Arsenal's annual football revenues exceeded £400million for the first time but the club's cash reserves have reduced after a record spend on players.
Increased income from TV rights and commercial activity saw the Gunners' turnover from football increase from £350.6million the previous year to £422.8million for the 12 months ending May 31, 2017.
But wages rose to nearly £200million while Arsenal had a net spend of £102.5million on players, led by the signings of Granit Xhaka, Shkodran Mustafi and Lucas Perez - nearly double the previous 12 months.
Group profit before tax was £44.6million but cash reserves have reduced from £191.1million to £144.3million.
Meanwhile, it is predicted that missing out on the Champions League this season will cost the club around £20million.
Chief executive Ivan Gazidis said: "Our ambition is clear - to win major trophies. In order to compete at the top, we need to strive to be better than our competitors in everything we do.
"That is why during the past season we have continued to make substantial investments to drive the club forward.
"At the top of the pyramid, we have scaled up our investment in our first-team squad significantly in recent years, spending a net £203million in transfer fees in the last three seasons.
"We have transformed our training ground and completed a total rebuild of our academy. We are focused on ensuring that the structures, in terms of people, expertise and facilities, in place around the manager and the players are the best that they can be.
"By getting that environment right, down to fine tuning the detail, we optimise our chances of achieving the results we want on the pitch."