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GuruFocus has detected 4 Warning Signs with Netflix Inc \$NFLX.
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Netflix Inc (NAS:NFLX)
Gross Profit
\$3,192 Mil (TTM As of Mar. 2017)

Netflix Inc's gross profit for the three months ended in Mar. 2017 was \$980 Mil. Netflix Inc's gross profit for the trailing twelve months (TTM) ended in Mar. 2017 was \$3,192 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Netflix Inc's gross profit for the three months ended in Mar. 2017 was \$980 Mil. Netflix Inc's revenue for the three months ended in Mar. 2017 was \$2,637 Mil. Therefore, Netflix Inc's Gross Margin for the quarter that ended in Mar. 2017 was 37.15%.

Netflix Inc had a gross margin of 37.15% for the quarter that ended in Mar. 2017 => Competition eroding margins

During the past 13 years, the highest Gross Margin of Netflix Inc was 37.24%. The lowest was 26.52%. And the median was 32.79%.

Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Netflix Inc's Gross Profit for the fiscal year that ended in Dec. 2016 is calculated as

 Gross Profit (A: Dec. 2016 ) = Revenue - Cost of Goods Sold = 8830.669 - 6029.901 = 2,801

Netflix Inc's Gross Profit for the quarter that ended in Mar. 2017 is calculated as

 Gross Profit (Q: Mar. 2017 ) = Revenue - Cost of Goods Sold = 2636.635 - 1657.024 = 980

Netflix Inc Gross Profit for the trailing twelve months (TTM) ended in Mar. 2017 was 632.106 (Jun. 2016 ) + 757.344 (Sep. 2016 ) + 823.122 (Dec. 2016 ) + 979.611 (Mar. 2017 ) = \$3,192 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Netflix Inc's Gross Margin for the quarter that ended in Mar. 2017 is calculated as

 Gross Margin (Q: Mar. 2017 ) = Gross Profit (Q: Mar. 2017 ) / Revenue (Q: Mar. 2017 ) = (Revenue - Cost of Goods Sold) / Revenue = 980 / 2636.635 = 37.15 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Netflix Inc had a gross margin of 37.15% for the quarter that ended in Mar. 2017 => Competition eroding margins

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Netflix Inc Annual Data

 Dec07 Dec08 Dec09 Dec10 Dec11 Dec12 Dec13 Dec14 Dec15 Dec16 Gross_Profit 419 454 591 805 1,165 957 1,257 1,752 2,188 2,801

Netflix Inc Quarterly Data

 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Gross_Profit 470 527 523 564 574 588 632 757 823 980
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