Do Gross Margins Matter? When and why to care about gross margins. And what is AI's impact on gross margin

Gross margins represent the ceiling on profitability and are sticky over time, making them critical to long-term valuation, but focus should be prioritized based on company scale, growth rate, and deviation from benchmarks. Operating expenses, by contrast, improve dramatically with scale through leverage. AI products present a novel dynamic where gross margins are currently lower than traditional SaaS but expected to improve as inference costs decline, requiring different analytical treatment than legacy software.