Net revenue is the revenue a company recognizes after deductions for returns, allowances, discounts, and — in some business models — amounts that pass through to third parties.

How it works

A retailer sells $1M gross but refunds $50K and gives $30K in discounts → net revenue $920K. A marketplace processes $10M GMV at a 15% take rate → net revenue $1.5M, not $10M. Payment processors and ad networks similarly report net of pass-through costs under GAAP in many cases.

SaaS companies usually show subscription revenue net of credits and churn-related refunds. Billings may exceed revenue when customers prepay multi-year contracts; net revenue follows recognition rules.

Investors normalize metrics in diligence: two “$5M ARR” companies are not comparable if one counts gross merchandise and the other counts commission. Consistent definitions in the data room prevent re-trading late in a process.

Why it matters

• Founders: Use consistent definitions in board decks and data rooms. Label GMV separately from net revenue to avoid credibility hits in diligence.
• Investors: Valuation multiples apply to net revenue for comparable analysis. Misclassified top line leads to wrong entry multiples and disappointed follow-on investors.

Common mistake

Equating invoice totals or GMV with net revenue. Pass-through payments, sales tax collected, and partner rev-share should not inflate your core revenue line.

Related ideas

See also billings, GMV versus take rate, net burn, and revenue recognition.