Gross margin is gross profit as a percentage of revenue. It shows how much of each dollar of sales is left after the direct cost of producing what was sold.
Formula
gross margin = gross profit / revenue
Both figures are for the same period, as reported. A trailing twelve-month margin divides TTM gross profit by TTM revenue. It is not an average of four quarterly margins.
Reading it
Gross margin varies widely by industry. Software companies often have high gross margins and retailers low ones, so compare a company with itself over time, or with close peers, rather than with the market as a whole. A small change matters: on revenue of $1,000 million (an illustrative figure), one percentage point of gross margin is $10 million of gross profit.
When it says "not reported"
- Gross profit is not reported for the period.
- Revenue is not reported, or is zero.
In the forecast leagues, gross margin is one of the three metrics. For a company that reports no gross profit, the leagues use operating margin instead.