Profit margin by industry

By understanding the average profit margins for different industries, investors can get a better sense of what is considered "normal" for a particular industry.

Assessing gross profit margin can be challenging since each business has its unique characteristics. By analyzing a company's gross and net profit margins, investors can get a better sense of how efficiently the company is operating and how much profit it is generating from its revenue.

Generally companies that prioritize sales volume or operate in competitive markets may have lower gross profit margins, even if they are financially stable. To gain insights from gross profit margins, it is essential to establish industry-specific benchmarks and consider broader business strategies. Comparing a company's gross profit margin to industry averages and other financial metrics such as operating margin and net profit can help determine a suitable ratio for that specific business.

Industry Averages Profit Margins

The average gross and net profit margins can vary significantly across different industries. Here is a table of some common company industries in the US and their average gross profit margin and net profit margin as of May 2025:

Industry	Average Gross Profit Margin	Average Net Profit Margin	Number of companies
Advertising Agencies	47%	-1.9%	23
Aerospace & Defense	27.8%	5.7%	52
Agricultural Inputs	29.3%	6.3%	11
Airlines	49.2%	0.4%	11
Airports & Air Services	22.4%	N/A	4
Aluminum	13.8%	3.6%	4
Apparel Manufacturing	49.1%	0.9%	16
Apparel Retail	41.9%	3.3%	29
Asset Management	81.5%	20.4%	77
Auto Manufacturers	10.3%	5.1%	13
Auto Parts	22.4%	3%	44
Auto & Truck Dealerships	28.3%	0.4%	13
Banks - Diversified	88.7%	27.6%	6
Banks - Regional	100%	24%	286
Beverages - Non-Alcoholic	45.2%	7.6%	12
Beverages - Wineries & Distilleries	41.6%	-2.9%	6
Biotechnology	86.8%	-116.9%	500
Broadcasting	46.9%	-3.7%	14
Building Materials	32.5%	13.8%	8
Building Products & Equipment	32.2%	8.3%	28
Business Equipment & Supplies	35.8%	2%	7
Capital Markets	80.8%	12.7%	36
Chemicals	19.7%	0.1%	18
Communication Equipment	42.3%	-4.5%	43
Computer Hardware	37.5%	-6.3%	25
Conglomerates	30.8%	-3.2%	12
Consulting Services	44.3%	4.4%	17
Consumer Electronics	36.4%	-9.2%	11
Copper	48.1%	N/A	4
Credit Services	82.7%	19.1%	44
Department Stores	34.7%	2.9%	5
Diagnostics & Research	47.9%	-59.1%	60
Discount Stores	25.9%	3.8%	8
Drug Manufacturers - General	72.9%	17.2%	12
Drug Manufacturers - Specialty & Generic	55.6%	-55.4%	44
Education & Training Services	55.8%	7.2%	17
Electrical Equipment & Parts	29.1%	5.3%	41
Electronic Components	32.5%	-1.3%	32
Electronic Gaming & Multimedia	69.3%	-6.9%	7
Electronics & Computer Distribution	13.7%	1.6%	6
Engineering & Construction	19.3%	4.6%	30
Entertainment	47%	-4.9%	38
Farm & Heavy Construction Machinery	22.5%	5%	21
Farm Products	15.5%	0.6%	15
Financial Data & Stock Exchanges	70.3%	28.2%	11
Food Distribution	14.5%	0.3%	9
Footwear & Accessories	46.3%	6.4%	11
Furnishings, Fixtures & Appliances	37.6%	1.9%	21
Gambling	54.6%	5.7%	11
Gold	39.8%	12.7%	28
Grocery Stores	27.5%	2%	10
Healthcare Plans	16.4%	0%	11
Health Information Services	58.2%	-22.9%	32
Home Improvement Retail	42.7%	5%	7
Household & Personal Products	56.4%	4.5%	26
Industrial Distribution	28.3%	4.5%	17
Information Technology Services	36.3%	5.6%	52
Insurance Brokers	76.4%	8%	12
Insurance - Diversified	55%	12.7%	12
Insurance - Life	43.5%	7.8%	14
Insurance - Property & Casualty	44.5%	10.6%	37
Insurance - Reinsurance	41.3%	7.4%	8
Insurance - Specialty	73.1%	13%	17
Integrated Freight & Logistics	35.2%	3.3%	14
Internet Content & Information	64.1%	-0.8%	41
Internet Retail	48.4%	0.9%	25
Leisure	42.9%	4%	24
Lodging	34.1%	7.9%	9
Luxury Goods	56.1%	1.4%	5
Marine Shipping	50.4%	15.4%	24
Medical Care Facilities	34.9%	-23.5%	39
Medical Devices	63.5%	-38.2%	93
Medical Distribution	19.8%	3.5%	6
Medical Instruments & Supplies	56.9%	-8.8%	43
Metal Fabrication	26.5%	5.2%	12
Mortgage Finance	78.3%	13.3%	17
Oil & Gas Drilling	36.2%	1.1%	7
Oil & Gas E&P	60.1%	9.8%	61
Oil & Gas Equipment & Services	29.1%	4%	47
Oil & Gas Integrated	35%	5.2%	5
Oil & Gas Midstream	47.7%	16.8%	35
Oil & Gas Refining & Marketing	8.6%	0.7%	17
Other Industrial Metals & Mining	15.9%	-4.9%	17
Other Precious Metals & Mining	34.8%	N/A	10
Packaged Foods	27.5%	3.5%	42
Packaging & Containers	25.1%	4.5%	18
Paper & Paper Products	13.7%	-3.1%	5
Personal Services	43.2%	7.7%	11
Pharmaceutical Retailers	38.9%	-22.8%	6
Pollution & Treatment Controls	36.8%	7%	10
Publishing	60.5%	-1.4%	7
Railroads	38.2%	12.9%	8
Real Estate - Development	44.1%	-0.1%	10
Real Estate - Diversified	32%	14.6%	4
Real Estate Services	39.7%	-0.9%	25
Recreational Vehicles	22.5%	0.1%	14
REIT - Diversified	69%	19.6%	20
REIT - Healthcare Facilities	67.1%	12%	17
REIT - Hotel & Motel	42.1%	5.4%	15
REIT - Industrial	72.2%	29.6%	16
REIT - Mortgage	87.8%	29.9%	39
REIT - Office	61.6%	-6.7%	23
REIT - Residential	56.9%	11.6%	18
REIT - Retail	71.2%	17.9%	23
REIT - Specialty	59.7%	17.6%	16
Rental & Leasing Services	36.8%	7.8%	20
Residential Construction	24.3%	10.5%	20
Resorts & Casinos	48.6%	3.1%	17
Restaurants	36.4%	2.8%	43
Scientific & Technical Instruments	48%	9.6%	23
Security & Protection Services	38%	9.1%	14
Semiconductor Equipment & Materials	45.8%	5.1%	25
Semiconductors	46.6%	-5.9%	64
Software - Application	65.7%	-2.9%	183
Software - Infrastructure	64.5%	4%	94
Solar	30.1%	-8.6%	15
Specialty Business Services	33.2%	3.6%	26
Specialty Chemicals	28.8%	4.3%	44
Specialty Industrial Machinery	37.1%	9.3%	77
Specialty Retail	40.2%	2.1%	38
Staffing & Employment Services	33.8%	2.2%	23
Steel	15.4%	0.2%	14
Telecom Services	60.3%	-0.4%	32
Thermal Coal	30.5%	7.9%	8
Tobacco	44.7%	N/A	5
Tools & Accessories	37.1%	7.7%	10
Travel Services	52.5%	8.7%	11
Trucking	48%	2.9%	12
Uranium	6.4%	N/A	5
Utilities - Diversified	41.2%	13.3%	15
Utilities - Regulated Electric	43.7%	13.4%	24
Utilities - Regulated Gas	45.9%	11.7%	14
Utilities - Regulated Water	51.9%	18.3%	13
Utilities - Renewable	37.4%	10.9%	10
Waste Management	30.6%	3%	11

For example, the average gross profit margin for the Banks - Regional industry is around 100%, and the average gross profit margin for the Banks - Diversified industry is around 88.7%. On the other hand, the average gross profit margin for the Uranium industry is around 6.4%, and the average gross profit margin for the Oil & Gas Refining & Marketing industry is around 8.6%.

Please note that these figures are based on industry averages and can vary significantly depending on the specific company, its size, location, competition, and other factors.

Industries with highest gross profit margin

You can explore the top industries with highest gross profit margin in the chart and table below. The chart allows you to apply additional sector-based filters to the industries, enabling you to explore a breakdown of the industries with highest gross profit margin within each sector.

Industry	Average Gross Profit Margin	Average Net Profit Margin	Number of companies
Banks - Regional	100%	24%	286
Banks - Diversified	88.7%	27.6%	6
REIT - Mortgage	87.8%	29.9%	39
Biotechnology	86.8%	-116.9%	500
Credit Services	82.7%	19.1%	44
Asset Management	81.5%	20.4%	77
Capital Markets	80.8%	12.7%	36
Mortgage Finance	78.3%	13.3%	17
Insurance Brokers	76.4%	8%	12
Insurance - Specialty	73.1%	13%	17

Industries with lowest gross profit margin

Industries with the lowest gross profit margin are shown in the following chart and table. You can use the chart to group industries by sector and find the ones with lowest gross profit margin in each sector.

Industry	Average Gross Profit Margin	Average Net Profit Margin	Number of companies
Uranium	6.4%	N/A	5
Oil & Gas Refining & Marketing	8.6%	0.7%	17
Auto Manufacturers	10.3%	5.1%	13
Electronics & Computer Distribution	13.7%	1.6%	6
Paper & Paper Products	13.7%	-3.1%	5
Aluminum	13.8%	3.6%	4
Food Distribution	14.5%	0.3%	9
Steel	15.4%	0.2%	14
Farm Products	15.5%	0.6%	15
Other Industrial Metals & Mining	15.9%	-4.9%	17

Understanding Gross Profit Margin

Gross profit margin is a financial metric used to assess the financial health and efficiency of a publicly traded company by indicating the proportion of money left over from revenues after accounting for the cost of goods sold (COGS). It is expressed as a percentage and calculated using the formula:

Gross profit margin is a critical financial metric that serves as an indicator of a publicly traded company's profitability and operational efficiency by showing the percentage of revenue that exceeds the cost of goods sold (COGS). It offers insights into how well a company controls its production costs and its ability to generate profit from sales, reflecting on its financial health and competitive positioning. This metric is invaluable for investors, analysts, and the company's management, as it aids in assessing the company's profitability before other expenses are deducted, facilitating comparative analysis over time and against peers in the industry. A higher gross profit margin suggests a company is efficiently managing its direct costs and selling its products at a higher markup, which can indicate stronger financial health and potentially higher returns for investors.

Understanding Net Profit Margin

Net profit margin is a crucial financial metric that measures the overall profitability of a publicly traded company, expressed as a percentage of its total revenues. It indicates how much net income (profit after all expenses) a company generates from its total revenue. The formula to calculate net profit margin is:

Net profit margin is a fundamental financial metric that represents the proportion of net income to total revenues for a publicly traded company, illustrating how effectively it converts sales into profits after deducting all expenses, such as cost of goods sold, operating expenses, taxes, and interest. This ratio is a comprehensive indicator of a company's overall financial health and operational efficiency, revealing its ability to manage expenses and maximize profitability from its revenue streams. It is critically evaluated by investors, analysts, and stakeholders to gauge the company's profitability, compare its performance against peers, and make informed investment decisions. A higher net profit margin indicates a company's success in generating income relative to its revenue, highlighting its financial robustness and operational effectiveness in controlling costs.

Gross Profit margins vs Net Profit margins

Gross profit margin and net profit margin are two important financial metrics that measure a company's profitability. The main difference between them is the level of expenses that they take into account.

Gross profit margin is the percentage of revenue that a company retains after deducting the cost of goods sold (COGS). COGS includes direct costs such as materials, labor, and manufacturing overheads. A higher gross profit margin means that a company is earning more money per dollar of revenue, which indicates better operational efficiency.

Net profit margin, on the other hand, is the percentage of revenue that a company retains after deducting all expenses, including COGS, operating expenses, interest, taxes, and other charges. A higher net profit margin means that a company is earning more money after all expenses have been accounted for, which indicates better overall financial performance.

Several factors can affect both gross and net profit margins. These include:

1. Sales volume: Higher sales volume can increase revenue and gross profit, but it may also increase operating expenses, leading to lower net profit margins.
2. Competition: Companies operating in highly competitive markets may have lower gross and net profit margins due to pricing pressures and higher marketing expenses.
3. Industry: Different industries have different cost structures, which can affect both gross and net profit margins. For example, manufacturing companies may have higher COGS due to raw material costs, while service-based companies may have lower COGS but higher operating expenses.
4. Efficiency: Operational efficiency, such as effective cost management, process optimization, and resource allocation, can lead to higher gross and net profit margins.
5. Taxes and regulations: Taxes and regulatory compliance costs can impact a company's net profit margins.

Overall, while gross profit margin and net profit margin are both important metrics, they provide different insights into a company's financial health and performance. It's essential to consider both when evaluating a company's profitability and to compare them to industry benchmarks and other financial metrics to get a complete picture.

Several other factors can affect a company's gross and net profit margins like the size of the company, economic conditions, pricing strategies, and operating expenses.

For example, a larger company may be able to achieve higher economies of scale, which can result in higher profit margins. On the other hand, a company operating in a highly competitive market may need to lower its prices in order to remain competitive, which can result in lower profit margins.

Similarly, economic conditions can also have a significant impact on a company's profit margins. During a recession, for example, consumers may be less willing to spend money, which can result in lower revenue and lower profit margins for companies across the board.