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.
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- Balance Sheet: Assets
- Cash Flow Statement
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Geographic Areas
- Enterprise Value to FCFF (EV/FCFF)
- Selected Financial Data since 2012
- Net Profit Margin since 2012
- Operating Profit Margin since 2012
- Price to Book Value (P/BV) since 2012
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Economic Profit
ServiceNow Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial performance, as measured by economic profit, demonstrates a fluctuating yet generally positive trend over the five-year period. Net operating profit after taxes (NOPAT) exhibits consistent growth, while invested capital increases substantially throughout the period. The cost of capital remains relatively stable. These factors combine to influence the observed economic profit.
- NOPAT Trend
- Net operating profit after taxes increased from US$1,108 million in 2021 to US$3,210 million in 2025. Growth was particularly strong between 2022 and 2023 (US$666 million increase) and between 2023 and 2024 (US$469 million increase). This indicates improving operational efficiency and profitability.
- Cost of Capital Stability
- The cost of capital remained consistently around 16.8% to 17.0% throughout the period. A slight increase is observed from 16.84% in 2021 to 17.03% in 2024, followed by a minor decrease to 16.90% in 2025. This relative stability suggests consistent risk assessment and financing conditions.
- Invested Capital Growth
- Invested capital experienced significant growth, rising from US$5,871 million in 2021 to US$16,322 million in 2025. The largest increase occurred between 2024 and 2025 (US$6,424 million), suggesting substantial investment in growth initiatives during that period.
- Economic Profit Analysis
- Economic profit initially decreased from US$120 million in 2021 to US$53 million in 2022, before increasing substantially to US$434 million in 2023 and US$598 million in 2024. A slight decrease to US$451 million is observed in 2025. The fluctuations in economic profit are influenced by the combined effect of NOPAT growth, the stable cost of capital, and the increasing invested capital. While NOPAT consistently increased, the larger increases in invested capital partially offset the gains in economic profit, particularly in the final year.
Overall, the period demonstrates a positive trajectory in NOPAT and economic profit, despite the significant growth in invested capital. The company appears to be effectively deploying capital, although the rate of economic profit growth is moderated by the increasing capital base.
Net Operating Profit after Taxes (NOPAT)
ServiceNow Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= × 21.00% =
8 Elimination of after taxes investment income.
Net operating profit after taxes (NOPAT) demonstrates a consistent upward trajectory over the observed period. While net income fluctuates, NOPAT exhibits a more stable and positive growth pattern, suggesting increasing operational efficiency and profitability. The period begins with NOPAT at US$1,108 million in 2021 and culminates in US$3,210 million by 2025.
- Overall Trend
- A clear increasing trend is evident in NOPAT from 2021 to 2025. The growth is not linear, with acceleration observed between 2022 and 2024. The largest absolute increase occurs between 2024 and 2025, adding US$927 million to NOPAT.
- Year-over-Year Changes
- From 2021 to 2022, NOPAT increased by US$40 million, representing a 3.6% growth rate. A more substantial increase of US$666 million (58.1%) occurred between 2022 and 2023. The growth rate continued with an increase of US$469 million (25.8%) from 2023 to 2024. Finally, NOPAT grew by US$927 million (40.6%) from 2024 to 2025.
- Relationship to Net Income
- While net income shows volatility, with a decrease from US$325 million in 2022 to US$1,425 million in 2024, NOPAT consistently increases. This divergence suggests that non-operating factors significantly influence net income, while core operational performance, as reflected in NOPAT, remains strong. The difference between NOPAT and net income indicates substantial interest expense and other non-operating costs.
The sustained growth in NOPAT indicates a strengthening ability to generate profit from core operations. This positive trend is a key indicator of financial health and suggests effective management of operational costs and revenue generation.
Cash Operating Taxes
ServiceNow Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
The provision for (benefit from) income taxes exhibits significant volatility over the observed period. Beginning at US$19 million in 2021, it increased substantially to US$74 million in 2022 before experiencing a large negative swing to a benefit of negative US$723 million in 2023. This was followed by a return to a provision of US$313 million in 2024 and a further increase to US$513 million in 2025.
In contrast, cash operating taxes demonstrate a consistent upward trend, albeit at a more moderate pace. The amount rose from US$59 million in 2021 to US$53 million in 2022, then increased to US$82 million in 2023, US$138 million in 2024, and finally reached US$180 million in 2025.
- Provision for Income Taxes Trend
- The substantial negative provision in 2023 warrants further investigation. This could be attributable to various factors, including changes in tax laws, utilization of net operating loss carryforwards, or adjustments related to deferred tax assets and liabilities. The subsequent positive provisions in 2024 and 2025 suggest a normalization of tax obligations following the 2023 event.
- Cash Operating Taxes Trend
- The steady increase in cash operating taxes aligns with the overall growth in the business, indicating a higher tax burden associated with increased profitability. The consistent upward movement suggests a predictable relationship between operating performance and cash tax outflows.
- Relationship Between Provision and Cash Taxes
- A divergence is apparent between the provision for income taxes and cash operating taxes. While the provision fluctuates significantly, cash taxes demonstrate a more stable, increasing pattern. This discrepancy highlights the impact of non-cash tax items included in the provision, such as deferred taxes, which do not represent immediate cash outflows. The large benefit in 2023 significantly reduced the effective tax rate, while cash taxes continued to rise, though at a slower rate than the provision would suggest.
The differing trends between the provision for income taxes and cash operating taxes suggest that the company’s reported tax expense is significantly influenced by non-cash accounting adjustments. A detailed analysis of the deferred tax components would be necessary to fully understand the drivers behind these variations.
Invested Capital
ServiceNow Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of available-for-sale debt securities.
The reported invested capital demonstrates a consistent upward trend over the five-year period. A review of the components reveals increases in both total reported debt & leases and stockholders’ equity, contributing to this overall growth.
- Total Reported Debt & Leases
- Total reported debt & leases exhibits a modest increase from US$2,214 million in 2021 to US$2,403 million in 2025. While generally increasing, a slight decrease is observed between 2022 and 2023, and again between 2023 and 2024, before resuming an upward trajectory in the final year.
- Stockholders’ Equity
- Stockholders’ equity shows substantial growth throughout the period, rising from US$3,695 million in 2021 to US$12,964 million in 2025. The rate of increase accelerates significantly from 2022 onwards, indicating a growing reinvestment of earnings or successful equity fundraising activities.
- Invested Capital
- Invested capital, calculated as the sum of total reported debt & leases and stockholders’ equity, increases steadily from US$5,871 million in 2021 to US$16,322 million in 2025. The growth in invested capital mirrors the growth in stockholders’ equity, as the latter component represents the larger portion of the total. The most significant increase in invested capital occurs between 2024 and 2025, reflecting the substantial rise in stockholders’ equity during that period.
The consistent expansion of invested capital suggests ongoing investment in the business and its operations. The increasing stockholders’ equity component indicates a strengthening financial position and potentially increased capacity for future growth initiatives.
Cost of Capital
ServiceNow Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term 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 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term 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 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term 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 Long-term debt. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term 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 Long-term debt. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
ServiceNow Inc., economic spread ratio calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| 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. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Economic profit. See details »
2 Invested capital. See details »
3 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The economic spread ratio demonstrates considerable fluctuation over the five-year period. Initial values indicate a moderate return on invested capital, followed by a period of expansion and subsequent moderation.
- Economic Spread Ratio Trend
- The economic spread ratio began at 2.04% in 2021. A substantial decrease was observed in 2022, falling to 0.82%. This was followed by a significant increase in 2023, reaching 5.33%, and a further increase in 2024 to 6.04%. The most recent year, 2025, shows a decline to 2.76%.
The economic spread ratio’s movement correlates with changes in economic profit and invested capital. The initial decline in the ratio in 2022 coincided with a decrease in economic profit, despite an increase in invested capital. The subsequent increases in the ratio from 2023 to 2024 were driven by a substantial rise in economic profit, outpacing the growth in invested capital. The decrease in 2025 is attributable to a reduction in economic profit, coupled with continued growth in invested capital.
- Relationship to Economic Profit
- Economic profit increased significantly from US$120 million in 2021 to US$434 million in 2023, peaking at US$598 million in 2024 before decreasing to US$451 million in 2025. The economic spread ratio generally follows this trend, suggesting a strong relationship between profitability and the return generated on invested capital.
- Relationship to Invested Capital
- Invested capital consistently increased throughout the period, rising from US$5,871 million in 2021 to US$16,322 million in 2025. While the economic spread ratio increased in 2023 and 2024, the growth in invested capital was not sufficient to offset the increases in economic profit, resulting in a higher ratio. The decline in the ratio in 2025, despite continued growth in invested capital, indicates that the increase in capital outpaced the maintenance of profitability.
The observed fluctuations in the economic spread ratio suggest a dynamic relationship between profitability, capital deployment, and the overall efficiency of capital utilization. The recent decline in the ratio warrants further investigation to determine the sustainability of future returns.
Economic Profit Margin
ServiceNow Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Revenues | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted revenues | ||||||
| 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. | ||||||
| International Business Machines Corp. | ||||||
| Intuit Inc. | ||||||
| Microsoft Corp. | ||||||
| Oracle Corp. | ||||||
| Palantir Technologies Inc. | ||||||
| Palo Alto Networks Inc. | ||||||
| Salesforce Inc. | ||||||
| Synopsys Inc. | ||||||
| Workday Inc. | ||||||
Based on: 10-K (reporting date: 2025-12-31), 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).
1 Economic profit. See details »
2 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
3 Click competitor name to see calculations.
The economic profit exhibited significant fluctuation over the five-year period. Initial values increased substantially before declining again. Adjusted revenues demonstrated consistent growth throughout the period. Consequently, the economic profit margin showed corresponding variability, peaking in 2024 before decreasing in the final year.
- Economic Profit
- Economic profit began at US$120 million in 2021, decreased to US$53 million in 2022, and then experienced a considerable increase to US$434 million in 2023. This upward trend continued into 2024, reaching US$598 million, before declining to US$451 million in 2025. The largest year-over-year change occurred between 2022 and 2023.
- Adjusted Revenues
- Adjusted revenues increased steadily from US$6,787 million in 2021 to US$14,798 million in 2025. Annual growth rates were consistently positive, indicating a sustained expansion of the revenue base. The increase from 2023 to 2024 was particularly notable.
- Economic Profit Margin
- The economic profit margin mirrored the fluctuations in economic profit. It started at 1.77% in 2021, decreased to 0.66% in 2022, and then rose sharply to 4.29% in 2023. The margin peaked at 4.97% in 2024 before falling to 3.05% in 2025. While the margin generally increased over the period, the decline in 2025 suggests a potential weakening in the relationship between profit and revenue.
The observed pattern suggests that while revenue growth has been consistent, the ability to translate that revenue into economic profit has varied. The peak margin in 2024 indicates a period of efficient profit generation, while the subsequent decline in 2025 warrants further investigation to determine the underlying causes.