Portsmouth made losses of £16.6m for the 2007-08 financial year despite winning the FA Cup for the first time in 69 years.
However, the English Premier League club said on Tuesday the deficit was nearly £7m less than the previous year and the club is optimistic the loss will be reduced again next year.
"The club anticipates a further substantial reduction for 2008/09 and is on course to break even by the time Fratton Park is redeveloped to accommodate 30,000 fans by the season 2010/11," the club said on its website.
The struggling club, which stands fifth from bottom in the standings and just four points above the relegation zone, is up for sale and French-born owner Alexandre Gaydamak has been looking for a buyer since December.
Plans for a new stadium have been shelved for the foreseeable future and instead Portsmouth will redevelop their Fratton Park home by the 2011-12 season when it should hold about 10,000 more than the current capacity.
The transfers of Pedro Mendes to Rangers and Sulley Muntari to Inter Milan in the summer of 2008 and the moves of Lassana Diarra to Real Madrid and Jermain Defoe to Tottenham Hotspur this January were not included in the figures.
The purchases of Peter Crouch, Younes Kaboul, Nadir Belhadj and Hayden Mullins were also not taken into account.