Oracle Corp. (NYSE:ORCL)

The analysis of the annual financial data reveals several notable trends and fluctuations in the company's financial performance and capital efficiency over the examined periods.

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits a fluctuating pattern with an initial increase from 10,144 million USD in 2020 to a peak of 14,348 million USD in 2021, followed by a sharp decline to 7,492 million USD in 2022. Subsequently, it recovers steadily, rising to 14,158 million USD by 2025, indicating a resurgence in operational profitability after a temporary drop.

Cost of Capital

The cost of capital shows a consistent upward trend, rising from 11.72% in 2020 to 14.34% in 2025. This steady increase suggests a growing expense or required return on investments, possibly reflecting changes in market conditions or company risk profile over time.

Invested Capital

Invested capital presents a moderate decline from 87,978 million USD in 2020 to 77,262 million USD in 2022, then a pronounced increase reaching 115,423 million USD by 2025. This pattern may indicate an initial phase of capital divestment or efficiency optimization, followed by renewed investment or expansion activities.

Economic Profit

Economic profit fluctuates significantly, starting with a slight negative value of -166 million USD in 2020 and rising to a strong positive 4,435 million USD in 2021. However, it then turns negative again, declining to -3,102 million USD in 2023, and remains negative through 2025, signaling ongoing challenges in generating returns above the cost of capital despite recovering NOPAT figures.

In summary, while operational profit margins (NOPAT) demonstrate recovery and growth after periods of volatility, the rising cost of capital and fluctuations in invested capital have exerted pressure on economic profit, which remains negative in recent years. This suggests that the company faces challenges in creating value above its capital costs, highlighting the need for continuous focus on capital efficiency and operational effectiveness.

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 variability and an overall negative trend across the analyzed periods. Starting from a negative value of -166 million USD in 2020, it sharply improves to a positive 4,435 million USD in 2021, indicating a period of strong value creation. However, this improvement is not sustained as economic profit declines dramatically in subsequent years, returning to negative territory with values of -2,066 million USD in 2022, -3,102 million USD in 2023, and remaining significantly negative in 2024 and 2025, at -2,206 million USD and -2,398 million USD, respectively. This suggests challenges in maintaining profitability above the cost of capital over the latter part of the timeframe.

Invested Capital

Invested capital demonstrates a general upward trajectory over the time span, with some fluctuations. It decreases from 87,978 million USD in 2020 to a low of 77,262 million USD in 2022, potentially reflecting divestments or asset optimization. From 2022 onward, there is a noticeable increase in invested capital, reaching 98,251 million USD in 2023, 101,930 million USD in 2024, and finally 115,423 million USD in 2025. This growth indicates substantial reinvestment or asset accumulation in the later years, which may be associated with strategic expansion or capital expenditure initiatives.

Economic Spread Ratio

The economic spread ratio, an indicator of returns relative to the cost of capital, mirrors the fluctuations observed in economic profit but remains predominantly negative except for 2021. Starting with a negative ratio of -0.19% in 2020, it improves significantly to 5.43% in 2021, denoting a favorable period where returns exceeded the cost of capital. However, the ratio deteriorates again from 2022 onward, hitting -2.67% in 2022, then slightly worsening in 2023 to -3.16%, before modestly improving to -2.16% in 2024 and -2.08% in 2025. Despite these slight recent improvements, the negative spread suggests the company is generating returns below its cost of capital in the majority of the analyzed years.

Revenue Trends

The adjusted revenues show a consistent upward trend across the observed periods. Starting at $38,624 million in May 2020, revenues increased steadily each year, reaching $57,586 million by May 2025. This indicates sustained growth in the company's revenue-generating ability over the six-year span.

Economic Profit Analysis

The economic profit figures exhibit significant volatility throughout the periods. There is a notable positive spike in May 2021, with economic profit rising to $4,435 million from a negative position of -$166 million the previous year. However, following this peak, economic profit declines sharply into negative territory once again, reaching -$3,102 million in May 2023. Subsequent years show a moderate recovery; however, economic profit remains negative through May 2025, ending at -$2,398 million. This suggests challenges in generating returns exceeding the company's cost of capital after 2021.

Economic Profit Margin Dynamics

The economic profit margin aligns with the behavior seen in economic profit numbers, indicating profitability relative to revenues. The margin starts negative at -0.43% in May 2020, improves substantially to 10.73% in May 2021, signaling strong value creation during that year. In the following years, the margin deteriorates steadily, becoming negative again and fluctuating between -4.91% and -6.11%, and stabilizing close to -4.16% in May 2025. This trend points to decreasing efficiency in converting revenue into economic profit after its peak in 2021.

Overall Insights

Despite robust revenue growth, economic profit and its margin indicate inconsistent profitability performance. The data suggests that while the company expanded its revenue base significantly, it struggled to convert this growth into sustained economic profit beyond 2021. The recurring negative economic profit margins in recent years highlight potential issues with cost management, capital efficiency, or competitive pressures impacting overall value creation.