What is Cost of Goods Sold (COGS)?
Cost of Goods Sold (COGS) is the direct cost of producing the goods or services sold by a company during a period — raw materials, direct labour, third-party fulfilment, hosting and cloud infrastructure for SaaS, payment processing, customer support directly attributable to delivery, and similar costs.
Gross margin (Revenue − COGS ÷ Revenue) is a primary indicator of business quality. Investors examine COGS classification carefully: aggressive companies sometimes shift costs from COGS to operating expenses to inflate reported gross margin.