SHOP and TWLO gross margins

Can one explain why Shopify and Twilio have gross margins in the mid-50s while some ‘hardware’ businesses such as Arista (consistently), Nvidia (latest but variable), Pure Storage, …have it in the 60s? btw, what is the GM for Nutanix?
Square has a GM just below 40%.

What gives? I would expect ‘software’ businesses to have higher GM in general and SaaS to have even higher GM given that they spend all the R&D up front and bring it up and then just collect for a long time. At any rate, engineering and management salaries, R&D and most(?) sales&marketing would not be included in the cost of goods. Is that statement right? What do they put under cost of good for businesses building software?


1 Like

NTNX GM is 70.5% according to

Those sites are relatively unreliable. Per their latest 10-Q, Gross margin of 76.3% or adjusted to account for stock-based compensation and amortization of intangible assets 78.6% .



NTNX gross margins from earning releases. 2Q19 is an estimate I picked up either in the release or conference call.

non-GAAP Gross Margin Growth					
	Q1	Q2	Q3	Q4	YR
2017	65.4%	63.2%	61.2%	62.6%	63.1%
2018	61.9%	63.5%	68.4%	77.7%	68.1%
2019	78.6%	79.0%			

Definitely trending in the right direction and looking more “software” like every Q.


Sorry. Just realized the title on the table should read “Gross Margins”, not “Gross Margin Growth”. Typo.

SHOP and TWLO have services for which they pay third parties…
SHOP (and SQ) also operates as payment processor… paying a large chunk for credit card processing…
TWLO pays network connectivity cost to carriers like Verizon…
thats why their gross margins are lower