Dell Technologies Inc. (NYSE:DELL)

The period under review demonstrates significant fluctuations in economic profit. Initially, the company experienced negative economic profit, which transitioned to positive territory before reverting to negative values. These shifts correlate with changes in net operating profit after taxes, cost of capital, and invested capital.

Net Operating Profit After Taxes (NOPAT)

NOPAT increased substantially from 2020 to 2021, reaching 7,942 US$ millions. This growth was followed by a slight decrease in 2022, and a more pronounced decline in both 2023 and 2024, ultimately reaching 2,835 US$ millions. A further reduction is projected for 2025, with NOPAT expected to be 2,070 US$ millions. This indicates a clear downward trend in operational profitability.

Cost of Capital

The cost of capital exhibited an increasing trend from 2020 through 2024. Starting at 7.73% in 2020, it rose to 12.88% in 2024, before a slight increase to 13.10% in 2025. This suggests a growing cost of funding for the company’s operations and investments.

Invested Capital

Invested capital decreased significantly from 81,348 US$ millions in 2020 to 53,988 US$ millions in 2022. It experienced a modest increase in 2023, but then decreased again in 2024 to 53,565 US$ millions, with a further projected decrease to 49,926 US$ millions in 2025. This indicates a reduction in the company’s capital base over the period.

Economic Profit

Economic profit was negative in 2020 and 2021, at -1,235 US$ millions and -662 US$ millions respectively. A substantial positive economic profit of 2,026 US$ millions was recorded in 2022. However, economic profit turned negative again in 2023 (-115 US$ millions) and experienced significant declines in 2024 and 2025, reaching -4,065 US$ millions and -4,473 US$ millions respectively. The pattern suggests that while the company was able to generate economic profit in 2022, it has struggled to do so in subsequent periods, and the situation is worsening.

The combined effect of decreasing NOPAT, increasing cost of capital, and declining invested capital has resulted in a deteriorating economic profit position. The shift from positive to negative economic profit, and the accelerating decline in recent years, warrants further investigation into the underlying drivers of these trends.

Net income attributable to Dell Technologies Inc.

The net income exhibited a fluctuating trend over the periods analyzed. It started at 4,616 million USD in early 2020, then declined to 3,250 million USD by early 2021. This was followed by a significant increase to 5,563 million USD in early 2022. After this peak, net income dropped sharply to 2,442 million USD in early 2023, before gradually rising again to 3,211 million USD in early 2024 and reaching 4,592 million USD in early 2025. Overall, net income showed volatility with a recovery trend towards the end of the period.

Net operating profit after taxes (NOPAT)

NOPAT demonstrated considerable variability during the examined timeframe. Initially, it was at 5,052 million USD in early 2020, then increased substantially to 7,942 million USD in early 2021. It remained relatively stable in early 2022 at 7,874 million USD but experienced a notable decline to 5,638 million USD in early 2023. The downward trajectory continued sharply, with NOPAT decreasing to 2,835 million USD in early 2024 and further dropping to 2,070 million USD by early 2025. This pattern indicates a peak in operating profitability around 2021-2022, followed by a sustained downward trend.

Key Observations

Both net income and NOPAT values experienced significant fluctuations across the reviewed years. While net income showed a recovery phase in the last two years, NOPAT declined more consistently after reaching high levels in 2021 and 2022. The divergence in the trends between net income and NOPAT in the later years may suggest changes in operational efficiency, tax impacts, or other non-operating factors affecting net income. The sustained decrease in NOPAT highlights a potential weakening in core operational profitability that merits further investigation.

Income tax expense (benefit)

The income tax expense shows a significant fluctuation over the periods analyzed. In the fiscal year ending January 31, 2020, there was a notable tax benefit of -$5,533 million, indicating a tax credit or refund situation. Subsequently, the tax expense turned positive and increased from $165 million in 2021 to a peak of $981 million in 2022. After this peak, a gradual decline was observed, with expenses decreasing to $803 million in 2023, $692 million in 2024, and further down to $472 million in 2025. This trend suggests a recovery from the initial tax benefit, followed by a reduction in tax expenses in recent years, possibly reflecting changes in taxable income or tax planning strategies.

Cash operating taxes

Cash operating taxes exhibited variability throughout the periods. Starting at $1,348 million in 2020, the amount paid decreased to $1,071 million in 2021. This was followed by a substantial increase to $1,523 million in 2022 and further growth to $1,762 million in 2023. However, a sharp decrease is evident in the last two periods, with cash operating taxes falling to $1,042 million in 2024 and $947 million in 2025. These fluctuations indicate variability in cash tax payments, which could be attributed to changes in operating profits, tax rates, or timing differences in tax payments.

Total reported debt & leases

The total reported debt and leases exhibit a significant downward trend over the observed periods. Starting from a peak of $53,848 million in January 2020, the amount decreases to $50,207 million by January 2021. A pronounced reduction is evident in the following years, with debt declining to $27,961 million by January 2022. Although there is a slight increase to $30,478 million in February 2023, the downward trajectory resumes subsequently, reaching $25,325 million by January 2025. This pattern indicates a strategic effort to reduce overall debt burden.

Total Dell Technologies Inc. stockholders’ equity (deficit)

The stockholders’ equity fluctuates between positive and negative values across the periods. Initially, there is a deficit of -$1,574 million as of January 2020. This reverses to a positive equity position of $2,479 million by January 2021, suggesting improved net asset value or capital structure during that timeframe. However, the equity returns to negative territory subsequently and remains so through the latest period, with deficits ranging from -$1,685 million to -$3,122 million, before improving slightly to -$1,482 million by January 2025. The persistent negative equity in most years may indicate accumulated losses, significant liabilities, or other financial challenges impacting net worth.

Invested capital

Invested capital displays an overall declining trend throughout the data set. It peaks at $83,528 million in January 2021, followed by a sharp decrease to $53,988 million in January 2022. Subsequent periods show minor fluctuations but generally continue downward, reaching $49,926 million by January 2025. This reduction in invested capital suggests a contraction in the company’s total invested resources, which may be related to decreased asset base or strategic divestitures aligned with debt reduction efforts.

The economic spread ratio demonstrates significant fluctuation over the observed period. Initially negative, it improved substantially before declining again to levels below those recorded at the beginning of the period. This movement correlates with changes in economic profit and invested capital.

Economic Spread Ratio Trend

The economic spread ratio began at -1.52% in 2020 and improved to -0.79% in 2021, indicating a lessening of the gap between the cost of capital and returns generated. A substantial increase was then observed in 2022, with the ratio reaching 3.75%. However, this positive trend reversed in 2023, falling to -0.20%, and continued to deteriorate significantly in 2024 and 2025, reaching -7.59% and -8.96% respectively. This indicates a widening gap between returns and the cost of capital in recent years.

Relationship to Economic Profit

The economic spread ratio’s trajectory closely mirrors the fluctuations in economic profit. The improvement from 2020 to 2022 aligns with the transition from a substantial economic loss (-1,235 US$ million) to a significant economic profit (2,026 US$ million). The subsequent decline in the ratio from 2022 onwards corresponds with the return to economic losses, culminating in losses of -4,065 US$ million and -4,473 US$ million in 2024 and 2025.

Relationship to Invested Capital

Invested capital decreased from 81,348 US$ million in 2020 to 49,926 US$ million in 2025. While the economic spread ratio improved in 2021 and 2022 despite fluctuations in invested capital, the recent declines in the ratio are occurring alongside continued reductions in invested capital. This suggests that the declining profitability is not simply a result of capital allocation, but rather a fundamental issue with generating returns on the capital employed.

The consistently negative economic spread ratio in most years suggests that the company’s returns are, in general, insufficient to cover the cost of its invested capital. The increasing negativity in the most recent years is a cause for concern and warrants further investigation into the underlying drivers of profitability.

The economic profit margin exhibited significant fluctuations over the observed period. Initially negative, it improved substantially before declining again to levels below those recorded in the earliest period. A review of the economic profit reveals a similar pattern of volatility.

Economic Profit Margin

The economic profit margin began at -1.29% in 2020 and improved to -0.68% in 2021, indicating a lessening of economic loss. A substantial positive shift occurred in 2022, with the margin reaching 1.96%, representing economic profit generation. However, this positive trend was short-lived. The margin decreased to -0.11% in 2023 and then experienced a marked decline to -4.66% in 2024. This downward trend continued into 2025, with the margin reaching -4.84%.

Economic Profit

Economic profit mirrored the trend observed in the economic profit margin. Losses of US$1,235 million and US$662 million were reported in 2020 and 2021, respectively. A significant turnaround occurred in 2022, with a profit of US$2,026 million. However, profitability diminished in subsequent years, with losses of US$115 million in 2023, US$4,065 million in 2024, and US$4,473 million in 2025.

Adjusted Net Revenue

Adjusted net revenue generally increased from US$95,944 million in 2020 to US$103,178 million in 2022. A decrease was observed in 2024, with revenue falling to US$87,284 million, before partially recovering to US$92,387 million in 2025. The decline in economic profit margin in 2023, 2024, and 2025 does not appear directly correlated with revenue trends, suggesting factors beyond sales volume are influencing profitability.

The substantial decline in economic profit margin and the return to economic loss in the later years of the period warrant further investigation. While revenue experienced a temporary dip, the significant deterioration in profitability suggests increasing costs, declining operational efficiency, or changes in the cost of capital may be contributing factors.