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
Palo Alto Networks Inc., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2026-07-31), 10-K (reporting date: 2025-07-31), 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2026 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 1,992 – 18.11% × 37,471 = -4,793
The financial trajectory reveals a period of value creation between 2022 and 2024, which was subsequently reversed by a sharp decline in operating efficiency and a massive expansion of the capital base. The overall trend demonstrates a shift from an initial phase of growth and economic profit to a state of significant value destruction by the end of the period.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT experienced rapid growth from 2021 to 2023, rising from US$ 845 million to a peak of US$ 2,610 million. Following this peak, a decline was observed, with profit falling to US$ 1,791 million in 2025, before a slight recovery to US$ 1,992 million in 2026. This indicates a period of decelerating operating performance after 2023.
- Invested Capital and Cost of Capital
- Invested capital grew steadily from US$ 7,361 million in 2021 to US$ 12,434 million in 2025. A significant anomaly occurred in 2026, where invested capital spiked to US$ 37,471 million. Simultaneously, the cost of capital remained relatively stable but trended upward, increasing from 16.65% in 2021 to 18.11% in 2026, thereby increasing the financial burden required to generate a positive return.
- Economic Profit Analysis
- Economic profit transitioned from a negative position of US$ -380 million in 2021 to a peak of US$ 1,050 million in 2023, signaling a period where NOPAT exceeded the cost of capital. However, this trend reversed sharply; the profit fell to US$ 582 million in 2024 and turned negative again in 2025. The collapse culminated in 2026 with an economic profit of US$ -4,793 million, driven primarily by the drastic increase in invested capital which far outpaced the growth in operating profits.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Net Operating Profit after Taxes (NOPAT)
Palo Alto Networks Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2026-07-31), 10-K (reporting date: 2025-07-31), 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowance for credit losses.
3 Addition of increase (decrease) in deferred revenue.
4 Addition of increase (decrease) in equity equivalents to net income (loss).
5 2026 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 793 × 5.40% = 43
6 2026 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 43 × 21.00% = 9
7 Addition of after taxes interest expense to net income (loss).
8 2026 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 374 × 21.00% = 79
9 Elimination of after taxes investment income.
An analysis of the financial trajectory from July 2021 through July 2026 reveals a notable divergence between statutory net profitability and core operating performance. While net income experienced significant volatility and an initial period of losses, the net operating profit after taxes (NOPAT) maintained a consistently positive trend, indicating that the underlying operational engine remained productive even during periods of net losses.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited strong growth in the initial three-year period, rising from 845 million US dollars in July 2021 to a peak of 2.610 billion US dollars in July 2023. Following this peak, a period of stabilization and slight correction occurred, with values settling between 1.791 billion and 1.992 billion US dollars from 2025 to 2026. This suggests a sustained ability to generate operating profit regardless of the fluctuations seen in the final net income.
- Net Income Volatility
- Net income demonstrated extreme variance over the observed period. The company reported net losses of 499 million US dollars in 2021 and 267 million US dollars in 2022, before transitioning to profitability in 2023. A sharp peak was reached in July 2024 at 2.578 billion US dollars, followed by a significant decline to 1.134 billion US dollars in 2025 and 307 million US dollars in 2026.
- Operating Performance vs. Net Bottom Line
- A critical disparity is observed between 2021 and 2022, where positive NOPAT coincided with negative net income. This gap indicates that non-operating items—such as interest expenses, tax adjustments, or non-cash charges—outweighed the operational gains during those years. By 2024, the convergence of NOPAT and net income suggests a period of peak efficiency where operational success translated directly into statutory profit, though the subsequent divergence in 2025 and 2026 indicates the return of non-operating pressures or increased costs that reduced the net result despite stable operating profits.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cash Operating Taxes
Palo Alto Networks Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2026-07-31), 10-K (reporting date: 2025-07-31), 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31).
An analysis of the tax-related figures reveals a significant divergence between accounting provisions and actual cash outflows, particularly during the 2024 and 2025 fiscal periods. While the provision for income taxes exhibits extreme volatility, cash operating taxes follow a different trajectory, peaking in 2025 before experiencing a sharp decline in 2026.
- Cash Operating Taxes Trend
- Cash tax payments remained relatively stable between 2021 and 2023, fluctuating within a narrow range of 68 million to 82 million US dollars. A substantial upward shift occurred starting in 2024, with payments rising to 384 million US dollars and peaking at 741 million US dollars in 2025. This growth represents a significant increase in the cash burden of taxes before a notable reduction to 210 million US dollars in 2026.
- Provision for Income Taxes Volatility
- The provision for income taxes shows a steady increase from 2021 through 2023. However, a drastic reversal occurred in 2024, where the company recorded a tax benefit of 1,589 million US dollars. This anomalous negative provision shifted back to positive figures in 2025 and 2026, recording 462 million and 229 million US dollars, respectively.
- Analysis of Accounting vs. Cash Divergence
- A critical disconnect is observed in 2024, where a massive non-cash tax benefit was recognized in the provision account despite a simultaneous increase in actual cash operating taxes paid. This suggests that the 2024 benefit was likely driven by non-cash accounting adjustments or deferred tax assets rather than liquid tax refunds. Similarly, in 2025, cash operating taxes exceeded the provision by 279 million US dollars, indicating that cash outflows for taxes were significantly higher than the expense recognized on the income statement.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Invested Capital
Palo Alto Networks Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2026-07-31), 10-K (reporting date: 2025-07-31), 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31).
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 stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of available-for-sale investments.
Invested capital exhibits a consistent upward trajectory over the analyzed period, growing from US$ 7,361 million in 2021 to US$ 37,471 million by 2026. While the growth was steady between 2021 and 2025, the final period shows a dramatic acceleration, with total invested capital more than tripling in a single year.
- Debt and Lease Obligations
- Total reported debt and leases reached a peak of US$ 4,015 million in 2022, followed by a sustained four-year decline that bottomed at US$ 417 million in 2025. This downward trend indicates a period of significant deleveraging. However, this pattern is interrupted in 2026, where debt levels rebound to US$ 2,567 million.
- Stockholders' Equity
- Equity levels were volatile in the early stages, dropping to US$ 210 million in 2022 before embarking on a period of exponential growth. From 2023 to 2025, equity increased from US$ 1,748 million to US$ 7,824 million. The most substantial increase occurred in 2026, where equity surged to US$ 27,492 million, representing the primary driver of the overall increase in invested capital.
- Capital Structure Shift
- The data reveals a fundamental shift in the composition of invested capital. In the earlier years, the capital base was less reliant on equity. By 2026, the capital structure transitioned to be heavily equity-dominated, with stockholders' equity comprising the vast majority of the total invested capital, suggesting a transition toward a more equity-funded financial position.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Cost of Capital
Palo Alto Networks Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 276,885) | 276,885) | ÷ | 279,452) | = | 0.99 | 0.99 | × | 18.26% | = | 18.10% | ||
| Convertible senior notes3 | 1,774) | 1,774) | ÷ | 279,452) | = | 0.01 | 0.01 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 793) | 793) | ÷ | 279,452) | = | 0.00 | 0.00 | × | 5.40% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 279,452) | 1.00 | 18.11% | ||||||||||
Based on: 10-K (reporting date: 2026-07-31).
1 US$ in millions
2 Equity. See details »
3 Convertible senior notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 127,439) | 127,439) | ÷ | 127,856) | = | 1.00 | 1.00 | × | 18.26% | = | 18.20% | ||
| Convertible senior notes3 | —) | —) | ÷ | 127,856) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Operating lease liability4 | 417) | 417) | ÷ | 127,856) | = | 0.00 | 0.00 | × | 5.40% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 127,856) | 1.00 | 18.22% | ||||||||||
Based on: 10-K (reporting date: 2025-07-31).
1 US$ in millions
2 Equity. See details »
3 Convertible senior notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 109,343) | 109,343) | ÷ | 112,989) | = | 0.97 | 0.97 | × | 18.26% | = | 17.67% | ||
| Convertible senior notes3 | 3,200) | 3,200) | ÷ | 112,989) | = | 0.03 | 0.03 | × | 0.60% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 446) | 446) | ÷ | 112,989) | = | 0.00 | 0.00 | × | 5.30% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 112,989) | 1.00 | 17.70% | ||||||||||
Based on: 10-K (reporting date: 2024-07-31).
1 US$ in millions
2 Equity. See details »
3 Convertible senior notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 74,902) | 74,902) | ÷ | 80,241) | = | 0.93 | 0.93 | × | 18.26% | = | 17.05% | ||
| Convertible senior notes3 | 5,000) | 5,000) | ÷ | 80,241) | = | 0.06 | 0.06 | × | 0.60% × (1 – 21.00%) | = | 0.03% | ||
| Operating lease liability4 | 339) | 339) | ÷ | 80,241) | = | 0.00 | 0.00 | × | 4.70% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 80,241) | 1.00 | 17.09% | ||||||||||
Based on: 10-K (reporting date: 2023-07-31).
1 US$ in millions
2 Equity. See details »
3 Convertible senior notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 52,919) | 52,919) | ÷ | 59,957) | = | 0.88 | 0.88 | × | 18.26% | = | 16.12% | ||
| Convertible senior notes3 | 6,700) | 6,700) | ÷ | 59,957) | = | 0.11 | 0.11 | × | 0.74% × (1 – 21.00%) | = | 0.07% | ||
| Operating lease liability4 | 338) | 338) | ÷ | 59,957) | = | 0.01 | 0.01 | × | 4.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 59,957) | 1.00 | 16.20% | ||||||||||
Based on: 10-K (reporting date: 2022-07-31).
1 US$ in millions
2 Equity. See details »
3 Convertible senior notes. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 45,609) | 45,609) | ÷ | 51,489) | = | 0.89 | 0.89 | × | 18.26% | = | 16.18% | ||
| Convertible senior notes3 | 5,500) | 5,500) | ÷ | 51,489) | = | 0.11 | 0.11 | × | 5.30% × (1 – 21.00%) | = | 0.45% | ||
| Operating lease liability4 | 379) | 379) | ÷ | 51,489) | = | 0.01 | 0.01 | × | 3.80% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 51,489) | 1.00 | 16.65% | ||||||||||
Based on: 10-K (reporting date: 2021-07-31).
1 US$ in millions
2 Equity. See details »
3 Convertible senior notes. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Palo Alto Networks Inc., economic spread ratio calculation, comparison to benchmarks
| Jul 31, 2026 | Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (4,793) | (474) | 582) | 1,050) | 307) | (380) | |
| Invested capital2 | 37,471) | 12,434) | 10,842) | 9,130) | 8,705) | 7,361) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -12.79% | -3.82% | 5.37% | 11.50% | 3.53% | -5.17% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Accenture PLC | -0.31% | 1.52% | 1.19% | 1.97% | 4.84% | 6.66% | |
| Adobe Inc. | — | 13.20% | 0.92% | 1.09% | 6.58% | 8.97% | |
| AppLovin Corp. | — | 28.93% | 1.21% | -20.00% | -26.37% | -29.58% | |
| Cadence Design Systems Inc. | — | -1.28% | -2.87% | 7.18% | 6.59% | 6.80% | |
| Datadog Inc. | — | -8.74% | -9.43% | -5.95% | -11.70% | -3.88% | |
| International Business Machines Corp. | — | -0.82% | -7.67% | -3.61% | -11.36% | -6.21% | |
| Intuit Inc. | 7.83% | -2.91% | -6.58% | -8.63% | -7.52% | 0.11% | |
| Microsoft Corp. | 8.88% | 5.63% | 7.51% | 10.56% | 18.54% | 27.58% | |
| Oracle Corp. | -3.77% | -7.90% | -7.76% | -8.56% | -7.56% | 0.65% | |
| Palantir Technologies Inc. | — | 41.88% | -12.04% | -8.76% | -32.50% | -39.96% | |
| Salesforce Inc. | -6.95% | -12.37% | -14.18% | -17.63% | -14.50% | -12.36% | |
| ServiceNow Inc. | — | 2.66% | 5.94% | 5.23% | 0.73% | 1.94% | |
| Synopsys Inc. | — | -12.39% | -8.14% | -7.44% | -0.84% | -6.86% | |
| Workday Inc. | -9.43% | -11.52% | -12.93% | -19.15% | -13.98% | -19.23% | |
Based on: 10-K (reporting date: 2026-07-31), 10-K (reporting date: 2025-07-31), 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2026 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -4,793 ÷ 37,471 = -12.79%
4 Click competitor name to see calculations.
The economic value creation profile exhibits a cyclical trajectory, transitioning from a phase of recovery and value generation to a period of significant value destruction.
- Economic Spread Ratio Dynamics
- The ratio demonstrates significant volatility over the analyzed period. Following an initial negative position of -5.17% in 2021, the ratio improved steadily to a peak of 11.50% in 2023. However, a subsequent reversal occurred, with the ratio declining to -3.82% in 2025 and deteriorating sharply to -12.79% by 2026. This indicates that the return on invested capital fell substantially below the cost of capital in the final period.
- Invested Capital Expansion
- Invested capital followed a consistent upward trajectory from 2021 through 2025, increasing from 7,361 million USD to 12,434 million USD. A disproportionate increase is observed in 2026, where invested capital surged to 37,471 million USD. This abrupt expansion in the capital base coincides with the most severe decline in economic performance.
- Economic Profit Trends
- Economic profit mirrors the fluctuations of the spread ratio. A positive trend was established between 2021 and 2023, reaching a maximum of 1,050 million USD. This gain was eroded over the following three years, culminating in a substantial economic loss of 4,793 million USD in 2026. The correlation suggests that the massive increase in invested capital failed to generate proportional returns, resulting in a sharp contraction of economic value.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?
Economic Profit Margin
Palo Alto Networks Inc., economic profit margin calculation, comparison to benchmarks
| Jul 31, 2026 | Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (4,793) | (474) | 582) | 1,050) | 307) | (380) | |
| Revenue | 11,480) | 9,222) | 8,028) | 6,893) | 5,502) | 4,256) | |
| Add: Increase (decrease) in deferred revenue | 2,004) | 1,271) | 2,184) | 2,302) | 1,970) | 1,214) | |
| Adjusted revenue | 13,484) | 10,493) | 10,212) | 9,195) | 7,472) | 5,470) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -35.54% | -4.52% | 5.70% | 11.42% | 4.11% | -6.95% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Accenture PLC | -0.22% | 0.97% | 0.67% | 1.01% | 2.33% | 3.42% | |
| Adobe Inc. | — | 11.94% | 1.04% | 1.37% | 7.67% | 11.17% | |
| AppLovin Corp. | — | 29.73% | 1.17% | -27.38% | -49.38% | -59.23% | |
| Cadence Design Systems Inc. | — | -1.92% | -4.40% | 7.15% | 6.57% | 6.91% | |
| Datadog Inc. | — | -5.18% | -8.56% | -3.72% | -8.10% | -3.08% | |
| International Business Machines Corp. | — | -1.46% | -13.55% | -6.43% | -19.67% | -11.82% | |
| Intuit Inc. | 9.56% | -3.75% | -10.11% | -14.13% | -14.48% | 0.14% | |
| Microsoft Corp. | 14.91% | 8.39% | 10.50% | 12.02% | 17.77% | 22.89% | |
| Oracle Corp. | -9.25% | -15.82% | -14.76% | -16.57% | -13.87% | 1.29% | |
| Palantir Technologies Inc. | — | 21.69% | -10.44% | -4.70% | -54.53% | -65.82% | |
| Salesforce Inc. | -14.89% | -26.71% | -32.78% | -44.58% | -40.27% | -28.34% | |
| ServiceNow Inc. | — | 2.94% | 4.88% | 4.21% | 0.58% | 1.68% | |
| Synopsys Inc. | — | -72.30% | -13.64% | -10.49% | -1.18% | -10.92% | |
| Workday Inc. | -11.34% | -12.24% | -14.39% | -23.49% | -18.95% | -25.09% | |
Based on: 10-K (reporting date: 2026-07-31), 10-K (reporting date: 2025-07-31), 10-K (reporting date: 2024-07-31), 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31).
1 Economic profit. See details »
2 2026 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × -4,793 ÷ 13,484 = -35.54%
3 Click competitor name to see calculations.
The analysis of economic value creation reveals a period of initial growth followed by a substantial contraction in economic profitability, despite a consistent increase in top-line revenue.
- Revenue Growth Patterns
- Adjusted revenue demonstrates a consistent upward trajectory, increasing from 5,470 million in 2021 to 13,484 million by 2026. This indicates a sustained expansion in scale and sales volume throughout the observed timeframe.
- Economic Profit Fluctuations
- Economic profit experienced a significant recovery phase, transitioning from a deficit of 380 million in 2021 to a peak of 1,050 million in 2023. This positive trend reversed sharply thereafter, with profit declining to 582 million in 2024 and falling into a deep deficit of 4,793 million by 2026.
- Economic Profit Margin Analysis
- The economic profit margin closely mirrors the volatility of absolute profit figures. After improving from -6.95% in 2021 to a peak of 11.42% in 2023, the margin entered a steep downward trend. By 2026, the margin deteriorated to -35.54%, indicating that the returns failed to cover the cost of capital by a significant margin.
- Divergence Between Revenue and Economic Value
- A critical divergence is observed between the growth in adjusted revenue and the collapse of economic profitability. While revenue increased steadily over the period, the economic profit margin shifted from positive territory back to a severe deficit. This suggests that the cost of capital or operational expenses scaled at a rate that far outpaced revenue growth in the final years of the period.
AI Ask an analyst for more
Hi, I’m an AI-powered financial analyst at Stock Analysis on Net.
Without a user account, I tend to respond rather slowly.
How can I help you?