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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- Balance Sheet: Assets
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Profitability Ratios
- Analysis of Reportable Segments
- Analysis of Geographic Areas
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Enterprise Value to EBITDA (EV/EBITDA)
- Capital Asset Pricing Model (CAPM)
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Economic Profit
Texas Instruments Inc., economic profit calculation
US$ in millions
| 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
= – × =
An analysis of the financial performance from 2021 to 2025 reveals a significant contraction in economic profit. While the company maintained positive economic value added throughout the period, the magnitude of value creation has diminished substantially, indicating a decline in the efficiency of capital deployment.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a volatile trend, reaching a peak of 8,736 million US$ in 2022 before entering a period of decline. A notable drop occurred in 2023 and 2024, reaching a low of 5,023 million US$. A marginal recovery was observed in 2025, with NOPAT rising to 5,439 million US$, though it remained significantly below the 2022 peak.
- Invested Capital
- A consistent and aggressive upward trajectory is observed in invested capital. The capital base grew from 16,409 million US$ in 2021 to 28,591 million US$ by 2025. This steady expansion indicates a period of heavy investment in assets or operations over the five-year duration.
- Cost of Capital
- The cost of capital remained remarkably stable, fluctuating minimally between a high of 16.84% in 2022 and a low of 16.50% in 2024. The lack of significant variance in this metric suggests that the erosion of economic profit was not driven by changes in the cost of funding or risk premiums.
- Economic Profit Dynamics
- Economic profit experienced a severe decline, falling from a peak of 5,778 million US$ in 2022 to 682 million US$ in 2025. This downturn is the direct result of the diverging trends between NOPAT and invested capital; as the capital base expanded and operating profits decreased, the capital charge increased significantly, thereby consuming a larger portion of the NOPAT and reducing the overall economic value added.
Net Operating Profit after Taxes (NOPAT)
Texas Instruments Inc., NOPAT calculation
US$ in millions
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 accounts receivable allowances.
3 Addition of increase (decrease) in accrued restructuring.
4 Addition of increase (decrease) in equity equivalents to net income.
5 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
6 2025 Calculation
Tax benefit of interest and debt expense = Adjusted interest and debt expense × Statutory income tax rate
= × 21.00% =
7 Addition of after taxes interest expense to net income.
Net income and net operating profit after taxes (NOPAT) exhibited similar patterns over the five-year period. Both metrics increased from 2021 to 2022, followed by a decline through 2024, and a partial recovery in 2025. However, the magnitude of change differed between the two measures.
- Overall Trend
- From 2021 to 2022, both net income and NOPAT demonstrated growth, increasing from US$7,769 million and US$7,923 million, respectively, to US$8,749 million and US$8,736 million. This represents a period of positive financial performance. A subsequent downturn occurred between 2022 and 2024, with both metrics decreasing. Net income fell to US$4,799 million and NOPAT to US$5,023 million. A modest recovery was then observed in 2025, with net income reaching US$5,001 million and NOPAT reaching US$5,439 million.
- NOPAT Analysis
- NOPAT began at US$7,923 million in 2021 and peaked at US$8,736 million in 2022, representing a year-over-year increase of approximately 10.3%. The subsequent decline saw NOPAT decrease by approximately 42.6% between 2022 and 2024. The 2025 value indicates a partial recovery, with an increase of approximately 8.2% from 2024. The fluctuations in NOPAT suggest sensitivity to underlying operational factors or broader economic conditions.
- Relationship to Net Income
- NOPAT closely tracked net income throughout the period. The difference between the two values remained relatively small each year, indicating that non-operating items had a limited impact on overall profitability. In 2021, NOPAT exceeded net income by US$154 million. This difference narrowed in 2022 to just US$13 million. The gap widened again in 2023, 2024, and 2025, reaching US$22 million, US$224 million, and US$438 million respectively, suggesting a growing divergence due to non-operating factors in later years.
Cash Operating Taxes
Texas Instruments Inc., cash operating taxes calculation
US$ in millions
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 exhibited distinct patterns over the five-year period. Both metrics experienced fluctuations, though cash operating taxes demonstrated a more pronounced variance than the provision for income taxes.
- Provision for Income Taxes
- The provision for income taxes initially increased from US$1,150 million in 2021 to US$1,283 million in 2022, representing a growth of approximately 11.57%. A subsequent decrease was observed in 2023, falling to US$908 million. This downward trend continued into 2024 with a further reduction to US$654 million, before modestly increasing to US$709 million in 2025. Overall, the provision for income taxes decreased from 2022 to 2025.
- Cash Operating Taxes
- Cash operating taxes showed a significant increase from US$1,176 million in 2021 to US$1,521 million in 2022, a rise of approximately 29.12%. This was followed by a decrease to US$1,286 million in 2023. The decline continued into 2024, reaching US$978 million, and further decreased to US$849 million in 2025. The trend indicates a substantial reduction in cash operating taxes from the peak in 2022 to the end of the period.
The difference between the provision for income taxes and cash operating taxes narrowed from US$26 million in 2021 to US$238 million in 2022. However, this difference reversed in subsequent years, becoming a negative value of US$378 million in 2023, US$324 million in 2024, and US$140 million in 2025. This suggests a growing divergence between reported tax expense and actual cash outflows for taxes, potentially due to timing differences or tax planning strategies.
The most substantial changes occurred between 2022 and 2023 for both metrics, with both experiencing notable declines. The period from 2023 to 2025 shows a more moderate, but continued, decrease in cash operating taxes, while the provision for income taxes stabilized somewhat.
Invested Capital
Texas Instruments Inc., invested capital calculation (financing approach)
US$ in millions
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 allowance for doubtful accounts receivable.
4 Addition of accrued restructuring.
5 Addition of equity equivalents to stockholders’ equity.
6 Removal of accumulated other comprehensive income.
7 Subtraction of investments measured at fair value.
Invested capital has demonstrated a consistent upward trend over the five-year period. Simultaneously, both total reported debt & leases and stockholders’ equity have increased, contributing to the growth in invested capital. The rate of increase in invested capital appears to be accelerating in later years.
- Total Reported Debt & Leases
- Total reported debt & leases increased from US$8,206 million in 2021 to US$14,779 million in 2025. The largest single-year increase occurred between 2022 and 2023, rising by US$2,635 million. Growth slowed between 2023 and 2024, but remained substantial at US$2,588 million. The increase from 2024 to 2025 was minimal, at US$392 million.
- Stockholders’ Equity
- Stockholders’ equity exhibited growth from US$13,333 million in 2021 to US$16,273 million in 2025. The rate of growth was most pronounced between 2021 and 2023, increasing by US$3,564 million. Growth slowed considerably between 2023 and 2024, with a marginal increase, and then decreased slightly in 2025.
- Invested Capital
- Invested capital increased steadily from US$16,409 million in 2021 to US$28,591 million in 2025. The increase from 2021 to 2022 was US$1,154 million. The increase from 2022 to 2023 was US$5,027 million, representing a significant acceleration. This trend continued from 2023 to 2024 with an increase of US$3,577 million, and then US$2,424 million from 2024 to 2025. The growth in invested capital is largely driven by the increases in both debt and equity, with debt contributing a larger proportion of the increase in recent years.
The consistent rise in invested capital suggests ongoing investment in operations and/or acquisitions. The increasing reliance on debt financing, particularly between 2022 and 2024, warrants further investigation to assess the associated financial risk and the returns generated from these investments.
Cost of Capital
Texas Instruments Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Texas Instruments 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 millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Marvell Technology Inc. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
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 performance indicators exhibit a pronounced divergence between capital expansion and value creation from 2021 through 2025. While the capital base has expanded consistently, economic profit and the corresponding economic spread ratio have undergone a significant contraction.
- Economic Profit
- Economic profit peaked in 2022 at 5,778 million US$, following a 2021 value of 5,174 million US$. Subsequently, a precipitous decline occurred, with profits falling to 2,783 million US$ in 2023, and further decreasing to 706 million US$ in 2024 and 682 million US$ in 2025. This trajectory indicates a substantial reduction in the company's ability to generate returns exceeding its cost of capital.
- Invested Capital
- A continuous upward trend is observed in invested capital over the analyzed period. The capital base grew from 16,409 million US$ in 2021 to 28,591 million US$ by 2025. This represents a steady increase in the resources deployed into the business, reflecting an aggressive expansion of the asset base.
- Economic Spread Ratio
- The economic spread ratio demonstrates a severe deterioration, mirroring the decline in economic profit while being further pressured by the increase in invested capital. After reaching a high of 32.90% in 2022, the ratio fell sharply to 12.32% in 2023, eventually collapsing to 2.70% in 2024 and 2.38% in 2025. The narrowing of this spread suggests that the incremental capital invested has yielded diminishing returns relative to the cost of funding.
Economic Profit Margin
Texas Instruments 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 millions) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Advanced Micro Devices Inc. | ||||||
| Analog Devices Inc. | ||||||
| Applied Materials Inc. | ||||||
| Broadcom Inc. | ||||||
| Intel Corp. | ||||||
| KLA Corp. | ||||||
| Lam Research Corp. | ||||||
| Marvell Technology Inc. | ||||||
| Micron Technology Inc. | ||||||
| NVIDIA Corp. | ||||||
| Qualcomm Inc. | ||||||
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 ÷ Revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The company experienced a significant contraction in value creation between 2021 and 2025. While the initial period showed strong economic performance, a pronounced downward trajectory is evident in both absolute economic profit and the efficiency of value generation relative to revenue.
- Economic Profit
- A peak in economic profit was observed in 2022 at US$ 5,778 million. This was followed by a sharp and consistent decline, with figures dropping to US$ 2,783 million in 2023, US$ 706 million in 2024, and reaching a low of US$ 682 million by 2025. This trend indicates a substantial reduction in the surplus generated above the company's cost of capital.
- Revenue Performance
- Revenue exhibited volatility throughout the period. After an increase to US$ 20,028 million in 2022, revenue declined for two consecutive years, reaching US$ 15,641 million in 2024. Although a recovery to US$ 17,682 million occurred in 2025, this growth in top-line revenue did not result in a recovery of economic profit.
- Economic Profit Margin
- A severe compression of the economic profit margin is observed. The margin remained robust in 2021 and 2022, peaking at 28.85%. However, the margin fell sharply to 15.88% in 2023 and continued to erode, ending the period at 3.86% in 2025. This suggests a significant decrease in the company's ability to convert revenue into economic value.