AT&T Inc. (NYSE:T)

The period under review demonstrates significant fluctuations in economic profit. Net operating profit after taxes (NOPAT) exhibited considerable volatility, beginning at US$32,698 million, declining sharply to US$1,500 million, then recovering to US$22,742 million, followed by a further decrease to US$18,826 million, and finally increasing to US$32,194 million. Invested capital also showed variation, decreasing from US$439,195 million to US$309,447 million before increasing to US$326,144 million, then decreasing slightly to US$314,065 million, and concluding at US$337,331 million.

Economic Profit Trend

Economic profit experienced a substantial decline from a positive US$1,894 million in 2021 to a negative US$22,078 million in 2022. This negative trend continued, albeit less dramatically, to a loss of US$1,056 million in 2023 and further to a loss of US$7,886 million in 2024. A return to positive economic profit was observed in 2025, reaching US$3,959 million.

Cost of Capital

The cost of capital increased from 7.01% in 2021 to 7.62% in 2022, decreased slightly to 7.30% in 2023, and then rose significantly to 8.50% in 2024 before decreasing to 8.37% in 2025. This increasing cost of capital likely contributed to the negative economic profit observed in 2022, 2023, and 2024.

Relationship between NOPAT and Economic Profit

The substantial decrease in NOPAT between 2021 and 2022 directly correlates with the significant decline in economic profit during the same period. While NOPAT recovered in subsequent years, the increasing cost of capital limited the extent to which this recovery translated into improved economic profit. The positive correlation between NOPAT and economic profit is evident in the final year, with both metrics showing improvement.

The fluctuations in economic profit suggest a sensitivity to both operational performance, as reflected in NOPAT, and external financial conditions, as indicated by the cost of capital. The return to positive economic profit in 2025 is a positive development, but continued monitoring of both NOPAT and the cost of capital is warranted.

Net operating profit after taxes (NOPAT) exhibited significant fluctuation over the five-year period. While net income attributable to AT&T also showed volatility, the NOPAT figures present a distinct pattern of initial decline, subsequent recovery, and further growth. A substantial decrease in NOPAT is observed between 2021 and 2022, followed by a period of recovery and expansion through 2025.

NOPAT Trend

In 2021, NOPAT stood at US$32,698 million. This value decreased dramatically to US$1,500 million in 2022, representing a significant contraction in operating profitability. A strong recovery occurred in 2023, with NOPAT reaching US$22,742 million. This upward trend continued into 2024, with NOPAT reported at US$18,826 million, although at a slower rate of increase than the prior year. Finally, NOPAT experienced substantial growth in 2025, reaching US$32,194 million, nearly returning to the level observed in 2021.

Relationship to Net Income

The divergence between NOPAT and net income is notable. While net income experienced a substantial loss in 2022, NOPAT, though significantly reduced, remained positive. This suggests that non-operating items contributed substantially to the net loss in 2022. In 2023 and 2025, NOPAT growth outpaced net income growth, indicating improved core operational performance relative to other financial influences. The difference between NOPAT and net income suggests the presence of significant interest expense, non-recurring items, or tax adjustments impacting the bottom line.

The fluctuations in NOPAT warrant further investigation to understand the underlying drivers. The sharp decline in 2022 requires detailed analysis of operational performance, cost structures, and any significant one-time events. The subsequent recovery and growth demonstrate an ability to improve operational profitability, but the slower growth rate in 2024 suggests potential headwinds or challenges to sustaining the momentum. The strong performance in 2025 indicates a return to robust operational profitability.

The reported income tax expense demonstrates fluctuation over the five-year period. A decrease is observed from 2021 to 2022, followed by increases in 2022 and 2023, a further increase in 2024, and then a decrease in 2025. However, cash operating taxes exhibit a different pattern, showing a more substantial increase between 2021 and 2024 before declining in the most recent year.

Income Tax Expense Trend

Income tax expense began at US$5,468 million in 2021, decreased to US$3,780 million in 2022, and then increased to US$4,225 million in 2023. This upward trend continued into 2024, reaching US$4,445 million, before decreasing to US$3,621 million in 2025. The largest single-year decrease occurred between 2021 and 2022, while the largest single-year increase occurred between 2022 and 2023.

Cash Operating Taxes Trend

Cash operating taxes increased from US$1,603 million in 2021 to US$2,134 million in 2022. A significant increase is then observed, rising to US$4,298 million in 2023 and further to US$5,277 million in 2024. In 2025, cash operating taxes decreased substantially to US$2,308 million. The period between 2021 and 2024 shows a consistent upward trajectory, while 2025 represents a considerable decline.

Relationship Between Income Tax Expense and Cash Operating Taxes

While both metrics relate to taxation, their movements diverge. Cash operating taxes generally increased at a faster rate than income tax expense between 2021 and 2024. The substantial decrease in cash operating taxes in 2025, while income tax expense also decreased, suggests a potential shift in the timing of tax payments or changes in tax planning strategies. The difference between the two metrics indicates the presence of deferred tax items or other non-cash tax effects.

The fluctuations in both income tax expense and cash operating taxes warrant further investigation to understand the underlying drivers. The significant divergence in trends between the two metrics, particularly in 2025, suggests a need to examine the components of each figure in greater detail.

The reported invested capital exhibited considerable fluctuation over the five-year period. Total reported debt & leases and stockholders’ equity attributable to AT&T both experienced significant changes, contributing to the observed trends in invested capital.

Invested Capital Trend

Invested capital decreased substantially from US$439,195 million in 2021 to US$309,447 million in 2022, representing a decline of approximately 29.7%. A moderate increase followed, with invested capital reaching US$326,144 million in 2023. This was followed by a slight decrease to US$314,065 million in 2024. The most recent year, 2025, shows a further increase to US$337,331 million.

Debt & Leases

Total reported debt & leases decreased significantly from US$202,321 million in 2021 to US$158,096 million in 2022, a reduction of roughly 21.8%. The level remained relatively stable through 2023 at US$158,423 million, before decreasing again to US$144,456 million in 2024. In 2025, debt & leases increased to US$158,624 million, approaching the 2022 level.

Stockholders’ Equity

Stockholders’ equity attributable to AT&T experienced a substantial decrease from US$166,332 million in 2021 to US$97,500 million in 2022, a decline of approximately 41.2%. Subsequent years showed a recovery, with equity increasing to US$103,297 million in 2023, US$104,372 million in 2024, and further to US$110,533 million in 2025. While recovering, equity levels remained below those observed in 2021.

The fluctuations in invested capital appear to be driven primarily by the significant changes in both debt & leases and stockholders’ equity. The substantial decrease in both components in 2022 resulted in the largest drop in invested capital during the period. The subsequent recovery in equity, coupled with relatively stable debt levels in 2023-2025, contributed to the stabilization and modest increase in invested capital observed in those years.

The economic spread ratio exhibited significant fluctuations over the five-year period. Initially positive, it transitioned to negative values before recovering in the final year. This movement correlates with substantial shifts in economic profit, while invested capital also demonstrated considerable change.

Economic Spread Ratio

In 2021, the economic spread ratio stood at 0.43%, indicating a modest positive spread between the return on invested capital and the cost of capital. A dramatic decline occurred in 2022, with the ratio falling to -7.13%. This signifies that the company’s returns were substantially lower than its cost of capital. The ratio remained negative in 2023 at -0.32%, though the magnitude of the loss lessened. Further deterioration was observed in 2024, reaching -2.51%. Finally, the ratio turned positive again in 2025, reaching 1.17%, suggesting a return to generating returns exceeding the cost of capital.

The economic spread ratio’s volatility suggests inconsistent performance in generating value for investors. The substantial negative spread in 2022 and 2024 warrants further investigation into the underlying factors contributing to these periods of underperformance. The recovery in 2025 is a positive sign, but continued monitoring is necessary to confirm the sustainability of this trend.

Relationship to Economic Profit

The economic spread ratio closely mirrors the trend in economic profit. The positive ratio in 2021 corresponds with the positive economic profit of US$1,894 million. The significant negative economic profit of US$-22,078 million in 2022 aligns with the sharply negative economic spread ratio. Similarly, the return to positive economic profit in 2025 (US$3,959 million) coincides with the positive economic spread ratio of 1.17%.

The invested capital figures also show considerable movement. It decreased significantly from 2021 to 2022, then increased in subsequent years, though not returning to the initial level. This fluctuation in invested capital, combined with the changes in economic profit, directly influenced the observed economic spread ratio.

The economic profit exhibited significant volatility over the five-year period. Initially positive, it transitioned to substantial negative values before recovering to positive territory. This fluctuation is mirrored in the economic profit margin, which demonstrates a corresponding pattern of decline and subsequent improvement.

Economic Profit

Economic profit began at US$1,894 million in 2021. A dramatic decrease occurred in 2022, resulting in an economic loss of US$22,078 million. This negative trend continued, albeit less severely, in 2023 with a loss of US$1,056 million. The loss persisted in 2024, reaching US$7,886 million, before a substantial recovery in 2025, yielding a profit of US$3,959 million.

Operating Revenues

Operating revenues experienced a considerable decline from US$168,864 million in 2021 to US$120,741 million in 2022. Revenue demonstrated modest growth in subsequent years, increasing to US$122,428 million in 2023 and remaining relatively stable at US$122,336 million in 2024. A further increase was observed in 2025, with revenues reaching US$125,648 million.

Economic Profit Margin

The economic profit margin began at 1.12% in 2021. It sharply decreased to -18.29% in 2022, reflecting the significant economic loss. The margin remained negative in 2023 at -0.86% and further declined to -6.45% in 2024. A substantial positive shift occurred in 2025, with the margin rising to 3.15%, indicating improved profitability relative to revenues.

The substantial decline in economic profit and the corresponding margin in 2022 coincided with a significant reduction in operating revenues. While revenues showed some recovery in the following years, the economic profit margin did not immediately follow suit, suggesting that factors beyond revenue generation influenced profitability. The positive economic profit and margin in 2025 indicate a potential turnaround, though sustained performance will be necessary to confirm this trend.