Arsenal say "significant investment" in the club's playing squad is behind slim profit-before-tax of £2.9m last season, a £15.3m drop on a year earlier and the lowest bottom line for over 10 years.
Turnover rose to £353.6m from £344.5m a year ago thanks to a runners-up finish in the Premier League and the start of a new Champions League broadcasting cycle boosting TV income by just over £15m to £140.6m.
Chairman Sir Chips Keswick said the club had made "further significant investment into what was already a very competitive squad" in a bid to remain competitive against their increasingly wealthy Premier League rivals enjoying the fruits of the competition's booming broadcast money.
Yet the club's squad investment led to a £3.1m increase in the wage bill to £195.4m and increased its player amortisation costs from £54.4m to £59.3m.
Combined with a reduction of income from player sales and the club's property development, the club's bottom line came in at its lowest level of the Emirates Stadium era.
The club's cash considerable cash reserves stood at £226.5m at the end of the year, but Keswick stressed that not all of that can be put towards a transfer war chest for manager Arsene Wenger.
"It is my duty to point out that after excluding debt service reserves and amounts owed to other clubs on past transfers the balance reduces to £149m," he said in the chairman's statement.
The accounts reveal that since the start of the year Arsenal have spent £90m on securing new players.
"We now have the strongest squad we have had for many seasons", said chief executive Ivan Gazidis. "This has taken time and effort to construct and considerable investment.
"In the five seasons since Stan Kroenke became our majority shareholder we have invested some £350m in transfer fees.
"This is coupled with an increase in our wage bill from £124m to £195m in the same period."