15,018,000) | 15,018,000) | ÷ | 264,294,180) | = | 0.06 | 0.06 | × | 4.73% × (1 – 21.00%) | = | 0.21% | ||
| Operating lease liability4 | 2,430,113) | 2,430,113) | ÷ | 264,294,180) | = | 0.01 | 0.01 | × | 3.30% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 264,294,180) | 1.00 | 24.28% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in thousands
2 Equity. See details »
3 Senior Notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 162,507,039) | 162,507,039) | ÷ | 179,168,527) | = | 0.91 | 0.91 | × | 25.75% | = | 23.35% | ||
| Senior Notes3 | 14,083,000) | 14,083,000) | ÷ | 179,168,527) | = | 0.08 | 0.08 | × | 4.75% × (1 – 21.00%) | = | 0.29% | ||
| Operating lease liability4 | 2,578,488) | 2,578,488) | ÷ | 179,168,527) | = | 0.01 | 0.01 | × | 3.20% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 179,168,527) | 1.00 | 23.69% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in thousands
2 Equity. See details »
3 Senior Notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 171,680,533) | 171,680,533) | ÷ | 192,434,208) | = | 0.89 | 0.89 | × | 25.75% | = | 22.97% | ||
| Senior Notes3 | 18,030,000) | 18,030,000) | ÷ | 192,434,208) | = | 0.09 | 0.09 | × | 4.75% × (1 – 21.00%) | = | 0.35% | ||
| Operating lease liability4 | 2,723,675) | 2,723,675) | ÷ | 192,434,208) | = | 0.01 | 0.01 | × | 3.10% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 192,434,208) | 1.00 | 23.36% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in thousands
2 Equity. See details »
3 Senior Notes. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Netflix 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 | 438,567) | (1,501,452) | (3,772,768) | (3,960,409) | (2,046,333) | |
| Invested capital2 | 43,678,946) | 40,712,328) | 37,926,586) | 37,782,560) | 34,785,312) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 1.00% | -3.69% | -9.95% | -10.48% | -5.88% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | 26.54% | 22.42% | 15.78% | 7.39% | 26.68% | |
| Comcast Corp. | 1.83% | -1.38% | -3.27% | -7.74% | -2.74% | |
| Meta Platforms Inc. | 16.71% | 13.86% | 6.77% | 0.52% | 22.81% | |
| Walt Disney Co. | -12.40% | -15.81% | -17.33% | -15.13% | -18.12% | |
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 × 438,567 ÷ 43,678,946 = 1.00%
4 Click competitor name to see calculations.
The financial performance from 2021 to 2025 reflects a transition from significant economic value destruction to the attainment of positive economic value. The period is characterized by an initial deterioration in efficiency followed by a consistent recovery, culminating in the company generating returns in excess of its cost of capital by the end of the observed timeframe.
- Economic Profit
- A trajectory of recovery is evident after a period of deepening losses. Economic profit decreased from -2.05 billion USD in 2021 to a low of -3.96 billion USD in 2022. Subsequent years show a steady reversal of this trend, with losses narrowing to -3.77 billion USD in 2023 and -1.50 billion USD in 2024, eventually shifting to a positive economic profit of 438.57 million USD by December 31, 2025.
- Invested Capital
- A consistent upward trend in invested capital is observed over the five-year period. Capital grew from 34.79 billion USD in 2021 to 43.68 billion USD in 2025. The steady increase suggests continuous investment in the business base, even during periods where economic profit remained negative.
- Economic Spread Ratio
- The economic spread ratio follows a V-shaped recovery pattern. The ratio deteriorated from -5.88% in 2021 to its lowest point of -10.48% in 2022. From 2023 onward, a significant improvement is noted, with the ratio rising to -9.95% in 2023 and -3.69% in 2024. The transition to a positive ratio of 1.00% in 2025 signifies that the internal rate of return on invested capital has finally surpassed the weighted average cost of capital.
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Economic Profit Margin
Netflix 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 | 438,567) | (1,501,452) | (3,772,768) | (3,960,409) | (2,046,333) | |
| Revenues | 45,183,036) | 39,000,966) | 33,723,297) | 31,615,550) | 29,697,844) | |
| Add: Increase (decrease) in deferred revenue | 254,917) | 77,844) | 178,308) | 55,319) | 91,350) | |
| Adjusted revenues | 45,437,953) | 39,078,810) | 33,901,605) | 31,670,869) | 29,789,194) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 0.97% | -3.84% | -11.13% | -12.50% | -6.87% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | 20.35% | 14.56% | 9.73% | 5.28% | 17.70% | |
| Comcast Corp. | 3.43% | -2.39% | -5.65% | -13.66% | -5.40% | |
| Meta Platforms Inc. | 17.94% | 13.98% | 7.09% | 0.46% | 17.92% | |
| Walt Disney Co. | -21.70% | -28.77% | -33.84% | -31.15% | -46.18% | |
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 revenues
= 100 × 438,567 ÷ 45,437,953 = 0.97%
3 Click competitor name to see calculations.
An analysis of the economic profit trajectory indicates a significant shift from value destruction to value creation over the five-year period ending December 31, 2025. While the organization faced substantial economic losses in the initial years of the period, a consistent recovery trend emerged after 2022, culminating in a transition to positive economic profit by the end of 2025.
- Revenue Trajectory
- Adjusted revenues exhibited continuous growth throughout the analyzed period. Starting at US$ 29.79 billion in 2021, revenues climbed steadily to US$ 45.44 billion by 2025. This represents a consistent expansion of the top line, providing the necessary scale to support the eventual recovery of economic profit.
- Economic Profit Evolution
- Economic profit remained negative from 2021 through 2024, with a notable decline in 2022 where losses widened to US$ 3.96 billion. Following this trough, a sustained recovery is observed: losses narrowed to US$ 3.77 billion in 2023, dropped further to US$ 1.50 billion in 2024, and finally shifted to a positive value of US$ 438.57 million in 2025. This suggests that the company successfully optimized its capital costs and operating performance to exceed its cost of capital by the final year.
- Economic Profit Margin Performance
- The economic profit margin mirrors the trend seen in absolute economic profit, reflecting the efficiency of value creation relative to revenue. The margin deteriorated from -6.87% in 2021 to a period low of -12.50% in 2022. Subsequent years showed a steady improvement, with the margin recovering to -11.13% in 2023 and -3.84% in 2024, before crossing into positive territory at 0.97% in 2025. The transition from a double-digit negative margin to a positive margin indicates a fundamental improvement in the company's ability to generate returns above its weighted average cost of capital.
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