What is Gross Margin?
Gross Margin
Gross Margin is the percentage of revenue remaining after subtracting the cost of goods sold (COGS), showing the core profitability of a product.
Why It Matters for Startups
Essential for navigating early-stage business execution; mastering Gross Margin allows founding teams to scale operations, manage risk, and optimize efficiency for product unit economics assessment.
Detailed Deep Dive
Gross Margin is the percentage of revenue remaining after subtracting the cost of goods sold (COGS). High gross margins (e.g. >80% in SaaS) are prized because they leave more capital to invest in sales and expansion.
Frequently Asked Questions
Q:Why do VCs love high gross margins?
Higher gross margins (e.g. >80% in SaaS) mean more money can be reinvested into sales, marketing, and expansion.
Q:What constitutes COGS for software?
Server hosting costs, customer support salaries, and third-party APIs integrated into the product.
Quick Facts
- CategoryMetrics
- Key ApplicationProduct unit economics assessment
Coverage Trend12 Weeks
Related Startup Terms
Cite This Term
Reference this definition in your articles, research, or documentation to credit this source:
Gross Margin Media Coverage & Intelligence
AI Infrastructure Spending Boosts Cisco's Earnings and Revenue, but Its Stock Declines After-hours
Networking giant Cisco Systems Inc. coasted to a solid earnings and revenue beat and issued strong guidance for the current quarter, but a drop in gross margin seems to have spooked investors, sending its stock down in late trading today.
AI server maker Supermicro's stock gains on $60B order backlog and stronger margins
Artificial intelligence server maker Super Micro Computer Inc. told investors in a preliminary earnings forecast today that it has secured more than $60 billion worth of new orders for its products in its fiscal fourth quarter. As a result, it now expects its gross margin to significantly exceed...
Cerebras stock plunges after earnings as CEO says margin outlook was misunderstood
In its first earnings report since going public, the AI chipmaker forecast a narrower gross margin in its core business, scaring investors.