Investing term
What is Net margin?
Net income as a percentage of revenue — final profit per dollar of sales.
Net margin is net income as a percentage of revenue — how many cents of final profit a company keeps from each dollar of sales. A company with $100M revenue and $10M net income has a 10% net margin, meaning 10 cents of every sales dollar survives all the way to the bottom line.
It captures the full efficiency of the business after every cost — production, operating expenses, interest, and tax. Comparing net margins within an industry shows who runs the tightest ship, converting the most of each sale into actual profit. But margins vary enormously across industries — a software company and a grocer live in different worlds — so net margin, like all margins, is meaningful within a sector and over time, not across unrelated businesses.
Net margin is net income as a share of revenue — the cents of final profit kept from each dollar of sales, after every cost. It sums up the whole business's efficiency; compare within an industry.
For example
A company keeping $10M of net income from $100M of revenue has a 10% net margin, while a lean rival at 15% keeps half as much again from every sales dollar.
Learn it by doing
That's Net margin in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 14, Reading Financial Statements).
Try the free lesson →Why it matters to you
Net margin matters because it summarises a company's overall profitability in a single, comparable figure — the share of each sales dollar that becomes real profit after everything. It's a quick way to compare how efficiently rivals in the same industry turn revenue into earnings, and to track whether a company's profitability is improving or eroding over time. Because it sits at the bottom of the income statement, it reflects the combined effect of pricing power, cost control, financing, and tax.
⚠ Comparing net margins across industries
Net margins differ hugely by industry — software firms may keep 25%+ while grocers scrape a few percent, both normal for their sectors. Comparing a company's net margin to one in an unrelated industry is meaningless. Net margin is useful within a sector and over time for the same company, not as a cross-industry measure of quality.