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.
Economic Profit
ServiceNow Inc., economic profit 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 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
= 3,210 – 17.00% × 16,322 = 435
The financial performance from 2021 to 2025 exhibits a consistent expansion in operating profitability alongside a strategic increase in capital allocation. While net operating profit after taxes has grown steadily, the economic profit has experienced fluctuations, reflecting the dynamic interplay between operational gains and the cost of the capital employed.
- Net Operating Profit After Taxes (NOPAT)
- A strong and continuous upward trend is observed in NOPAT, which increased from 1,108 million US$ in 2021 to 3,210 million US$ in 2025. The most significant growth acceleration occurred between 2022 and 2023, indicating a substantial improvement in operational efficiency and revenue generation.
- Cost of Capital
- The cost of capital remained remarkably stable throughout the period, fluctuating within a narrow range between 16.94% and 17.13%. This consistency suggests a stable risk profile and a steady weighted average cost of capital over the five-year horizon.
- Invested Capital
- Invested capital shows a progressive increase, rising from 5,871 million US$ in 2021 to 16,322 million US$ in 2025. A significant surge in capital expenditure is evident in 2025, where invested capital grew by approximately 65% compared to 2024, suggesting aggressive expansion or strategic acquisitions.
- Economic Profit
- Economic profit demonstrated volatility, initially declining in 2022 before ascending to a peak of 588 million US$ in 2024. In 2025, a divergence is observed; despite achieving the highest NOPAT in the series, economic profit decreased to 435 million US$. This decline is attributable to the massive increase in invested capital, which raised the associated capital charge beyond the growth rate of the operating profit for that year.
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Net Operating Profit after Taxes (NOPAT)
ServiceNow Inc., NOPAT calculation
US$ 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
= 912 × 4.00% = 36
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 59 × 21.00% = 12
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
= 451 × 21.00% = 95
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$1,425 million in 2024, NOPAT consistently increases. This divergence suggests that non-operating factors significantly influence net income, while core operational performance, as reflected in NOPAT, remains strong. The difference between NOPAT and net income indicates substantial interest expense and other non-operating costs.
The sustained growth in NOPAT indicates a strengthening ability to generate profit from core operations. This positive trend is a key indicator of financial health and suggests effective management of operational costs and revenue generation.
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Cash Operating Taxes
ServiceNow Inc., cash operating taxes calculation
US$ 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$180 million in 2025.
- Provision for Income Taxes Trend
- The substantial negative provision in 2023 warrants further investigation. This could be attributable to various factors, including changes in tax laws, utilization of net operating loss carryforwards, or adjustments related to deferred tax assets and liabilities. The subsequent positive provisions in 2024 and 2025 suggest a normalization of tax obligations following the 2023 event.
- Cash Operating Taxes Trend
- The steady increase in cash operating taxes aligns with the overall growth in the business, indicating a higher tax burden associated with increased profitability. The consistent upward movement suggests a predictable relationship between operating performance and cash tax outflows.
- Relationship Between Provision and Cash Taxes
- A divergence is apparent between the provision for income taxes and cash operating taxes. While the provision fluctuates significantly, cash taxes demonstrate a more stable, increasing pattern. This discrepancy highlights the impact of non-cash tax items included in the provision, such as deferred taxes, which do not represent immediate cash outflows. The large benefit in 2023 significantly reduced the effective tax rate, while cash taxes continued to rise, though at a slower rate than the provision would suggest.
The differing trends between the provision for income taxes and cash operating taxes suggest that the company’s reported tax expense is significantly influenced by non-cash accounting adjustments. A detailed analysis of the deferred tax components would be necessary to fully understand the drivers behind these variations.
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Invested Capital
ServiceNow Inc., invested capital calculation (financing approach)
US$ 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$16,322 million in 2025. The growth in invested capital mirrors the growth in stockholders’ equity, as the latter component represents the larger portion of the total. The most significant increase in invested capital occurs between 2024 and 2025, reflecting the substantial rise in stockholders’ equity during that period.
The consistent expansion of invested capital suggests ongoing investment in the business and its operations. The increasing stockholders’ equity component indicates a strengthening financial position and potentially increased capacity for future growth initiatives.
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Cost of Capital
ServiceNow Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 122,100) | 122,100) | ÷ | 124,336) | = | 0.98 | 0.98 | × | 17.28% | = | 16.97% | ||
| Long-term debt3 | 1,324) | 1,324) | ÷ | 124,336) | = | 0.01 | 0.01 | × | 1.53% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 912) | 912) | ÷ | 124,336) | = | 0.01 | 0.01 | × | 4.00% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 124,336) | 1.00 | 17.00% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ 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 | 208,627) | 208,627) | ÷ | 210,663) | = | 0.99 | 0.99 | × | 17.28% | = | 17.11% | ||
| Long-term debt3 | 1,247) | 1,247) | ÷ | 210,663) | = | 0.01 | 0.01 | × | 1.53% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 789) | 789) | ÷ | 210,663) | = | 0.00 | 0.00 | × | 4.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 210,663) | 1.00 | 17.13% | ||||||||||
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 | 157,174) | 157,174) | ÷ | 159,206) | = | 0.99 | 0.99 | × | 17.28% | = | 17.06% | ||
| Long-term debt3 | 1,236) | 1,236) | ÷ | 159,206) | = | 0.01 | 0.01 | × | 1.53% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 796) | 796) | ÷ | 159,206) | = | 0.00 | 0.00 | × | 3.80% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 159,206) | 1.00 | 17.08% | ||||||||||
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 | 92,395) | 92,395) | ÷ | 94,285) | = | 0.98 | 0.98 | × | 17.28% | = | 16.93% | ||
| Long-term debt3 | 1,144) | 1,144) | ÷ | 94,285) | = | 0.01 | 0.01 | × | 1.53% × (1 – 21.00%) | = | 0.01% | ||
| Operating lease liability4 | 746) | 746) | ÷ | 94,285) | = | 0.01 | 0.01 | × | 3.50% × (1 – 21.00%) | = | 0.02% | ||
| Total: | 94,285) | 1.00 | 16.97% | ||||||||||
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 | 112,170) | 112,170) | ÷ | 114,648) | = | 0.98 | 0.98 | × | 17.28% | = | 16.90% | ||
| Long-term debt3 | 1,840) | 1,840) | ÷ | 114,648) | = | 0.02 | 0.02 | × | 1.72% × (1 – 21.00%) | = | 0.02% | ||
| Operating lease liability4 | 638) | 638) | ÷ | 114,648) | = | 0.01 | 0.01 | × | 3.00% × (1 – 21.00%) | = | 0.01% | ||
| Total: | 114,648) | 1.00 | 16.94% | ||||||||||
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 | 435) | 588) | 426) | 47) | 114) | |
| Invested capital2 | 16,322) | 9,898) | 8,131) | 6,490) | 5,871) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 2.66% | 5.94% | 5.23% | 0.73% | 1.94% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Accenture PLC | 0.70% | 0.34% | 1.12% | 3.99% | 5.81% | |
| Adobe Inc. | 13.20% | 0.92% | 1.09% | 6.58% | 8.97% | |
| AppLovin Corp. | 28.93% | 1.21% | -20.00% | -26.37% | -29.58% | |
| Cadence Design Systems Inc. | -1.28% | -2.87% | 7.18% | 6.59% | 6.80% | |
| Datadog Inc. | -8.74% | -9.43% | -5.95% | -11.70% | -3.88% | |
| International Business Machines Corp. | -0.82% | -7.67% | -3.61% | -11.36% | -6.21% | |
| Intuit Inc. | -2.91% | -6.58% | -8.63% | -7.52% | 0.11% | |
| Microsoft Corp. | 5.63% | 7.51% | 10.56% | 18.54% | 27.58% | |
| Oracle Corp. | -7.90% | -7.76% | -8.56% | -7.56% | 0.65% | |
| Palantir Technologies Inc. | 41.88% | -12.04% | -8.76% | -32.50% | -39.96% | |
| Palo Alto Networks Inc. | -3.82% | 5.37% | 11.50% | 3.53% | -5.17% | |
| Salesforce Inc. | -12.37% | -14.18% | -17.63% | -14.50% | -12.36% | |
| Synopsys Inc. | -12.39% | -8.14% | -7.44% | -0.84% | -6.86% | |
| Workday Inc. | -11.52% | -12.93% | -19.15% | -13.98% | -19.23% | |
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 × 435 ÷ 16,322 = 2.66%
4 Click competitor name to see calculations.
The economic spread ratio exhibits significant volatility over the analyzed five-year period, reflecting fluctuations in the efficiency of value generation relative to the cost of invested capital.
- Economic Profit Trends
- Economic profit demonstrated an inconsistent trajectory, characterized by a sharp decline in 2022 to 47 million USD. This was followed by a period of robust growth, peaking at 588 million USD in 2024. A subsequent contraction occurred in 2025, with economic profit decreasing to 435 million USD.
- Invested Capital Growth
- A consistent upward trend in invested capital is observed from 2021 through 2024, rising from 5,871 million USD to 9,898 million USD. A substantial acceleration in capital deployment occurred in 2025, where invested capital increased sharply to 16,322 million USD.
- Economic Spread Ratio Analysis
- The economic spread ratio followed a cyclical pattern, dropping to a low of 0.73% in 2022 before expanding to a peak of 5.94% in 2024. In 2025, the ratio contracted to 2.66%. This decline is driven by the disproportionate increase in invested capital relative to the decrease in economic profit, suggesting that the expanded capital base in 2025 has not yet translated into a proportional increase in economic value added.
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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 | 435) | 588) | 426) | 47) | 114) | |
| Revenues | 13,278) | 10,984) | 8,971) | 7,245) | 5,896) | |
| Add: Increase (decrease) in deferred revenue | 1,520) | 1,048) | 1,136) | 831) | 891) | |
| Adjusted revenues | 14,798) | 12,032) | 10,107) | 8,076) | 6,787) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 2.94% | 4.88% | 4.21% | 0.58% | 1.68% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Accenture PLC | 0.45% | 0.19% | 0.58% | 1.92% | 2.98% | |
| Adobe Inc. | 11.94% | 1.04% | 1.37% | 7.67% | 11.17% | |
| AppLovin Corp. | 29.73% | 1.17% | -27.38% | -49.38% | -59.23% | |
| Cadence Design Systems Inc. | -1.92% | -4.40% | 7.15% | 6.57% | 6.91% | |
| Datadog Inc. | -5.18% | -8.56% | -3.72% | -8.10% | -3.08% | |
| International Business Machines Corp. | -1.46% | -13.55% | -6.43% | -19.67% | -11.82% | |
| Intuit Inc. | -3.75% | -10.11% | -14.13% | -14.48% | 0.14% | |
| Microsoft Corp. | 8.39% | 10.50% | 12.02% | 17.77% | 22.89% | |
| Oracle Corp. | -15.82% | -14.76% | -16.57% | -13.87% | 1.29% | |
| Palantir Technologies Inc. | 21.69% | -10.44% | -4.70% | -54.53% | -65.82% | |
| Palo Alto Networks Inc. | -4.52% | 5.70% | 11.42% | 4.11% | -6.95% | |
| Salesforce Inc. | -26.71% | -32.78% | -44.58% | -40.27% | -28.34% | |
| Synopsys Inc. | -72.30% | -13.64% | -10.49% | -1.18% | -10.92% | |
| Workday Inc. | -12.24% | -14.39% | -23.49% | -18.95% | -25.09% | |
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 × 435 ÷ 14,798 = 2.94%
3 Click competitor name to see calculations.
The financial performance from 2021 to 2025 is characterized by a consistent expansion in adjusted revenues contrasted with significant volatility in economic profit and its associated margin. While the top-line growth remained steady and positive throughout the period, the ability to generate economic value above the cost of capital fluctuated considerably.
- Adjusted Revenue Growth
- A sustained upward trajectory is observed in adjusted revenues, which grew from 6,787 million USD in 2021 to 14,798 million USD in 2025. This represents a continuous scaling of operations, with the most significant absolute increases occurring between 2023 and 2025.
- Economic Profit Fluctuations
- Economic profit exhibited a non-linear trend. After an initial decline from 114 million USD in 2021 to 47 million USD in 2022, a period of rapid acceleration occurred, peaking at 588 million USD in 2024. However, this momentum reversed in 2025, with economic profit retreating to 435 million USD.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute profit figures. The margin reached a trough of 0.58% in 2022, indicating a period where value creation was nearly offset by the cost of capital. A subsequent recovery led to a peak margin of 4.88% in 2024. The decline to 2.94% in 2025 suggests that despite continued revenue growth, the efficiency of capital utilization or operational profitability decreased relative to previous years.
In summary, the period was marked by strong revenue scaling, but the relationship between growth and economic value creation was inconsistent. The sharp expansion in the economic profit margin between 2022 and 2024 indicates a phase of high capital efficiency, while the 2025 contraction highlights a divergence between revenue growth and economic profit.
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