gross margin

I’ve been thinking how important gross margin is to the profitability of companies I invest.

TWLO has gross margin of 55%.

Let’s assume down the line they can get up to 60%.

If fixed costs drop to 40%, their operating margin can get to 20%.

Most of the Saas companies I invest in are 80%+ gross margin.

40% fixed costs, that is an operating profit of 40%.

With a 20% higher gross margin, they can be 2x more profitable, so are really worth twice as much per dollar of revenue.

And AYX is over 90%, they could potentially get much higher than 40% operating profit.

Gross margins matter.



Gross margins matter.

Here are Apple’s Gross Margins. They have fallen as Apple has soared and they have always been below 50%.…

I doubt many holding Apple would have traded it for even Alteryx and the 905 gross margins.


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