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Rackspace Hosting Inc (NYSE:RAX)
Gross Profit
$1,250 Mil (TTM As of Mar. 2015)

Rackspace Hosting Inc's gross profit for the three months ended in Mar. 2015 was $319 Mil. Rackspace Hosting Inc's gross profit for the trailing twelve months (TTM) ended in Mar. 2015 was $1,250 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Rackspace Hosting Inc's gross profit for the three months ended in Mar. 2015 was $319 Mil. Rackspace Hosting Inc's revenue for the three months ended in Mar. 2015 was $480 Mil. Therefore, Rackspace Hosting Inc's Gross Margin for the quarter that ended in Mar. 2015 was 66.41%.

Rackspace Hosting Inc had a gross margin of 66.41% for the quarter that ended in Mar. 2015 => Durable competitive advantage

During the past 11 years, the highest Gross Margin of Rackspace Hosting Inc was 71.03%. The lowest was 65.72%. And the median was 67.95%.


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. 2014 is calculated as

Gross Profit (A: Dec. 2014 )=Revenue - Cost of Goods Sold
=1794.357 - 582.334
=1,212

Rackspace Hosting Inc's Gross Profit for the quarter that ended in Mar. 2015 is calculated as

Gross Profit (Q: Mar. 2015 )=Revenue - Cost of Goods Sold
=480.2 - 161.3
=319

Rackspace Hosting Inc Gross Profit for the trailing twelve months (TTM) ended in Mar. 2015 was 296.061 (Jun. 2014 ) + 316.822 (Sep. 2014 ) + 318.51 (Dec. 2014 ) + 318.9 (Mar. 2015 ) = $1,250 Mil.

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

Rackspace Hosting Inc's Gross Margin for the quarter that ended in Mar. 2015 is calculated as

Gross Margin (Q: Mar. 2015 )=Gross Profit (Q: Mar. 2015 ) / Revenue (Q: Mar. 2015 )
=(Revenue - Cost of Goods Sold) / Revenue
=319 / 480.2
=66.41 %

* 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 66.41% for the quarter that ended in Mar. 2015 => 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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Gross_Profit 01592443594285317168901,0421,212

Rackspace Hosting Inc Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
Gross_Profit 244249258261274281296317319319
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