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.
Economic Profit
Arista Networks Inc., economic profit calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 3,398,738 – 15.84% × 5,869,309 = 2,469,085
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes has shown a consistent and significant increase over the observed periods. Starting from approximately 676 million US dollars in the initial year, it rose to over 3.3 billion US dollars by the final year, indicating strong and sustained profitability growth.
- Cost of Capital
- The cost of capital remained relatively stable across all years, fluctuating marginally around 15.8%. This stability suggests consistent financing costs and risk profile over the period.
- Invested Capital
- The invested capital exhibits a substantial upward trend, increasing from about 1.87 billion US dollars to nearly 5.87 billion US dollars. This reflects significant investments in the company’s assets or operations, more than tripling over the timeframe.
- Economic Profit
- Economic profit has grown markedly from approximately 381 million US dollars to nearly 2.47 billion US dollars. Despite a slight dip in the third period, the overall trajectory reflects efficient value creation exceeding the cost of capital, with accelerated gains in the later years.
- Overall Insights
- The company demonstrates strong financial performance characterized by growing profitability and increasing capital investment. The steady cost of capital implies stability in funding conditions. The substantial rise in economic profit corroborates the effectiveness of capital utilization and management's success in generating shareholder value above the required returns.
Net Operating Profit after Taxes (NOPAT)
Arista Networks Inc., NOPAT calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
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 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 59,642 × 0.00% = 0
5 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 0 × 21.00% = 0
6 Addition of after taxes interest expense to net income.
7 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 311,045 × 21.00% = 65,319
8 Elimination of after taxes investment income.
- Net Income Trend
- The net income of the company has demonstrated a consistent upward trajectory over the five-year period. Starting at $634.6 million in 2020, it increased by approximately 32.5% to $840.9 million in 2021. The growth accelerated further in 2022 with net income reaching $1.35 billion, representing a notable increase of around 60.7% year over year. This positive momentum sustained into 2023 and 2024, with net income rising to $2.09 billion and $2.85 billion respectively, indicating continued strong profitability expansion.
- Net Operating Profit After Taxes (NOPAT) Trend
- NOPAT exhibited a similarly positive trend, reflecting improving operational efficiency and profitability. The initial value of approximately $676.2 million in 2020 increased to $1.02 billion in 2021, a growth rate of about 50.6%. Although the growth rate slightly moderated in 2022 with NOPAT at $1.20 billion, the figure surged significantly to $2.07 billion in 2023 and further to $3.40 billion in 2024. These figures indicate a robust enhancement in the company's operational profit generation after tax consideration.
- Comparative Analysis Between Net Income and NOPAT
- Both net income and NOPAT demonstrate strong and consistent growth patterns, with NOPAT generally exceeding net income in absolute terms throughout the period, which may suggest an increasingly efficient core business operation after taxes. The gap between NOPAT and net income widened notably towards the end of the period, highlighting enhanced operational earnings relative to net income, potentially due to improvements in non-operating factors or tax effects over time.
- Overall Financial Performance Insights
- The data reflects significant and accelerating growth in profitability metrics, indicating a successful expansion and improved operational performance. The company’s ability to nearly triple its net income within four years, alongside a more than fivefold increase in NOPAT, points to strong financial health and effective management strategies. This upward trend suggests solid prospects for continued business success if the current growth drivers are sustained.
Cash Operating Taxes
Arista Networks Inc., cash operating taxes calculation
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
- Provision for Income Taxes
- Over the five-year period, the provision for income taxes demonstrates a substantial upward trend. Starting at $104,306 thousand in 2020, it slightly decreased to $90,025 thousand in 2021, marking a minor decline in the second year. However, from 2021 onward, there is a notable acceleration in growth, with the provision increasing significantly to $229,350 thousand in 2022, then further rising to $334,705 thousand in 2023, and reaching $412,980 thousand by 2024. This pattern suggests a rising tax expense potentially linked to increased profitability or changes in tax legislation or accounting practices.
- Cash Operating Taxes
- Cash operating taxes exhibit a strong and consistent upward trajectory throughout the observed period. Starting at $106,136 thousand in 2020, cash operating taxes almost doubled by 2021, reaching $188,364 thousand. This growth momentum continued sharply in subsequent years, with values increasing to $468,759 thousand in 2022, $675,037 thousand in 2023, and ultimately $840,462 thousand in 2024. The sharp escalation in cash operating taxes compared to the provision for income taxes may reflect timing differences in tax payments or increased effective tax rates, or a combination of operational scale expansion and higher taxable income.
- Comparative Insights
- Both provision for income taxes and cash operating taxes have risen notably over the five years, with cash operating taxes growing at an even faster rate than the provision. The disparity between these two tax-related figures suggests potential differences in deferred tax accounting or changes in the company’s tax payment schedule. The steady increase across both metrics implies growing taxable income levels or evolving tax obligations. This consistent increase in tax-related expenses may impact the company’s net earnings and cash flows, indicating the necessity for careful tax planning going forward.
Invested Capital
Arista Networks Inc., invested capital calculation (financing approach)
US$ in thousands
Based on: 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), 10-K (reporting date: 2020-12-31).
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.
- Total Reported Debt & Leases
- The total reported debt and leases demonstrate a declining trend over the five-year period. Starting at $90,170 thousand in 2020, the figure decreases each year, reaching $59,642 thousand by 2024. This consistent reduction indicates a deliberate effort to lower debt levels and manage lease obligations effectively, improving the company’s leverage position.
- Stockholders’ Equity
- Stockholders’ equity shows a strong upward trend, more than tripling from $3,320,291 thousand in 2020 to $9,994,807 thousand in 2024. This significant increase suggests robust retained earnings, possibly combined with equity financing activities, contributing to a solid expansion of the company’s net asset base over the period.
- Invested Capital
- Invested capital rises steadily from $1,866,365 thousand in 2020 to $5,869,309 thousand in 2024. The growth accelerates particularly after 2021, indicating increased investment in operating assets or growth initiatives. The expansion of invested capital alongside rising equity suggests an aggressive strategy focused on scaling operations or asset acquisition.
- Overall Financial Trends
- The combined trends reflect a company that is strengthening its financial foundation by reducing debt, significantly increasing equity, and expanding invested capital. The reduction in total debt coupled with substantial equity growth suggests an improved capital structure and financial stability. The growth in invested capital points to reinvestment and expansion efforts, which may support future growth and operational capacity.
Cost of Capital
Arista Networks Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 131,055,860) | 131,055,860) | ÷ | 131,115,502) | = | 1.00 | 1.00 | × | 15.85% | = | 15.84% | ||
| Operating lease liability3 | 59,642) | 59,642) | ÷ | 131,115,502) | = | 0.00 | 0.00 | × | 0.00% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 131,115,502) | 1.00 | 15.84% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 83,010,477) | 83,010,477) | ÷ | 83,075,996) | = | 1.00 | 1.00 | × | 15.85% | = | 15.83% | ||
| Operating lease liability3 | 65,519) | 65,519) | ÷ | 83,075,996) | = | 0.00 | 0.00 | × | 5.40% × (1 – 21.00%) | = | 0.00% | ||
| Total: | 83,075,996) | 1.00 | 15.84% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 43,348,819) | 43,348,819) | ÷ | 43,412,661) | = | 1.00 | 1.00 | × | 15.85% | = | 15.82% | ||
| Operating lease liability3 | 63,842) | 63,842) | ÷ | 43,412,661) | = | 0.00 | 0.00 | × | 5.10% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 43,412,661) | 1.00 | 15.83% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 39,997,344) | 39,997,344) | ÷ | 40,074,169) | = | 1.00 | 1.00 | × | 15.85% | = | 15.82% | ||
| Operating lease liability3 | 76,825) | 76,825) | ÷ | 40,074,169) | = | 0.00 | 0.00 | × | 5.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 40,074,169) | 1.00 | 15.82% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 23,742,172) | 23,742,172) | ÷ | 23,832,342) | = | 1.00 | 1.00 | × | 15.85% | = | 15.79% | ||
| Operating lease liability3 | 90,170) | 90,170) | ÷ | 23,832,342) | = | 0.00 | 0.00 | × | 5.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 23,832,342) | 1.00 | 15.80% | ||||||||||
Based on: 10-K (reporting date: 2020-12-31).
Economic Spread Ratio
Arista Networks Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 2,469,085) | 1,310,694) | 711,267) | 718,570) | 381,291) | |
| Invested capital2 | 5,869,309) | 4,774,714) | 3,095,800) | 1,889,936) | 1,866,365) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 42.07% | 27.45% | 22.98% | 38.02% | 20.43% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Apple Inc. | 167.18% | 140.35% | 201.84% | 198.18% | 146.12% | |
| Cisco Systems Inc. | 1.26% | 8.48% | 8.37% | 7.61% | 11.84% | |
| Dell Technologies Inc. | -5.97% | 0.86% | 4.98% | 0.39% | -0.80% | |
| Super Micro Computer Inc. | -2.82% | 7.45% | -1.86% | -9.55% | -12.41% | |
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 2,469,085 ÷ 5,869,309 = 42.07%
4 Click competitor name to see calculations.
- Economic Profit
- The economic profit demonstrated a significant upward trend over the analyzed periods. Starting at approximately 381 million US dollars in 2020, it nearly doubled by 2021 to about 719 million US dollars. It remained relatively stable in 2022 before sharply increasing to roughly 1.31 billion US dollars in 2023 and then almost doubling again to nearly 2.47 billion US dollars by 2024. This growth indicates substantial improvements in the company's ability to generate profits beyond its cost of capital.
- Invested Capital
- The invested capital showed a consistent increase throughout the years. Beginning at approximately 1.87 billion US dollars in 2020, it experienced modest growth in 2021, followed by a more pronounced rise in 2022. The largest increments occurred between 2022 and 2023, and again from 2023 to 2024, reaching nearly 5.87 billion US dollars by the end of 2024. This suggests active expansion or reinvestment in the company's assets or operations.
- Economic Spread Ratio
- The economic spread ratio, which reflects the differential between returns and cost of capital, exhibited volatility but maintained an overall upward trajectory. Starting at 20.43% in 2020, it rose significantly to 38.02% in 2021, then decreased to 22.98% in 2022. Subsequently, it increased again to 27.45% in 2023, culminating at 42.07% in 2024. The fluctuations indicate varying efficiency in utilizing capital, with the final period showing the highest profitability relative to cost.
- Overall Analysis
- The financial metrics collectively reveal a pattern of robust growth and enhanced value creation. Increasing economic profit coupled with rising invested capital and improving economic spread ratio signifies an effective allocation of resources and improving operational performance over the period. Despite some volatility in the economic spread ratio, the company appears to strengthen its economic profitability and capital efficiency significantly by the end of the latest period.
Economic Profit Margin
Arista Networks Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Economic profit1 | 2,469,085) | 1,310,694) | 711,267) | 718,570) | 381,291) | |
| Revenue | 7,003,146) | 5,860,168) | 4,381,310) | 2,948,037) | 2,317,512) | |
| Add: Increase (decrease) in deferred revenue | 1,285,211) | 464,958) | 111,934) | 278,485) | 75,539) | |
| Adjusted revenue | 8,288,357) | 6,325,126) | 4,493,244) | 3,226,522) | 2,393,051) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 29.79% | 20.72% | 15.83% | 22.27% | 15.93% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Apple Inc. | 21.37% | 22.08% | 23.85% | 23.03% | 19.15% | |
| Cisco Systems Inc. | 2.03% | 8.44% | 9.38% | 8.49% | 12.35% | |
| Dell Technologies Inc. | -3.66% | 0.47% | 2.61% | 0.34% | -0.68% | |
| Super Micro Computer Inc. | -1.43% | 2.53% | -0.79% | -3.44% | -4.60% | |
Based on: 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), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 2,469,085 ÷ 8,288,357 = 29.79%
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit has shown significant growth over the observed period. Starting at 381,291 thousand US dollars in 2020, it nearly doubled by 2021 reaching 718,570 thousand US dollars. Although there was a slight decline in 2022 to 711,267 thousand US dollars, the economic profit rebounded strongly in 2023 to 1,310,694 thousand US dollars and continued to rise substantially to 2,469,085 thousand US dollars by 2024. This overall upward trajectory indicates an improving financial performance and increased value creation over time.
- Adjusted Revenue
- Adjusted revenue experienced consistent and robust growth throughout the periods analyzed. It grew from 2,393,051 thousand US dollars in 2020 to 3,226,522 thousand US dollars in 2021, demonstrating a healthy growth rate. This growth accelerated sharply in 2022 to 4,493,244 thousand US dollars, followed by a further increase to 6,325,126 thousand US dollars in 2023, and then reaching 8,288,357 thousand US dollars in 2024. The data suggests strong and steady revenue expansion, highlighting successful business scaling.
- Economic Profit Margin
- The economic profit margin fluctuated over the years with an overall upward trend. Starting at 15.93% in 2020, it increased appreciably to 22.27% in 2021, followed by a decline to 15.83% in 2022. However, it recovered to 20.72% in 2023 and showed a marked improvement in 2024, reaching 29.79%. This indicates improved profitability relative to revenue, despite some volatility, with the margin in the latest year reflecting an enhanced ability to convert revenue into economic profit.