Gross Profit Margin

Profitability
Updated Apr 2026 • Has calculator

The percentage of revenue remaining after deducting the cost of goods sold.

What is Gross Margin?

Gross profit margin subtracts the cost of goods sold (COGS) from revenue and divides the result by revenue, expressing how efficiently a company produces its products or services before accounting for operating expenses. High gross margins are characteristic of software, pharmaceuticals, and branded consumer goods, where the cost to deliver each additional unit is low. Gross margin is often the first line of defence in profitability analysis: a declining gross margin can signal rising input costs, pricing pressure, or a less favourable product mix.

Formula

Gross Margin = ((Revenue − COGS) ÷ Revenue) × 100

Worked Example

Worked example — Apple Inc. (AAPL)

FY2024

Step 1  Revenue: $391,035M
Step 2  Cost of sales (COGS): $210,352M
Step 3  Gross profit: $391,035M − $210,352M = $180,683M
Step 4  Gross margin = $180,683M ÷ $391,035M × 100 = 46.21%
Step 5  → Apple retained $0.46 of every $1 in revenue after production costs

Source: Apple Annual Report FY2024 (2024-11-01)

Calculate Gross Margin

Total net revenue (USD millions)

Cost of sales or cost of revenue (USD millions)

Gross Margin

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Not investment advice.

How to Interpret Gross Margin

< 20
Thin — commodity or highly competitive business
20 – 40
Moderate — typical manufacturing or retail
40 – 60
Strong — branded goods or software
> 60
Premium — IP-rich or high-margin service business

📚 Profitability Metrics — Complete the path

  1. Gross Margin
  2. Operating Margin
  3. EBITDA Margin
  4. Net Margin
  5. ROE
Sources
  1. Apple Inc. — Annual Report FY2024
  2. CFA Institute — Financial Reporting and Analysis, 6th ed.
  3. Investopedia — Gross Profit Margin