How to use this calculator
- Choose a reporting period and decide whether to measure your entire company, a subscription service, or one named product or service. Use revenue and costs for that same scope.
- Enter revenue recognized during the period, then choose the currency used for every amount. Changing the currency changes the displayed unit; it does not convert your figures.
- Put each delivery cost in one of the five categories. Enter 0 only when you know a category has no cost for this scope and period. If a cost is unknown, check your records instead of treating a blank as zero.
- Check gross profit and gross margin, then compare the cost total and category amounts with your records. Enter amounts as plain digits with up to two decimal places; commas and currency symbols are not accepted.
What the margin measures
Gross profit is an amount of money. Gross margin expresses that amount as a share of recognized revenue. It measures what remains after cost of revenue, before expenses such as sales, research, and general administration. It is not net profit or cash flow. Atlassian's FY2026 second-quarter filing uses the same gross profit and gross margin definitions.
A period with 75% gross margin
With $200,000 in recognized revenue and $50,000 in matching cost of revenue, gross profit is $150,000. Divide $150,000 by $200,000 to get a 75% gross margin. Delivery costs equal 25% of recognized revenue in this example. This illustrates the arithmetic; 75% is not a target margin.
Use revenue recognized for the period
Use revenue recognized during the reporting window you entered, with costs for delivering that same revenue. The Entire company scope needs company-wide figures. The Subscription service scope needs recognized subscription revenue and its matching service costs. A named product or service needs both revenue and costs for that offering.
Monthly recurring revenue (MRR) and annual recurring revenue (ARR) describe a recurring revenue run rate based on contracts at a point in time. They do not stand in for revenue recognized during your reporting period. Invoices, bookings, and cash receipts may also cover revenue recognized in another period. For example, a customer can pay for a year of service in advance while the provider recognizes revenue as it delivers the promised service. The timing depends on the contract and what the provider has promised; a fee is not automatically spread evenly across the contract. Atlassian's filing distinguishes its MRR and ARR measures from reported revenue, and the IFRS 15 overview explains when promised goods or services are recognized as revenue.
What belongs in cost of revenue
The five fields help you build the cost total. Use your business's accounting policy consistently to decide what belongs in each field. Count each cost only once:
- Hosting and infrastructure: hosting, network, and capacity used to provide the service.
- Third-party APIs and delivery software: outside services used to deliver what customers bought, such as a production API. Software used only for sales or administration belongs elsewhere.
- Payment processing: fees attributable to the revenue scope you selected.
- Support and service delivery people: pay and contractor costs for people delivering or supporting that service. If someone has mixed duties, include only the portion allocated to delivery under your policy.
- Other cost of revenue: matched costs without another field, such as depreciation or amortization of delivery equipment and technology, overhead allocated to delivery, or the cost of delivering professional services when their revenue is included.
Cost of revenue can include fixed service capacity and allocated costs, as well as costs that change with usage. Atlassian's quarterly filing includes hosting, support, payment fees, depreciation, amortization, and allocated overhead in its cost of revenue. GitLab's FY2026 annual filing reports subscription and professional-services delivery costs separately. These are examples of their policies; use your own records and consistent policy to classify your costs. Sales, marketing, research and development, and general administration usually sit outside cost of revenue, except for a portion properly allocated to delivery.
Reading unusual and differing results
Costs can exceed revenue. If recognized revenue is $1,000 and cost of revenue is $1,150, gross profit is -$150 and gross margin is -15%. That is a valid calculation for the figures entered, not an input error or a verdict on the business.
If recognized revenue is zero, the calculator still subtracts costs to show gross profit, but gross margin is Undefined because division by zero has no result. This remains true when both revenue and costs are zero.
If your result differs from a financial report, check the revenue recognition period, the scope of the revenue and costs, shared-cost allocations, and whether the report uses an adjusted margin that excludes selected costs. Changes in product or service mix can also change a company-wide margin. Use the same scope and accounting policy when comparing periods. The calculator cannot inspect your records or tell you whether a particular margin is healthy.
For a wider monthly view of retention, acquisition, and recurring margin, use the SaaS metrics calculator. Browse the SaaS tools catalog for related calculators.