Cost of Revenue

Cost of revenue means the direct costs a company pays to produce or deliver the goods and services it sells. In simple terms, cost of revenue is the cost of creating the revenue. Cost of revenue is important because it helps investors understand how expensive it is for a company to deliver its products or services. It is used to calculate gross profit and gross margin. For example, for a software company, cost of revenue may include hosting costs, customer support, and service delivery expenses. Cost of revenue is not the same as operating expenses. Cost of revenue is directly tied to delivering sales, while operating expenses include broader business costs.