Glossary
What is gross margin?
Definition
Gross margin is gross profit as a percentage of revenue, where gross profit is revenue minus cost of revenue. It shows the share of revenue left after the direct costs of the goods and services sold. For example, NVIDIA's gross margin for FY2026 (ended 25 Jan 2026) was 71.1%, our calculation from its Form 10-K.
Formula
Gross margin = Gross profit ÷ Revenue
Gross margin, also called gross profit margin, divides gross profit by revenue and shows the result as a percentage. Both inputs come from the income statement, where revenue is the top line and cost of revenue usually comes next. Gross profit is the subtotal left after that cost is subtracted from revenue.[1]
Cost of revenue is what a business spent to produce the goods or services it sold in the period.[1] Some companies print it as cost of sales or cost of goods sold (COGS). Operating expenses, such as research and development, come after gross profit, and operating margin is measured after them. Gross margin is negative when cost of revenue is larger than revenue.
Worked example: NVIDIA
This example calculates gross margin from NVIDIA's income statement for its latest fiscal year, from its Form 10-K. NVIDIA prints revenue as its first line, cost of revenue next and gross profit as the subtotal after them. To get the margin, divide gross profit by revenue and show the result as a percentage.
Gross profit here is the line NVIDIA prints, so it carries no D marker (derived by StockFactsheet). How to read a 10-Q walks through NVIDIA's quarterly income statement, which opens with the same lines.
| USD m | FY2026ended |
|---|---|
| Revenue | 215,938 |
| Gross profit | 153,463 |
| Gross margin % | 71.1% |
Source: NVIDIA Form 10-K for FY2026, SEC EDGAR
Totals may not add up because of rounding.
All periods: NVIDIA income statement
How StockFactsheet calculates it
StockFactsheet calculates gross margin from gross profit and revenue as reported, with no adjustment for one-off items. Where a filing reports no gross profit, we build it as revenue minus cost of revenue from the same filing. A gross profit we build carries the D marker, while the margin itself carries none.
A trailing 12 months (TTM) gross margin divides TTM gross profit by TTM revenue, a ratio of sums. Where no gross profit can be read or built, our table has no gross margin row, and bank tables never have one. The full rule is in our methodology for gross margin.
Common mistakes
- Assuming every gross margin in a filing is a percentage: some documents use gross margin for the amount of gross profit, while ours is always a share of revenue.[1]
- Comparing gross margins across companies as if cost of revenue meant the same costs: companies differ in whether costs such as depreciation or shipping sit in cost of revenue.
- Treating a higher gross margin as higher profit: a business with a high gross margin can still report a loss after its operating expenses, interest and tax.
Sources and data
The references explain the term; the worked example's figures are as reported in the filings after them. Derived figures are our calculations (see Methodology).
(opens in new tab)- [1] Reference Beginners' Guide to Financial Statements
- [2] Filing Form 10-K, fiscal year ended 25 Jan 2026
- [3] Our dataset StockFactsheet fundamentals dataset, extracted from SEC EDGAR XBRL on ; derived values (Q4, TTM, free cash flow, net debt, margins, growth rates and ratios) are explained in Methodology.
Cite this page
StockFactsheet (2026). "What is gross margin?" Signed off by OffScriptBySami. Updated ; data as of . https://stockfactsheet.com/learn/gross-margin/
For information only. StockFactsheet does not recommend buying, selling or holding any security. Figures can contain errors; always check the original filings. Full disclaimer
Update history
- Published First published version.