METRIC/Metrics

Metric · Margin

Gross Margin Explained

Q: What is a good gross margin?

As a rough guide, above 50% counts as strong and below 25% as low. But the industry-typical range varies enormously between software, industrials and retail.

Q: Why does gross margin differ so much from net margin?

Because sales, R&D, admin, interest and taxes are still deducted between gross profit and net profit. Gross margin only shows the first stage of the cost cascade.

Gross margin relates gross profit (revenue minus direct cost of goods sold) to revenue. It shows how much room a company has to fund sales, R&D and administration before any operating profit is even generated.

Updated 20266 min read

Formula

Gross margin = Gross profit ÷ Revenue × 100

> 50%Strong margin

25–50%Moderate margin

< 25%Low margin

Guideline values, industry-dependent, illustrative

The formula in detail

The components of the formula at a glance.

Numerator

Gross profit

Revenue minus the cost of goods sold (materials, production).

Denominator

Revenue

Revenue from the core operating business.

Gross margin calculator

Enter your own figures and see the value instantly.

Gross profit (€m)

Revenue (€m)

Result gross margin

Moderate margin

45.0%

A gross margin above 50% is typical for software or branded businesses with low variable costs.

A margin below 25% is often normal for retail or manufacturing and not a warning sign on its own.

Gross margin is the first step in the margin cascade: sales, R&D, admin and interest still have to be funded from it before net profit emerges.

A declining gross margin over several quarters can point to pricing pressure or rising input costs.

Typical industry ranges

Typical value range per sector, for orientation.

Financial Services

52.0–85.1%

Healthcare

41.2–74.0%

Real Estate

28.6–70.7%

Technology

36.1–68.5%

Communication Services

30.6–60.4%

Consumer Cyclical

20.7–52.3%

Consumer Defensive

25.7–48.6%

Basic Materials

23.7–47.8%

Industrials

18.6–39.6%

Utilities

14.2–49.7%

Energy

16.2–46.0%

Aggregated sector values (median band). Data as of Nov 15, 2026

Threshold slider

How many sectors meet a threshold?

Move the threshold and see how many of the sectors shown above sit below or above it with their median.

Bounded preview

Threshold for Gross margin37.9%

Comparison

6 of 11 sectors meet the thresholdBased on the aggregated sector medians above, not on individual companies.

What the metric looks like at large companies

Data as of Nov 15, 2026

Name	Sector	Value	Sector median
Apple Inc.	Technology	48.8%	49.4%
Alphabet Inc Class A	Communication Services	60.9%	44.5%
Amazon.com Inc	Consumer Cyclical	51.4%	37.9%
Space Exploration Technologies Corp. Class A Common Stock	Industrials	49.4%	30.0%
Saudi Aramco	Energy	50.1%	25.4%
Eli Lilly and Company	Healthcare	83.6%	62.6%

Selection: the company with the highest market cap in each sector. Not a recommendation, only worked examples with real values.

Used in these strategies

Magic Formula: Value + QualityGood companies at cheap prices: two factors, one score.Moat QualityCompanies with an economic moat, recognisable by persistently high returns and defended margins.

Frequently asked questions

What is a good gross margin?

As a rough guide, above 50% counts as strong and below 25% as low. But the industry-typical range varies enormously between software, industrials and retail.

Why does gross margin differ so much from net margin?

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Not investment advice. This explanation is for informational purposes only and does not constitute a recommendation to buy or sell securities.