What is cost of revenue?

The cost of revenue includes all expenses tied to delivering a product or service. For SaaS companies, this might cover hosting fees, cloud infrastructure, software licenses, website maintenance, and customer support team salaries—essentially, anything required to provide the service to customers.

What is COGS in SaaS?

For SaaS companies, cost of goods sold (COGS) includes all direct costs related to delivering the product or service. This can include hosting and cloud infrastructure, software license fees, website maintenance, and salaries for customer support teams.

What is the cost of revenue formula?

A general formula is: Cost of revenue = COGS + costs of delivering the product (like marketing). In SaaS, the lines between COGS and cost of revenue often blur. What you include may vary based on your business model—think cloud storage, personnel costs, and customer support.

Is cost of revenue an expense?

Yes, cost of revenue is categorized as an expense. It’s written off as an expense in the company’s income statement.

Can COGS be used for services?

Yes, though it’s often called “cost of revenue” or “cost of sales.” Service businesses use these terms to reflect the direct costs of delivering their services.

Is cost of revenue the same as cost of goods sold?

Not exactly. COGS is a subset of cost of revenue. The latter includes additional costs like distribution or marketing—especially relevant in SaaS, where physical goods aren’t part of the product.

Resource Center

Accrued (or unbilled) revenue

Accrued revenue, also known as unbilled income, is the revenue a company earns but hasn't…

saas-financial-model-template, business-meeting-dashboard-analysis

The dangers of one-size-fits-all SaaS financial models

SaaS financial models can be uniquely complex—largely due to the intricacies of recurring revenue. Templates…

ARR snowball model for top-line planning

Download this free ARR snowball model template to get a head start on top-line planning.

A guide to using AI for financial modeling and forecasting

Financial models can sometimes feel like a house of cards—built on a delicate balance of…

Best Practice Guide to SaaS Accounting in 2025

SaaS accounting guide: best practices & principles

Accounting teams have long been seen as back-office scorekeepers—focused on closing the books, checking compliance…

Revenue Forecasting Guide: 4 Top Line Forecasting Models

Revenue forecasting projects future top-line growth based on driver-based models and assumptions tailored to your…

Sales conversion rate

Sales conversion rate—also called deal conversion rate—is the percentage of opportunities that result in closed-won…

Free cash flow

Free cash flow (FCF) represents the cash a company generates after accounting for operating expenses…

Days payable outstanding

Days payable outstanding (DPO) is a metric that tracks the average number of days a…

Financial waterfall chart guide: how to build and use waterfall charts and models

In strategic finance, you’re constantly balancing two priorities: clearly presenting past performance and forecasting what’s…

Sales capacity model for top-line planning

Download our template to build a sales capacity model.

HR Tech Trends and Statistics graphic featuring bold typography and a colorful data icon. Background is soft cream. HR Tech, Trends Statistics

23+ HR technology trends and statistics for 2025

Discover critical HR tech statistics for 2025, highlighting trends, impacts, and insights to help HR…

HR glossary on employee tenure with bold text and a stylized gray graphic in a light background. Employee tenure, HR terminology

What is employee tenure?

Employee tenure, or job tenure, is the length of time a person has worked for…

Storytelling with people data: Aligning HR metrics to business priorities

Watch this webinar for a practical, story-packed session on how to make HR data resonate…

Watch on-demand >

From Curiosity to Clarity: How HR can ask the Right questions and find the right data

Watch this webinar for a chance to get smarter about data, strategy, and storytelling—from two…

Watch on-demand >