Profit Margin Benchmarks by Industry: Net and Gross Margin Data for 2026
The short answer
The aggregate net profit margin across US public companies is 9.74%, with a 37.76% gross margin and a 14.39% pre-tax operating margin, based on NYU Stern (Damodaran) data as of January 2026 covering 5,994 firms. Software leads on net margin at 25.49%; grocery retail sits near the floor at 1.32%. Margin is set far more by sector structure than by effort.
Key findings
Sector, not management skill, explains most of the spread in profitability. As of January 2026 (NYU Stern/Damodaran), net margins run from roughly 30% at the top to near zero at the bottom. Capital-light, IP-heavy sectors keep the most; high-volume, price-taking sectors keep the least.
- Highest net margins: Semiconductor 30.45%, Software 25.49%, Pharmaceuticals 18.54%, Asset Management 18.36%.
- Thinnest net margins: Food Wholesalers 1.17%, Healthcare Support Services 1.25%, Auto & Truck 1.29%, Grocery Retail 1.32%.
- The broad market: 9.74% net, 37.76% gross, 14.39% pre-tax operating (5,994 firms).
- Gross does not equal net: Apparel keeps a 56.88% gross margin but only 3.85% net after operating and financing costs.
How to read margin data
Three margins measure three different things. Gross margin is revenue minus cost of goods sold. Operating margin (EBIT) subtracts overhead, sales, and R&D. Net margin subtracts interest and tax, leaving the profit an owner keeps. A high gross margin with a low net margin signals heavy operating or financing costs, not a pricing problem.
- Gross margin = (Revenue − Cost of goods sold) ÷ Revenue. Tests pricing power and unit economics.
- Operating margin (EBIT) = Operating profit ÷ Revenue. Tests the cost of running the business.
- Net margin = Net income ÷ Revenue. Tests what survives interest and tax.
Compare a company only against its own sector row below. A 6% net margin is weak for software and strong for grocery.
Margins by major sector (US public firms)
Net margins span roughly 30 points across sectors as of January 2026 (NYU Stern/Damodaran). Software and semiconductors clear 25%+, while grocery, food wholesale, and auto sit near 1%. The table below reports gross, operating (EBIT), and net margin for representative sectors so a business can find the row closest to its own model.
| Sector | Gross margin | Operating margin (EBIT) | Net margin |
|---|---|---|---|
| Total market | 37.76% | 14.39% | 9.74% |
| Total market (excl. financials) | 34.39% | 14.65% | 8.56% |
| Software (system & application) | 71.72% | 40.81% | 25.49% |
| Semiconductor | 58.97% | 40.37% | 30.45% |
| Drugs (pharmaceutical) | 71.73% | 31.24% | 18.54% |
| Investments & asset management | 69.77% | 30.59% | 18.36% |
| Healthcare products | 54.00% | 15.34% | 9.61% |
| Healthcare support services | 12.08% | 3.00% | 1.25% |
| Business & consumer services | 33.38% | 12.27% | 7.03% |
| Computer services (IT) | 24.26% | 7.41% | 4.45% |
| Information services | 34.08% | 11.89% | 6.53% |
| Advertising | 36.24% | 13.30% | −0.30% |
| Retail (general) | 33.18% | 6.80% | 5.61% |
| Retail (grocery & food) | 26.31% | 2.29% | 1.32% |
| Retail (building supply) | 34.22% | 11.94% | 7.84% |
| Restaurant/dining | 32.24% | 15.79% | 9.37% |
| Hotel/gaming | 60.85% | 19.39% | 10.38% |
| Engineering/construction | 15.46% | 6.49% | 5.94% |
| Building materials | 30.94% | 12.64% | 7.42% |
| Construction supplies | 25.52% | 15.23% | 10.78% |
| Trucking | 21.19% | 6.89% | 3.79% |
| Telecom services | 58.82% | 20.47% | 14.20% |
| Utility (general) | 44.18% | 23.49% | 14.18% |
| Household products | 51.04% | 18.62% | 11.68% |
| Food processing | 23.23% | 10.63% | 2.82% |
| Food wholesalers | 15.44% | 2.61% | 1.17% |
| Apparel | 56.88% | 10.18% | 3.85% |
| Auto & truck | 10.41% | 3.16% | 1.29% |
Full sector coverage, including the columns above for every industry, sits in the primary file at NYU Stern (Damodaran), margins by sector.
Professional services and knowledge work
Knowledge-work margins split hard by whether the firm sells capital or labor. Asset managers keep 18.36% net on a 69.77% gross margin (data as of January 2026, NYU Stern/Damodaran) because fees scale without added headcount. Advertising and agency work, which resell people’s time, post a 36.24% gross margin but a −0.30% net margin in aggregate. Owner-operated consulting and accounting firms, absent from public data, typically clear stronger owner-adjusted margins than the public agency figure implies.
Home services, construction, and trades
Trades and construction are structurally thin at the public-company level. Engineering/construction keeps 5.94% net on a 15.46% gross margin, and building materials 7.42% net, as of January 2026 (NYU Stern/Damodaran). Public figures understate well-run private trade shops, where owner compensation and route density lift real margins. For deal-side benchmarks, see the analysis on home services M&A and EBITDA multiples.
Retail, food, and hospitality
Retail and food live on volume, not margin. Grocery retail keeps just 1.32% net, general retail 5.61%, and food wholesalers 1.17%, as of January 2026 (NYU Stern/Damodaran). Restaurants do better at 9.37% net, and hotels/gaming reach 10.38%. A single point of net margin decides whether a grocery chain funds growth or stalls, which is why the sector competes on turnover and scale.
Independent cross-check: retail (CSIMarket)
A second source confirms retail’s thin bottom line. CSIMarket reports the Retail Sector at a 5.92% net margin and 4.06% operating margin on a trailing-twelve-month basis for Q2 2026, close to Damodaran’s 5.61% net for general retail. Two independent datasets landing near 5-6% net raises confidence that retail’s structural margin is genuinely low, not an artifact of one method.
Technology, healthcare, and high-margin sectors
The top of the table is built on intangibles. Semiconductors keep 30.45% net and software 25.49%, on gross margins near 60-72%, as of January 2026 (NYU Stern/Damodaran). Pharmaceuticals hold 71.73% gross and 18.54% net. Healthcare splits sharply: products keep 9.61% net while healthcare support services keep 1.25%. High gross margins here reflect near-zero marginal cost on each additional unit sold.
Public firms versus small private firms
These figures describe public companies and overstate margins for the small private firms that dominate services and trades. Damodaran’s series is revenue-weighted, so a few giants can pull a sector value. For the private universe, IRS Statistics of Income corporate data (most recent complete file: Tax Year 2022, published September 2025) is the better reference, though it lags by roughly three years. Use the public row as a ceiling, not a private-firm target.
Which sectors structurally sustain the highest margins
Four structural traits, not superior management, separate the top margin tier from the bottom. Reading the January 2026 data (NYU Stern/Damodaran) top-down, the highest-net sectors share a repeatable pattern, and the lowest-net sectors share its inverse. This is analysis of the cited data, not a new dataset.
- Near-zero marginal cost. Software (25.49% net) and semiconductors (30.45%) sell additional units for almost nothing once the first is built. Grocery pays full cost of goods on every sale, capping net at 1.32%.
- Defensible intangibles. Patents and platforms let pharma (18.54%) and software hold price. Auto (1.29%) and trucking (3.79%) sell commoditized output into price competition.
- Capital that scales without headcount. Asset managers keep 18.36% net because fees rise with assets, not staff. Agencies (−0.30% net) add people to add revenue.
- Pricing power from concentration or regulation. Telecom (14.20%) and utilities (14.18%) operate in concentrated, often regulated markets that limit new entrants.
The practical read: a business chasing higher margin should move toward recurring, IP-backed, low-marginal-cost revenue, or accept that its sector sets a hard ceiling and compete on volume instead. Margin expansion strategy is covered further in growth consulting.
Margin tiers snapshot
Sorting sectors into three net-margin tiers gives a fast diagnostic. As of January 2026 (NYU Stern/Damodaran), high-tier sectors clear 15% net, mid-tier run 6-15%, and low-tier fall under 6%. Find the tier that matches your model before judging any single company’s profitability.
| Tier | Net margin band | Representative sectors | Example |
|---|---|---|---|
| High | 15%+ | Semiconductor, software, pharma, telecom, asset management | Semiconductor 30.45% |
| Mid | 6–15% | Restaurant, hotel, household products, construction supplies, general market | Restaurant 9.37% |
| Low | Under 6% | General retail, grocery, trucking, engineering/construction, auto | Grocery 1.32% |
Methodology
Every margin here traces to a named source with a stated date. The primary series is NYU Stern (Aswath Damodaran), “Operating and Net Margins by Sector (US),” data as of January 2026, covering 5,994 publicly traded firms. Retail figures are cross-checked against CSIMarket (Q2 2026 TTM). Private-firm context uses IRS Statistics of Income corporate data (Tax Year 2022). Where sources disagree, both are shown with their definitions rather than blended.
Data limitations
Read these figures as directional, not exact. Damodaran’s aggregates are revenue-weighted, so large firms dominate a sector value. The series measures public companies only and overstates margins versus small private firms. Reported margins reflect trailing-twelve-month data running into the prior year, not the calendar year on the update label. Sector definitions differ between Damodaran, CSIMarket, and the IRS, so cross-source comparisons are approximate.
Frequently asked questions
What is a good net profit margin?
There is no single good number; it depends on sector. The all-industry aggregate is 9.74% net as of January 2026 (NYU Stern/Damodaran), so beating roughly 10% is above the market average. But 6% is strong for grocery and weak for software. Judge your margin against your own sector row, not the overall figure.
Which industry has the highest net margin?
Semiconductors post the highest net margin among major sectors at 30.45%, followed by software at 25.49%, as of January 2026 (NYU Stern/Damodaran). Pharmaceuticals (18.54%) and asset management (18.36%) round out the top tier. All four rely on intangible assets and near-zero marginal cost per additional unit sold.
Which industry has the lowest net margin?
Food wholesalers run one of the thinnest net margins at 1.17%, closely followed by healthcare support services (1.25%), auto & truck (1.29%), and grocery retail (1.32%), all as of January 2026 (NYU Stern/Damodaran). These are high-volume, low-differentiation businesses that compete on price and turnover rather than margin.
What is the average gross margin across all industries?
The aggregate gross margin across 5,994 US public firms is 37.76%, or 34.39% excluding financials, as of January 2026 (NYU Stern/Damodaran). Gross margin varies far more by sector than net margin does, from about 10% in auto to over 70% in software and pharmaceuticals.
What net margin do restaurants make?
Restaurants and dining chains keep a 9.37% net margin on a 32.24% gross margin, as of January 2026 (NYU Stern/Damodaran), which is close to the broad market average. That figure reflects public restaurant companies; independent, single-location restaurants typically run thinner because they lack purchasing scale.
What is the profit margin in retail?
General retail keeps a 5.61% net margin on a 33.18% gross margin as of January 2026 (NYU Stern/Damodaran), and CSIMarket independently reports the retail sector near 5.92% net for Q2 2026. Grocery retail is far thinner at 1.32% net. Retail earns on volume and inventory turnover, not on margin per sale.
Do construction companies have high margins?
No. Engineering and construction keep just 5.94% net on a 15.46% gross margin, and building materials 7.42% net, as of January 2026 (NYU Stern/Damodaran). Public figures understate well-run private trade firms once owner compensation is added back, but the sector is structurally capital- and labor-intensive with thin bottom-line margins.
Why is software gross margin so high?
Software gross margin reaches 71.72% (data as of January 2026, NYU Stern/Damodaran) because the marginal cost of one more license or user is close to zero. The build cost is fixed and mostly upfront; revenue from each additional customer flows through with almost no added cost of goods, which is why net margin stays high at 25.49% too.
Does this data cover small businesses?
No. The NYU Stern/Damodaran series covers publicly traded companies and overstates margins for small private firms in services and trades. For the private universe, use IRS Statistics of Income corporate data (most recent complete file: Tax Year 2022, published September 2025), which lags by roughly three years but reflects the small-firm population.
How often is the margin-by-sector data updated?
NYU Stern (Damodaran) refreshes the margins-by-sector dataset once a year, each January, using trailing-twelve-month financials. The current file is dated January 2026. CSIMarket updates quarterly, giving a more current cross-check within the year (Q2 2026 at the time of this update).
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About the author
Christoph Olivier is the founder of CO Consulting and a fractional CMO who manages millions in annual ad spend and has built an audience of over one million followers. He works with 7- and 8-figure businesses across tax, M&A, consulting, real estate, capital raising, and financial services. To pressure-test your own margins against your sector, book a consultation.
Suggested citation: CO Consulting. “Profit Margin Benchmarks by Industry: Net and Gross Margin Data for 2026.” christopholivierconsulting.com, 2026.