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Microsoft Corp (NAS:MSFT)
Gross Margin
61.65% (As of Sep. 2016)

Gross Margin is calculated as gross profit divided by its revenue. Microsoft Corp's gross profit for the six months ended in Sep. 2016 was $12,609 Mil. Microsoft Corp's revenue for the six months ended in Sep. 2016 was $20,453 Mil. Therefore, Microsoft Corp's Gross Margin for the quarter that ended in Sep. 2016 was 61.65%.

Warning Sign:

Microsoft Corp gross margin has been in long term decline. The average rate of decline per year is -4.8%.

MSFT' s Gross Margin Range Over the Past 10 Years
Min: 60.87   Max: 80.8
Current: 60.87

60.87
80.8

During the past 13 years, the highest Gross Margin of Microsoft Corp was 80.80%. The lowest was 60.87%. And the median was 76.98%.

MSFT's Gross Margin is ranked higher than
58% of the 1873 Companies
in the Global Software - Infrastructure industry.

( Industry Median: 52.58 vs. MSFT: 60.87 )

Microsoft Corp had a gross margin of 61.65% for the quarter that ended in Sep. 2016 => Durable competitive advantage

The 5-Year average Growth Rate of Gross Margin for Microsoft Corp was -4.80% per year.


Definition

Gross Margin is the percentage of Gross Profit out of sales or Revenue.

Microsoft Corp's Gross Margin for the fiscal year that ended in Jun. 2016 is calculated as

Gross Margin (A: Jun. 2016 )=Gross Profit (A: Jun. 2016 ) / Revenue (A: Jun. 2016 )
=52540 / 85320
=(Revenue - Cost of Goods Sold) / Revenue
=(85320 - 32780) / 85320
=61.58 %

Microsoft Corp's Gross Margin for the quarter that ended in Sep. 2016 is calculated as

Gross Margin (Q: Sep. 2016 )=Gross Profit (Q: Sep. 2016 ) / Revenue (Q: Sep. 2016 )
=12609 / 20453
=(Revenue - Cost of Goods Sold) / Revenue
=(20453 - 7844) / 20453
=61.65 %

* 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

Microsoft Corp had a gross margin of 61.65% for the quarter that ended in Sep. 2016 => Durable competitive advantage


Be Aware

If a company loses its competitive advantages, usually its gross margin declines well before its sales declines. Watching Gross Margin and Operating Margin closely helps avoid value trap situations.


Related Terms

Operating Margin, Cost of Goods Sold, Gross Profit, Revenue


Historical Data

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

Microsoft Corp Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
Gross Margin 79.0880.8079.2080.1677.7376.2273.8168.8264.7061.58

Microsoft Corp Semi-Annual Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
Gross Margin 67.3664.3461.7167.0466.3364.6458.5162.3961.2961.65
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