Gross margin is gross profit divided by revenue, the share of each sale left after the direct cost of making or delivering it. It excludes overheads such as research, marketing, administration, interest and tax.
Gross margin shows pricing power and the cost of the product itself. It moves with mix: a business that shifts toward lower-margin products sees it fall even if nothing else changes. What counts as a direct cost differs across industries, so compare like with like.
Microsoft reported a gross margin of 68% for the quarter to September 2026, down one point from a year earlier. Gross margin dollars rose 17% while revenue rose 19%. Microsoft Cloud gross margin fell to 66% from 68% on a shift in mix toward Azure, and the company guided it to roughly 65% for the next quarter. SK hynix, by contrast, reported a gross margin of 86% in its third quarter, up 3 points, according to Investing.com.
Compare gross margin with the company's own earlier quarters and with its peers, and look for the driver of any change: price, mix or cost.