What is Revenue?
Tushum (daromad)
In short
A company's total sales before any expenses are deducted.
Also known as: sales
Revenue (sales) is the total money a company takes in from selling goods and services, before any expenses are deducted. It is the first line of the income statement, hence the "top line"; net profit is the "bottom line".
From revenue to profit
- Revenue − cost of goods sold = gross profit → gross margin
- Gross profit − operating expenses = operating profit
- After taxes, interest and other items = net profit → net margin = net profit ÷ revenue
Why it matters
Revenue growth shows rising demand for the business. Profit can be boosted temporarily by cutting costs, but revenue is much harder to dress up — so analysts watch it closely. Growth is usually measured year over year (YoY): this quarter versus the same quarter last year, because many businesses are seasonal.
Limitation: revenue is not profit. Plenty of fast-growing companies lose money. In halal screening the composition of revenue matters too: under the AAOIFI standard, income from impermissible activities should not exceed 5% of total revenue (our approach: methodology).
Of every $100 in sales, $20 is left after costs, expenses and tax. The higher the margin, the more efficient the business.
Example
Illustrative: a company's revenue is $10B this year versus $8B last year.
- YoY growth: ($10 − $8) ÷ $8 = 25%.
- Net profit of $1.5B → net margin: $1.5 ÷ $10 = 15%.
- If $0.3B of revenue comes from impermissible activities: $0.3 ÷ $10 = 3% — below the AAOIFI standard's 5% limit.
Another company grows revenue 40% but has a net loss (−$0.5B on $5B revenue, a −10% net margin) — growth, but no profit yet.
Mistakes and tips
Always look at revenue together with margins: growth without profit can mean the business loses money on every sale.
Compare quarters with the same quarter last year, not sequentially, so seasonality doesn't mislead you.
If revenue misses expectations, the market may react badly even when EPS beats (earnings).
Frequently asked questions
- What is the difference between revenue and profit?
- Revenue is total sales before expenses. Profit is what's left after all costs, taxes and interest are subtracted.
- What is good revenue growth?
- It depends on the sector and company size: a few percent a year can be normal for a mature company, while a young tech company is expected to grow much faster.
Learn it in the Academy
This term is covered with hands-on examples and a quiz in these lessons of the interactive course.
- Fundamental analysis basicsThe three financial statements, reading the income statement line by line, margins, EPS, share count, ROE/ROIC and a business-quality checklist.Open lesson · 12 min
- Earnings seasonCompanies report every quarter: the calendar, consensus, beats and misses, guidance, the conference call, the expected move, gaps and drift, and managing a position into a report.Open lesson · 13 min
Try the theory without risk
Open a free account: demo trading with a $10,000 virtual balance, a trading journal, calculators and a step-by-step course.
Related terms
Read more on this
- Anthropic plans to go public: $2T expected — who sets that price?AI company Anthropic is reportedly preparing a November IPO. What an IPO is, where the $2T figure comes from, why one analyst says $150B, and why the date is not official yet.
- Tesla shows a "flying" Roadster: does it really fly, and how did the stock reactOn October 15 Tesla unveiled the new Roadster: a compressed-air hop, 0–60 mph in 0.81 s and a 2028 start. What happened, how TSLA reacted and what to watch next.
- Insider buying: what happens when executives buy their own stockWhen a CEO or director buys company stock with their own money — is it a signal? How to read SEC Form 4, what research says, and where it's easy to go wrong.