Revenue, profit and earnings: an Amazon case study

What this lesson covers

• Why revenue is called the top line, and why a big number doesn't automatically mean big profit
• How operating costs sit between revenue and operating income
• The difference between operating income and net income
• How earnings per share connects profit to each share, and why the share count matters
• Amazon's 2024 and 2025 results side by side
• Margins: how much of every $100 in sales remains
• A quick check to test yourself

One thing to be clear about first. We are not deciding whether Amazon is a good or bad investment. We are using its published results to understand how money moves through a company's income statement.

One business, three different numbers

Profit comes in several levels, so always check which profit measure you are looking at. Earnings often means net income, the bottom-line profit available to common shareholders. Divide it by the number of shares and you get earnings per share, or EPS.

A question for you: if you opened a company's results for the first time, which number would you check first? There is no single correct answer. A careful investor looks at all three, because each tells a different part of the story.

Revenue is the top line

Revenue is often called the top line because it appears near the top of the income statement. Amazon calls its revenue net sales.

That figure brings together online and physical stores, services for third-party sellers, advertising, subscriptions and Amazon Web Services (AWS).

Revenue is recorded before the costs of running the business are taken away. A company can generate a very large amount of revenue and still produce only a small profit, or even a loss if its costs are greater than its revenue. Revenue growth can be encouraging, but it does not automatically mean profitability is improving.

Costs sit between revenue and profit

Amazon's costs include the cost of products sold, fulfilment centres, shipping, technology infrastructure, content, marketing and general administration.

A note on the $636.9 billion. Amazon's income statement lists several separate expense categories. We have combined them here to make the idea easier to see. The operating cost figure is calculated from Amazon's reported net sales and operating income, so it is a simplified teaching figure rather than a line copied from the income statement.

Operating income shows how the main business performed after operating expenses. It does not yet include every item that affects the bottom line.

Operating profit and net income

After operating income, other items can change the final result. These can include interest income or expense, gains and losses on investments, other non-operating items and income tax. After those, Amazon reported net income of $77.7 billion for 2025.

Net income is the bottom line. In this particular year, operating income and net income were fairly close, but that won't always happen. For another company or another year, non-operating items and tax can create a much bigger gap.

This is why the word "profit" causes confusion. Someone might mean gross profit, operating profit or net profit. When you see the word, ask which level of profit the figure represents.

Earnings per share connects profit to ownership

EPS tells us how much of the company's earnings is associated with each share, based on the weighted average number of shares. Diluted EPS also allows for extra shares that may be created from items such as employee stock awards.

The share count matters. If a company buys back shares, EPS can rise because earnings are divided among fewer shares. If it issues more shares, earnings are spread more thinly. So total net income and EPS don't always grow at the same rate. Check both.

Amazon's 2024 and 2025 results

The three measures did not grow at the same rate. Revenue rose, operating income rose, and net income rose by a larger percentage than revenue. This is why investors look beyond the top line: we want to know whether higher sales are also leading to stronger operating performance and higher bottom-line earnings.

Two years is not enough to draw a conclusion from. A fuller analysis would look at a longer period and at what caused the changes. The point here is to see how the three levels connect.

Margins show how much of each sales dollar remains

Large dollar figures are hard to compare, so investors often turn profit into a percentage of revenue. That percentage is called a margin.

Margins help you compare a company with itself over time, and compare companies of different sizes. But compare sensibly: a supermarket, a software company and a bank run very different business models and normally have very different margins. It is usually more meaningful to compare a company with its own history and with similar businesses.

The key takeaway

Next time you open an income statement, trace the path: begin with revenue, look at the costs and operating income, continue to net income, then check earnings per share and whether the share count has changed.

No single number tells you everything. Revenue can grow while costs grow faster. Profit can rise because of an unusual non-operating gain. EPS can change because the company has more or fewer shares.

So rather than asking whether the number rose, ask:

"What changed, why did it change, and does the change look sustainable?"

Where to go next

If you'd like to see these ideas applied to real companies and real results, How Markets Think is where I write that up each week. It covers earnings, deals and market moves, explained in plain English.

Sources

• Amazon.com Inc., Amazon Announces Fourth Quarter Results, 5 February 2026.
• Amazon.com Inc., Annual Report on Form 10-K for the year ended 31 December 2025, United States Securities and Exchange Commission.