Revenue in plain words
If a coffee shop sells 400 cups a day at $4.50, its daily revenue is $1,800. That's before paying for beans, milk, rent or the barista.
Revenue sits on the first line of the income statement, which is why traders call it the top line. Net income sits at the bottom, so it's called the bottom line.
From revenue to profit
Costs come out of revenue in layers. Each layer has its own name, and each one tells you something different about the business.
Gross profit
Revenue minus the direct cost of making what you sold. Shows whether the product itself is profitable.
Operating profit
Gross profit minus running costs like salaries, rent and marketing. Shows whether the whole business works.
Net income
What's left after interest and taxes. This is the number used to calculate EPS.
Run a coffee shop
Run a coffee shop for a month
Set your prices and costs. The chart shows how revenue flows down to profit.
You're selling plenty of coffee and still losing money. High revenue doesn't mean a healthy business.
Reading revenue growth
On earnings day, traders care less about the revenue number itself and more about how fast it's growing and whether it beat analyst estimates.
Northwind Coffee quarterly revenue ($M)
Tap a quarter. Q1 of Year 2 is the interesting one.
Y1
Y1
Y1
Y1
Y2
Y2
Y2
Y2
Revenue fell 15% from the holiday quarter, which looks alarming. Compared with Q1 last year it actually grew 15%. That's why traders focus on year-over-year growth.
Common mistakes
Treating revenue as profit
A company with $10B in revenue can still lose money. Always check the margins.
Comparing to the wrong quarter
Many businesses are seasonal. Compare with the same quarter last year, not the one just before.
Ignoring one-time sales
A single large contract can make one quarter look great. Look for revenue that repeats, like subscriptions.
Skipping the guidance
The company's forecast for next quarter's revenue often moves the stock more than the current number.
Revenue on Stockwhiz
Stockwhiz earnings reports show revenue next to the estimate and the year-over-year change, so you can judge growth in one glance.
| Company | Revenue | Estimate | YoY growth |
|---|---|---|---|
| Northwind Coffee (NWCF) | $23.0M | $22.1M | +15.0% |
| Helio Grid Systems (HLGD) | $1.84B | $1.91B | +4.2% |
| Brightpath Health (BPTH) | $612M | $598M | −2.1% |
Sample rows with made-up companies. Live earnings data coming soon.
Check yourself
Which line of the income statement is called the top line?
Frequently asked questions
Usually, yes. Some companies also earn revenue from other sources like licensing or interest, but for most businesses the terms are used interchangeably.
Revenue is the money coming in. Income, or profit, is what's left after costs. Revenue is always the larger number unless something unusual happens.
Young companies often reinvest everything and show little profit. Fast revenue growth is the clearest sign their product is catching on.
On the first line of the income statement in the quarterly earnings release and the 10-Q or 10-K filing.
Related terms
Sources and further reading
This guide was written using the following references. The coffee shop and Northwind Coffee figures are made up for teaching.
Stockwhiz Learn is for education only and isn't investment advice. Examples use made-up companies unless marked as live data.