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Rackspace Hosting, Inc. (NYSE:RAX)
Gross Profit
$1,042 Mil (TTM As of Dec. 2013)

Rackspace Hosting, Inc.'s gross profit for the three months ended in Dec. 2013 was $274 Mil. Rackspace Hosting, Inc.'s gross profit for the trailing twelve months (TTM) ended in Dec. 2013 was $1,042 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Rackspace Hosting, Inc.'s gross profit for the three months ended in Dec. 2013 was $274 Mil. Rackspace Hosting, Inc.'s revenue for the three months ended in Dec. 2013 was $408 Mil. Therefore, Rackspace Hosting, Inc.'s Gross Margin for the quarter that ended in Dec. 2013 was 67.21%.

Rackspace Hosting, Inc. had a gross margin of 67.21% for the quarter that ended in Dec. 2013 => Durable competitive advantage

During the past 10 years, the highest Gross Margin of Rackspace Hosting, Inc. was 71.03%. The lowest was 65.72%. And the median was 67.99%.


Definition

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

Rackspace Hosting, Inc.'s Gross Profit for the fiscal year that ended in Dec. 2013 is calculated as

Gross Profit (A: Dec. 2013 )=Revenue - Cost of Goods Sold
=1534.786 - 492.493
=1,042

Rackspace Hosting, Inc.'s Gross Profit for the quarter that ended in Dec. 2013 is calculated as

Gross Profit (Q: Dec. 2013 )=Revenue - Cost of Goods Sold
=408.103 - 133.821
=274

Rackspace Hosting, Inc. Gross Profit for the trailing twelve months (TTM) ended in Dec. 2013 was 248.59 (Mar. 2013 ) + 258.189 (Jun. 2013 ) + 261.232 (Sep. 2013 ) + 274.282 (Dec. 2013 ) = $1,042 Mil.

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

Rackspace Hosting, Inc.'s Gross Margin for the quarter that ended in Dec. 2013 is calculated as

Gross Margin (Q: Dec. 2013 )=Gross Profit (Q: Dec. 2013 ) / Revenue (Q: Dec. 2013 )
=(Revenue - Cost of Goods Sold) / Revenue
=274 / 408.103
=67.21 %

* All numbers are in millions except for per share data and ratio. All numbers are in their own 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

Rackspace Hosting, Inc. had a gross margin of 67.21% for the quarter that ended in Dec. 2013 => Durable competitive advantage


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Rackspace Hosting, Inc. Annual Data

Dec03Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Gross_Profit 3701592443594285317168901,042

Rackspace Hosting, Inc. Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
Gross_Profit 182200201216229244249258261274
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