AI Vocabulary · 06 Own Your AI
What is Gross Margin?
The share of revenue left after paying the direct costs of delivering a product. For AI products, inference is one of those costs.
Gross margin is revenue minus the direct cost of delivering the product, divided by revenue. If a customer pays 100 euros and serving them costs 40, the gross margin is 60%. It shows how much is left for development, sales and profit.
Classic software costs very little for each extra user. AI products pay for every answer through inference, so their margins sit lower. In ICONIQ's 2026 survey, AI products averaged 45% gross margin in 2025, with 53% projected for 2026. In 2023 Andreessen Horowitz estimated that many AI apps ran at 50 to 60%, with 20 to 40% of revenue going to inference and customer-specific model tuning (both investor sources).
Why it matters for you
Margin decides whether growth makes you richer or poorer. An AI product that grows fast on thin margins can burn more money with every new customer.
Own it
Track your inference cost per customer from day one. Smaller models for easy requests through model routing and shorter contexts raise the margin without touching the price.
Where it comes from
Gross margin is a standard accounting measure. The AI figures come from ICONIQ's 2026 State of AI and from Who Owns the Generative AI Platform? by Andreessen Horowitz (2023).
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