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 – 25.21% × 43,678,946 = 231,441
The financial performance, as measured by economic profit, demonstrates a clear progression over the five-year period. Initially, the entity experienced negative economic profit, but this trend reversed towards the end of the observed timeframe.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited volatility. A decrease was observed from 2021 to 2022, followed by a modest increase in 2023. Significant growth in NOPAT occurred in both 2024 and 2025, indicating improving operational profitability. The largest year-over-year increase occurred between 2024 and 2025.
- Cost of Capital
- The cost of capital generally increased from 2021 to 2024, rising from 23.80% to 25.29%. A slight decrease to 25.21% was noted in 2025. This suggests a potentially increasing risk profile or changing market conditions impacting funding costs, although the 2025 value indicates some stabilization.
- Invested Capital
- Invested capital consistently increased throughout the period, moving from US$34,785,312 in 2021 to US$43,678,946 in 2025. This indicates ongoing investment in the business, potentially supporting growth initiatives. The rate of increase appeared to accelerate between 2023 and 2025.
- Economic Profit
- Economic profit was negative in the initial three years, reaching a low point in 2022 at -US$4,130,719. A substantial improvement was seen in 2024, with the negative economic profit reduced to -US$1,695,226. By 2025, the entity achieved positive economic profit of US$231,441, signifying that returns exceeded the cost of capital. This positive shift suggests improved capital allocation and/or enhanced operational efficiency.
The convergence of increasing NOPAT and a relatively stable cost of capital, coupled with continued investment, drove the transition from negative to positive economic profit. The most significant improvement in economic profit occurred in the final two years of the period, suggesting a successful implementation of strategies to enhance value creation.
Net Operating Profit after Taxes (NOPAT)
Netflix Inc., NOPAT calculation
US$ 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$11,242,756 thousand in 2025. The rate of increase accelerated in these years, suggesting successful strategic initiatives or favorable market conditions. The difference between NOPAT and net income widened during this period, potentially due to changes in non-operating items or tax implications.
- NOPAT vs. Net Income
- Throughout the entire period, NOPAT values consistently exceeded net income values. This difference likely reflects the impact of items such as interest expense and taxes, which are subtracted from NOPAT to arrive at net income. The widening gap between NOPAT and net income in later years warrants further investigation to understand the underlying drivers.
Cash Operating Taxes
Netflix Inc., cash operating taxes calculation
US$ 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$570.000 million. This suggests a changing dynamic in the timing of tax payments relative to reported income tax expense.
The accelerating growth in both the provision for income taxes and cash operating taxes, particularly from 2023 onwards, warrants further investigation. The widening, then slight narrowing, gap between these two figures suggests potential shifts in deferred tax assets or liabilities, or changes in the utilization of tax credits or loss carryforwards. The substantial increases in both metrics indicate a growing tax burden, which could impact future profitability and cash flow.
Invested Capital
Netflix Inc., invested capital calculation (financing approach)
US$ 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$26,615,488 thousand in 2025. This represents a cumulative growth of approximately 68.1%. The rate of increase appears to be accelerating, particularly between 2023 and 2025.
The increasing invested capital, coupled with the growth in stockholders’ equity and relatively stable debt levels, suggests a reliance on equity financing to fund growth. The acceleration in both invested capital and stockholders’ equity in the later years of the period indicates potentially increased investment activity or profitability contributing to retained earnings. The slight decrease in debt in the final year could indicate a strategic decision to reduce leverage or optimize the capital structure.
Cost of Capital
Netflix Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 363,612,604) | 363,612,604) | ÷ | 381,076,605) | = | 0.95 | 0.95 | × | 26.25% | = | 25.04% | ||
| Senior Notes3 | 14,951,000) | 14,951,000) | ÷ | 381,076,605) | = | 0.04 | 0.04 | × | 4.76% × (1 – 21.00%) | = | 0.15% | ||
| Operating lease liability4 | 2,513,001) | 2,513,001) | ÷ | 381,076,605) | = | 0.01 | 0.01 | × | 3.80% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 381,076,605) | 1.00 | 25.21% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | × | 26.25% | = | 25.14% | ||
| 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 | 25.29% | ||||||||||
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 | × | 26.25% | = | 24.51% | ||
| 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 | 24.75% | ||||||||||
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 | × | 26.25% | = | 23.80% | ||
| 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 | 24.14% | ||||||||||
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 | × | 26.25% | = | 23.41% | ||
| 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 | 23.80% | ||||||||||
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 | 231,441) | (1,695,226) | (3,948,811) | (4,130,719) | (2,200,564) | |
| Invested capital2 | 43,678,946) | 40,712,328) | 37,926,586) | 37,782,560) | 34,785,312) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 0.53% | -4.16% | -10.41% | -10.93% | -6.33% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | — | 23.80% | 17.16% | 8.77% | 28.06% | |
| Comcast Corp. | — | -2.68% | -4.77% | -9.21% | -4.25% | |
| Meta Platforms Inc. | — | 14.85% | 7.76% | 1.49% | 23.80% | |
| Trade Desk Inc. | — | -12.32% | -18.99% | -21.65% | -14.84% | |
| Walt Disney Co. | -12.68% | -16.08% | -17.59% | -15.40% | -18.39% | |
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 × 231,441 ÷ 43,678,946 = 0.53%
4 Click competitor name to see calculations.
The economic spread ratio demonstrates a clear progression from negative values to positive territory over the observed period. Initially, the ratio is negative, indicating that the company’s return on invested capital is less than its cost of capital. However, the trend shows a consistent improvement, culminating in a positive ratio in the final year.
- Economic Spread Ratio Trend
- The economic spread ratio begins at -6.33% in 2021 and declines to -10.93% in 2022, suggesting a widening gap between the cost of capital and the return generated from invested capital. A slight improvement is noted in 2023, with the ratio moving to -10.41%. The most significant positive change occurs between 2023 and 2024, with the ratio increasing to -4.16%. This indicates a narrowing of the gap. Finally, in 2025, the ratio turns positive, reaching 0.53%, signifying that the company’s return on invested capital exceeds its cost of capital.
The movement in the economic spread ratio correlates with the trend in economic profit. While economic profit remains negative for the first four years, its magnitude decreases over time, mirroring the improving economic spread ratio. The transition to positive economic profit in 2025 aligns with the ratio exceeding zero, confirming the company’s ability to generate value for its investors in that year.
- Invested Capital
- Invested capital consistently increases throughout the period, from US$34,785,312 thousand in 2021 to US$43,678,946 thousand in 2025. This growth in invested capital occurs alongside the improvements in the economic spread ratio, suggesting that the company is becoming more efficient in deploying its capital to generate returns.
The observed trend suggests a successful shift in the company’s financial performance. The increasing economic spread ratio and the eventual achievement of positive economic profit indicate improved capital allocation and value creation.
Economic Profit Margin
Netflix Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 231,441) | (1,695,226) | (3,948,811) | (4,130,719) | (2,200,564) | |
| 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 | 0.51% | -4.34% | -11.65% | -13.04% | -7.39% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | — | 15.46% | 10.58% | 6.26% | 18.61% | |
| Comcast Corp. | — | -4.66% | -8.26% | -16.29% | -8.37% | |
| Meta Platforms Inc. | — | 14.97% | 8.12% | 1.30% | 18.69% | |
| Trade Desk Inc. | — | -12.38% | -17.22% | -25.60% | -19.09% | |
| Walt Disney Co. | -22.18% | -29.26% | -34.36% | -31.69% | -46.87% | |
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 × 231,441 ÷ 45,437,953 = 0.51%
3 Click competitor name to see calculations.
The economic profit margin demonstrates a clear progression from negative values to positive territory over the observed five-year period. Initially, the metric reflects substantial economic losses, which diminish over time before transitioning to economic profit. This shift suggests improving efficiency in capital allocation and/or revenue generation relative to the cost of capital.
- Economic Profit Margin Trend
- The economic profit margin began at -7.39% in 2021, indicating that the company’s economic profit was 7.39% less than its cost of capital. This margin deteriorated to -13.04% in 2022, representing the largest negative margin within the period. A modest improvement to -11.65% was noted in 2023, followed by a more significant increase to -4.34% in 2024. By 2025, the economic profit margin had turned positive, reaching 0.51%, signifying that the company generated economic profit equivalent to 0.51% of its adjusted revenues.
The movement in economic profit margin closely mirrors the trend in economic profit itself. The substantial negative economic profit values in 2021 and 2022 correspond with the lowest margins. The reduction in economic losses from 2022 to 2024 is reflected in the improving, though still negative, margins. The positive economic profit in 2025 directly results in the positive economic profit margin observed for that year.
- Relationship to Adjusted Revenues
- Adjusted revenues consistently increased throughout the period, rising from US$29,789,194 thousand in 2021 to US$45,437,953 thousand in 2025. However, revenue growth alone did not drive the improvement in the economic profit margin. The margin’s positive trajectory indicates that the company’s ability to generate returns exceeding its cost of capital improved alongside revenue expansion.
The transition from negative to positive economic profit margin in 2025 is a noteworthy development. Continued monitoring of this metric will be crucial to assess the sustainability of this improvement and the company’s long-term value creation potential.