Revenue vs. Earnings: An Overview

Revenue and earnings are two of the most closely watched numbers in a company's quarterly and annual financial statements.

• Revenue is the total income earned by a company for selling its products and services.
• Earnings are revenues minus all expenses associated with operating the business.

Both of these numbers can tell investors and analysts a good deal about a company's profitability and help them evaluate a company's investment potential.

Revenue

Companies usually report their revenue on a quarterly and annual basis in their financial statements. A company's financial statement includes its balance sheet, income statement, and cash flow statement.

Revenue is the income generated before expenses 🔜are deducted. It is the total amount of money earned by a company for selling its goods and services in the period being reported.

Revenue is called the top line because it sits at the top of a company's income statement, which also refers to a company's 澳洲幸运5开奖号码历史查询:gross sales. Revenue is also called net sales for some companies since net sales include any returns of merchandise by customers.

Many analysts use the terms revenue and sales interchangeably.

Earnings

Earnings reflect the 澳洲幸运5开奖号码历史查询:bottom line on the income statement and are the profit a company has earned for the period being reported. The e⛎arnings figure is listed as net income on the income statement. 

When investors and analysts talk about a company's earnings, they're talking about the company's net income or profit.

Companies calculate net income or earnings by subtracting the costs of doing business from total revenue. This includes factors like 澳洲幸运5开奖号码历史查询:depreciation, interest charges paid on loans, g🧸eneral and administrative costs,&nb🅰sp;income taxes, and operating expenses such as rent, utilities, and payroll.

A company's bottom line is also called 澳洲幸运5开奖号码历史查询:net profit.

Special Considerations

Based on revenue alone, a company could appear to be financially successful even if it's not. A company's management will frequently tout its growing revenue when discussing its prospects. However, revenue alone does not paint a complete picture of a 澳洲幸运5开奖号码历史查询:company's financial health.

If a company's revenue is greater than its expenses, it will show a profit. If its expenses are greater than its revenue, it's 澳洲幸运5开奖号码历史查询:operating at a loss.

A company's financial statements could show revenues that are growing quarter-over-quarter or year-over-year, but the company could still be in financial trouble if its expenses continue to outstrip its revenue.

That's why reviewing a company's earnings—which deducts expenses from revenue—is key to evaluating the long-term sustainability of a company.

Revenue vs. Earnings Example 

Below is the income statement for Apple Inc. as of the end of the fiscal year in 2022 from the company's 10-K statement.

Apple Inc. (AAPL) posted a net sales number of $394,328 billion for the period, representing an i📖ncrease of over $28 billion when compared to the same period a year earliꦫer.

After recording revenue, Apple needs to deduct all expenses associated with running the business. This incඣludes deducting from revenue cost of sales, operating expens♒es, other expenses, and provisions for income taxes.

All these costs reduce revenues to arrive at net income (earnings). Apple posted $99,803 billion in net income (earnings) for 2022 (a $5 billion increase from the same period in 2021). 

The Bottom Line

Revenue tracks the total amount of money that a company is bringing in, but earnings reflect the portion of the revenue the company keeps in proꦕfit after expenses are paid.

Revenue and earnings are among the most straightforward numbers that an investor can use to underst🍎and the real level of success that a company has acꦿhieved.