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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- Common-Size Income Statement
- Analysis of Short-term (Operating) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Capital Asset Pricing Model (CAPM)
- Present Value of Free Cash Flow to Equity (FCFE)
- Operating Profit Margin since 2012
- Debt to Equity since 2012
- Price to Sales (P/S) since 2012
- Aggregate Accruals
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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 trajectory from 2021 to 2025 is characterized by aggressive expansion in both operational profitability and capital investment, although the resulting economic profit exhibits volatility due to the increasing cost of funding that expansion.
- Net Operating Profit After Taxes (NOPAT)
- A consistent and accelerating upward trend is observed in NOPAT, which grew from 1,108 million USD in 2021 to 3,210 million USD by 2025. This represents a substantial increase in core operational efficiency and earnings power over the five-year period.
- Invested Capital and Cost of Capital
- Invested capital has expanded significantly, rising from 5,871 million USD in 2021 to 16,322 million USD in 2025. The most pronounced increase occurred between 2024 and 2025, where capital grew by approximately 65%. Throughout this period, the cost of capital remained remarkably stable, fluctuating within a narrow range between 16.93% and 17.12%.
- Economic Profit Analysis
- Economic profit demonstrates a non-linear pattern. After an initial decline in 2022, the metric experienced strong growth, peaking at 588 million USD in 2024. However, a contraction is noted in 2025, with economic profit falling to 436 million USD. This decline occurs despite the record high NOPAT in 2025, indicating that the capital charge associated with the surge in invested capital exceeded the incremental gains in operating profit during that fiscal year.
In summary, while operational growth is robust, the massive scaling of the capital base in 2025 has created a temporary drag on economic value addition, as the return on the new investment has not yet fully offset its associated 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. | ||||||
| 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 financial performance from 2021 through 2025 indicates a period of significant volatility in value creation, characterized by an initial contraction, a strong recovery phase, and a subsequent decline in capital efficiency despite aggressive investment expansion.
- Economic Profit Trends
- Economic profit experienced a notable decline between 2021 and 2022, dropping from 114 million to 47 million. This was followed by a period of rapid growth, with profit increasing to 426 million in 2023 and peaking at 588 million in 2024. However, a reversal occurred in 2025, where economic profit decreased to 436 million, suggesting a reduction in the value generated above the cost of capital.
- Invested Capital Growth
- Invested capital demonstrated a consistent upward trajectory throughout the analyzed period. Capital grew steadily from 5,871 million in 2021 to 9,898 million by 2024. A substantial acceleration in investment occurred in 2025, with invested capital surging to 16,322 million, representing a significant expansion of the company's asset base.
- Economic Spread Ratio Analysis
- The economic spread ratio reflects the efficiency of capital deployment. After reaching a low of 0.73% in 2022, the ratio improved sharply to 5.24% in 2023 and reached a peak of 5.94% in 2024, indicating optimal alignment between returns and the cost of capital. In 2025, the ratio contracted to 2.67%. This decline, occurring simultaneously with the largest increase in invested capital, suggests that the recent capital expenditures have not yet yielded proportional economic returns, thereby compressing the spread.
Overall, the data reveals a divergence in 2025; while the company significantly expanded its invested capital base, the efficiency of that capital—as measured by the economic spread ratio—and the absolute economic profit both declined, indicating a transition period of diminishing marginal returns on new investments.
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. | ||||||
| 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 financial performance from 2021 to 2025 demonstrates a consistent expansion in adjusted revenues paired with significant volatility in economic profit and the corresponding economic profit margin. While top-line growth remains steady, the company's ability to generate value above its cost of capital has followed a non-linear trajectory.
- Adjusted Revenue Growth
- A sustained upward trend is observed in adjusted revenues, which increased from US$ 6,787 million in 2021 to US$ 14,798 million by 2025. This indicates a continuous expansion of the operational scale over the analyzed period.
- Economic Profit Volatility
- Economic profit exhibited substantial fluctuations, beginning with a decline from US$ 114 million in 2021 to US$ 47 million in 2022. A sharp recovery followed, with profit accelerating to a peak of US$ 588 million in 2024, before experiencing a reduction to US$ 436 million in 2025.
- Economic Profit Margin Trends
- The economic profit margin mirrored the volatility of absolute economic profit. After reaching a low of 0.59% in 2022, the margin expanded significantly to a peak of 4.89% in 2024. By 2025, the margin contracted to 2.94%, indicating that the growth in adjusted revenues in the final year did not translate into a proportional increase in economic value creation.