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
Verizon Communications 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
= 25,872 – 7.55% × 329,613 = 997
The financial trajectory between 2021 and 2025 is characterized by significant volatility in operational profitability and a consistent expansion of the capital base. While a recovery in net operating profit after taxes was observed following a sharp decline in 2023, the ability to generate economic profit has remained constrained relative to the 2021 baseline.
- Net Operating Profit After Taxes (NOPAT)
- A downward trend occurred between 2021 and 2023, with NOPAT falling from 29,903 million US$ to a period low of 19,450 million US$. A subsequent recovery phase is evident from 2024 onward, with figures rising to 25,872 million US$ by 2025. Despite this rebound, the 2025 profit levels remain below those recorded in 2021.
- Invested Capital and Cost of Capital
- Invested capital demonstrated a steady and uninterrupted increase throughout the period, growing from 290,004 million US$ in 2021 to 329,613 million US$ in 2025. Concurrently, the cost of capital remained relatively stable, fluctuating within a narrow band between 7.20% and 7.55%.
- Economic Profit Performance
- Economic profit experienced a severe contraction, transitioning from a surplus of 8,262 million US$ in 2021 to a deficit of -2,833 million US$ in 2023, indicating a period of value destruction where NOPAT failed to cover the cost of invested capital. Although the company returned to positive economic profit in 2024 and 2025, a secondary decline is noted in the final year. In 2025, economic profit decreased to 997 million US$ despite an increase in NOPAT; this suggests that the rapid expansion of invested capital and a marginal increase in the cost of capital outpaced the growth in operating profits.
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Net Operating Profit after Taxes (NOPAT)
Verizon Communications 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 allowance for credit losses.
3 Addition of increase (decrease) in equity equivalents to net income attributable to Verizon.
4 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 23,493 × 4.30% = 1,010
5 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 7,704 × 21.00% = 1,618
6 Addition of after taxes interest expense to net income attributable to Verizon.
7 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 329 × 21.00% = 69
8 Elimination of after taxes investment income.
Net income attributable to Verizon and Net Operating Profit After Taxes (NOPAT) both exhibited fluctuations over the five-year period. NOPAT generally tracked above net income, as expected, reflecting the adjustments made to arrive at an operating profit figure. A notable decline in both metrics occurred between 2021 and 2023, followed by recoveries in subsequent years.
- NOPAT Trend
- NOPAT decreased from US$29,903 million in 2021 to US$19,450 million in 2023, representing a substantial reduction. This decline suggests a weakening in core operational profitability during this period. However, NOPAT rebounded in 2024 to US$24,675 million and continued to increase to US$25,872 million in 2025, indicating a recovery in operating performance. The 2024 and 2025 values, while improved, did not reach the levels observed in 2021.
- Relationship between NOPAT and Net Income
- The difference between NOPAT and net income attributable to Verizon varied across the period. In 2021, NOPAT exceeded net income by approximately US$7,838 million. This difference narrowed in 2022 to around US$6,783 million. The gap widened significantly in 2023, with NOPAT exceeding net income by US$7,836 million, likely due to the more pronounced decline in net income. In 2024, the difference was approximately US$7,129 million, and in 2025, it was around US$8,698 million. These variations suggest changes in non-operating items or tax impacts influencing the disparity between the two profit measures.
The recovery in NOPAT during 2024 and 2025 is a positive sign, but the levels remain below the 2021 peak. Further investigation would be required to understand the drivers behind the initial decline and the subsequent recovery in NOPAT, including analysis of revenue growth, operating expenses, and tax rates.
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Cash Operating Taxes
Verizon Communications Inc., cash operating taxes calculation
US$ 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 income tax provision and cash operating taxes exhibited distinct trends over the five-year period. While the income tax provision generally decreased then stabilized, cash operating taxes demonstrated more volatility.
- Income Tax Provision
- The income tax provision decreased from US$6,802 million in 2021 to US$6,523 million in 2022, representing a 4.1% decline. A more substantial decrease was observed in 2023, falling to US$4,892 million. This trend reversed slightly in 2024, with the provision increasing to US$5,030 million, and continued with a further increase to US$5,064 million in 2025. Overall, the income tax provision shows an initial decline followed by a period of relative stability.
- Cash Operating Taxes
- Cash operating taxes increased significantly from US$3,436 million in 2021 to US$4,451 million in 2022, a rise of 29.6%. This was followed by a decrease to US$3,774 million in 2023. A substantial increase occurred in 2024, reaching US$5,750 million, before decreasing to US$4,273 million in 2025. The fluctuations in cash operating taxes suggest potential impacts from changes in tax laws, deferred tax asset realization, or timing differences between book and tax accounting.
The divergence between the income tax provision and cash operating taxes is notable. The income tax provision, representing the accounting expense, decreased initially and then stabilized, while cash operating taxes experienced larger swings. This difference suggests that non-cash components of the income tax provision, such as deferred taxes, play a significant role in the overall tax expense recognition. The increase in cash operating taxes in 2024, followed by a decrease in 2025, warrants further investigation to understand the underlying drivers of these changes.
- Relationship between Items
- In 2021, cash operating taxes were approximately 50.5% of the income tax provision. This percentage increased to 68.2% in 2022, decreased to 77.1% in 2023, rose to 114.3% in 2024, and then decreased to 84.3% in 2025. These shifts in the ratio indicate a changing relationship between reported tax expense and actual cash outflows for taxes.
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Invested Capital
Verizon Communications Inc., invested capital calculation (financing approach)
US$ 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 allowance for doubtful accounts receivable.
4 Addition of equity equivalents to equity attributable to Verizon.
5 Removal of accumulated other comprehensive income.
6 Subtraction of work in progress.
7 Subtraction of marketable securities.
The reported invested capital exhibited an overall increasing trend between December 31, 2021, and December 31, 2025. However, this progression was not consistently upward, with some fluctuations observed during the period.
- Invested Capital Trend
- Invested capital began at US$290,004 million in 2021 and increased to US$301,478 million in 2022, representing a growth of approximately 3.9%. A further, albeit smaller, increase was noted in 2023, reaching US$304,400 million. The upward trend continued in 2024, with invested capital reaching US$307,881 million. A more substantial increase occurred between 2024 and 2025, with invested capital rising to US$329,613 million, marking the highest value within the observed timeframe.
- Debt & Leases
- Total reported debt and leases generally decreased from US$177,930 million in 2021 to US$168,357 million in 2024. However, an increase was observed in 2025, with debt and leases rising to US$181,643 million. This suggests a potential shift in financing strategy or increased borrowing activity towards the end of the period.
- Equity Attributable to Verizon
- Equity attributable to Verizon demonstrated consistent growth throughout the period. Starting at US$81,790 million in 2021, equity increased to US$91,144 million in 2022, US$92,430 million in 2023, US$99,237 million in 2024, and ultimately reached US$104,460 million in 2025. This consistent increase in equity likely contributed to the overall growth in invested capital.
The combined effect of fluctuations in debt and consistent growth in equity contributed to the overall trend in invested capital. The significant increase in invested capital between 2024 and 2025 warrants further investigation to determine the underlying drivers, potentially including significant capital expenditures or acquisitions.
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Cost of Capital
Verizon Communications Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 206,371) | 206,371) | ÷ | 386,679) | = | 0.53 | 0.53 | × | 9.07% | = | 4.84% | ||
| Short-term and long-term debt, including finance leases3 | 156,815) | 156,815) | ÷ | 386,679) | = | 0.41 | 0.41 | × | 7.81% × (1 – 21.00%) | = | 2.50% | ||
| Operating lease liability4 | 23,493) | 23,493) | ÷ | 386,679) | = | 0.06 | 0.06 | × | 4.30% × (1 – 21.00%) | = | 0.21% | ||
| Total: | 386,679) | 1.00 | 7.55% | ||||||||||
Based on: 10-K (reporting date: 2025-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 170,619) | 170,619) | ÷ | 334,327) | = | 0.51 | 0.51 | × | 9.07% | = | 4.63% | ||
| Short-term and long-term debt, including finance leases3 | 139,365) | 139,365) | ÷ | 334,327) | = | 0.42 | 0.42 | × | 7.63% × (1 – 21.00%) | = | 2.51% | ||
| Operating lease liability4 | 24,343) | 24,343) | ÷ | 334,327) | = | 0.07 | 0.07 | × | 4.10% × (1 – 21.00%) | = | 0.24% | ||
| Total: | 334,327) | 1.00 | 7.37% | ||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 166,994) | 166,994) | ÷ | 338,963) | = | 0.49 | 0.49 | × | 9.07% | = | 4.47% | ||
| Short-term and long-term debt, including finance leases3 | 147,701) | 147,701) | ÷ | 338,963) | = | 0.44 | 0.44 | × | 7.70% × (1 – 21.00%) | = | 2.65% | ||
| Operating lease liability4 | 24,268) | 24,268) | ÷ | 338,963) | = | 0.07 | 0.07 | × | 3.60% × (1 – 21.00%) | = | 0.20% | ||
| Total: | 338,963) | 1.00 | 7.32% | ||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 168,037) | 168,037) | ÷ | 334,502) | = | 0.50 | 0.50 | × | 9.07% | = | 4.55% | ||
| Short-term and long-term debt, including finance leases3 | 140,773) | 140,773) | ÷ | 334,502) | = | 0.42 | 0.42 | × | 7.38% × (1 – 21.00%) | = | 2.45% | ||
| Operating lease liability4 | 25,692) | 25,692) | ÷ | 334,502) | = | 0.08 | 0.08 | × | 3.20% × (1 – 21.00%) | = | 0.19% | ||
| Total: | 334,502) | 1.00 | 7.20% | ||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 223,828) | 223,828) | ÷ | 421,420) | = | 0.53 | 0.53 | × | 9.07% | = | 4.81% | ||
| Short-term and long-term debt, including finance leases3 | 170,530) | 170,530) | ÷ | 421,420) | = | 0.40 | 0.40 | × | 7.79% × (1 – 21.00%) | = | 2.49% | ||
| Operating lease liability4 | 27,062) | 27,062) | ÷ | 421,420) | = | 0.06 | 0.06 | × | 3.10% × (1 – 21.00%) | = | 0.16% | ||
| Total: | 421,420) | 1.00 | 7.46% | ||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Short-term and long-term debt, including finance leases. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Verizon Communications 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 | 997) | 1,969) | (2,833) | 6,328) | 8,262) | |
| Invested capital2 | 329,613) | 307,881) | 304,400) | 301,478) | 290,004) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 0.30% | 0.64% | -0.93% | 2.10% | 2.85% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| AT&T Inc. | 1.03% | -2.66% | -0.44% | -7.26% | 0.32% | |
| T-Mobile US Inc. | 1.26% | 1.31% | -0.31% | -4.08% | -4.01% | |
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 × 997 ÷ 329,613 = 0.30%
4 Click competitor name to see calculations.
The financial performance regarding economic value generation exhibits significant volatility between 2021 and 2025. While the period began with strong positive economic profit and a healthy spread, a substantial contraction occurred by 2023, followed by a partial recovery and subsequent compression in the final year.
- Economic Profit Trends
- Economic profit peaked in 2021 at US$ 8,262 million before experiencing a steady decline. A critical downturn occurred in 2023, where the figure dropped to a negative US$ 2,833 million, indicating that the return on invested capital fell below the company's cost of capital. Although a recovery was observed in 2024 with a return to positive territory at US$ 1,969 million, this momentum decelerated in 2025, with economic profit decreasing to US$ 997 million.
- Invested Capital Growth
- A consistent upward trajectory is observed in invested capital over the five-year duration. Starting at US$ 290,004 million in 2021, the capital base expanded steadily each year, reaching US$ 329,613 million by 2025. This indicates a continuous increase in the total resources deployed to generate earnings.
- Economic Spread Ratio Analysis
- The economic spread ratio mirrors the fluctuations seen in economic profit, reflecting the efficiency of the invested capital. The ratio declined from a high of 2.85% in 2021 to a low of -0.93% in 2023. The subsequent rise to 0.64% in 2024 suggests a temporary stabilization in value creation, but the further decline to 0.30% in 2025 indicates an narrowing gap between the return on capital and the cost of capital.
Overall, the data reveals a disconnect between the growth of invested capital and the generation of economic profit. While the capital base expanded linearly, the economic spread ratio contracted significantly, suggesting that the incremental investments made between 2021 and 2025 did not yield commensurate returns relative to the cost of capital.
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Economic Profit Margin
Verizon Communications 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 | 997) | 1,969) | (2,833) | 6,328) | 8,262) | |
| Operating revenues | 138,191) | 134,788) | 133,974) | 136,835) | 133,613) | |
| Performance Ratio | ||||||
| Economic profit margin2 | 0.72% | 1.46% | -2.11% | 4.62% | 6.18% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| AT&T Inc. | 2.76% | -6.83% | -1.17% | -18.61% | 0.83% | |
| T-Mobile US Inc. | 2.81% | 3.01% | -0.73% | -9.56% | -9.23% | |
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 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Operating revenues
= 100 × 997 ÷ 138,191 = 0.72%
3 Click competitor name to see calculations.
The economic profit margin exhibits significant volatility over the analyzed five-year period, characterized by a sharp contraction leading into 2023 and a subsequent, unstable recovery. While operating revenues remained relatively stagnant, the capacity to generate value in excess of the cost of capital fluctuated substantially.
- Economic Profit Trajectory
- A pronounced downward trend is observed between 2021 and 2023, with economic profit falling from US$ 8,262 million to a deficit of US$ 2,833 million. Although a recovery occurred in 2024, returning the figure to a positive US$ 1,969 million, a secondary decline followed in 2025, with economic profit ending at US$ 997 million.
- Operating Revenue Stability
- Operating revenues demonstrated relative consistency, maintaining a range between US$ 133,613 million and US$ 138,191 million. The lack of significant growth in the top line indicates that the volatility in economic profit was not driven by revenue collapse, but rather by fluctuations in operating expenses or the cost of capital employed.
- Economic Profit Margin Analysis
- The economic profit margin peaked at 6.18% in 2021 before descending to a trough of -2.11% in 2023. While the margin returned to positive territory in 2024 at 1.46%, it underwent further compression to 0.72% in 2025. This trend suggests a diminishing ability to translate operating revenues into economic value over the long term.
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