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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Arista Networks Inc. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Cash Flow Statement
- Analysis of Liquidity Ratios
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Operating Profit Margin since 2014
- Price to Earnings (P/E) since 2014
- Price to Sales (P/S) since 2014
- Analysis of Revenues
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Economic Profit
Arista Networks Inc., economic profit calculation
US$ in thousands
| 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
= – × =
The financial trajectory indicates a period of significant value creation and accelerated growth in operational efficiency. While there was a temporary contraction in economic profit during the 2022 fiscal year, the subsequent years demonstrate an exponential increase in the ability to generate returns above the cost of capital.
- Net Operating Profit After Taxes (NOPAT) Trend
- A consistent and accelerating upward trend is observed in NOPAT, which grew from 1,017,627 thousand dollars in 2021 to 5,477,356 thousand dollars by 2025. The growth rate intensified significantly after 2022, indicating a substantial increase in core operational profitability.
- Invested Capital and Cost of Capital
- Invested capital expanded steadily from 1,889,936 thousand dollars in 2021 to 7,160,800 thousand dollars in 2025. Throughout this period, the cost of capital remained virtually stagnant at approximately 22.92%, suggesting a stable risk profile and a constant hurdle rate for new investments.
- Economic Profit Dynamics
- Economic profit experienced a slight decline in 2022, falling to 492,173 thousand dollars from 584,877 thousand dollars in the previous year. This contraction was driven by the growth in invested capital outpacing the growth in NOPAT during that specific window. However, from 2023 onward, NOPAT growth surged, far exceeding the associated capital charges and resulting in a steep increase in economic profit, peaking at 3,835,927 thousand dollars in 2025.
- Capital Efficiency Insight
- The widening gap between NOPAT and the capital charge indicates an improvement in capital productivity. By 2025, the entity achieved a state where the incremental return on invested capital significantly outperformed the cost of capital, resulting in substantial economic value added.
Net Operating Profit after Taxes (NOPAT)
Arista Networks Inc., NOPAT calculation
US$ in thousands
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 deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
Net income and net operating profit after taxes (NOPAT) both demonstrate a consistent upward trajectory over the five-year period. However, the rate of growth differs between the two metrics. NOPAT exhibits a more substantial increase, particularly in the later years of the observed period.
- Overall Trend
- Both net income and NOPAT increased year-over-year from 2021 to 2025. The growth appears to accelerate from 2022 onwards, with the most significant gains occurring between 2023 and 2025.
- Net Income Analysis
- Net income increased from US$840,854 thousand in 2021 to US$3,511,400 thousand in 2025. The growth rate, while positive each year, shows some moderation between 2021 and 2022 before resuming a higher pace of increase.
- NOPAT Analysis
- NOPAT began at US$1,017,627 thousand in 2021 and rose to US$5,477,356 thousand in 2025. The increase from 2022 to 2023 was notable, and the growth continued strongly into 2024 and 2025. The magnitude of NOPAT consistently exceeds that of net income throughout the period.
- Relationship between Net Income and NOPAT
- The difference between NOPAT and net income suggests a significant impact from financing and accounting adjustments. The widening gap between the two metrics over time indicates that these adjustments are becoming increasingly substantial relative to core operating profitability. This could be due to factors such as changes in depreciation methods, interest expense, or tax rates. Further investigation into these specific items would be necessary to understand the drivers of this divergence.
The substantial growth in NOPAT suggests strong underlying operational performance. The increasing difference between NOPAT and net income warrants further scrutiny to fully understand the company’s profitability and capital structure dynamics.
Cash Operating Taxes
Arista Networks Inc., cash operating taxes calculation
US$ in thousands
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 both demonstrate a consistent upward trend over the five-year period. However, the magnitude of increase differs between the two measures. Cash operating taxes consistently exceed the provision for income taxes, and the gap between them widens over time.
- Provision for Income Taxes
- The provision for income taxes increased from US$90.025 million in 2021 to US$738.300 million in 2025. This represents a substantial increase, with the largest year-over-year change occurring between 2022 and 2023 (US$105.355 million). The rate of increase appears to accelerate in later years, with a US$325.320 million increase between 2023 and 2025.
- Cash Operating Taxes
- Cash operating taxes also exhibited a significant increase, rising from US$188.364 million in 2021 to US$969.744 million in 2025. Similar to the provision for income taxes, the largest single-year increase occurred between 2022 and 2023 (US$206.278 million). The increase between 2024 and 2025 was US$129.282 million, indicating a continued, though slightly moderated, growth rate.
- Relationship between Provision and Cash Taxes
- In 2021, cash operating taxes were approximately twice the provision for income taxes. This ratio increased over the period, with cash operating taxes being more than three times the provision for income taxes in 2025. This divergence suggests a growing difference between reported taxable income and actual cash outflows for taxes. Potential reasons for this difference could include timing differences related to deferred taxes, tax credits, or changes in tax laws impacting the cash tax rate.
The consistent increases in both measures indicate growing profitability and/or a higher effective tax rate. Further investigation into the specific drivers of these increases, particularly the widening gap between the provision for income taxes and cash operating taxes, would be beneficial for a comprehensive understanding of the company’s tax position.
Invested Capital
Arista Networks Inc., invested capital calculation (financing approach)
US$ in thousands
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 deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction-in-process.
7 Subtraction of marketable securities.
The reported invested capital demonstrates a consistent upward trend over the five-year period. Simultaneously, changes are observed in the components contributing to this invested capital, namely total reported debt & leases and stockholders’ equity.
- Invested Capital Trend
- Invested capital increased significantly from US$1,889,936 thousand in 2021 to US$7,160,800 thousand in 2025. This represents a substantial cumulative growth, indicating increasing financial resources committed to the business. The growth rate appears to accelerate between 2022 and 2023, and continues at a strong pace through 2025.
- Debt & Leases
- Total reported debt & leases decreased from US$76,825 thousand in 2021 to US$59,642 thousand in 2024, suggesting a reduction in reliance on debt financing during this period. However, a notable increase to US$90,500 thousand is observed in 2025, potentially indicating a new financing strategy or significant capital expenditure.
- Stockholders’ Equity
- Stockholders’ equity exhibited a consistent and substantial increase throughout the period, rising from US$3,978,600 thousand in 2021 to US$12,370,500 thousand in 2025. This growth suggests strong profitability and/or successful equity fundraising activities. The rate of increase in stockholders’ equity appears to be the primary driver of the overall increase in invested capital.
- Relationship between Components and Invested Capital
- While debt & leases initially decreased, the significant growth in stockholders’ equity consistently outweighed any impact from debt fluctuations, resulting in the overall upward trend in invested capital. The 2025 increase in debt, however, contributes more substantially to the invested capital increase than in prior years, though stockholders’ equity continues to be the dominant component.
The observed patterns suggest a company increasingly funded by equity, with a recent shift towards incorporating more debt into its capital structure. Further investigation into the reasons behind the 2025 debt increase would be beneficial.
Cost of Capital
Arista Networks Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Operating lease liability3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
Economic Spread Ratio
Arista Networks 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 thousands) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Lumentum Holdings Inc. | ||||||
| Super Micro Computer 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 from 2021 to 2025 is characterized by a substantial expansion of the capital base and an accelerating trajectory of economic profit, culminating in a significant increase in capital efficiency.
- Economic Profit Trends
- Economic profit exhibited a slight contraction in 2022, decreasing from 584.88 million to 492.17 million. However, this was followed by a period of rapid acceleration, with profits increasing to 972.55 million in 2023, 2.05 billion in 2024, and reaching 3.84 billion by the end of 2025. This trajectory indicates an exponential increase in value creation following the 2022 dip.
- Invested Capital Growth
- Invested capital grew consistently and significantly throughout the period, rising from 1.89 billion in 2021 to 7.16 billion in 2025. The steady increase in the capital base suggests a continuous commitment to scaling operations and infrastructure to support long-term growth.
- Economic Spread Ratio Analysis
- The economic spread ratio experienced a notable decline in 2022, falling to 15.90% from 30.95% in 2021, which indicates that capital investment grew faster than the corresponding economic profit during that window. Following this trough, the ratio demonstrated a strong recovery and subsequent surge, rising to 20.37% in 2023, 34.98% in 2024, and peaking at 53.57% in 2025. This sharp upward trend reflects an increasing ability to generate superior returns on every unit of invested capital, suggesting high operational leverage and efficiency gains in the later years of the period.
Economic Profit Margin
Arista Networks 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 thousands) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies Inc. | ||||||
| Lumentum Holdings Inc. | ||||||
| Super Micro Computer 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 ÷ Adjusted revenue
= 100 × ÷ =
3 Click competitor name to see calculations.
The financial trajectory between 2021 and 2025 is characterized by substantial expansion in both top-line revenue and economic value creation. After a period of temporary margin compression in 2022, there is a pronounced acceleration in the ability to generate economic profit relative to revenue, indicating strong operating leverage and increasing efficiency in value generation.
- Adjusted Revenue Growth
- A consistent and significant upward trend is observed, with revenue increasing from 3,226,522 thousand USD in 2021 to 11,586,700 thousand USD by 2025. This steady growth reflects a continuous expansion of the business scale throughout the period analyzed.
- Economic Profit Performance
- Economic profit experienced an initial decline in 2022, falling to 492,173 thousand USD from 584,877 thousand USD in 2021. However, this was followed by a period of rapid acceleration, with values rising to 972,550 thousand USD in 2023, 2,053,283 thousand USD in 2024, and reaching 3,835,927 thousand USD by 2025. This suggests that the growth in absolute economic value significantly outpaced the growth in revenue in the later years.
- Economic Profit Margin Evolution
- The economic profit margin exhibited a V-shaped recovery and subsequent expansion. The margin decreased from 18.13% in 2021 to 10.95% in 2022, marking the period's lowest point of efficiency. From 2023 onward, the margin grew steadily to 15.38%, then to 24.77% in 2024, and finally to 33.11% in 2025. This trend indicates that for every dollar of adjusted revenue, a progressively larger portion is contributing to economic profit, signaling enhanced profitability and superior capital utilization.