Profit margin is the share of a company's revenue left over as profit after every expense — net income divided by revenue. A 20% net margin means the company keeps 20 cents of profit from every sales dollar.
A company can grow sales every year and still be a poor business if each new dollar of revenue costs almost a full dollar to produce. Two firms with identical $10bn revenue can be worlds apart: one at a 5% margin keeps $500m, another at 25% keeps $2.5bn. A widening margin often signals pricing power or efficiency; a shrinking one is an early warning before it shows up in headline revenue.
Margins are structural to a business model. A grocery chain at a 2–3% net margin can be perfectly healthy because it runs on huge volume, while a software company at 3% would be alarming. Always compare against sector peers and the company's own history, and check whether a jump came from the core business or a one-time item like an asset sale or tax benefit.
There is no universal number — it is structural to the industry. A 2–3% net margin is healthy for a grocer but alarming for a software company. Compare against sector peers, not the whole market.
Gross margin subtracts only the direct cost of goods; operating margin also subtracts running costs; net margin subtracts everything left, including interest and taxes.
Yes — a margin can jump on a one-time item like an asset sale or tax benefit that won't repeat. Check whether the gain came from the core business first.
AAPL analysis shows this metric in context, or browse all S&P 500 tickers.
Educational research only — not investment advice.