TTM cost of revenue is the total direct cost of the goods a company sold and the services it delivered over the trailing twelve months, the four most recent fiscal quarters. It pairs with TTM revenue to give a current, full-year view of gross profit and gross margin.
Cost of revenue covers costs such as materials, direct labor, production overhead, and the costs of delivering services. It leaves out selling, administrative, and research expenses, which sit lower on the income statement.
The quarterly figure is usually tagged CostOfRevenue in XBRL, the aggregate cost of goods produced and sold and services rendered in the period. Some companies tag a narrower CostOfGoodsAndServicesSold line instead, or split product and service costs into separate lines. Regulation S-X Rule 5-03.2 asks companies to break this caption into the cost of tangible goods sold, operating expenses of utilities, expenses tied to rental income, cost of services, and expenses tied to other revenues.
Income statements in a 10-Q show both the latest quarter and the fiscal year to date, but there is no separate fourth-quarter filing. The fourth quarter is therefore derived as the 10-K annual amount minus the nine-month year-to-date amount from the third-quarter 10-Q, and the TTM total is the sum of the latest four quarters built that way. Summing four quarters that each come from the same element keeps the figure consistent with TTM revenue, as long as the company has not changed how it classifies costs during the year.
TTM cost of revenue is most useful next to TTM sales. Subtracting it gives TTM gross profit, and dividing that by TTM sales gives a gross margin that is current but not distorted by a single seasonal quarter. It is also the numerator of inventory turnover and the base for days inventory outstanding. Comparisons across companies need care, since some include depreciation or occupancy costs in cost of revenue and others report them elsewhere.
A: Close, but not always identical. Cost of revenue can include the cost of services and other revenue streams, while cost of goods sold refers strictly to products. Many companies use the terms interchangeably.
A: Many businesses are seasonal, so one quarter's costs can mislead. A trailing year matches a full cycle and lines up with TTM revenue.
A: It is the full-year amount from the 10-K minus the nine-month year-to-date amount reported in the third-quarter 10-Q.
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