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.
Paying user area
Try for free
International Business Machines Corp. pages available for free this week:
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Analysis of Liquidity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Present Value of Free Cash Flow to Equity (FCFE)
- Return on Equity (ROE) since 2005
- Current Ratio since 2005
- Total Asset Turnover since 2005
- Analysis of Debt
The data is hidden behind: . Unhide it.
Get full access to the entire website from $10.42/mo, or
get 1-month access to International Business Machines Corp. for $24.99.
This is a one-time payment. There is no automatic renewal.
We accept:
Economic Profit
International Business Machines Corp., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes exhibits significant volatility across the five-year period. Starting at a positive 4477 million US dollars in 2020, it declined moderately to 4163 million in 2021 before dropping sharply to a negative value of -710 million in 2022. A substantial recovery is noted in 2023 with profit rising to 8615 million, followed by a subsequent decrease to 4895 million in 2024. This pattern indicates periods of financial stress and recovery, with overall variability affecting operational profitability.
- Cost of Capital
- The cost of capital has followed a steady upward trend over the period analyzed. Beginning at 8.33% in 2020, it increased incrementally each year, reaching 10.8% by the end of 2024. This gradual increase suggests rising expenses or risks associated with the capital employed, potentially impacting investment decisions and the weighted average cost of capital considerations.
- Invested Capital
- Invested capital shows a declining trend from 130,176 million US dollars in 2020 to 104,131 million in 2022. The figure then increases slightly to 112,927 million in 2023 before experiencing a marginal decline again to 111,965 million in 2024. Overall, the invested capital has decreased compared to the initial value, reflecting adjustments in the asset base or capital allocation strategies over time.
- Economic Profit
- The economic profit remains negative throughout the entire period, indicating that the firm consistently failed to generate returns above its cost of capital. Starting at a loss of 6,362 million US dollars in 2020, the deficit lessened somewhat in 2021 but then deteriorated sharply, reaching a maximum negative value of -10,709 million in 2022. A notable improvement occurs in 2023, declining the economic loss to -2,805 million, yet it worsens again in 2024 to -7,197 million. This persistent negative economic profit suggests ongoing challenges in value creation relative to capital costs.
Net Operating Profit after Taxes (NOPAT)
International Business Machines Corp., NOPAT calculation
US$ in millions
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 allowance for expected credit losses on notes and accounts receivable.
3 Addition of increase (decrease) in deferred income.
4 Addition of increase (decrease) in product warranty liability.
5 Addition of increase (decrease) in equity equivalents to net income attributable to IBM.
6 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
7 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income attributable to IBM.
9 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
10 Elimination of after taxes investment income.
11 Elimination of discontinued operations.
The financial data shows significant fluctuations in key profitability metrics over the analyzed period. Net income attributable to the company exhibits a generally volatile pattern, with an initial increase from 2020 to 2021, a sharp decline in 2022, followed by a strong recovery in 2023 and a moderate decrease in 2024.
The net operating profit after taxes (NOPAT) demonstrates a similarly volatile trend but with more pronounced negative values in 2022. Specifically, NOPAT decreases from 4477 million US dollars in 2020 to 4163 million in 2021, then turns negative in 2022, suggesting operational challenges or extraordinary expenses impacting profitability during that year. The metric sharply recovers in 2023, reaching 8615 million US dollars, the highest recorded in the period, before retracting to 4895 million US dollars in 2024.
- Net Income Attributable to the Company
- The figure increased by approximately 2.7% from 5590 million in 2020 to 5743 million in 2021, signaling stable performance during that timeframe.
- A significant drop to 1639 million in 2022 marks a pronounced decline of over 70%, indicating a challenging fiscal year.
- Recovery occurs in 2023, with net income rising sharply to 7502 million, exceeding even the 2020 and 2021 levels.
- The following year, 2024, shows a moderate decline to 6023 million, suggesting some stabilization albeit at a lower level than the previous year's peak.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT declined from 4477 million in 2020 to 4163 million in 2021, a drop of about 7%, indicating some weakening in operating performance.
- In 2022, the figure turned negative (-710 million), reflecting a significant operational loss during the period, which could be attributed to unusual charges or decreased operational efficiency.
- The subsequent year marked an exceptional turnaround, with NOPAT surging to 8615 million—almost doubling the previous positive peak—pointing to a strong recovery in operational profitability.
- There was a decrease in 2024 to 4895 million, which, while lower than the prior year, remains above the 2020 and 2021 levels, indicating sustained but moderated operational success.
Overall, the data reveals a period of volatility with a severe downturn in 2022 followed by a powerful rebound in 2023. The decline in both net income and NOPAT in 2022 could suggest the impact of one-time events or market pressures, which were largely mitigated in the following year. The recovery in 2023 indicates effective management responses or favorable market conditions, though the slight pullback in 2024 suggests the need for ongoing vigilance to maintain profitability.
Cash Operating Taxes
International Business Machines Corp., cash operating taxes calculation
US$ in millions
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).
- Continuing Operations Provision for (Benefit from) Income Taxes
- The provision for income taxes from continuing operations exhibited significant volatility during the five-year period. Initially, in 2020, it reflected a substantial tax benefit of -864 million US dollars, shifting to a tax expense of 124 million in 2021. This pattern repeated with a benefit of -626 million in 2022, followed by a marked increase to an expense of 1176 million in 2023. The figure then moved back to a tax benefit of -218 million in 2024. Such fluctuations suggest variability in taxable income, tax planning strategies, or adjustments related to deferred taxes or other tax-related accounting considerations.
- Cash Operating Taxes
- Cash operating taxes demonstrated relative stability throughout the period, though with some fluctuations. The amount declined from 2738 million US dollars in 2020 to 2130 million in 2021, indicating a reduction in tax payments or taxable income. In 2022 and 2023, cash operating taxes increased to 2497 million and 2510 million respectively, showing a recovery and stabilization. The figure slightly decreased again to 2356 million in 2024. Overall, this trend indicates some variability in actual cash tax payments, but with a general range between approximately 2100 and 2700 million US dollars annually.
Invested Capital
International Business Machines Corp., invested capital calculation (financing approach)
US$ in millions
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 allowance for doubtful accounts receivable.
4 Addition of deferred income.
5 Addition of product warranty liability.
6 Addition of equity equivalents to total IBM stockholders’ equity.
7 Removal of accumulated other comprehensive income.
8 Subtraction of marketable securities.
The financial data reveals several key trends in the company's capital structure and financial position over the five-year period.
- Total reported debt & leases
- The total reported debt and leases show a decreasing trend from 66,469 million US dollars at the end of 2020 to 54,013 million by the end of 2022. This reduction indicates efforts to lower leverage during this period. However, in 2023, there is a noticeable increase to 59,935 million, followed by a slight decline to 58,396 million in 2024. The fluctuation in recent years may suggest strategic adjustments in debt management or financing activities.
- Total IBM stockholders’ equity
- The stockholders' equity decreased from 20,597 million in 2020 to 18,901 million in 2021, reflecting a contraction potentially due to losses, dividends, or share repurchases. Subsequently, equity increased steadily, reaching 27,307 million by the end of 2024. This upward trajectory indicates a strengthening of the company’s net asset base and possibly enhanced profitability or capital issuance during this period.
- Invested capital
- Invested capital exhibited a declining trend from 130,176 million in 2020 to 104,131 million in 2022, which aligns with the reduction in debt levels, signaling a possible downsizing or restructuring of invested resources. However, invested capital recovered somewhat to 112,927 million in 2023 before marginally decreasing to 111,965 million in 2024. This fluctuation suggests a stabilization or modest reinvestment phase following the initial contraction.
Overall, the data indicates an initial phase of deleveraging and capital reduction until 2022, followed by partial recovery of equity and invested capital, accompanied by a moderate resurgence in debt levels in the last two reported years. These patterns point toward an adaptive financial strategy balancing debt, equity, and capital investment over time.
Cost of Capital
International Business Machines Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
International Business Machines Corp., 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 millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
The financial data reveals notable fluctuations in key performance indicators over the five-year period under review.
- Economic Profit
- Economic profit has consistently been negative across all years, indicating that the company has been operating below its expected return on invested capital. The loss widened substantially from -5,756 million US dollars in 2021 to -10,709 million US dollars in 2022, followed by a significant recovery to -2,805 million US dollars in 2023. However, this improvement was not sustained, as the economic profit declined again to -7,197 million US dollars in 2024.
- Invested Capital
- Invested capital experienced a downward trend from 130,176 million US dollars in 2020 to 104,131 million US dollars in 2022, suggesting a reduction in the capital base during this timeframe. Subsequently, there was a moderate increase in 2023 to 112,927 million US dollars, which slightly decreased again to 111,965 million US dollars in 2024. Overall, invested capital diminished by approximately 14% over the five years.
- Economic Spread Ratio
- The economic spread ratio remained negative throughout the period, confirming that the returns generated on invested capital were inferior to the cost of capital. The ratio deteriorated sharply in 2022, reaching -10.28%, before improving considerably in 2023 to -2.48%. Nevertheless, it worsened again to -6.43% in 2024. This volatility suggests fluctuating operational efficiency or changing cost structures impacting profitability.
In summary, the data portrays a company facing persistent challenges in generating sufficient returns on its invested capital, with significant volatility in economic profit and spread ratios. The fluctuating invested capital suggests some strategic adjustments in asset deployment. Despite a temporary improvement in 2023, the downward trend resumed in 2024, indicating the need for enhanced measures to achieve sustainable profitability.
Economic Profit Margin
International Business Machines Corp., 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 millions) | ||||||
| Economic profit1 | ||||||
| Revenue | ||||||
| Add: Increase (decrease) in deferred income | ||||||
| Adjusted revenue | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | ||||||
| Adobe Inc. | ||||||
| AppLovin Corp. | ||||||
| Cadence Design Systems Inc. | ||||||
| CrowdStrike Holdings Inc. | ||||||
| Datadog Inc. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| ServiceNow Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
The financial performance over the five-year period exhibits notable fluctuations in both economic profit and revenue metrics. The economic profit consistently remains negative throughout the span, indicating that the company experienced economic losses each year. Despite some oscillations, the magnitude of economic losses shows substantial variation, with the largest negative value occurring in the year 2022 and notable improvement in 2023, before deteriorating again in 2024.
Adjusted revenue demonstrates a mixed trend. After a high point in 2020, revenue declines significantly in 2021 but then gradually increases over the following two years, stabilizing at a slightly lower level by 2024 compared to 2020. This suggests some recovery attempts or business adjustments after the initial drop in 2021.
In terms of profitability relative to revenue, the economic profit margin remains negative and follows a pattern similar to economic profit. The margin deteriorated notably in 2022, reaching its lowest point, which aligns with the steepest economic loss observed in that year. There is an improvement in 2023, reducing the margin deficit substantially, but this improvement is not sustained into 2024, when the margin again worsens though not to the levels seen in 2022.
- Economic Profit Trend
- Negative throughout the period, peaking negatively in 2022, with partial recovery in 2023 followed by decline in 2024.
- Revenue Trend
- High revenue in 2020 is followed by a sharp decline in 2021, then a gradual recovery through 2023 and stabilization in 2024.
- Economic Profit Margin
- Consistently negative, worsening significantly in 2022, improving in 2023, but declining again in 2024, mirroring economic profit patterns.
Overall, the data indicates challenges in achieving economic profitability despite some revenue stabilization after 2021. The volatility in economic profit and its margin suggests underlying issues affecting cost management or competitive positioning that impacted profitability dynamics over the period analyzed.