What is an income statement waterfall?

An income statement waterfall is a bar chart that walks from total revenue down to net income, with each step showing how much a cost or tax line removes (or adds). Subtotals — gross profit, operating income, pre-tax income — are anchored to zero so the cascade reconciles exactly to the bottom line.

How much of Ares Capital (ARCC) revenue becomes net income?

For TTM through Q1 2026, Ares Capital turned $2.63B of revenue into $1.15B of net income — a net margin of 43.7%. The waterfall shows where the rest goes: cost of revenue, operating expenses, non-operating items, and taxes.

What are Ares Capital (ARCC) gross, operating, and net margins?

For TTM through Q1 2026, Ares Capital reported a gross margin of 70.8%, an operating margin of 66.2%, and a net margin of 43.7%. Each subtotal in the waterfall corresponds to one of these margins.

Why does Ares Capital (ARCC) have such a high (or low) gross margin?

Gross margin (gross profit ÷ revenue) reflects how much of each revenue dollar remains after direct production costs. Capital-light software and platform businesses often show gross margins above 60–80% because their cost of revenue is mainly hosting and support. Hardware, retail, and commodity businesses show lower gross margins because raw materials and manufacturing costs are significant. The waterfall makes this visible at a glance — the size of the "Cost of Revenue" bar relative to Revenue is the gross margin complement.

What is the difference between gross, operating, and net margin?

Gross margin = (Revenue − Cost of Revenue) ÷ Revenue. It measures production efficiency. Operating margin = Operating Income ÷ Revenue. It adds operating expenses (R&D, S&M, G&A) and measures the profitability of core operations. Net margin = Net Income ÷ Revenue. It also includes interest, other income/expense, and taxes, and represents the shareholder take after everything.

Ares Capital (ARCC) Income Statement Waterfall

Revenue

$2.63B

Gross Margin

+70.8%

Operating Margin

+66.2%

Net Margin

+43.7%

Income statement waterfall for Ares Capital (ARCC) — TTM through Q1 2026

Net income: $1.15B

Margin breakdown for Ares Capital (ARCC) — TTM through Q1 2026

Line item	Amount	Running total
Revenue	$2.63B	$2.63B
Cost of Revenue	-$768M	$1.86B
Gross Profit	$1.86B	$1.86B
Operating Expenses	-$122M	$1.74B
Operating Income	$1.74B	$1.74B
Other Income / Expense	-$516M	$1.23B
Pre-tax Income	$1.23B	$1.23B
Income Tax	-$76M	$1.15B
Net Income	$1.15B	$1.15B

Revenue$2.63B
Cost of Revenue-$768M
Gross Profit$1.86B
Operating Expenses-$122M
Operating Income$1.74B
Other Income / Expense-$516M
Pre-tax Income$1.23B
Income Tax-$76M
Net Income$1.15B

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