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Red Hat Inc  (NYSE:RHT) Gross Profit: $2,150 Mil (TTM As of May. 2017)

Red Hat Inc's gross profit for the three months ended in May. 2017 was $576 Mil. Red Hat Inc's gross profit for the trailing twelve months (TTM) ended in May. 2017 was $2,150 Mil.

Gross Margin % is calculated as gross profit divided by its revenue. Red Hat Inc's gross profit for the three months ended in May. 2017 was $576 Mil. Red Hat Inc's Revenue for the three months ended in May. 2017 was $677 Mil. Therefore, Red Hat Inc's Gross Margin % for the quarter that ended in May. 2017 was 85.12%.

Red Hat Inc had a gross margin of 85.12% for the quarter that ended in May. 2017 => Durable competitive advantage

During the past 13 years, the highest Gross Margin % of Red Hat Inc was 85.31%. The lowest was 83.47%. And the median was 84.76%.


Historical Data

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

* Premium members only.

Red Hat Inc Annual Data

Feb08 Feb09 Feb10 Feb11 Feb12 Feb13 Feb14 Feb15 Feb16 Feb17
Gross Profit Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 1,128.22 1,302.02 1,516.29 1,742.60 2,057.43

Red Hat Inc Quarterly Data

Aug12 Nov12 Feb13 May13 Aug13 Nov13 Feb14 May14 Aug14 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 May17
Gross Profit Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 483.85 512.13 524.81 536.63 576.10

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Calculation

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. 2017 is calculated as

Gross Profit (A: Feb. 2017 )=Revenue - Cost of Goods Sold
=2411.803 - 354.378
=2,057

Red Hat Inc's Gross Profit for the quarter that ended in May. 2017 is calculated as

Gross Profit (Q: May. 2017 )=Revenue - Cost of Goods Sold
=676.796 - 100.696
=576

Gross Profit for the trailing twelve months (TTM) ended in May. 2017 was 512.134 (Aug. 2016 ) + 524.807 (Nov. 2016 ) + 536.633 (Feb. 2017 ) + 576.1 (May. 2017 ) = $2,150 Mil.

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

Red Hat Inc's Gross Margin % for the quarter that ended in May. 2017 is calculated as

Gross Margin % (Q: May. 2017 )=Gross Profit (Q: May. 2017 ) / Revenue (Q: May. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=576 / 676.796
=85.12 %

* 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

Red Hat Inc had a gross margin of 85.12% for the quarter that ended in May. 2017 => Durable competitive advantage


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Headlines

From the Internet

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Red Hat Inc 2018 Q2 Results Earnings Call Slides

- Seekingalpha 2017-09-25 17:43:48

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