Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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Return on Invested Capital (ROIC)
Arista Networks Inc., ROIC 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies 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 NOPAT. See details »
2 Invested capital. See details »
3 2025 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The analysis reveals a dynamic pattern in the relationship between net operating profit after taxes and invested capital over the five-year period. Net operating profit after taxes demonstrates consistent growth, while invested capital also increases, though at varying rates. This interplay significantly influences the return on invested capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibits a steady upward trajectory, increasing from US$1,017,627 thousand in 2021 to US$5,477,356 thousand in 2025. The growth rate appears to accelerate over time, with particularly substantial increases observed between 2022 and 2023, and again between 2023 and 2024. This suggests improving operational efficiency or increased market demand.
- Invested Capital
- Invested capital also shows an increasing trend, rising from US$1,889,936 thousand in 2021 to US$7,160,800 thousand in 2025. However, the rate of increase is not constant. A significant jump is noted between 2021 and 2022, followed by a more moderate increase in subsequent years. This indicates potential strategic investments or acquisitions contributing to capital growth.
- Return on Invested Capital (ROIC)
- ROIC fluctuates over the period. It begins at 53.84% in 2021, then declines to 38.80% in 2022. A recovery is observed in 2023, reaching 43.29%, followed by a substantial increase to 57.91% in 2024. The most significant rise occurs in 2025, with ROIC reaching 76.49%. This suggests that while invested capital is growing, the company is becoming increasingly efficient at generating profits from that capital, particularly in the later years of the period. The initial decline in 2022, despite NOPAT growth, suggests a disproportionate increase in invested capital during that year. The subsequent increases in ROIC demonstrate an improved ability to leverage invested capital into profits.
In summary, the company demonstrates a strong ability to grow both profits and invested capital. The increasing ROIC, particularly in the later years, indicates improving capital allocation efficiency and a positive trend in profitability relative to investment.
Decomposition of ROIC
Arista Networks Inc., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2025 | = | × | × | ||||
| Dec 31, 2024 | = | × | × | ||||
| Dec 31, 2023 | = | × | × | ||||
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × |
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 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The period demonstrates significant fluctuations and overall improvement in return on invested capital (ROIC). This improvement appears to be driven by a combination of factors relating to profitability, efficiency, and tax management. A decomposition of ROIC, based on the provided figures, reveals distinct trends in operating profit margin, capital turnover, and the impact of taxes.
- Operating Profit Margin (OPM)
- The operating profit margin exhibits a notable upward trend throughout the period. Starting at 37.38% in 2021, it experiences a slight decrease in 2022 to 37.17%, before increasing substantially to 43.35% in 2023. This positive momentum continues, reaching 51.15% in 2024 and culminating in a high of 55.64% in 2025. This suggests increasing efficiency in core operations and/or improved pricing power.
- Turnover of Capital (TO)
- The turnover of capital shows more volatility. It declines from 1.71 in 2021 to 1.45 in 2022, and further to 1.32 in 2023, indicating decreasing efficiency in asset utilization. However, a recovery is observed in 2024 with a value of 1.41, followed by a further increase to 1.62 in 2025. This suggests a stabilization and eventual improvement in how effectively capital is deployed to generate revenue.
- Effective Cash Tax Rate Impact (1 – CTR)
- The factor representing the benefit from taxes (1 – Effective Cash Tax Rate) generally increases over the period. Starting at 84.38% in 2021, it decreases to 71.93% in 2022, then recovers to 75.38% in 2023, and continues to rise to 80.17% in 2024 and 84.96% in 2025. This indicates a growing positive impact from tax efficiency on overall returns.
- Return on Invested Capital (ROIC)
- The ROIC mirrors the combined effects of the aforementioned factors. It declines from 53.84% in 2021 to 38.80% in 2022, coinciding with the decreases in both operating profit margin and capital turnover. A partial recovery occurs in 2023 (43.29%), followed by a substantial increase to 57.91% in 2024 and a significant jump to 76.49% in 2025. The strong performance in 2025 is likely attributable to the combined positive influence of a high operating profit margin, improved capital turnover, and a favorable tax impact.
In summary, while initial years show some decline, the period concludes with a strong upward trajectory in ROIC, driven primarily by improvements in operating profitability and, to a lesser extent, capital efficiency and tax management. The increasing operating profit margin appears to be the most significant contributor to the overall improvement in returns.
Operating Profit Margin (OPM)
Arista Networks Inc., OPM 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) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies 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 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenue
= 100 × ÷ =
4 Click competitor name to see calculations.
The operating profit margin exhibits a consistent upward trend over the observed five-year period. Simultaneously, net operating profit before taxes and adjusted revenue demonstrate substantial growth. This suggests increasing operational efficiency and profitability as the company scales.
- Operating Profit Margin (OPM)
- The operating profit margin began at 37.38% in 2021 and increased to 37.17% in 2022, representing a slight decrease. However, a significant positive trend emerges from 2022 onwards. The OPM rose to 43.35% in 2023, then to 51.15% in 2024, and further to 55.64% in 2025. This indicates a strengthening ability to convert revenue into operating profit.
The growth in net operating profit before taxes parallels the increase in the operating profit margin. NOPBT increased from US$1,205,990 thousand in 2021 to US$6,447,100 thousand in 2025. This substantial increase, coupled with the rising OPM, suggests that the company is not only generating more revenue but also managing its costs effectively.
Adjusted revenue also shows a strong upward trajectory, growing from US$3,226,522 thousand in 2021 to US$11,586,700 thousand in 2025. The consistent improvement in OPM alongside revenue growth indicates potential economies of scale and effective pricing strategies.
The combined trends suggest a positive feedback loop where increased revenue allows for greater operational leverage, leading to higher profitability and an expanding operating profit margin. The company appears to be successfully translating revenue growth into improved operational performance.
Turnover of Capital (TO)
Arista Networks Inc., TO calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenue | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies 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 Invested capital. See details »
2 2025 Calculation
TO = Adjusted revenue ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The analysis reveals a fluctuating pattern in the turnover of capital over the five-year period. While adjusted revenue consistently increased, the efficiency with which invested capital generated that revenue varied.
- Turnover of Capital (TO)
- The turnover of capital began at 1.71 in 2021, indicating that for every dollar of invested capital, the company generated $1.71 in revenue. A decline was then observed in 2022, falling to 1.45, suggesting a reduced efficiency in capital utilization. This downward trend continued into 2023, reaching a low of 1.32.
- A slight recovery occurred in 2024, with the turnover of capital increasing to 1.41. However, the most significant improvement was seen in 2025, where the ratio rose to 1.62. This represents a return towards the efficiency levels observed in the initial year of the period.
- The fluctuations in the turnover of capital do not directly correlate with the consistent growth in adjusted revenue. The decrease in TO from 2021 to 2023, despite revenue increases, suggests that the company was requiring more capital to generate each additional dollar of revenue. The increase in TO in 2025, alongside continued revenue growth, indicates improved capital efficiency.
The invested capital base expanded substantially throughout the period, from approximately $1.89 billion in 2021 to $7.16 billion in 2025. The initial decline in turnover, despite revenue growth, could be attributed to significant investments made in expanding operations or acquiring assets that did not immediately translate into proportional revenue gains. The subsequent improvement in 2025 suggests these investments began to yield more substantial returns.
Overall, the trend indicates a period of initial capital inefficiency followed by a recovery, suggesting a dynamic relationship between capital investment, revenue generation, and operational efficiency.
Effective Cash Tax Rate (CTR)
Arista Networks Inc., CTR calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Apple Inc. | ||||||
| Cisco Systems Inc. | ||||||
| Dell Technologies 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 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
The effective cash tax rate exhibited considerable fluctuation over the five-year period. While cash operating taxes increased consistently year-over-year, the rate at which these taxes were levied against net operating profit before taxes varied significantly.
- Effective Cash Tax Rate (CTR) - Overall Trend
- The effective cash tax rate began at 15.62% in 2021, increased substantially to 28.07% in 2022, then decreased in subsequent years, reaching 15.04% in 2025. This indicates a period of increasing tax burden followed by a reduction, suggesting potential changes in the company’s taxable income composition or utilization of tax benefits.
- CTR - 2021 to 2022
- A marked increase in the effective cash tax rate occurred between 2021 and 2022, rising from 15.62% to 28.07%. This coincided with a significant increase in both net operating profit before taxes and cash operating taxes, but the tax expense grew at a faster rate than pre-tax income. This could be attributable to a shift in the geographic distribution of profits towards higher-tax jurisdictions, or a reduction in available tax credits.
- CTR - 2022 to 2025
- Following the peak in 2022, the effective cash tax rate demonstrated a consistent downward trend, decreasing to 24.62% in 2023, 19.83% in 2024, and finally 15.04% in 2025. This decline occurred alongside continued growth in both net operating profit before taxes and cash operating taxes. The decreasing rate suggests the company may have been able to leverage tax planning strategies, benefit from changes in tax legislation, or experience a shift in its profit mix towards lower-taxed earnings.
The consistent growth in cash operating taxes throughout the period suggests overall profitability is increasing. However, the fluctuating effective cash tax rate highlights the importance of considering the impact of tax planning and external factors on the company’s overall financial performance.