Gross margin
The share of revenue left after the direct cost of producing what was sold, before operating expenses.
Gross margin is gross profit divided by revenue, where gross profit is revenue minus cost of revenue. Cost of revenue includes direct costs such as materials, production labor and delivery, but not most overhead. It shows how much each dollar of sales contributes before spending on sales, research and administration.
On our site, gross margin is shown as a percentage with the change from the prior year. Compare it within an industry, since software and retail have very different cost structures.
Traders care because gross margin trends reveal pricing power and cost pressure early, often before operating results show the change.
Worked example (illustrative numbers, not real data): revenue is 200 million dollars and cost of revenue is 120 million. Gross profit is 80 million, so gross margin is 40 percent. If costs rise to 130 million on the same revenue, the margin falls to 35 percent.