Lesson 2.4 · 4 of 5 · How to read financial statements
Revenue vs profit vs cash flow: the difference, using Nvidia
Revenue is everything a company sold, profit is what is left after costs, and cash flow is the money that actually reached the bank. The three can move apart: a company can report a big profit and collect less cash if customers pay later or if its inventory builds up.
Terms in this lesson
- Revenue
- All the money the company bills from sales, before any cost.
- Net income
- What is left for shareholders after all costs, interest and tax.
- Cash conversion
- How much of the accounting profit actually lands in the bank as cash.
- Working capital
- The money a company needs to keep running day to day.
Revenue, profit and cash flow: three figures, three stories
| Figure | What it shows | Nvidia |
|---|---|---|
| Revenue | everything the company sold, paid for or not | $215.9 bn |
| Net income | what is left of revenue after every cost and tax | $120.1 bn |
| Operating cash flow | cash actually collected, minus day-to-day payments | $102.7 bn |
Nvidia, financial year ended 25 January 2026, from its 10-K annual report.
Revenue and profit come from the income statement, cash from the cash flow statement. The first two follow accounting rules that tie a sale to the moment of delivery. Cash follows the money. That is why the figures drift apart.
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Create a free accountProfit without cash: receivables and inventory build-up
Definition
How can a company make a profit without the cash?
Profit is booked when the sale is made; cash arrives when the bill is paid.
Receivables: when it sells on credit, the company has revenue and profit, but the money is still with the customer. Inventory: when it makes goods in advance, the cash spent sits in the warehouse and only becomes a cost once the goods are sold. Rising receivables and rising inventory both push operating cash flow below profit. The ratio of cash to profit is called cash conversion.
A real company example: Nvidia, financial year 2026
Real case
Nvidia, financial year ended 25 January 2026
Revenue rose by 65.5% to $215.9bn. Net income was $120.1bn and operating cash flow $102.7bn. The gap comes mainly from receivables (+$15.4bn: customers who had not yet paid) and inventory (+$11.3bn: products and components not yet sold).
That is not necessarily a bad sign. Receivables rose by 66.8%, from $23.1bn to $38.5bn, roughly in line with sales. Inventory more than doubled, from $10.1bn to $21.4bn, faster than sales: that is the figure to watch in the next reports.
Lessons are educational. They are not a recommendation to buy or sell. Investing involves risk and you can lose money. Sources: Nvidia, 10-K annual report for the financial year ended 25 January 2026 (revenue $215,938m, against $130,497m a year earlier; net income $120,067m; operating cash flow $102,718m; change in receivables $15,399m and in inventory $11,324m; receivables $38,466m against $23,065m; inventory $21,403m against $10,080m); Apple, 10-K annual report for financial year 2025 (net income $112,010m, operating cash flow $111,482m).