How to Read an Income Statement, With a Real Example

A line-by-line guide to the income statement, from revenue to earnings per share, worked through with Apple's fiscal 2025 figures from its 10-K.

Updated 2026-10-18 · 5 min read

An income statement shows how much money a company brought in over a period, what it spent, and what was left as profit. It is also called a profit and loss statement, or P&L. Public companies report one every quarter in their 10-Q and every year in their 10-K.

The statement reads from top to bottom. It starts with revenue, subtracts costs in stages, and ends with net income and earnings per share. Each stage tells you something different about the business.

Apple's fiscal 2025 income statement

Here is Apple's income statement for the fiscal year that ended September 27, 2025, taken from its 10-K. Figures are in millions of U.S. dollars, except per-share amounts.

You can see the same figures, with ten years of history and quarterly data, on Apple's income statement page.

Revenue

Revenue, also called sales or the top line, is the money a company earned from customers during the period. Apple's revenue for fiscal 2025 was $416.2 billion, up 6.4% from $391.0 billion the year before.

Revenue is recorded when a product or service is delivered, not necessarily when cash is received. A company that sells a two-year subscription records the revenue over the two years even if the customer paid up front.

Many companies also break revenue down by product line or region in the notes to their financial statements. See Apple's revenue by segment for an example.

Cost of revenue and gross profit

Cost of revenue, also called cost of goods sold, is what it cost to make the products or deliver the services that were sold. For a hardware maker that means parts, manufacturing and shipping. For a software company it is mostly hosting and support.

Gross profit is revenue minus cost of revenue. Apple's was $195.2 billion. Dividing gross profit by revenue gives the gross margin: 195,201 ÷ 416,161 = 46.9%. Gross margin shows how much of each dollar of sales is left to pay for everything else, and it varies a lot by industry. Software companies often have gross margins above 70%, while grocery chains are often below 30%.

Operating expenses and operating income

Operating expenses are the costs of running the business that are not tied to a specific sale. The two largest categories are usually:

• Research and development (R&D): engineering and product work. Apple spent $34.6 billion, or 8.3% of revenue.
• Selling, general and administrative (SG&A): sales, marketing, offices and management. Apple spent $27.6 billion.

Operating income is gross profit minus operating expenses: 195,201 − 62,151 = 133,050. It is the profit the core business produced before interest and taxes. The operating margin is 133,050 ÷ 416,161 = 32.0%.

Operating income is often the best line for comparing how well two companies in the same industry are run, because it is not affected by how they are financed or where they pay taxes.

Other income, taxes and net income

Below operating income come items that are not part of day-to-day operations: interest earned on cash, interest paid on debt, and gains or losses on investments. For Apple these netted to a loss of $321 million, which gives pretax income of $132.7 billion.

Income tax comes next. Apple's tax expense of $20.7 billion was 15.6% of pretax income, which is its effective tax rate. That rate can move a lot from year to year because of one-time tax charges or credits.

Net income, the bottom line, is what remains: $112.0 billion. The net profit margin is 112,010 ÷ 416,161 = 26.9%.

Earnings per share

Earnings per share (EPS) is net income divided by the average number of shares outstanding. Companies report two versions:

• Basic EPS uses the shares actually outstanding.
• Diluted EPS also counts shares that could be created from stock options, restricted stock and convertible securities. It is slightly lower and is the version most people quote.

Apple's diluted EPS was 112,010 ÷ 15,005 = $7.46. Because Apple buys back its own stock, its share count falls each year, so EPS can grow faster than net income.

Annual, quarterly and trailing twelve months

Income statements cover a period of time, so always check which period you are looking at:

• Annual figures come from the 10-K and cover a full fiscal year.
• Quarterly figures come from the 10-Q. Many businesses are seasonal (Apple's December quarter is its largest), so compare a quarter with the same quarter a year earlier rather than with the one just before it.
• Trailing twelve months (TTM) adds up the last four quarters. It gives an up-to-date annual figure between 10-K filings.

On this site, switch between annual and quarterly views with the period buttons on any statement page, such as Microsoft's quarterly income statement.

Common pitfalls

• One-time items. Restructuring charges, legal settlements and asset write-downs can make one year look much worse or better than the underlying business. The MD&A section of the 10-K usually explains them.
• Adjusted figures in press releases. Earnings press releases often lead with "adjusted" or non-GAAP figures that leave out some costs. The income statement in the 10-K or 10-Q uses standard accounting rules (GAAP), so the two can differ.
• Different fiscal years. Apple's fiscal year ends in September and Microsoft's in June, so "fiscal 2025" covers different months for each.
• Profit is not cash. Net income includes non-cash items such as depreciation and stock-based compensation. Read the cash flow statement to see how much cash the business actually produced.
• Banks and insurers look different. Their income statements start with interest income or premiums instead of sales, and they usually have no gross profit line.

Frequently asked questions

Is the income statement the same as a profit and loss statement?

Yes. Income statement, profit and loss statement, P&L and statement of operations all refer to the same report.

Where do I find a company's income statement?

In Item 8 of its 10-K for annual figures, and in Part I of its 10-Q for quarterly figures. Both are free on the SEC's EDGAR system. On this site, search for a ticker and open the Income statement tab. What are SEC filings? explains the different reports.

What is the difference between operating income and EBITDA?

EBITDA adds depreciation and amortization back to operating income. Apple's depreciation and amortization in fiscal 2025 was $11.7 billion, so its EBITDA was about $144.7 billion. Companies do not report EBITDA on the income statement itself; it is calculated from the reported figures.

This guide explains how to read public filings. It is not investment advice.