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Red Hat, Inc. (NYSE:RHT)
Gross Profit
$1,302 Mil (TTM As of Feb. 2014)

Red Hat, Inc.'s gross profit for the three months ended in Feb. 2014 was $340 Mil. Red Hat, Inc.'s gross profit for the trailing twelve months (TTM) ended in Feb. 2014 was $1,302 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Red Hat, Inc.'s gross profit for the three months ended in Feb. 2014 was $340 Mil. Red Hat, Inc.'s revenue for the three months ended in Feb. 2014 was $400 Mil. Therefore, Red Hat, Inc.'s Gross Margin for the quarter that ended in Feb. 2014 was 84.88%.

Red Hat, Inc. had a gross margin of 84.88% for the quarter that ended in Feb. 2014 => Durable competitive advantage

During the past 13 years, the highest Gross Margin of Red Hat, Inc. was 84.90%. The lowest was 41.55%. And the median was 82.57%.


Definition

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

Red Hat, Inc.'s Gross Profit for the fiscal year that ended in Feb. 2014 is calculated as

Gross Profit (A: Feb. 2014 )=Revenue - Cost of Goods Sold
=1534.615 - 232.6
=1,302

Red Hat, Inc.'s Gross Profit for the quarter that ended in Feb. 2014 is calculated as

Gross Profit (Q: Feb. 2014 )=Revenue - Cost of Goods Sold
=400.397 - 60.536
=340

Red Hat, Inc. Gross Profit for the trailing twelve months (TTM) ended in Feb. 2014 was 307.202 (May. 2013 ) + 318.843 (Aug. 2013 ) + 336.109 (Nov. 2013 ) + 339.861 (Feb. 2014 ) = $1,302 Mil.

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

Red Hat, Inc.'s Gross Margin for the quarter that ended in Feb. 2014 is calculated as

Gross Margin (Q: Feb. 2014 )=Gross Profit (Q: Feb. 2014 ) / Revenue (Q: Feb. 2014 )
=(Revenue - Cost of Goods Sold) / Revenue
=340 / 400.397
=84.88 %

* 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

Red Hat, Inc. had a gross margin of 84.88% for the quarter that ended in Feb. 2014 => 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.

Red Hat, Inc. Annual Data

Feb05Feb06Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14
Gross_Profit 1582303364425466347599551,1281,302

Red Hat, Inc. Quarterly Data

Nov11Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14
Gross_Profit 245253269275290294307319336340
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