How is gross margin calculated?

The formula is: Gross Margin = (Revenue − Cost of Goods Sold) / Revenue. The full breakdown is on this page, including a worked example on AAPL.

Why does gross margin matter for value investing?

Gross Margin is a quality metric documented across Warren Buffett's 50+ years of Berkshire Hathaway shareholder letters and the broader value-investing canon (Graham, Fisher, Lynch, Greenblatt). It feeds into the Buffett-Fit composite score on invest-like - graders apply it consistently across every public stock so you can compare like-for-like.

Where can I see gross margin for a real stock?

Open /buffett/aapl/ on invest-like for AAPL's Gross Margin value alongside the rest of the 5-pillar Buffett-Fit verdict. Every public stock in the 12,000-ticker universe has the same field - refresh daily.

How is gross margin different from operating margin?

Gross Margin and operating margin are both quality metrics - see the linked term for the distinction in mechanics and use. The Buffett-Fit framework on invest-like uses both in the composite score with different pillar weights.

Gross Margin - Definition, Formula + Buffett Example

The % of every dollar of revenue that's left after paying the direct cost of producing the good or service. Higher = more pricing power.

What it is

Gross profit divided by revenue. Apple at 47% gross margin earns 47 cents of gross profit on every dollar of iPhone sold. Walmart at 25% earns 25 cents.

Why it matters

Gross margin is the cleanest single signal of pricing power. A business that can charge a 60% premium over its costs - and sustain that premium for 10+ years - has structural advantages that show up nowhere else on the income statement.

What "good" looks like

80%+: software, exchanges, payment networks (Visa, MSCI, Mastercard)
40–60%: branded consumer goods (Apple, Coca-Cola, LVMH)
20–40%: industrials, retailers, restaurants
< 20%: commodities, low-cost-leader businesses (airlines, refiners)

Trends matter more than levels

A business going from 32% to 28% gross margin over 5 years is a worse signal than one going from 22% to 26%, even though the first is at a higher level. Margin compression usually means competitors are biting into pricing power.

Gross Margin

What it is

Why it matters

What "good" looks like

Trends matter more than levels

Related terms

See it on a real stock

Related on invest-like