Yahoo maps creator payouts and infrastructure into COGS, turning a contribution margin into a "gross margin"

Claim

Roblox's 10-K defines cost of revenue narrowly: third-party payment-processing fees on virtual-currency sales, plus sales tax. Developer exchange fees and infrastructure / trust-and-safety are separate operating expense lines below gross profit.

RBLX FY2025 ($M)	Amount	% revenue
Revenue	4,890.6	100%
Cost of revenue (payment processing + sales tax)	1,072.3	22%
True gross profit	3,818.3	78%
Developer exchange fees	1,503.1	31%
Infrastructure & trust/safety	1,153.5	24%

100 − 22 − 31 − 24 = 23.8%, which is approximately the 26% Yahoo reports. Yahoo is computing a content-cost-inclusive contribution margin and labelling it gross margin.

Confirmations: Yahoo's own income statement reports FY2025 gross profit of $3.82B on $4.89B revenue = 78.1%, contradicting its own snapshot field. roic.ai independently reports 78.07% (FY2025) / 77.76% (FY2024).

Why it matters

Neither number is wrong — they answer different questions. The trap is that the 26% figure is not comparable to a software peer set, and it is the one that lands in screens and snapshot tables. A 26% "gross margin" on a software company reads as a broken business model. The real read is an 78%-gross-margin platform that spends 31 points of revenue acquiring content and 24 points on infrastructure and compliance.

How to avoid it

For any platform that pays a supply side — RBLX, Spotify, Netflix, Uber, DoorDash, Etsy, Twitch/AMZN — read the cost-of-revenue definition out of the 10-K before using a margin figure. Ask specifically: are creator/content payouts above or below the gross profit line? Then say which margin you are quoting.

Same-vendor companions caught on the same name

Yahoo's snapshot on RBLX also returned, all unusable:

• EV $33.41B vs a correct ~$21.2B — it netted only the narrow $1.19B cash line (ignoring ~$4.9B of investments) and appears to treat the $6.81B deferred-revenue balance as debt. Deferred revenue is cash already collected against future delivery; it is not debt. Roblox has $4.31B net cash.
• P/B 58.9 and D/E 1,301 — meaningless when book equity is near zero by construction ($394M equity against a $5.31B accumulated deficit, itself largely SBC). Use Debt/Assets (18.2%) per analysis_notes.md §1 instead.

Generalization: when book equity is near zero from accumulated SBC-driven deficits, every equity-denominated ratio a vendor computes is noise. This is the normal state for post-2020 tech IPOs, not an edge case.

Related

[[principle-primary-source-beats-vendor]] · [[pitfall-entg-margins-corrupted-in-vendor-feeds]] (same family — vendor feeds corrupting the exact figure that decides a verdict) · [[pitfall-yahoo-misclassifies-strategic-investment-gains]]

History

• 2026-07-31 — found during the RBLX analysis. Caught by cross-checking Yahoo's snapshot field against Yahoo's own income statement, which disagreed with itself.