Switch to:
GuruFocus has detected 4 Warning Signs with Adobe Systems Inc $ADBE.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
Adobe Systems Inc (NAS:ADBE)
Gross Margin %
85.89% (As of Feb. 2017)

Gross Margin is calculated as gross profit divided by its revenue. Adobe Systems Inc's gross profit for the three months ended in Feb. 2017 was $1,444 Mil. Adobe Systems Inc's revenue for the three months ended in Feb. 2017 was $1,682 Mil. Therefore, Adobe Systems Inc's Gross Margin for the quarter that ended in Feb. 2017 was 85.89%.

Warning Sign:

Adobe Systems Inc gross margin has been in long term decline. The average rate of decline per year is -1.1%.

ADBE' s Gross Margin % Range Over the Past 10 Years
Min: 84.48   Max: 89.93
Current: 86.04

84.48
89.93

During the past 13 years, the highest Gross Margin of Adobe Systems Inc was 89.93%. The lowest was 84.48%. And the median was 88.89%.

ADBE's Gross Margin % is ranked higher than
81% of the 1917 Companies
in the Global Software - Application industry.

( Industry Median: 52.05 vs. ADBE: 86.04 )

Adobe Systems Inc had a gross margin of 85.89% for the quarter that ended in Feb. 2017 => Durable competitive advantage

The 5-Year average Growth Rate of Gross Margin for Adobe Systems Inc was -1.10% per year.


Definition

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

Adobe Systems Inc's Gross Margin for the fiscal year that ended in Nov. 2016 is calculated as

Gross Margin (A: Nov. 2016 )=Gross Profit (A: Nov. 2016 ) / Revenue (A: Nov. 2016 )
=5034.5 / 5854.43
=(Revenue - Cost of Goods Sold) / Revenue
=(5854.43 - 819.908) / 5854.43
=86.00 %

Adobe Systems Inc's Gross Margin for the quarter that ended in Feb. 2017 is calculated as

Gross Margin (Q: Feb. 2017 )=Gross Profit (Q: Feb. 2017 ) / Revenue (Q: Feb. 2017 )
=1444.3 / 1681.646
=(Revenue - Cost of Goods Sold) / Revenue
=(1681.646 - 237.337) / 1681.646
=85.89 %

* 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

Adobe Systems Inc had a gross margin of 85.89% for the quarter that ended in Feb. 2017 => 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.

Adobe Systems Inc Annual Data

Nov07Nov08Nov09Nov10Nov11Nov12Nov13Nov14Nov15Nov16
Gross Margin 88.7789.8789.9389.3889.6189.0185.5485.0084.4886.00

Adobe Systems Inc Quarterly Data

Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17
Gross Margin 85.0184.9684.0784.3284.5985.6585.5586.1586.5485.89
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
FEEDBACK