Oracle Corp. (NYSE:ORCL)

The period under review demonstrates significant fluctuations in economic profit. Net operating profit after taxes (NOPAT) exhibited volatility, while the cost of capital consistently increased. Invested capital also showed a generally increasing trend, though not without interim declines. These factors combined to produce consistently negative economic profit throughout the analyzed timeframe.

NOPAT Trend

Net operating profit after taxes increased substantially from US$10,144 million in 2020 to US$14,348 million in 2021. However, a significant decrease was observed in 2022, falling to US$7,492 million. NOPAT recovered to US$10,160 million in 2023 and continued to rise, reaching US$11,940 million in 2024 and US$14,158 million in 2025. Despite the recent increases, NOPAT levels did not consistently translate into positive economic profit.

Cost of Capital Trend

The cost of capital experienced a steady upward trend throughout the period, increasing from 13.54% in 2020 to 16.67% in 2025. This consistent rise in the cost of capital likely contributed to the sustained negative economic profit, as the required return on invested capital grew over time.

Invested Capital Trend

Invested capital decreased from US$87,978 million in 2020 to US$77,262 million in 2022. A substantial increase was then recorded in 2023, reaching US$98,251 million, and continued to grow to US$101,930 million in 2024 and US$115,423 million in 2025. The increasing invested capital base, coupled with a rising cost of capital, placed further pressure on achieving positive economic profit.

Economic Profit Trend

Economic profit was negative in 2020, at -US$1,772 million, before turning positive in 2021, reaching US$2,873 million. However, economic profit subsequently declined, becoming negative again in 2022 (-US$3,577 million) and continuing to deteriorate through 2025, reaching -US$5,087 million. The magnitude of the negative economic profit increased over the latter part of the period, indicating a widening gap between returns generated and the cost of capital.

In summary, while NOPAT demonstrated recovery in later years, the consistently increasing cost of capital and growing invested capital base resulted in sustained negative economic profit. The period highlights a challenge in generating returns sufficient to cover the cost of capital employed.

Net Income Trend

The net income showed a rising trend from 2020 to 2021, increasing from 10,135 million USD to 13,746 million USD. However, there was a significant decline in 2022, with net income dropping to 6,717 million USD. Following this decline, the net income gradually increased over the next three years, reaching 8,503 million USD in 2023, 10,467 million USD in 2024, and 12,443 million USD in 2025. Overall, despite the dip in 2022, the net income demonstrates recovery and growth toward the latter years.

Net Operating Profit After Taxes (NOPAT) Trend

NNOPAT also increased from 10,144 million USD in 2020 to a peak of 14,348 million USD in 2021. It similarly experienced a large decrease in 2022 to 7,492 million USD. From 2023 onward, NOPAT consistently rose, reaching 10,160 million USD in 2023, 11,940 million USD in 2024, and culminating at 14,158 million USD in 2025. This suggests a strong rebound in operational profitability and effective tax management.

Comparative Insights

The patterns for both net income and NOPAT are aligned, with a peak in 2021, a notable downturn in 2022, and a steady recovery through the following years. NOPAT values are consistently close to net income values, indicating relatively stable operating efficiency and tax impact. The data imply that the company managed to improve operating results over time despite the intermediate disturbance in 2022.

Provision for (benefit from) income taxes

The provision for income taxes displays a fluctuating trend over the periods observed. It started at a positive amount of 1928 million USD in May 31, 2020, then dropped sharply to a negative value of -747 million USD in May 31, 2021, suggesting a tax benefit for that year. This was followed by a return to positive values with 932 million USD in 2022 and steady increases in subsequent years, reaching 1717 million USD in May 31, 2025. The data indicates variability but an overall upward trend after the negative dip.

Cash operating taxes

Cash operating taxes present a generally increasing trajectory from May 31, 2020, through May 31, 2025. Starting at 3101 million USD in 2020, the amount decreased in 2021 to 2197 million USD, but then steadily increased each year thereafter, reaching a peak of 4137 million USD in 2024, with a slight decrease to 4134 million USD in 2025. This suggests progressively higher cash tax outflows during the later years, indicative of either higher taxable income or changes in tax payments.

Total reported debt & leases

The total reported debt and leases exhibited an overall increasing trend from 2020 through 2025. Starting at $73,695 million in 2020, the amount rose to $87,027 million in 2021, followed by a decline to $79,517 million in 2022. Thereafter, a consistent upward movement occurred, reaching $95,330 million in 2023, slightly declining to $94,414 million in 2024, and finally increasing substantially to $108,952 million in 2025. This pattern indicates fluctuating debt exposures with a notable increase in the last reported period.

Total Oracle Corporation stockholders’ equity (deficit)

Stockholders’ equity showed significant volatility and a considerable turnaround over the years. Initially, equity stood at $12,074 million in 2020, sharply declining to $5,238 million in 2021 and turning into a deficit of -$6,220 million by 2022. Subsequently, equity recovered to a positive $1,073 million in 2023, then improved substantially to $8,704 million in 2024, and reached $20,451 million in 2025. This indicates a transition from financial distress or negative equity toward a stronger equity position, reflecting improved capital structure and retained earnings or other comprehensive income gains.

Invested capital

Invested capital decreased from $87,978 million in 2020 to $77,262 million in 2022, indicating reductions or restructuring in capital allocation during this period. However, from 2022 onward, invested capital rose markedly to $98,251 million in 2023, continuing to $101,930 million in 2024, and further to $115,423 million in 2025. This evolution suggests renewed investment activities and potentially greater operational scale or asset acquisition in the latter years. The confluence of rising invested capital and improving equity alongside increasing debt points to an expansion phase with leveraged financing.

The economic spread ratio exhibits considerable fluctuation over the observed period. Initially negative in 2020, it became positive in 2021 before returning to negative values and remaining there through 2025. This pattern is closely linked to the performance of economic profit and the changes in invested capital.

Economic Spread Ratio Trend

The economic spread ratio began at -2.01% in 2020, indicating that the company’s return on invested capital was less than its cost of capital. A significant improvement occurred in 2021, with the ratio reaching 3.51%, signifying a period where returns exceeded the cost of capital. However, this positive trend was short-lived. The ratio declined to -4.63% in 2022 and continued to worsen, reaching -5.32% in 2023. A slight recovery to -4.40% was observed in 2024, but this did not sustain, with the ratio settling at -4.41% in 2025. This suggests a consistent struggle to generate returns exceeding the cost of capital in the later years of the period.

The invested capital generally increased throughout the period, rising from US$87,978 million in 2020 to US$115,423 million in 2025. However, this increase in invested capital did not translate into a corresponding improvement in economic profit, as evidenced by the consistently negative economic profit figures from 2020-2025, except for 2021.

Relationship between Economic Profit and Economic Spread Ratio

The economic spread ratio directly reflects the relationship between economic profit and invested capital. The positive economic spread ratio in 2021 aligns with the positive economic profit of US$2,873 million for that year. Conversely, the negative economic spread ratios in 2020, 2022, 2023, 2024, and 2025 correspond with negative economic profit values during those years. The magnitude of the negative economic profit appears to influence the depth of the negative economic spread ratio, with larger negative economic profits generally resulting in more negative spread ratios.

The trend suggests that while the company has been increasing its investment in the business, it has not been effectively translating those investments into economic value. The sustained negative economic spread ratio indicates a potential need to re-evaluate investment strategies, cost of capital calculations, or operational efficiency to improve returns.

The economic profit margin exhibits considerable fluctuation over the observed period. Initially negative, it experienced a substantial improvement before reverting to, and exceeding, its initial negative value. Adjusted revenues demonstrate a consistent upward trajectory throughout the period, contrasting with the volatile performance of economic profit and its margin.

Economic Profit Margin

The economic profit margin began at -4.59% in May 31, 2020. A significant positive shift occurred in the following year, reaching 6.95% by May 31, 2021. However, this improvement proved unsustainable, as the margin declined sharply to -8.50% in May 31, 2022. Further deterioration followed, with the margin reaching -10.30% by May 31, 2023. A slight recovery to -8.38% was noted by May 31, 2024, but this was followed by a further decline to -8.83% by May 31, 2025. This indicates a persistent struggle to generate returns exceeding the cost of capital.

Adjusted Revenues

Adjusted revenues increased steadily throughout the period. From US$38,624 million in May 31, 2020, revenues grew to US$41,334 million in May 31, 2021, and US$42,096 million in May 31, 2022. The rate of growth accelerated in subsequent years, reaching US$50,782 million by May 31, 2023, US$53,569 million by May 31, 2024, and US$57,586 million by May 31, 2025. This consistent revenue growth did not translate into consistent economic profitability.

The divergence between the upward trend in adjusted revenues and the fluctuating, predominantly negative, economic profit margin suggests that while the company is increasing sales, it is struggling to convert those sales into economic profit. This could be due to rising costs, inefficient capital allocation, or a combination of factors. The continued negative economic profit margin, despite revenue growth, warrants further investigation.

Economic Profit

Economic profit started at a loss of US$1,772 million in May 31, 2020, then became a profit of US$2,873 million in May 31, 2021. It then returned to a loss of US$3,577 million in May 31, 2022, and continued to decline to a loss of US$5,229 million in May 31, 2023. The loss moderated slightly to US$4,488 million in May 31, 2024, but increased again to US$5,087 million in May 31, 2025. This pattern reinforces the observation that revenue growth is not effectively translating into economic value creation.