Gross margin is the share of revenue left after the direct cost of goods.
▶ Watch: Gross Margin explained in 24 seconds
What it is
Gross margin measures how much of each sales dollar a company keeps after paying for the direct costs of its products or services, known as cost of goods sold (COGS). It captures pricing power and production efficiency before any overhead, marketing, interest, or taxes are counted. A higher gross margin means more money is left to cover everything else.
Why it matters
Gross margin is the first read on whether a business model is fundamentally profitable and how much pricing power it has. It varies hugely by industry, so it is most useful compared against the same company over time or against direct peers. A pitfall is that companies classify costs differently (some put shipping or depreciation in COGS, others below it), which can make raw cross-company comparisons misleading.
How it's calculated
Subtract cost of goods sold from revenue to get gross profit, then divide that by revenue and express it as a percentage.
How Quintarthai uses it
Gross margin is shown in the profitability ratios and across the 10-year income statement on a company's deep-analysis page.
Cross-border note. Canadian filers report under IFRS and US filers under US GAAP, which can classify some costs (like depreciation in COGS) differently, so compare a TSX name to its own history before comparing it to a US peer.
FAQ
What is a good gross margin?
It depends entirely on the industry: software firms often exceed 70% while grocers may run below 25%. Compare a company to its own past and to direct competitors rather than to a universal benchmark.
Is gross margin the same as markup?
No. Gross margin is gross profit as a percentage of revenue, while markup is gross profit as a percentage of cost. The same dollar profit gives a higher markup number than margin number.
Check your understanding
Two retailers report similar revenue but one shows a notably higher gross margin. Before concluding it is genuinely more efficient, what is the most important thing to check?
Companies classify costs differently (some put shipping or depreciation in COGS, others below it), so raw cross-company gross-margin comparisons can be misleading without checking the cost classifications.