Revenue vs. Income: What’s the Difference?

Revenue vs. Income: An Overview

Revenue is the total amount of money generated from a business’s primary operations. It is also called gross sales or “the top line” because it is the first line on an income statement. It is calculated by multiplying a company’s average sales price by the number of units sold.

Income is a company’s total earnings after all expenses and earnings not counted as revenue are deducted. It is calculated by subtracting expenses, interest, cost of sales or goods sold, and taxes from total revenues.

Revenue

Revenue is the money a company generates before any expenses are taken out. It only indicates how effective a company is at generating sales. It does not take into consideration operating efficiencies, which could have a dramatic impact on the bottom line.

Revenue can come from a variety of sources. These include (but aren’t limited to):

• The sale of goods, services, and assets
• Advertising
• Licensing agreements
• Fees and service charges
• Subscriptions
• Rental income

Companies recognize and record revenue differently. As such, it isn’t always the same—even for companies within the same industry. If you’re unsure of how a specific company defines it, you can find out in its financial statements.

Income

Income is the earnings left after all expenses and additional income are deducted. It is more commonly called net income because it is the net result after the deductions. There may be several line items subtracted from revenue to arrive at net income.

Just like revenue, income can be broken up into different categories—namely these two:

• Gross Income: Gross income is the total income recorded before any taxes and expenses are deducted. Gross income may also be referred to as gross profit or gross margin. It is found on the income statement.
• Net Income: Net income is calculated by taking revenues and subtracting the costs of doing business, such as depreciation, interest, taxes, and other expenses. The bottom line, or net income, describes how efficient a company is with its spending and managing its operating costs. This figure appears on a company’s income statement and is an important measure of the profitability of a company.

Income can be used to analyze and determine whether a company is operating efficiently.

Revenue vs. Income

To really grasp how significant the difference between revenue and income can be, consider Apple, one of the largest tech companies on the market. It had a $294.5 billion difference between revenue and net income for its 2022 year. From a net sales (total revenue) of $384.3 billion, Apple deducted its:

• Total cost of sales: $223.5 billion
• Total operating expenses: $21.3 billion
• Other income (expense), net: $334 million
• Income taxes: 19.3 million

Which gave the company a net income of $99.8 billion for its 2022 year.

The Bottom Line

There are several important financial metrics that companies report each quarter, including revenue and income. These two figures are often used synonymously because they refer to money a company earns. However, revenue refers to money earned from a variety of sources, while income is any money left over after all expenses are accounted for, including taxes and other costs.