Net Income

What is Net Income? — Definition

Net income is the 'bottom line' of the income statement — what remains after every expense has been paid. The calculation: Revenue - COGS - Operating Expenses - Interest Expense - Taxes = Net Income. It's the earnings figure that drives EPS and, ultimately, what shareholders receive either as dividends or reinvested into the business.

However, net income has limitations. It's subject to accounting choices (depreciation methods, revenue recognition timing) that can make it higher or lower than underlying business reality. This is why many investors prefer to analyze free cash flow alongside net income — the two should generally trend together in a healthy business.

Example

In its fiscal year 2023, Microsoft reported revenue of $211 billion and net income of approximately $72 billion — a net profit margin of about 34%. This exceptional margin reflects the scalability of its cloud and software businesses, where each incremental dollar of revenue flows through at very high margins.

Net income trends are central to the earnings analysis in BMInsider's 100X Insider Reports, especially when compared to free cash flow to assess earnings quality.