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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- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Analysis of Revenues
- Aggregate Accruals
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Economic Profit
Netflix 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 financial trajectory from 2021 to 2025 indicates a transition from systemic value destruction to the achievement of positive economic profit. While the organization faced significant challenges in meeting its cost of capital for several years, a substantial increase in operating efficiency and profitability in the later periods enabled a reversal of this trend.
- Net Operating Profit After Taxes (NOPAT)
- A volatile but ultimately upward trend is observed in NOPAT. After a decline from 6.08 billion USD in 2021 to 4.99 billion USD in 2022, the figure grew consistently, reaching 11.24 billion USD by 2025. The most significant acceleration occurred between 2023 and 2025, where NOPAT more than doubled, indicating a strong improvement in core operational profitability.
- Invested Capital and Cost of Capital
- Invested capital expanded steadily over the five-year period, rising from 34.79 billion USD in 2021 to 43.68 billion USD in 2025. Simultaneously, the cost of capital remained consistently high, fluctuating within a narrow band between 23.63% and 25.11%. This high hurdle rate necessitated substantial operating profits to avoid negative economic value added.
- Economic Profit Performance
- Economic profit remained negative from 2021 through 2024, peaking in losses in 2022 at -4.07 billion USD. This indicates that for four consecutive years, the returns generated by the invested capital were insufficient to cover the cost of that capital. However, a recovery phase began in 2023, leading to a significant reduction in economic loss by 2024 and finally crossing into positive territory in 2025 with a profit of 309.78 million USD.
- Overall Value Creation Analysis
- The shift to a positive economic profit in 2025 suggests that the growth in NOPAT has finally outpaced the combined effect of increasing invested capital and a high cost of capital. The organization has moved from a state of eroding shareholder value to a state of creating economic value.
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
= × =
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
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
= × 21.00% =
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$26,615,488 thousand in 2025. This represents a cumulative growth of approximately 68.1%. The rate of increase appears to be accelerating, particularly between 2023 and 2025.
The increasing invested capital, coupled with the growth in stockholders’ equity and relatively stable debt levels, suggests a reliance on equity financing to fund growth. The acceleration in both invested capital and stockholders’ equity in the later years of the period indicates potentially increased investment activity or profitability contributing to retained earnings. The slight decrease in debt in the final year could indicate a strategic decision to reduce leverage or optimize the capital structure.
Cost of Capital
Netflix Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Senior Notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | ÷ | = | × | = | |||||||||
| Senior Notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Senior Notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Senior Notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ÷ | = | × | = | |||||||||
| Senior Notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Walt Disney Co. | ||||||
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 trajectory between 2021 and 2025 reflects a significant transition from economic value destruction to value creation. While the organization maintained a consistent increase in its capital base, the efficiency of this investment relative to its cost improved markedly after a period of intensified losses.
- Invested Capital
- A steady upward trend is observed in invested capital, which grew from 34.79 billion USD in 2021 to 43.68 billion USD by 2025. This consistent expansion indicates a sustained commitment to deploying resources into the business operations over the five-year period.
- Economic Profit
- Economic profit exhibited a U-shaped recovery pattern. After an initial decline from -2.14 billion USD in 2021 to a peak deficit of -4.07 billion USD in 2022, the figures trended upward. The deficit narrowed to -3.88 billion USD in 2023 and -1.62 billion USD in 2024, ultimately crossing into positive territory in 2025 with a profit of 309.78 million USD.
- Economic Spread Ratio
- The economic spread ratio mirrors the trend of economic profit, illustrating the gap between the return on invested capital and the cost of capital. The ratio reached its lowest point in 2022 at -10.76%, signaling maximum value erosion. A subsequent recovery phase is evident, with the ratio improving to -10.24% in 2023, -3.98% in 2024, and finally reaching a positive 0.71% in 2025, confirming that the return on invested capital has finally exceeded the cost of capital.
The convergence of increasing invested capital and a positive economic spread ratio by 2025 suggests that the organization has successfully scaled its operations while improving capital efficiency, shifting from a phase of heavy investment-driven loss to sustainable economic value addition.
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 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Alphabet Inc. | ||||||
| Comcast Corp. | ||||||
| Meta Platforms Inc. | ||||||
| Walt Disney Co. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
The financial performance over the period from 2021 to 2025 indicates a transition from economic value destruction to economic value creation. While the initial years were marked by expanding economic losses, a consistent recovery trend emerged after 2022, culminating in a positive economic profit by the end of 2025.
- Economic Profit Trajectory
- Economic profit experienced a significant decline between 2021 and 2022, reaching a minimum of -4,066,308 thousand USD. Following this trough, a steady recovery is observed, with losses narrowing to -3,882,232 thousand USD in 2023 and -1,621,941 thousand USD in 2024. The period concludes with a pivot to a positive economic profit of 309,776 thousand USD in 2025.
- Revenue Expansion
- Adjusted revenues grew monotonically throughout the observed period. Starting at 29,789,194 thousand USD in 2021, revenues increased each year, reaching 45,437,953 thousand USD by 2025. This consistent growth in the top line provided the necessary scale to support the eventual shift toward positive economic value.
- Economic Profit Margin Trends
- The economic profit margin mirrors the absolute profit trajectory, showing a deterioration from -7.19% in 2021 to -12.84% in 2022. From 2023 onwards, a sustained upward trend is observed, with the margin improving to -11.45% in 2023, -4.15% in 2024, and finally achieving a positive value of 0.68% in 2025. This progression indicates that the company has successfully increased its returns to a level exceeding its cost of capital.