Cost of revenue, also called cost of goods sold or COGS, covers what goes directly into the products or services sold: raw materials, direct labor, production, and delivery. For a coffee shop, it is the beans, milk, cups, and the barista's wages, not the rent or the accountant.
When COGS shrinks as a share of sales, the company keeps more of each dollar it takes in, usually thanks to greater scale, stronger pricing power, or more efficient production.