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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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 between 2021 and 2025 indicates a substantial increase in economic value creation. Although a brief decline in economic profit occurred in 2022, the subsequent period is characterized by exponential growth, suggesting that the entity has successfully scaled its operations while maintaining a high return on invested capital.
- Net Operating Profit After Taxes (NOPAT)
- A consistent and significant upward trend is observed in NOPAT, which grew from 1,017,627 thousand USD in 2021 to 5,477,356 thousand USD by 2025. This represents a growth of approximately 438% over the period, signaling strong operational performance and an increasing ability to generate profits from core business activities.
- Invested Capital and Cost of Capital
- Invested capital expanded steadily from 1,889,936 thousand USD in 2021 to 7,160,800 thousand USD in 2025. During this period of expansion, the cost of capital remained remarkably stable, fluctuating minimally between 22.65% and 22.68%. This stability suggests a consistent risk profile and a steady cost of financing despite the significant increase in the capital base.
- Economic Profit Analysis
- Economic profit exhibited a non-linear growth pattern. A decrease was noted in 2022, where economic profit fell to 499,821 thousand USD from 589,543 thousand USD in 2021; this coincided with a period where the increase in invested capital growth outpaced the growth in NOPAT, thereby increasing the total capital charge. However, from 2023 onward, economic profit accelerated rapidly, reaching 3,853,633 thousand USD by 2025. This acceleration indicates that the returns generated by new investments are significantly exceeding the 22.68% cost of capital, resulting in substantial shareholder value creation.
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 trajectory from 2021 through 2025 reflects a period of significant scaling and accelerating value creation. While a temporary contraction in profitability and efficiency occurred in 2022, the subsequent years demonstrate an aggressive upward trend in both absolute economic gains and capital efficiency.
- Economic Profit
- Economic profit experienced a slight decline in 2022, dropping from 589,543 thousand USD to 499,821 thousand USD. However, this was followed by a period of exponential growth, with profit increasing to 984,353 thousand USD in 2023, 2,067,797 thousand USD in 2024, and reaching 3,853,633 thousand USD by 2025. This represents a substantial increase in the value generated over and above the required return on capital.
- Invested Capital
- A consistent and steady expansion of the capital base is observed. Invested capital grew from 1,889,936 thousand USD in 2021 to 7,160,800 thousand USD by 2025. This sustained increase indicates a strategic deployment of resources to support operational growth and capacity expansion over the five-year period.
- Economic Spread Ratio
- The economic spread ratio shows significant volatility followed by a strong recovery. After peaking at 31.19% in 2021, the ratio fell sharply to 16.15% in 2022, suggesting that capital investments initially grew faster than the resulting economic profits. From 2023 onward, a powerful recovery is evident, with the ratio climbing to 20.62%, then 35.23% in 2024, and finally peaking at 53.82% in 2025. This progression indicates that the returns on invested capital are increasingly outpacing the cost of capital, demonstrating highly efficient scaling and enhanced operational productivity.
The convergence of rapidly increasing economic profit and a surging economic spread ratio, despite a quadrupling of invested capital, indicates a high degree of operating leverage and a successful strategy for value creation.
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 analysis of economic value added reveals a period of significant expansion in value creation and operational efficiency from 2021 through 2025. After a temporary contraction in 2022, the company entered a phase of accelerated growth where economic profit increases outpaced revenue growth, leading to a substantial improvement in the economic profit margin.
- Economic Profit Trajectory
- Economic profit experienced a decline in 2022, falling to 499.8 million from 589.5 million in 2021. This trend reversed sharply in 2023, with profit increasing to 984.4 million, and continuing an aggressive climb to 2.07 billion in 2024 and 3.85 billion in 2025. The growth from the 2022 trough to 2025 represents a nearly eight-fold increase in absolute economic profit.
- Adjusted Revenue Expansion
- Revenue demonstrates a consistent upward trend, growing from 3.23 billion in 2021 to 11.59 billion in 2025. This sustained increase in the top line provided the necessary scale to support the subsequent surge in economic profit.
- Economic Profit Margin Analysis
- The economic profit margin shifted from 18.27% in 2021 to 11.12% in 2022, suggesting a temporary misalignment between revenue growth and the cost of capital or operating expenses. However, the margin expanded significantly thereafter, reaching 15.56% in 2023, 24.95% in 2024, and peaking at 33.26% in 2025. This indicates a marked improvement in the efficiency of value generation relative to revenue.