Gross Revenue vs Net Revenue: Definitions, Formula and SaaS Examples

Gross revenue is the total value of sales before any deductions. Net revenue is gross revenue minus discounts, credits, refunds and allowances. For a SaaS company, gross revenue is subscriptions and services at list price, and net revenue is what customers actually owe after concessions. Net revenue is still not profit: costs come out below it.

The phrase "gross vs net revenue" also has a second meaning that most pages on this search mix up or skip. In accounting, it is the ASC 606 question of whether a company reports the full amount a customer pays (gross, as principal) or only its fee (net, as agent). That question decides how resellers, marketplaces and bundled third-party products show up on a SaaS income statement. This guide covers both meanings, sorts out which items belong between gross and net and which are expenses, and works one illustrative SaaS quarter from list price to reported revenue.

Not accounting advice. This page explains how ASC 606 treats discounts, credits and principal or agent arrangements, in plain language and with illustrative numbers. Gross or net presentation is a judgment your auditor will review, so confirm your policy with your controller and your audit firm.

What is the difference between gross revenue and net revenue?

Gross revenue measures what the company sold at full price. Net revenue measures what customers actually owe after every price reduction. The gap between them is price given away: discounts, free periods, credits and refunds. One point the top results get wrong: under US GAAP, the revenue a company reports is already net. ASC 606 measures revenue at the transaction price, and Deloitte's revenue roadmap lists discounts, rebates, refunds, credits and price concessions among the items that make that price variable. So "gross revenue" in the first sense is a number you build for management, from the CRM or the price book. The income statement starts at net.

How do you calculate gross revenue and net revenue?

Gross revenue is volume times list price. Net revenue is gross revenue minus every reduction the customer receives. In SaaS, both are calculated on revenue recognized in the period, not on contracts signed.

• Gross revenue = subscription revenue at list price + services revenue at list price + usage revenue at list rates
• Net revenue = gross revenue - discounts - free periods and waived fees - service credits - refunds and allowances
• Gross-to-net ratio = net revenue / gross revenue

The recognition rule matters for both. A $120,000 annual subscription signed on October 1 recognizes $30,000 in the fourth quarter, so the gross and net figures for that quarter use the recognized amount at list and at the contracted price. Bookings and billings run on different schedules, which ORM's guide to revenue recognition explains. For the price x quantity build of each revenue line, see the revenue formula guide.

What sits between gross and net revenue in SaaS?

Price reductions given to the customer sit between gross and net. Costs paid to anyone else are expenses and sit below the revenue line. That one test sorts most of the confusion: is the money going back to the customer, or to a vendor? The credit and coupon rule comes from ASC 606-10-32-25, which Deloitte reproduces in its roadmap section on consideration payable to a customer: a company "shall account for consideration payable to a customer as a reduction of the transaction price" unless the payment buys a distinct good or service. The sales tax election is in ASC 606-10-32-2A, covered in Deloitte's section 6.7. Commissions are a cost, and their timing is set by ASC 340-40.

The line between bad debt and a price concession takes judgment. If a company signs a customer knowing it will accept less than the contract price, the shortfall is an implied price concession and reduces revenue. If the customer simply fails to pay, it is a credit loss.

Worked example: one SaaS quarter from gross to net revenue

Here is one illustrative quarter for a B2B SaaS company with $3.25 million of gross revenue at list price and $2.74 million of net revenue: 84.3 cents of every list-price dollar reaches the revenue line. All numbers are illustrative. The $510,000 between the two totals is 15.7% of gross revenue. Three things fall out of it.

• Discounts are most of the gap. $360,000 of the $510,000 is headline discount. The other $150,000 never shows up in a discount percentage field, which is why ORM's entry on discount leakage says to measure money collected against money intended, then break the gap down by source.
• Every dollar of the gap is a dollar of gross profit. Discounts and credits cut revenue and leave hosting, support and delivery costs where they were. With $600,000 of cost of revenue, gross profit is $2,140,000 and gross margin is 78.1%. Calculate margin on gross revenue instead and it reads 81.5%, a number no auditor will see.
• Services carry the biggest concession rate. Waived fees take 20% off the services line, against 15.3% on subscriptions once discounts, free months, credits and refunds are counted. A services line already running at a low margin can turn loss-making this way.

What does not appear in the bridge matters as much. In the same quarter, the company sold $400,000 of total contract value through an AWS Marketplace private offer, paid card fees on its self-serve plans and paid commissions on new deals. None of those reduce revenue in this example, as the next sections show. The P&L view of the same lines, down to net income, is in ORM's guide to revenue vs profit, and the margin definitions are in gross margin vs net margin.

Gross vs net revenue under ASC 606: principal or agent?

A company reports revenue gross when it is the principal, meaning it controls the good or service before it reaches the customer, and net when it is an agent that arranges for someone else to provide it. The guidance is ASC 606-10-55-36 to 55-40, with the matching IFRS 15 paragraphs B34 to B38, as the FASB and IASB Transition Resource Group paper on gross versus net revenue hosted on PwC Viewpoint lays out.

The test runs in two steps under ASC 606-10-55-36A, as Deloitte's roadmap chapter on principal versus agent sets out: identify the specified goods or services to be provided to the customer, then assess whether the company controls each one before it is transferred. A company can be principal for one part of a contract and agent for another.

ASC 606-10-55-39 gives three indicators that the company is the principal, quoted in Deloitte's section 10.2:

• Primary responsibility. "The entity is primarily responsible for fulfilling the promise to provide the specified good or service."
• Inventory risk. "The entity has inventory risk before the specified good or service has been transferred to a customer."
• Pricing discretion. "The entity has discretion in establishing the price for the specified good or service."

Deloitte stresses that these indicators do not override the control assessment and are not a checklist. For SaaS, the indicator that usually settles it is who runs the service. Deloitte's 2025 note on SaaS reseller arrangements concludes that "in many instances, SaaS resellers do not obtain control of the SaaS service before it is transferred to the customer," because the SaaS vendor "controls substantially all aspects of the service without direction from the reseller." It reaches the same view on marketplaces: "Generally, these marketplace platforms do not obtain control of the SaaS products before they are sold."

Worked example: the same add-on, gross or net

Reporting gross or net changes revenue and gross margin percentage. It does not change gross profit dollars. That is why the principal or agent call can move a SaaS company's growth rate and margin profile without changing the cash it keeps. Numbers are illustrative.

A SaaS company sells a third-party data enrichment add-on to its customers at $20,000 a year and pays the data vendor $16,000 of it.

If the company integrates the data into its own product, sets the price and answers to the customer when the data is wrong, it is likely the principal. If the customer contracts for the vendor's data and the vendor is responsible for it, the company is likely an agent earning a $4,000 commission. These are the facts an auditor will test; the conclusion belongs to the company and its auditor, and nothing here is accounting advice.

How do marketplace fees, reseller margins and card fees affect net revenue?

Fees paid to a marketplace or a payment processor are usually costs, not revenue deductions, because the money goes to a vendor and not to the customer. A reseller margin is different: whether it reduces revenue depends on who the customer is.

• Cloud marketplaces. AWS Marketplace charges SaaS sellers a listing fee on each transaction, which its seller documentation sets at 3% for public offers, 3% for private offers under $1M of total contract value, 2% from $1M to under $10M, 1.5% at $10M or more and 1.5% on all renewals, plus a 0.5% uplift on channel partner private offers. The fee is calculated on the pre-tax total contract value and billed to the seller on a listing fee invoice. On the $400,000 private offer in the example, the fee is $12,000. If the marketplace is an agent, as Deloitte notes is typical, the buyer is the company's customer, revenue is measured on the $400,000 the buyer pays, and the $12,000 is an expense.
• Resellers. If the reseller buys the subscription and resells it as principal, the reseller is the customer, and the SaaS company's revenue is the price it charges the reseller. If the reseller only arranges the sale as an agent, the end buyer is the customer and the reseller's cut is a selling cost. The contract terms decide which, so check them deal by deal.
• Card fees. Stripe's standard US pricing is 2.9% + 30 cents per successful domestic card charge. On 400 self-serve charges averaging $500, that is $5,800 + $120 = $5,920 of expense. The customer still owes $200,000, and revenue reflects that.

Where companies classify these expenses (cost of revenue, or sales and marketing or G&A, the two parts of SG&A) is an accounting policy choice. Pick one, document it and keep it the same every quarter, or the gross margin trend becomes a classification trend.

Why should the board deck show both gross and net revenue?

Because the board sees bookings and pipeline at list price and revenue at net, and the gap between them is where price erosion shows up first. A board deck that shows only net revenue hides the discounting trend. One that shows only bookings overstates the business.

Pete Furseth's view from ORM's work with B2B SaaS finance teams is that "credibility is won in the detail": a number a board trusts is consistent from slide to slide, traceable down to the deals that make it, and shown as a range rather than one point. A gross-to-net bridge on one slide does that job. It starts at revenue at list price, walks through discounts, concessions, credits and refunds, and lands on the reported revenue that matches the financial statements.

The bridge also shows the cost of saving a quarter. Pete's observation on pulling deals forward is that it usually costs twice: the deal is discounted, so price erodes and deal size shrinks, and it takes pipeline from the next quarter, which then needs more pipeline generation spend. In the example above, one $100,000 contract pulled in at an extra 20% discount adds $20,000 a year to the discount line and takes $20,000 a year straight off gross profit. On the bridge, that shows up as a falling gross-to-net ratio before it shows up anywhere else.

• Show quarterly: gross revenue at list, each deduction as its own line, net revenue, and the gross-to-net ratio for the last four to eight quarters.
• Split it: by subscription and services, and by segment, because concessions concentrate in specific places.
• Reconcile it: net revenue on the slide must equal revenue in the financial statements, and ARR should be calculated on the contracted price after discounts, so all three numbers describe the same contracts.

The planning side, where next year's price assumptions and discount targets are set, belongs to FP&A. To build the monthly lines, ORM's free profit and loss template separates subscription and services revenue and shows each margin as a percentage of revenue.

Is net revenue the same as net revenue retention?

They are different metrics with a similar name. Net revenue is an income statement line for one period. Net revenue retention (NRR) is a ratio: the recurring revenue a cohort of existing customers produces now, including expansion, contraction and churn, divided by what the same customers produced a year earlier. Gross revenue retention is the same ratio without expansion. The related search "gross revenue vs net revenue retention" is about those two ratios, which ORM covers in gross vs net revenue retention. Discounting connects them: a deep discount at signature lowers net revenue now and sets a lower base for every renewal after it.

Gross and net revenue formulas for Excel and Google Sheets

With subscription revenue at list price in B2, services revenue at list in B3, discounts in B4, free months and waived fees in B5, service credits in B6 and refunds in B7:

Example B5 holds $110,000: $60,000 of free months and $50,000 of waived implementation fees.

Where ORM fits

Net revenue is what the forecast has to land on. ORM builds forecast models for B2B SaaS companies from CRM and finance data and targets 95% forecast accuracy, which means forecasting at the price deals actually close at, not the value entered when the opportunity was created. When pipeline sits at list and closed deals sit at a discount, the gap belongs in the model, not in a surprise at quarter end.

Sources

All checked on October 25, 2026. This page explains how the standards work; it is not accounting advice.

• FASB and IASB Transition Resource Group, Gross versus net revenue (staff paper, July 2014, on PwC Viewpoint): ASC 606-10-55-36 to 55-40 and IFRS 15 B34 to B38.
• Deloitte, Revenue roadmap, 10.1 and 10.2: the two-step test in ASC 606-10-55-36A and the three indicators in ASC 606-10-55-39.
• Deloitte, Accounting considerations related to SaaS resellers' arrangements (February 2025): resellers and marketplaces usually do not control the SaaS service.
• Deloitte, revenue roadmap sections 6.3 (variable consideration), 6.6 (consideration payable to a customer) and 6.7 (sales taxes).
• AWS, Understanding listing fees for AWS Marketplace sellers: SaaS public and private offer fees, effective January 5, 2024.
• Stripe, Pricing: 2.9% + 30 cents per successful domestic card transaction.