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
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Palo Alto Networks Inc., economic profit calculation

US$ in thousands

12 months ended:	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019	Jul 31, 2018
Net operating profit after taxes (NOPAT)¹	2,610,314)	1,717,615)	845,076)	696,422)	536,434)	455,238)
Cost of capital²	13.67%	12.96%	13.40%	12.86%	13.54%	13.25%
Invested capital³	9,129,500)	8,704,600)	7,360,500)	7,029,200)	3,879,623)	4,246,132)

Economic profit⁴	1,362,629)	589,294)	(140,890)	(207,336)	11,281)	(107,251)

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2023 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 2,610,314 – 13.67% × 9,129,500 = 1,362,629

Download chart

Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Palo Alto Networks Inc. economic profit increased from 2021 to 2022 and from 2022 to 2023.

Palo Alto Networks Inc., NOPAT calculation

US$ in thousands

12 months ended:	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019	Jul 31, 2018
Net income (loss)	439,700)	(267,000)	(498,900)	(267,000)	(81,900)	(147,900)
Deferred income tax expense (benefit)¹	12,500)	(3,100)	(12,400)	(9,100)	(18,000)	(6,600)
Increase (decrease) in allowance for credit losses²	(1,100)	(2,300)	8,900)	1,500)	(400)	500)
Increase (decrease) in deferred revenue³	2,302,400)	1,970,000)	1,213,800)	921,500)	609,400)	591,400)
Increase (decrease) in equity equivalents⁴	2,313,800)	1,964,600)	1,210,300)	913,900)	591,000)	585,300)
Interest expense	27,200)	27,400)	163,300)	88,700)	83,900)	29,600)
Interest expense, operating lease liability⁵	15,952)	13,536)	14,410)	15,386)	20,500)	21,868)
Adjusted interest expense	43,152)	40,936)	177,710)	104,086)	104,400)	51,468)
Tax benefit of interest expense⁶	(9,062)	(8,597)	(37,319)	(21,858)	(21,924)	(13,793)
Adjusted interest expense, after taxes⁷	34,090)	32,339)	140,391)	82,228)	82,476)	37,675)
Interest income	(224,400)	(15,600)	(8,500)	(41,400)	(69,800)	(27,100)
Investment income, before taxes	(224,400)	(15,600)	(8,500)	(41,400)	(69,800)	(27,100)
Tax expense (benefit) of investment income⁸	47,124)	3,276)	1,785)	8,694)	14,658)	7,263)
Investment income, after taxes⁹	(177,276)	(12,324)	(6,715)	(32,706)	(55,142)	(19,837)
Net operating profit after taxes (NOPAT)	2,610,314)	1,717,615)	845,076)	696,422)	536,434)	455,238)

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

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 2023 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 339,400 × 4.70% = 15,952

⁶ 2023 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 43,152 × 21.00% = 9,062

⁷ Addition of after taxes interest expense to net income (loss).

⁸ 2023 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 224,400 × 21.00% = 47,124

⁹ Elimination of after taxes investment income.

Download chart

Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Palo Alto Networks Inc. NOPAT increased from 2021 to 2022 and from 2022 to 2023.

Palo Alto Networks Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019	Jul 31, 2018
Provision for income taxes	126,600)	59,800)	33,900)	35,200)	7,300)	17,700)
Less: Deferred income tax expense (benefit)	12,500)	(3,100)	(12,400)	(9,100)	(18,000)	(6,600)
Add: Tax savings from interest expense	9,062)	8,597)	37,319)	21,858)	21,924)	13,793)
Less: Tax imposed on investment income	47,124)	3,276)	1,785)	8,694)	14,658)	7,263)
Cash operating taxes	76,038)	68,221)	81,834)	57,464)	32,566)	30,831)

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

Download chart

Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Palo Alto Networks Inc. cash operating taxes decreased from 2021 to 2022 but then increased from 2022 to 2023 not reaching 2021 level.

Palo Alto Networks Inc., invested capital calculation (financing approach)

US$ in thousands

	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019	Jul 31, 2018
Current portion of convertible senior notes, net	1,991,500)	3,676,800)	1,557,900)	—)	—)	550,400)
Convertible senior notes, net, excluding current portion	—)	—)	1,668,100)	3,084,100)	1,430,000)	1,369,700)
Operating lease liability¹	339,400)	338,400)	379,200)	394,500)	394,223)	429,632)
Total reported debt & leases	2,330,900)	4,015,200)	3,605,200)	3,478,600)	1,824,223)	2,349,732)
Stockholders’ equity	1,748,400)	210,000)	634,500)	1,101,800)	1,586,300)	966,400)
Net deferred tax (assets) liabilities²	5,400)	(11,200)	(9,100)	(9,000)	(7,000)	(8,500)
Allowance for credit losses³	7,800)	8,900)	11,200)	2,300)	800)	1,200)
Deferred revenue⁴	9,296,400)	6,994,000)	5,024,000)	3,810,200)	2,888,700)	2,364,900)
Equity equivalents⁵	9,309,600)	6,991,700)	5,026,100)	3,803,500)	2,882,500)	2,357,600)
Accumulated other comprehensive (income) loss, net of tax⁶	43,200)	55,600)	9,900)	(10,500)	3,700)	16,400)
Adjusted stockholders’ equity	11,101,200)	7,257,300)	5,670,500)	4,894,800)	4,472,500)	3,340,400)
Available-for-sale investments⁷	(4,302,600)	(2,567,900)	(1,915,200)	(1,344,200)	(2,417,100)	(1,444,000)
Invested capital	9,129,500)	8,704,600)	7,360,500)	7,029,200)	3,879,623)	4,246,132)

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

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.

Download chart

Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Palo Alto Networks Inc. invested capital increased from 2021 to 2022 and from 2022 to 2023.

Palo Alto Networks Inc., cost of capital calculations

Jul 31, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	74,902,082)	74,902,082)	÷	80,241,482)	=	0.93	0.93	×	14.59%	=	13.62%
Convertible Senior Notes³	5,000,000)	5,000,000)	÷	80,241,482)	=	0.06	0.06	×	0.60% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	339,400)	339,400)	÷	80,241,482)	=	0.00	0.00	×	4.70% × (1 – 21.00%)	=	0.02%
Total:	80,241,482)					1.00					13.67%

Based on: 10-K (reporting date: 2023-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Jul 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	52,915,962)	52,915,962)	÷	59,954,362)	=	0.88	0.88	×	14.59%	=	12.88%
Convertible Senior Notes³	6,700,000)	6,700,000)	÷	59,954,362)	=	0.11	0.11	×	0.74% × (1 – 21.00%)	=	0.07%
Operating lease liability⁴	338,400)	338,400)	÷	59,954,362)	=	0.01	0.01	×	4.00% × (1 – 21.00%)	=	0.02%
Total:	59,954,362)					1.00					12.96%

Based on: 10-K (reporting date: 2022-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Jul 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	45,606,516)	45,606,516)	÷	51,485,716)	=	0.89	0.89	×	14.59%	=	12.93%
Convertible Senior Notes³	5,500,000)	5,500,000)	÷	51,485,716)	=	0.11	0.11	×	5.30% × (1 – 21.00%)	=	0.45%
Operating lease liability⁴	379,200)	379,200)	÷	51,485,716)	=	0.01	0.01	×	3.80% × (1 – 21.00%)	=	0.02%
Total:	51,485,716)					1.00					13.40%

Based on: 10-K (reporting date: 2021-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Jul 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	22,710,367)	22,710,367)	÷	27,204,867)	=	0.83	0.83	×	14.59%	=	12.18%
Convertible Senior Notes³	4,100,000)	4,100,000)	÷	27,204,867)	=	0.15	0.15	×	5.30% × (1 – 21.00%)	=	0.63%
Operating lease liability⁴	394,500)	394,500)	÷	27,204,867)	=	0.01	0.01	×	3.90% × (1 – 21.00%)	=	0.04%
Total:	27,204,867)					1.00					12.86%

Based on: 10-K (reporting date: 2020-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Jul 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	20,481,480)	20,481,480)	÷	22,775,702)	=	0.90	0.90	×	14.59%	=	13.12%
Convertible Senior Notes³	1,900,000)	1,900,000)	÷	22,775,702)	=	0.08	0.08	×	5.20% × (1 – 21.00%)	=	0.34%
Operating lease liability⁴	394,223)	394,223)	÷	22,775,702)	=	0.02	0.02	×	5.20% × (1 – 21.00%)	=	0.07%
Total:	22,775,702)					1.00					13.54%

Based on: 10-K (reporting date: 2019-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Jul 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	22,151,607)	22,151,607)	÷	25,281,238)	=	0.88	0.88	×	14.59%	=	12.79%
Convertible Senior Notes³	2,700,000)	2,700,000)	÷	25,281,238)	=	0.11	0.11	×	5.09% × (1 – 26.80%)	=	0.40%
Operating lease liability⁴	429,632)	429,632)	÷	25,281,238)	=	0.02	0.02	×	5.09% × (1 – 26.80%)	=	0.06%
Total:	25,281,238)					1.00					13.25%

Based on: 10-K (reporting date: 2018-07-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible Senior Notes. See details »

⁴ Operating lease liability. See details »

Palo Alto Networks Inc., economic spread ratio calculation, comparison to benchmarks

	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019	Jul 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	1,362,629)	589,294)	(140,890)	(207,336)	11,281)	(107,251)
Invested capital²	9,129,500)	8,704,600)	7,360,500)	7,029,200)	3,879,623)	4,246,132)
Performance Ratio
Economic spread ratio³	14.93%	6.77%	-1.91%	-2.95%	0.29%	-2.53%
Benchmarks
Economic Spread Ratio, Competitors⁴
Accenture PLC	6.01%	8.86%	10.70%	11.26%	9.99%	10.23%
Adobe Inc.	5.59%	11.03%	13.44%	5.71%	3.81%	1.46%
International Business Machines Corp.	-1.48%	-9.34%	-4.35%	-4.09%	-0.36%	—
Intuit Inc.	-6.05%	-4.99%	2.76%	6.09%	19.76%	17.46%
Microsoft Corp.	16.03%	23.98%	32.99%	31.01%	26.13%	7.79%
Oracle Corp.	-1.15%	-0.86%	7.19%	1.50%	4.21%	-4.78%
Salesforce Inc.	-11.97%	-9.54%	-7.22%	-10.26%	-6.25%	—
ServiceNow Inc.	8.97%	4.44%	5.65%	7.27%	6.68%	—
Synopsys Inc.	-3.57%	3.01%	-3.01%	-2.84%	-5.83%	-7.21%

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2023 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 1,362,629 ÷ 9,129,500 = 14.93%

⁴ Click competitor name to see calculations.

Download chart

Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Palo Alto Networks Inc. economic spread ratio improved from 2021 to 2022 and from 2022 to 2023.

Palo Alto Networks Inc., economic profit margin calculation, comparison to benchmarks

	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020	Jul 31, 2019	Jul 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	1,362,629)	589,294)	(140,890)	(207,336)	11,281)	(107,251)

Revenue	6,892,700)	5,501,500)	4,256,100)	3,408,400)	2,899,600)	2,273,100)
Add: Increase (decrease) in deferred revenue	2,302,400)	1,970,000)	1,213,800)	921,500)	609,400)	591,400)
Adjusted revenue	9,195,100)	7,471,500)	5,469,900)	4,329,900)	3,509,000)	2,864,500)
Performance Ratio
Economic profit margin²	14.82%	7.89%	-2.58%	-4.79%	0.32%	-3.74%
Benchmarks
Economic Profit Margin, Competitors³
Accenture PLC	3.09%	4.27%	5.49%	5.73%	4.62%	4.30%
Adobe Inc.	7.00%	12.84%	16.75%	8.19%	5.73%	2.39%
International Business Machines Corp.	-2.64%	-16.22%	-8.30%	-7.10%	-0.61%	—
Intuit Inc.	-9.91%	-9.61%	3.50%	6.86%	13.17%	11.60%
Microsoft Corp.	18.26%	22.98%	27.38%	23.02%	19.33%	5.52%
Oracle Corp.	-2.23%	-1.58%	14.23%	3.42%	7.67%	-8.64%
Salesforce Inc.	-30.48%	-26.49%	-16.57%	-25.26%	-12.31%	—
ServiceNow Inc.	7.22%	3.57%	4.89%	5.93%	4.89%	—
Synopsys Inc.	-5.04%	4.24%	-4.79%	-4.87%	-10.08%	-12.30%

Based on: 10-K (reporting date: 2023-07-31), 10-K (reporting date: 2022-07-31), 10-K (reporting date: 2021-07-31), 10-K (reporting date: 2020-07-31), 10-K (reporting date: 2019-07-31), 10-K (reporting date: 2018-07-31).

¹ Economic profit. See details »

² 2023 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 1,362,629 ÷ 9,195,100 = 14.82%

³ Click competitor name to see calculations.

Download chart

Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Palo Alto Networks Inc. economic profit margin improved from 2021 to 2022 and from 2022 to 2023.

Palo Alto Networks Inc. (NASDAQ:PANW)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin