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
Oracle Corp., economic profit calculation
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2026 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 25,856 – 18.41% × 176,661 = -6,664
The financial trajectory from 2021 to 2026 indicates a period of sustained economic value destruction, as economic profit remained negative for five of the six years analyzed. Despite a substantial recovery and eventual surge in net operating profit after taxes (NOPAT) toward the end of the period, the growth in invested capital and the elevated cost of capital consistently offset these gains.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT experienced significant volatility, starting at 14,348 million US$ in 2021 before dropping sharply to 7,492 million US$ in 2022. A consistent recovery followed, with profits rising steadily through 2025 and culminating in a sharp increase to 25,856 million US$ by 2026. This suggests a strong recovery in operational efficiency and earning power in the latter years.
- Capital Investment and Cost Dynamics
- Invested capital showed a strong upward trend, increasing from 81,745 million US$ in 2021 to 176,661 million US$ in 2026, with a particularly aggressive expansion occurring in the final year. Concurrently, the cost of capital rose from 16.90% in 2021 to a peak of 20.16% in 2025, before moderating slightly to 18.41% in 2026. The rising cost of capital increased the threshold required for the company to generate positive economic value.
- Economic Profit Analysis
- Economic profit transitioned from a marginal surplus of 534 million US$ in 2021 to persistent deficits. The deepest value destruction occurred between 2023 and 2025, with the deficit peaking at 9,113 million US$ in 2025. While NOPAT grew significantly by 2026, the simultaneous surge in invested capital resulted in a capital charge that continued to exceed operating profits, leaving the economic profit negative at 6,664 million US$.
The correlation between the data points suggests that the company pursued an aggressive capital expansion strategy. However, the rate of return on this newly invested capital has not kept pace with the cost of capital, leading to a consistent failure to create economic value above the required return for investors.
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Net Operating Profit after Taxes (NOPAT)
Oracle Corp., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in allowances for credit losses.
3 Addition of increase (decrease) in deferred revenues.
4 Addition of increase (decrease) in restructuring plans accrued.
5 Addition of increase (decrease) in equity equivalents to net income.
6 2026 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 30,190 × 5.70% = 1,721
7 2026 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 6,320 × 21.00% = 1,327
8 Addition of after taxes interest expense to net income.
9 2026 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 780 × 21.00% = 164
10 Elimination of after taxes investment income.
An analysis of the financial results from 2021 to 2026 reveals a volatile initial period followed by a sustained recovery and an eventual acceleration in profitability. Both net income and net operating profit after taxes (NOPAT) experienced a significant contraction in 2022 before entering a multi-year growth phase.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited a sharp decline between May 2021 and May 2022, falling from US$ 14,348 million to US$ 7,492 million. From 2023 onward, a consistent upward trajectory is observed, with the figure rising to US$ 14,158 million by May 2025. A substantial surge occurred in May 2026, where NOPAT reached US$ 25,856 million, indicating a significant expansion in operational profitability.
- Net Income Correlation
- Net income followed a pattern closely aligned with NOPAT, dropping from US$ 13,746 million in 2021 to a low of US$ 6,717 million in 2022. The recovery phase was steady, with net income increasing annually to reach US$ 12,443 million in 2025, followed by a sharp increase to US$ 17,087 million in 2026.
- Analysis of the NOPAT to Net Income Spread
- Throughout the period, NOPAT consistently remained higher than net income. This gap widened most aggressively in May 2026, where NOPAT exceeded net income by US$ 8,769 million. This divergence suggests that while core operating performance improved drastically, non-operating expenses or financial obligations continued to impact the final net profit more heavily as the company scaled.
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Cash Operating Taxes
Oracle Corp., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
An analysis of the tax-related expenditures reveals a sustained upward trajectory in cash outflows for operating taxes and a general increase in accounting tax provisions over the observed period. The discrepancy between accrual-based tax provisions and actual cash payments indicates significant timing differences or permanent variances in tax reporting.
- Cash Operating Taxes Trend
- Cash operating taxes exhibit a consistent growth pattern, increasing from 2,197 million US dollars in May 2021 to 4,547 million US dollars by May 2026. A period of relative stability is observed between May 2024 and May 2025, where figures remained nearly flat at approximately 4,130 million US dollars, before resuming an upward trend in the final period.
- Provision for Income Taxes Analysis
- The provision for income taxes demonstrates higher volatility compared to cash taxes. After recording a tax benefit of 747 million US dollars in May 2021, the provision transitioned to a positive expense and grew to 2,467 million US dollars by May 2026. Despite a slight dip in May 2023, the overall trend is one of significant escalation, particularly between 2023 and 2026.
- Cash versus Accrual Divergence
- A persistent gap exists between cash operating taxes and the provision for income taxes. In every period analyzed, cash tax outflows exceeded the reported tax provision. This divergence was most pronounced in May 2021, where the company recognized a tax benefit while simultaneously paying 2,197 million US dollars in cash taxes. While the provision for taxes is rising toward the cash tax level, the cash outflow remains the primary driver of tax-related liquidity impact.
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Invested Capital
Oracle Corp., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
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 revenues.
5 Addition of restructuring plans accrued.
6 Addition of equity equivalents to total Oracle Corporation stockholders’ equity (deficit).
7 Removal of accumulated other comprehensive income.
8 Subtraction of construction in progress.
9 Subtraction of marketable securities.
Invested capital exhibits a general upward trajectory over the analyzed period, characterized by initial volatility followed by significant acceleration in the final two years. The overall trend indicates a substantial expansion of the capital base utilized to generate economic value.
- Total Debt and Leases
- Debt levels remained relatively stable between 2021 and 2024, fluctuating between 79,517 million and 95,330 million. A notable shift occurs after May 31, 2024, with a steady increase leading to a sharp spike to 167,432 million by May 31, 2026. This suggests a significant increase in external financing during the latter portion of the period.
- Stockholders' Equity
- The equity position experienced a period of instability, dropping from 5,238 million in 2021 to a deficit of 6,220 million in 2022. Following this deficit, a consistent and accelerating recovery is observed, with equity reaching 42,508 million by May 31, 2026. This reversal from a deficit to a substantial positive balance indicates a strengthening of the company's internal net worth.
- Invested Capital Trends
- Total invested capital grew from 81,745 million in 2021 to 176,661 million by 2026. While a slight contraction occurred in 2022, the subsequent growth was driven by both the recovery of stockholders' equity and the expansion of debt. The most aggressive growth occurs between 2025 and 2026, where invested capital increases by approximately 53%, primarily correlated with the surge in total reported debt and leases.
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Cost of Capital
Oracle Corp., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 504,284) | 504,284) | ÷ | 664,453) | = | 0.76 | 0.76 | × | 22.96% | = | 17.42% | ||
| 6.50% Series D Mandatory Convertible Preferred Stock | 6,410) | 6,410) | ÷ | 664,453) | = | 0.01 | 0.01 | × | 6.50% | = | 0.06% | ||
| Borrowings and finance lease liabilities3 | 123,569) | 123,569) | ÷ | 664,453) | = | 0.19 | 0.19 | × | 4.88% × (1 – 21.00%) | = | 0.72% | ||
| Operating lease liability4 | 30,190) | 30,190) | ÷ | 664,453) | = | 0.05 | 0.05 | × | 5.70% × (1 – 21.00%) | = | 0.20% | ||
| Total: | 664,453) | 1.00 | 18.41% | ||||||||||
Based on: 10-K (reporting date: 2026-05-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 592,299) | 592,299) | ÷ | 692,277) | = | 0.86 | 0.86 | × | 22.96% | = | 19.64% | ||
| 6.50% Series D Mandatory Convertible Preferred Stock | —) | —) | ÷ | 692,277) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Borrowings and finance lease liabilities3 | 86,528) | 86,528) | ÷ | 692,277) | = | 0.12 | 0.12 | × | 4.43% × (1 – 21.00%) | = | 0.44% | ||
| Operating lease liability4 | 13,450) | 13,450) | ÷ | 692,277) | = | 0.02 | 0.02 | × | 5.30% × (1 – 21.00%) | = | 0.08% | ||
| Total: | 692,277) | 1.00 | 20.16% | ||||||||||
Based on: 10-K (reporting date: 2025-05-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 393,840) | 393,840) | ÷ | 478,986) | = | 0.82 | 0.82 | × | 22.96% | = | 18.88% | ||
| 6.50% Series D Mandatory Convertible Preferred Stock | —) | —) | ÷ | 478,986) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Borrowings and finance lease liabilities3 | 77,601) | 77,601) | ÷ | 478,986) | = | 0.16 | 0.16 | × | 4.13% × (1 – 21.00%) | = | 0.53% | ||
| Operating lease liability4 | 7,545) | 7,545) | ÷ | 478,986) | = | 0.02 | 0.02 | × | 5.10% × (1 – 21.00%) | = | 0.06% | ||
| Total: | 478,986) | 1.00 | 19.47% | ||||||||||
Based on: 10-K (reporting date: 2024-05-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 331,248) | 331,248) | ÷ | 416,560) | = | 0.80 | 0.80 | × | 22.96% | = | 18.26% | ||
| 6.50% Series D Mandatory Convertible Preferred Stock | —) | —) | ÷ | 416,560) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Borrowings and finance lease liabilities3 | 80,463) | 80,463) | ÷ | 416,560) | = | 0.19 | 0.19 | × | 4.01% × (1 – 21.00%) | = | 0.61% | ||
| Operating lease liability4 | 4,849) | 4,849) | ÷ | 416,560) | = | 0.01 | 0.01 | × | 4.00% × (1 – 21.00%) | = | 0.04% | ||
| Total: | 416,560) | 1.00 | 18.91% | ||||||||||
Based on: 10-K (reporting date: 2023-05-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 180,362) | 180,362) | ÷ | 251,133) | = | 0.72 | 0.72 | × | 22.96% | = | 16.49% | ||
| 6.50% Series D Mandatory Convertible Preferred Stock | —) | —) | ÷ | 251,133) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Borrowings and finance lease liabilities3 | 67,113) | 67,113) | ÷ | 251,133) | = | 0.27 | 0.27 | × | 3.47% × (1 – 21.00%) | = | 0.73% | ||
| Operating lease liability4 | 3,658) | 3,658) | ÷ | 251,133) | = | 0.01 | 0.01 | × | 2.90% × (1 – 21.00%) | = | 0.03% | ||
| Total: | 251,133) | 1.00 | 17.25% | ||||||||||
Based on: 10-K (reporting date: 2022-05-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings and finance lease liabilities. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 217,748) | 217,748) | ÷ | 310,243) | = | 0.70 | 0.70 | × | 22.96% | = | 16.11% | ||
| 6.50% Series D Mandatory Convertible Preferred Stock | —) | —) | ÷ | 310,243) | = | 0.00 | 0.00 | × | 0.00% | = | 0.00% | ||
| Borrowings and finance lease liabilities3 | 89,713) | 89,713) | ÷ | 310,243) | = | 0.29 | 0.29 | × | 3.35% × (1 – 21.00%) | = | 0.77% | ||
| Operating lease liability4 | 2,782) | 2,782) | ÷ | 310,243) | = | 0.01 | 0.01 | × | 2.80% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 310,243) | 1.00 | 16.90% | ||||||||||
Based on: 10-K (reporting date: 2021-05-31).
1 US$ in millions
2 Equity. See details »
3 Borrowings and finance lease liabilities. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Oracle Corp., economic spread ratio calculation, comparison to benchmarks
| May 31, 2026 | May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (6,664) | (9,113) | (7,905) | (8,414) | (5,839) | 534) | |
| Invested capital2 | 176,661) | 115,423) | 101,930) | 98,251) | 77,262) | 81,745) | |
| Performance Ratio | |||||||
| Economic spread ratio3 | -3.77% | -7.90% | -7.76% | -8.56% | -7.56% | 0.65% | |
| Benchmarks | |||||||
| Economic Spread Ratio, Competitors4 | |||||||
| Accenture PLC | -0.31% | 1.52% | 1.19% | 1.97% | 4.84% | 6.66% | |
| Adobe Inc. | — | 13.20% | 0.92% | 1.09% | 6.58% | 8.97% | |
| AppLovin Corp. | — | 28.93% | 1.21% | -20.00% | -26.37% | -29.58% | |
| Cadence Design Systems Inc. | — | -1.28% | -2.87% | 7.18% | 6.59% | 6.80% | |
| Datadog Inc. | — | -8.74% | -9.43% | -5.95% | -11.70% | -3.88% | |
| International Business Machines Corp. | — | -0.82% | -7.67% | -3.61% | -11.36% | -6.21% | |
| Intuit Inc. | 7.83% | -2.91% | -6.58% | -8.63% | -7.52% | 0.11% | |
| Microsoft Corp. | 8.88% | 5.63% | 7.51% | 10.56% | 18.54% | 27.58% | |
| Palantir Technologies Inc. | — | 41.88% | -12.04% | -8.76% | -32.50% | -39.96% | |
| Palo Alto Networks Inc. | -12.79% | -3.82% | 5.37% | 11.50% | 3.53% | -5.17% | |
| Salesforce Inc. | -6.95% | -12.37% | -14.18% | -17.63% | -14.50% | -12.36% | |
| ServiceNow Inc. | — | 2.66% | 5.94% | 5.23% | 0.73% | 1.94% | |
| Synopsys Inc. | — | -12.39% | -8.14% | -7.44% | -0.84% | -6.86% | |
| Workday Inc. | -9.43% | -11.52% | -12.93% | -19.15% | -13.98% | -19.23% | |
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2026 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × -6,664 ÷ 176,661 = -3.77%
4 Click competitor name to see calculations.
A significant shift in value creation is evident between May 2021 and May 2026. Following a period of positive economic profit, a sustained trend of value destruction emerged, characterized by consistent negative economic profit and a negative economic spread ratio over the subsequent five years.
- Economic Profit
- A sharp transition occurred between May 2021 and May 2022, where economic profit moved from a positive US$ 534 million to a deficit of US$ 5,839 million. This downward trend intensified, reaching a peak loss of US$ 9,113 million in May 2025. A partial recovery was observed in May 2026, with the loss narrowing to US$ 6,664 million.
- Invested Capital
- The capital base demonstrated a general upward trajectory, growing from US$ 81,745 million in 2021 to US$ 176,661 million by 2026. While a slight contraction was noted in 2022, the subsequent years saw steady growth, culminating in a substantial increase in invested capital during the final reporting period.
- Economic Spread Ratio
- The economic spread ratio shifted from a positive 0.65% in 2021 to a negative 7.56% in 2022, indicating that returns on invested capital fell below the cost of capital. The ratio remained suppressed between -7.56% and -8.56% from 2022 through 2025. By May 2026, the ratio improved to -3.77%, suggesting a narrowing of the gap between the return on capital and its associated cost, although the ratio remained in negative territory.
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Economic Profit Margin
Oracle Corp., economic profit margin calculation, comparison to benchmarks
| May 31, 2026 | May 31, 2025 | May 31, 2024 | May 31, 2023 | May 31, 2022 | May 31, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Economic profit1 | (6,664) | (9,113) | (7,905) | (8,414) | (5,839) | 534) | |
| Revenues | 67,357) | 57,399) | 52,961) | 49,954) | 42,440) | 40,479) | |
| Add: Increase (decrease) in deferred revenues | 4,662) | 187) | 608) | 828) | (344) | 855) | |
| Adjusted revenues | 72,019) | 57,586) | 53,569) | 50,782) | 42,096) | 41,334) | |
| Performance Ratio | |||||||
| Economic profit margin2 | -9.25% | -15.82% | -14.76% | -16.57% | -13.87% | 1.29% | |
| Benchmarks | |||||||
| Economic Profit Margin, Competitors3 | |||||||
| Accenture PLC | -0.22% | 0.97% | 0.67% | 1.01% | 2.33% | 3.42% | |
| Adobe Inc. | — | 11.94% | 1.04% | 1.37% | 7.67% | 11.17% | |
| AppLovin Corp. | — | 29.73% | 1.17% | -27.38% | -49.38% | -59.23% | |
| Cadence Design Systems Inc. | — | -1.92% | -4.40% | 7.15% | 6.57% | 6.91% | |
| Datadog Inc. | — | -5.18% | -8.56% | -3.72% | -8.10% | -3.08% | |
| International Business Machines Corp. | — | -1.46% | -13.55% | -6.43% | -19.67% | -11.82% | |
| Intuit Inc. | 9.56% | -3.75% | -10.11% | -14.13% | -14.48% | 0.14% | |
| Microsoft Corp. | 14.91% | 8.39% | 10.50% | 12.02% | 17.77% | 22.89% | |
| Palantir Technologies Inc. | — | 21.69% | -10.44% | -4.70% | -54.53% | -65.82% | |
| Palo Alto Networks Inc. | -35.54% | -4.52% | 5.70% | 11.42% | 4.11% | -6.95% | |
| Salesforce Inc. | -14.89% | -26.71% | -32.78% | -44.58% | -40.27% | -28.34% | |
| ServiceNow Inc. | — | 2.94% | 4.88% | 4.21% | 0.58% | 1.68% | |
| Synopsys Inc. | — | -72.30% | -13.64% | -10.49% | -1.18% | -10.92% | |
| Workday Inc. | -11.34% | -12.24% | -14.39% | -23.49% | -18.95% | -25.09% | |
Based on: 10-K (reporting date: 2026-05-31), 10-K (reporting date: 2025-05-31), 10-K (reporting date: 2024-05-31), 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31).
1 Economic profit. See details »
2 2026 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × -6,664 ÷ 72,019 = -9.25%
3 Click competitor name to see calculations.
A comprehensive analysis of the economic performance from May 31, 2021, to May 31, 2026, reveals a significant transition from positive economic value creation to a sustained period of economic value destruction. While adjusted revenues exhibit a consistent upward trajectory, economic profit has remained predominantly negative following the 2021 fiscal year, indicating that returns have failed to exceed the cost of capital during this period.
- Economic Profit Trends
- The fiscal year ending May 31, 2021, was the only period in the analyzed timeframe where economic profit was positive, recorded at 534 million USD. Starting in 2022, a sharp reversal occurred, with economic profit dropping to -5,839 million USD. This negative trend deepened to a peak deficit of -9,113 million USD by May 31, 2025, before showing a moderate recovery to -6,664 million USD in 2026.
- Adjusted Revenue Growth
- Revenues demonstrate steady and uninterrupted growth over the six-year period. Starting at 41,334 million USD in 2021, figures rose incrementally to 57,586 million USD by 2025, culminating in a substantial increase to 72,019 million USD by May 31, 2026. The divergence between rising revenues and negative economic profit suggests that revenue expansion has not been sufficient to offset the capital charges associated with the company's investments.
- Economic Profit Margin Analysis
- The economic profit margin mirrors the volatility of the absolute economic profit. A positive margin of 1.29% in 2021 shifted to a severe contraction of -13.87% in 2022 and reached its lowest point of -16.57% in 2023. Although the margin fluctuated between -14.76% and -15.82% during 2024 and 2025, a notable improvement is observed by May 31, 2026, where the margin narrowed to -9.25%.
The overall data pattern indicates a period of aggressive expansion or high capital expenditure that has temporarily weighed down the economic value added. The improvement in both economic profit and profit margin in the final year suggests a potential shift toward better capital efficiency or a reduction in the cost of capital relative to operational returns.
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