When it comes to some of the most valuable companies in the world, there are often several factors that set them apart from the rest. Among the most important is high labor productivity. One of the interesting indicators illustrating labor productivity is income per employee. Extremely high revenue per employee demonstrates two key attributes of a great business that enable high productivity: scalability and strong management.
Scalability means that a business can increase the revenue and profits it generates out of proportion to the increase in headcount and other costs. This is how companies achieve higher profits. Effective use of technologies and products that are superior to competitors can help achieve scale. High revenue per employee shows that managers are using their staff well. They assign them roles that maximize their skills and productivity. As employees maximize their productivity, they also earn more income.
Below I will describe three firms in detail. Over the last 12 months, they generated over $1 million in revenue per employee, demonstrating impressive productivity.
Visa: Using Scale to Reduce Marketing Costs
Visa today
Visa
- 52 week range
- $252.70
▼
$331.09
- Dividend yield
- 0.71%
- P/E ratio
- 33.94
- Target price
- $334.58
Visa New York Stock Exchange: V. The company had approximately 31,600 employees in fiscal 2024. Over the past 12 months, Visa generated nearly $36 billion in revenue. This would result in revenue per employee of $1.1 million. The scalability of Visa’s business is evident in its growth. Adjusted earnings per share (EPS) grew faster than the number of employees. The company employed 11,300 people in 2015 and reported adjusted earnings per share of $2.62. For fiscal 2024, the company adjusted earnings per share at $10.05. Adjusted EPS growth was 262%, while headcount growth was only 180%. Over the past 10 years, the company has grown its profits by far more than its headcount.
Duopolistic position of Visa and Mastercard New York Stock Exchange: Massachusetts in the US, payment processing is helping it scale. New businesses probably already know that Visa and Mastercard are their only options. That way, Visa doesn’t have to hire as many salespeople to convince customers to choose them over many other options. Spending on advertising also becomes less necessary as a payment network grows, as most people will naturally become aware of their brand over time. This is true: Visa’s marketing expenses have increased by 79% since 2015, compared to a 158% increase in total revenue.
Broadcom: Management impresses with VMWare integration
Broadcom today
As of 4:00 pm ET
- 52 week range
- $117.43
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$251.88
- Dividend yield
- 0.96%
- P/E ratio
- 199.59
- Target price
- $225.83
Chip giant Broadcom NASDAQ: AVGO also generates huge sales volumes relative to the number of employees. Broadcom’s 37,000 employees helped the company generate nearly $52 billion in revenue over the past 12 months. This equates to almost 1.4 million in revenue per employee. Before VMware’s massive acquisition, revenue per employee was even higher. Before VMware’s 17,000 employees joined, it was worth nearly $1.8 million.
However, the VMware merger shows how Broadcom is improving efficiency. Before the merger, VMware had approximately 38,000 employees. However, Broadcom expects to continue to grow VMware-related revenues despite retaining less than half of VMware’s employees. This is exactly what he does. VMware’s annual order value grew 8% from Q3 to Q4 2024. Management expects this figure to increase to 10% in the first quarter of 2025. Rising revenue while reducing headcount sharply boosts VMware’s profits. Since the acquisition, Broadcom has more than doubled VMware’s operating profit, from 30% to 70%. This is a testament to management’s ability to integrate the business into Broadcom.
Apple: Profits have grown more than 10 times faster than headcount since 2019
Apple today
As of 4:00 pm ET
- 52 week range
- $164.07
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$260.10
- Dividend yield
- 0.45%
- P/E ratio
- 36.64
- Target price
- $238.05
Apple NASDAQ:AAPL Revenue per employee significantly exceeds that of the other two firms at $2.4 million. Over the past 12 months, Apple earned $391 billion in revenue from a workforce of 164,000. Apple has demonstrated its ability to scale, growing its revenue and adjusting earnings per share much faster than its headcount. Apple had 137,000 employees in 2019, an increase of 20% since then. However, during this time, revenue increased by 50%. Full-year adjusted earnings per share rose from $2.97 to $6.75, an increase of more than 127%.
Particularly strong drivers of the company’s revenue and profit growth were its services segment and regions outside of America. Annual service revenue has increased by 108% since 2019. Gross margin in the services segment also increased sharply to 74% from 64% in 2019. Revenue outside the Americas grew 56% during the period, significantly outpacing the 43% increase in Americas revenue.
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