By Aldo Santamaria | August 8, 2026
EBITDA vs. NOI
Choosing between the financial metrics Earnings Before Income Tax Depreciation Amortization (EBITDA ) and Net Operating Income (NOI) s a bit like choosing between parsley and cilantro: similar looking, but with a meaningful impact on the outcome.
If you’ve taken any project finance course, you’ve probably already encountered the concepts of EBITDA and NOI. Both are measures of operating profitability used in valuation, and, they are similar.
Comparing them is a bit like distingishing parsley and cilantro: I’ve personally confused these herbs many times at the grocery store. But while choosing one over the other may not matter every time, sometimes they can make or break a recipe.
EBITDA can be thought of as a measure of a company’s operating profitability. NOI, is also a measure of operating performance.
Moreover, these two concepts are often confused because both start with revenue and subtract operating expenses.
In simplified form:
- EBITDA = Revenue – Operating Expenses (including corporate overhead)
- NOI = Revenue – Operating Expenses (excluding corporate overhead)
- EBITDA = NOI – Corporate Overhead
The distinction between EBITDA and NOI lies in corporate overhead, which encompasses costs that support the business but are not incurred directly at the asset or project level. This includes finance personnel, lawyers, accountants, HR professionals, executives, and other functions operating from a separate office or headquarters.
Corporate overhead includes activities that support the business but are not performed directly at the asset or project level.
Lets look at an example.
Assume an asset generates $100 million of revenue and incurs $40 million of operating expenses.
This produces $60 million of operating profit before considering corporate overhead.
Now assume the company incurs $5 million of corporate overhead costs.
In this scenario:
NOI = $60 million
EBITDA = $55 million
The difference is entirely attributable to corporate overhead.
Why EBITDA and NOI Matter in Project Finance
Project Finance is cashflow-based. Investors and lenders ultimately care about a project’s ability to generate cash and support financial obligations over time.
For this reason, it’s often useful to focus on a specific asset rather than the corporate organization that happens to own it.
This is where NOI becomes particularly relevant, as it excludes corporate overhead. Therefore, it provides a cleaner view of the performance of the asset itself, whether it is a wind project, solar farm, or even a data center.
NOI focuses on the operating performance of the asset itself rather than broader corporate activities
Final Thoughts: Parsley or Cilantro
These two metrics are measures of operating profitability and play important roles in financial modeling.
The main difference is that NOI focuses purely on the asset, while EBITDA includes corporate overhead costs associated with running the business.
So, just like parsley and cilantro, EBITDA and NOI look remarkably similar at first glance. It would be easy to confuse them at your local grocery shop.
But a small difference can have a significant impact when building a financial model.
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