“Sales” refers to the amount of money a company generates over a period of time by providing its products or services to customers. “Revenue” refers to the total income a company earns over a specific time period. Revenue includes total sales, but it also may include income generated through non-sales activities such as investments, sale of assets, and allowances.
Understanding How Revenue and Sales Are Different
Companies issue income statements that summarize how much revenue they earned over a specific time period, such as a quarter or a year. An income statement lists both the total sales for that period—also known as gross sales—and gross revenue. Revenue is typically greater than sales if a company has other sources of income. It may be equal to sales if a company does not have any other source of income, and it can be less than sales if a significant amount of discounts, returns, and allowances are factored in. Electric carmaker Tesla’s 2021 first-quarter report provides an example of how gross revenue includes more than total sales of the company’s product or service. Tesla reported a net income of $438 million for the quarter and $10.4 billion in revenue. Two significant non-sales factors that boosted the company’s revenue were $518 million in revenue from the sale of emissions credits to other automakers and the sale of Bitcoin that added $101 million to its gross revenue.
The Difference Between Revenue and Sales
Net Sales
Net sales are the final amount of sales revenue earned by an organization after all the deductions and adjustments are accounted for. In an income statement, net sales are sometimes referred to as “income.”
The Bottom Line
Whether you are looking at a company’s revenue and its sales for investment purposes or to assess the business strategy, it is important to understand these two terms are not interchangeable. Mistaking sales for revenue could leave out important sources of income or significant deductions because of discounts or merchandise returns. It is also important to understand that some revenue sources may be singular events that should not be factored into long-term performance expectations.
