Gross margin is the difference between revenue and the cost of producing goods, divided by the total revenue. It is not quite the same as profit, as it excludes fixed costs, and back-end services. For instance, suppose a company spends $8 to produce a widget that they sell for $10. Their gross margin would then be 20%, even though this total does not include a wide variety of expenses like human resources, marketing, etc. It is closely related to gross profit, but expressed in percent instead of in dollars.