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Thank you for your interest in: The TSIA Cloud 40 Q4 Index
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Overview
Challenges
Summary
Key takeaways
Gross margin holds up. Operating profit doesn't follow.
The median company earns a 75.4% gross margin but only a 5.1% operating margin. Only four of thirty-four clear the Rule of 40, and only Palantir does it on growth. Report the Rule of 40 both ways, on operating margin AND on cash. If you publish only one version, you'll only be measured on the more flattering one.
The infrastructure layer is growing faster and earning more.
Google Cloud, AWS, and Microsoft Intelligent Cloud are growing at 32% to 82%, with GAAP operating margins of 36% to 41%. The median SaaS company grows at 16.1% with a 5.1% operating margin. Most SaaS companies host on these three, so the infrastructure bill belongs in your strategic planning as a cost line.
Professional services should be priced as an adoption cost.
Among the large companies that report services separately, most run it at a negative gross margin. Blended gross margin rises when services shrinks as a share of revenue, so a rising blended margin can reflect a change in mix. This eBook makes a case for judging your technology business separately from your services business.
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