Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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Palo Alto Networks Inc. pages available for free this week:
- Common-Size Income Statement
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Return on Assets (ROA) since 2012
- Current Ratio since 2012
- Price to Earnings (P/E) since 2012
- Price to Operating Profit (P/OP) since 2012
- Analysis of Debt
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Return on Invested Capital (ROIC)
Palo Alto Networks Inc., ROIC calculation, comparison to benchmarks
| Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | Jul 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net operating profit after taxes (NOPAT)1 | |||||||
| Invested capital2 | |||||||
| Performance Ratio | |||||||
| ROIC3 | |||||||
| Benchmarks | |||||||
| ROIC, Competitors4 | |||||||
| Accenture PLC | |||||||
| Adobe Inc. | |||||||
| Cadence Design Systems Inc. | |||||||
| CrowdStrike Holdings Inc. | |||||||
| Datadog Inc. | |||||||
| Fair Isaac Corp. | |||||||
| International Business Machines Corp. | |||||||
| Intuit Inc. | |||||||
| Microsoft Corp. | |||||||
| Oracle Corp. | |||||||
| Palantir Technologies Inc. | |||||||
| Salesforce Inc. | |||||||
| ServiceNow Inc. | |||||||
| Synopsys Inc. | |||||||
| Workday Inc. | |||||||
Based on: 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), 10-K (reporting date: 2020-07-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2025 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibited a significant upward trend from 2020 to 2023, increasing from approximately $696 million to over $2.6 billion. This represents a nearly fourfold increase over the three-year span. However, in 2024, there was a slight decline to around $2.5 billion, followed by a more pronounced drop to approximately $1.79 billion in 2025. The initial growth phase reflects strong operational performance improvements, while the recent decrease may indicate emerging challenges or strategic shifts affecting profitability.
- Invested Capital
- Invested capital increased steadily over the entire period, rising from $7.03 billion in 2020 to $12.43 billion in 2025. The growth rate is consistent and robust, suggesting ongoing investments or asset accumulation to support business expansion. This increase in capital base may have contributed to the changes observed in profitability and returns.
- Return on Invested Capital (ROIC)
- The return on invested capital showed an overall positive trajectory initially, starting at 9.91% in 2020 and peaking at 28.59% in 2023. This indicates an improving efficiency in generating profits from invested capital. After 2023, ROIC decreased to 23.08% in 2024 and further to 14.4% in 2025, aligning with the downward trend in NOPAT. Despite the decline, the ROIC in 2025 remains higher than the levels observed in 2020 and 2021, suggesting that the company is still maintaining a relatively good level of capital efficiency compared to the earlier years.
- Overall Analysis
- The period under review reveals strong growth in profitability and capital efficiency until 2023, driven by substantial increases in net operating profit outpacing the expansion in invested capital. Post-2023, there is a notable reversal in profitability and returns, even though invested capital continues to increase. This divergence suggests potential issues in translating investments into proportionate operating gains or increased costs impacting net profits. Close monitoring and strategic evaluation may be warranted to address the declining profit metrics and to sustain investor value creation in the future.
Decomposition of ROIC
Palo Alto Networks Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Jul 31, 2025 | = | × | × | ||||
| Jul 31, 2024 | = | × | × | ||||
| Jul 31, 2023 | = | × | × | ||||
| Jul 31, 2022 | = | × | × | ||||
| Jul 31, 2021 | = | × | × | ||||
| Jul 31, 2020 | = | × | × |
Based on: 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), 10-K (reporting date: 2020-07-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
- Operating Profit Margin (OPM)
- The operating profit margin exhibited an overall upward trend from 17.41% in 2020 to a peak of 29.22% in 2023. Following this peak, there was a gradual decline to 24.12% by 2025. This pattern suggests an initial strengthening in operational efficiency and profitability, followed by a moderation in profit margins in the latter years.
- Turnover of Capital (TO)
- The turnover of capital ratio increased steadily from 0.62 in 2020 to 1.01 in 2023, indicating improved efficiency in utilizing capital to generate revenue during this period. After reaching this high point, the ratio decreased to 0.84 by 2025, pointing to a reduction in asset turnover efficiency toward the end of the period analyzed.
- Effective Cash Tax Rate (1 – CTR)
- The effective cash tax rate, represented as 1 minus the cash tax rate, remained relatively high above 90% from 2020 to 2023, peaking at 97.17% in 2023. However, a noticeable decline occurred afterward, reducing to 70.75% in 2025. This decline indicates an increased cash tax burden or lower tax efficiency in the latter years compared to the earlier part of the observed period.
- Return on Invested Capital (ROIC)
- Return on invested capital showed significant growth from 9.91% in 2020 to a high of 28.59% in 2023, reflecting enhanced profitability relative to invested capital. Subsequent years showed a decline to 14.4% by 2025, albeit still above the levels recorded at the beginning of the period. This trend illustrates a strong initial improvement in capital returns, followed by a partial reduction in efficiency or profitability after 2023.
Operating Profit Margin (OPM)
Palo Alto Networks Inc., OPM calculation, comparison to benchmarks
| Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | Jul 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net operating profit after taxes (NOPAT)1 | |||||||
| Add: Cash operating taxes2 | |||||||
| Net operating profit before taxes (NOPBT) | |||||||
| Revenue | |||||||
| Add: Increase (decrease) in deferred revenue | |||||||
| Adjusted revenue | |||||||
| Profitability Ratio | |||||||
| OPM3 | |||||||
| Benchmarks | |||||||
| OPM, Competitors4 | |||||||
| Accenture PLC | |||||||
| Adobe Inc. | |||||||
| Cadence Design Systems Inc. | |||||||
| CrowdStrike Holdings Inc. | |||||||
| Datadog Inc. | |||||||
| Fair Isaac Corp. | |||||||
| International Business Machines Corp. | |||||||
| Intuit Inc. | |||||||
| Microsoft Corp. | |||||||
| Oracle Corp. | |||||||
| Palantir Technologies Inc. | |||||||
| Salesforce Inc. | |||||||
| ServiceNow Inc. | |||||||
| Synopsys Inc. | |||||||
| Workday Inc. | |||||||
Based on: 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), 10-K (reporting date: 2020-07-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenue
= 100 × ÷ =
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes has exhibited a consistent upward trajectory from 2020 through 2024, increasing from approximately $754 million to $2.89 billion. This represents a significant growth over the five-year period. However, in 2025, there is a noticeable decline in NOPBT to around $2.53 billion, indicating a reduction of about 12% from the previous year.
- Adjusted Revenue
- Adjusted revenue has demonstrated steady and substantial growth throughout the entire period under review. Starting from approximately $4.33 billion in 2020, it increased each year without interruption, reaching nearly $10.5 billion by 2025. The year-over-year growth reflects a strong expansion in the company’s sales or service income base.
- Operating Profit Margin (OPM)
- The operating profit margin showed a moderate decline from 17.41% in 2020 to 16.95% in 2021, followed by a sharp improvement in 2022, reaching 23.9%. This positive trend continued into 2023 with the OPM peaking at 29.22%. Subsequently, the margin slightly decreased in 2024 to 28.26%, and then further to 24.12% in 2025. The peak margin corresponds with the years of highest NOPBT and suggests improved operational efficiency or better cost management during that timeframe. The decline in margin afterward indicates increased costs or pricing pressures despite revenue growth.
- Overall Analysis
- The company has experienced strong revenue and profit growth over the five-year span, with peak profitability occurring in the years 2023 and 2024. Despite continued revenue growth into 2025, profitability measured by both net operating profit before taxes and operating margin shows a downturn in the final year analyzed. This may warrant further investigation into cost structures or market conditions impacting profitability. The trends suggest solid business expansion but highlight emerging challenges in maintaining operational efficiency.
Turnover of Capital (TO)
Palo Alto Networks Inc., TO calculation, comparison to benchmarks
| Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | Jul 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Revenue | |||||||
| Add: Increase (decrease) in deferred revenue | |||||||
| Adjusted revenue | |||||||
| Invested capital1 | |||||||
| Efficiency Ratio | |||||||
| TO2 | |||||||
| Benchmarks | |||||||
| TO, Competitors3 | |||||||
| Accenture PLC | |||||||
| Adobe Inc. | |||||||
| Cadence Design Systems Inc. | |||||||
| CrowdStrike Holdings Inc. | |||||||
| Datadog Inc. | |||||||
| Fair Isaac Corp. | |||||||
| International Business Machines Corp. | |||||||
| Intuit Inc. | |||||||
| Microsoft Corp. | |||||||
| Oracle Corp. | |||||||
| Palantir Technologies Inc. | |||||||
| Salesforce Inc. | |||||||
| ServiceNow Inc. | |||||||
| Synopsys Inc. | |||||||
| Workday Inc. | |||||||
Based on: 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), 10-K (reporting date: 2020-07-31).
1 Invested capital. See details »
2 2025 Calculation
TO = Adjusted revenue ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
- Adjusted Revenue
- Over the analyzed period, adjusted revenue demonstrates a consistent upward trend. It rose from approximately $4,329,900 thousand in 2020 to $10,492,900 thousand in 2025. This steady increase indicates strong revenue growth, with notable acceleration between 2020 and 2023. Growth appears to moderate slightly beyond 2023 but continues on a positive trajectory.
- Invested Capital
- Invested capital also shows a continuous increase throughout the period, beginning at about $7,029,200 thousand in 2020 and reaching $12,434,500 thousand by 2025. The rise is gradual initially but becomes more pronounced after 2022, suggesting increased investment activities or asset accumulation to support expanding operations.
- Turnover of Capital (TO)
- Turnover of capital, which measures the efficiency of capital utilization, improved from 0.62 in 2020 to a peak of 1.01 in 2023, indicating enhanced effectiveness in generating revenue from the invested capital. However, in subsequent years, this ratio declined to 0.84 by 2025. This decrease might reflect slower revenue growth relative to the expanded capital base or diminishing returns on investments.
- Overall Analysis
- The data indicates a company undergoing significant growth in both revenue and capital investment. While the growing invested capital supports expanding operations, the efficiency in capital use as indicated by the turnover ratio peaks around 2023 and declines afterward. This suggests that although revenue grows consistently, the pace of capital investment increase outstrips revenue gains in the later years, potentially signaling a need for enhanced capital efficiency or assessing the returns on new investments.
Effective Cash Tax Rate (CTR)
Palo Alto Networks Inc., CTR calculation, comparison to benchmarks
| Jul 31, 2025 | Jul 31, 2024 | Jul 31, 2023 | Jul 31, 2022 | Jul 31, 2021 | Jul 31, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Net operating profit after taxes (NOPAT)1 | |||||||
| Add: Cash operating taxes2 | |||||||
| Net operating profit before taxes (NOPBT) | |||||||
| Tax Rate | |||||||
| CTR3 | |||||||
| Benchmarks | |||||||
| CTR, Competitors4 | |||||||
| Accenture PLC | |||||||
| Adobe Inc. | |||||||
| Cadence Design Systems Inc. | |||||||
| CrowdStrike Holdings Inc. | |||||||
| Datadog Inc. | |||||||
| Fair Isaac Corp. | |||||||
| International Business Machines Corp. | |||||||
| Intuit Inc. | |||||||
| Microsoft Corp. | |||||||
| Oracle Corp. | |||||||
| Palantir Technologies Inc. | |||||||
| Salesforce Inc. | |||||||
| ServiceNow Inc. | |||||||
| Synopsys Inc. | |||||||
| Workday Inc. | |||||||
Based on: 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), 10-K (reporting date: 2020-07-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes
- The amount of cash operating taxes showed a rising trend over the analyzed periods. From 57,464 thousand USD in 2020, it increased steadily to 81,834 thousand USD in 2021, followed by a slight decline to 68,221 thousand USD in 2022. In 2023, the taxes rose again to 76,038 thousand USD, but then experienced a significant jump in 2024 to 384,452 thousand USD, and further increased markedly to 740,528 thousand USD in 2025. This sharp rise in the two most recent years suggests a substantial growth in taxable income or changes in tax policy impacting the cash taxes paid.
- Net Operating Profit Before Taxes (NOPBT)
- The NOPBT demonstrated a strong upward trajectory from 753,886 thousand USD in 2020 to 926,910 thousand USD in 2021, showing growth in operational profitability. This positive trend accelerated with a substantial increase to 1,785,836 thousand USD in 2022 and further to 2,686,352 thousand USD in 2023. The profit peaked at 2,886,159 thousand USD in 2024 before experiencing a decline to 2,531,340 thousand USD in 2025. Despite the dip in the final year, overall profitability before taxes grew significantly over the period, indicating strong operational performance.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate experienced fluctuations across the timeline. It started at a relatively low rate of 7.62% in 2020, increased to 8.83% in 2021, then decreased sharply to a low of 2.83% in 2023. However, there was a marked increase in 2024 to 13.32%, followed by a notable jump to 29.25% in 2025. This volatility in the effective tax rate, particularly the significant rise in the last two years, may reflect changes in tax regulations, differences in tax planning strategies, or shifts in the composition of taxable income.