Economic Value Added (EVA)
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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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- Statement of Comprehensive Income
- Common-Size Balance Sheet: Assets
- Analysis of Liquidity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Common Stock Valuation Ratios
- Enterprise Value (EV)
- Price to FCFE (P/FCFE)
- Current Ratio since 2012
- Analysis of Debt
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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 produce varying levels of economic profit.
- NOPAT Trend
- Net operating profit after taxes shows a steady increase from US$1,108 million in 2021 to US$3,210 million in 2025. The growth rate accelerates in later years, with a significant jump between 2022 and 2023, and again between 2023 and 2024. This indicates improving operational efficiency and profitability.
- Cost of Capital Stability
- The cost of capital remains consistently around 16.8% to 17.0% throughout the period. A slight increase is observed from 2021 to 2023, followed by a minor decrease in 2025. This relative stability suggests consistent risk assessment and financing conditions.
- Invested Capital Growth
- Invested capital experiences substantial growth, increasing from US$5,871 million in 2021 to US$16,322 million in 2025. This growth is particularly pronounced between 2023 and 2025, suggesting significant investments in operations or acquisitions. The increasing invested capital base requires higher NOPAT to maintain economic profitability.
- Economic Profit Analysis
- Economic profit initially declines from US$120 million in 2021 to US$54 million in 2022, before increasing significantly to US$434 million in 2023 and US$598 million in 2024. While remaining positive, economic profit decreases slightly to US$451 million in 2025. The fluctuations in economic profit are influenced by the combined effect of NOPAT growth, the stable cost of capital, and the substantial increase in invested capital. Despite the increase in invested capital, the growth in NOPAT has largely been sufficient to maintain positive economic profit.
Overall, the period demonstrates a positive trajectory in operational profitability, coupled with significant capital investment. While economic profit fluctuates, it remains positive throughout the period, indicating that the company is generating returns exceeding its cost of capital.
Net Operating Profit after Taxes (NOPAT)
ServiceNow Inc., NOPAT calculation
US$ 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 exhibited considerable fluctuation over the five-year period. Initial values were relatively modest, followed by a substantial increase, and then a subsequent decline. Economic profit demonstrated a similar pattern of volatility, though with a longer-term upward trajectory before a recent decrease. Invested capital consistently increased throughout the period, reflecting ongoing growth in the company’s capital base.
- Economic Spread Ratio
- The economic spread ratio began at 2.04% in 2021. It decreased significantly to 0.83% in 2022, indicating a reduced ability to generate returns above the cost of capital. A strong recovery occurred in 2023, with the ratio rising to 5.33%, suggesting improved profitability relative to invested capital. This positive trend continued into 2024, reaching a peak of 6.04%. However, the ratio declined in 2025 to 2.76%, signaling a potential weakening in the company’s ability to generate excess returns despite continued investment.
- Economic Profit
- Economic profit started at US$120 million in 2021. It experienced a decrease in 2022, falling to US$54 million. A substantial increase was observed in 2023, with economic profit reaching US$434 million. Further growth occurred in 2024, reaching US$598 million, representing the highest value in the observed period. In 2025, economic profit decreased to US$451 million, despite the continued growth in invested capital.
- Invested Capital
- Invested capital demonstrated a consistent upward trend throughout the period. It increased from US$5,871 million in 2021 to US$6,490 million in 2022, US$8,131 million in 2023, US$9,898 million in 2024, and reached US$16,322 million in 2025. This consistent growth suggests ongoing investment in the business, potentially driving future expansion, but also requiring higher levels of economic profit to maintain a consistent economic spread.
The divergence between the increasing invested capital and the fluctuating economic spread ratio and economic profit in the later years warrants further investigation. While the company continues to invest, its ability to generate returns above the cost of capital appears to be becoming less consistent.
Economic Profit Margin
ServiceNow Inc., economic profit margin calculation, comparison to benchmarks
| Dec 31, 2025 | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ 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 considerable fluctuation over the five-year period. Initial values demonstrated a decrease followed by substantial growth, culminating in a subsequent decline. Adjusted revenues consistently increased throughout the period, indicating overall business expansion. The economic profit margin mirrored the trends in economic profit, though expressed as a percentage of revenue, providing a standardized measure of profitability relative to scale.
- Economic Profit
- Economic profit began at US$120 million in 2021, decreased to US$54 million in 2022, and then experienced significant growth, reaching US$434 million in 2023 and peaking at US$598 million in 2024. A decrease to US$451 million was observed in 2025. This suggests periods of both strong and weaker value creation.
- Adjusted Revenues
- Adjusted revenues increased steadily from US$6,787 million in 2021 to US$14,798 million in 2025. This consistent growth indicates a positive trend in sales and overall business activity. The rate of revenue increase appears relatively stable year-over-year.
- Economic Profit Margin
- The economic profit margin began at 1.77% in 2021, decreased to 0.66% in 2022, then rose significantly to 4.29% in 2023 and further to 4.97% in 2024. The margin decreased to 3.05% in 2025. This indicates that while revenues grew consistently, the ability to translate those revenues into economic profit varied considerably. The peak margin in 2024 suggests a period of particularly efficient value creation, while the 2025 decline warrants further investigation.
The divergence between revenue growth and economic profit margin suggests that factors beyond revenue volume, such as cost of capital or operational efficiency, significantly impacted value creation. The substantial increase in economic profit in 2023 and 2024, despite consistent revenue growth, indicates improved profitability. The subsequent decline in economic profit margin in 2025, despite continued revenue growth, suggests potential challenges in maintaining that level of efficiency.