Oracle Corp. (NYSE:ORCL)

The financial data for the analyzed periods reveals several notable trends regarding profitability, capital costs, invested capital, and economic profit.

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrated variability over the years analyzed. After an initial increase from 10,144 million USD in 2020 to 14,348 million USD in 2021, there was a notable decline to 7,492 million USD in 2022. Subsequently, NOPAT increased again steadily through to 14,158 million USD by 2025. This indicates some fluctuations in operational profitability, with a recovery trend starting after a dip in 2022.

Cost of Capital

The cost of capital exhibited an upward trajectory throughout the periods, rising consistently from 11.68% in 2020 to 14.3% in 2025. This steady increase suggests a rising expense for financing the invested capital or an increase in the required return by investors, potentially reflecting higher risk perceptions or market interest rate changes.

Invested Capital

The invested capital showed some fluctuations initially, decreasing from 87,978 million USD in 2020 to 77,262 million USD in 2022. From 2022 onwards, invested capital increased markedly, reaching 115,423 million USD by 2025. This trend indicates a reversal after a period of capital base reduction, moving toward significant reinvestment or asset accumulation in the later periods.

Economic Profit

The economic profit figures reveal consistent negative outcomes in most years, except for 2021. Starting with a slight negative economic profit of -134 million USD in 2020, there was an improvement to a positive 4,466 million USD in 2021, followed by declines into negative territory again through 2025, with values worsening from -2,036 million USD in 2022 to -2,344 million USD in 2025. This pattern suggests that despite positive NOPAT figures in several years, the return on invested capital did not consistently exceed the cost of capital, leading to value destruction in most periods.

In summary, the company experienced fluctuating operating profit levels and an increasing capital base, alongside a rising cost of capital. Despite improvements in NOPAT in recent years, economic profit remained mostly negative, indicating challenges in generating returns above the cost of capital. The trends highlight the importance of managing capital efficiency and cost of capital to achieve sustained economic value creation.

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.

Economic Profit

The economic profit exhibits significant volatility over the observed periods. Beginning with a negative value in 2020 at -134 million USD, it sharply increased to a positive 4,466 million USD in 2021. However, this improvement was not sustained, as the economic profit declined drastically to negative values in the subsequent years, reaching -2,344 million USD by 2025. This pattern indicates fluctuating profitability, with a notable peak in 2021 followed by consistent losses in the later years.

Invested Capital

Invested capital shows an increasing trend overall, despite some fluctuations. From 87,978 million USD in 2020, it declined slightly to 81,745 million USD in 2021 and further to 77,262 million USD in 2022. Subsequently, there is a marked increase to 98,251 million USD in 2023, continuing upward to 101,930 million USD in 2024 and reaching 115,423 million USD in 2025. This upward trend in invested capital in the latter years suggests growing investment in business operations or asset base expansion.

Economic Spread Ratio

The economic spread ratio mirrors the economic profit trend but remains negative for the majority of the reported periods. It starts at -0.15% in 2020, rises sharply to a positive 5.46% in 2021, aligning with the peak in economic profit. After 2021, the ratio turns negative again, dropping to -2.63% in 2022 and continuing at negative values through 2025, though the negative gap narrows slightly from -3.11% in 2023 to -2.03% in 2025. This suggests that the company struggled to generate returns above its cost of capital in recent years, despite some improvement towards 2025.

Adjusted Revenues

Adjusted revenues demonstrate a consistent upward trend over the observed periods, increasing from $38,624 million in May 2020 to $57,586 million in May 2025. This reflects a substantial growth rate, particularly notable between May 2022 and May 2023, where revenues surged from approximately $42,096 million to $50,782 million.

Economic Profit

The economic profit exhibits significant volatility throughout the timeline. Starting with a negative value of -$134 million in May 2020, it sharply improves to a positive $4,466 million in May 2021. However, from May 2021 onwards, the economic profit declines steeply, registering negative figures again, falling to -$2,036 million in May 2022, and further deteriorating to -$3,059 million by May 2023. Although there is a slight recovery in the subsequent years, it remains negative, with values of -$2,160 million in May 2024 and -$2,344 million in May 2025.

Economic Profit Margin

The economic profit margin mirrors the behavior of the economic profit, shifting dramatically from a negative margin of -0.35% in May 2020 to a positive 10.81% in May 2021. This positive margin, however, was not sustained, as it sharply reverted to negative territory, standing at -4.84% in May 2022 and further declining to -6.02% in May 2023. Minor improvements are observed thereafter, with the margin at -4.03% in May 2024 and slightly worsening to -4.07% in May 2025.

Overall Analysis

While adjusted revenues consistently increase over the analyzed period, indicating robust top-line growth, the economic profit and its corresponding margin reveal challenges in translating revenue growth into sustainable economic value. The initial recovery in economic profit and margin in 2021 suggests a temporary improvement in operational efficiency or profitability; however, the subsequent decline indicates deterioration in value creation. This disparity suggests increased costs, investments, or other factors impacting profitability despite growing revenues. Continued negative economic profit and margins from 2022 forward highlight an ongoing issue with value generation that may require strategic review to realign revenue growth with economic profitability.