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)