What is Gross Margin?
Gross Margin is the simplest profitability metric: revenue minus the cost of goods sold (COGS), divided by revenue. High and stable gross margins typically signal pricing power and a strong competitive position. Software companies often run 70–90% gross margins; commodity retailers may run 15–25%.
Formula
Gross Margin = (Revenue − COGS) ÷ Revenue
How TopTier Strategy uses Gross Margin
Gross margin and its trend are core inputs to our Profitability pillar — declining margins are an early warning that competitive pressure is rising.
Related Glossary Terms
Other concepts in the Profitability pillar.
See Gross Margin on real stocks
Sign up free to see Gross Margin calculated for any company — alongside the rest of TopTier Strategy's five-pillar analysis.
Sign Up Free