NVIDIA's gross margin — the transfer test

mentor: You computed Apple's gross marginDefinitionGross marginThe share of each revenue dollar left after the direct cost of producing what was sold. It is the first read on pricing power and production efficiency, and the starting point of every margin analysis.Gross margin = Gross profit ÷ Revenue = (Revenue − Cost of revenue) ÷ RevenueDrivers: Price · Cost · Volume · MixFull definition →. The method is universal — it works on any company that files with the SEC. Prove it by running the same analysis on NVIDIA, a fabless chip designer with a very different business model.

Below are NVIDIA's own figures from its latest annual reportDefinitionForm 10-KThe audited annual report a US public company files with the SEC — the most complete single document about a business: audited financial statements, management's discussion, risk factors, and the auditor's own opinion. It is the primary source nearly every figure on Echelon grounds to.One 10-K = audited statements + MD&A + risk factors + auditor's reportDrivers: Assurance · Cadence · Restated comparativesFull definition → (Form 10-K), pulled from SEC EDGAR. Compute the margin the same way — then note in one line how the level differs from Apple's and what that difference says about the two business models.

Gross marginDefinitionGross marginThe share of each revenue dollar left after the direct cost of producing what was sold. It is the first read on pricing power and production efficiency, and the starting point of every margin analysis.Gross margin = Gross profit ÷ Revenue = (Revenue − Cost of revenue) ÷ RevenueDrivers: Price · Cost · Volume · MixFull definition → = gross profit ÷ revenue (equivalently, (revenue − cost of revenue) ÷ revenue).