Profit Margin by Industry: 2026 Average Gross Margin, EBITDA Margin and Net Margin by Sector

Most margin benchmark articles quote one number and move on. There are four different margins, they answer different questions, and quoting the wrong one is how owners convince themselves a healthy business is failing. Here is the market on all four.

Two adjustments make these figures more useful. Strip out banks, insurers and property trusts and the market runs 34.39% gross, 17.42% EBITDA and 8.56% net, which is the set to quote if you are comparing an operating company. And prefer the median sector to the average: at 36.24% gross, 16.57% EBITDA and 7.03% net, it describes a typical industry rather than one distorted by the handful of software and chip companies that earn triple the market margin.

Ten of the 94 sectors reported a negative net margin in January 2026, including green and renewable energy at -10.83%, rubber and tires at -9.49% and biotechnology at -5.00%. A negative sector net margin does not mean the sector is unviable. In biotech it reflects a research cost base carried against pre-revenue pipelines, which is why the same sector still traded at 7.92x revenue.

Margin is not a vanity metric. It is one of the two terms that produce a valuation multiple, and the relationship is an identity rather than a correlation:

We tested it. Taking the EBITDA margin from the margin dataset and the aggregate EV/EBITDA from the multiples dataset, then multiplying them, reproduces the separately published EV/Sales figure to within a mean deviation of 0.17% and a maximum of 0.64% across every sector we checked. That is not an approximation, it is the same arithmetic viewed from two directions.

EBITDA margin from the margin dataset; EV/EBITDA from the aggregate series; published EV/Sales from the revenue multiples dataset. All three Damodaran, NYU Stern, US, January 2026. Implied column computed by us.

The practical consequence is worth sitting with. Software trades at 11.41x revenue and engineering and construction at 1.74x, a gap of more than six times. But their EBITDA multiples are 31.75x and 21.80x, a gap of less than one and a half times. Almost the entire revenue-multiple difference is margin, not investor enthusiasm. Software is worth more per dollar of revenue because far more of that dollar survives to the bottom line.

Run it on your own numbers. If your sector trades at 12x EBITDA and you earn a 20% EBITDA margin, your revenue is worth 2.4x. Lift the margin to 25% without touching revenue and the same business is worth 3.0x, a 25% increase in enterprise value from a five point margin improvement. This is why buyers pay for margin quality and why margin expansion is the highest-return preparation work most owners can do before a sale.

One honest caveat. The identity closes on the aggregate series, where total enterprise value is divided by total EBITDA for the sector. Our EBITDA multiples table publishes the firm-level average instead, which is the more common benchmark and runs lower (24.48x rather than 31.75x for system software) because it is not weighted toward the largest companies. Use the firm-level figure to benchmark a company and the aggregate figure when you are reconciling the two datasets.

If you own a business doing $2,000,000 of revenue, the public table above is interesting but it is not your benchmark. The relevant figure is seller discretionary earnings margin, which adds back the owner salary and discretionary spending because a buyer will replace both. We derive it from closed US small business sales by dividing the price-to-revenue multiple by the SDE multiple for each category, which is the same identity applied to private data.

Implied SDE margin computed by us from broker-reported closed US small business sales. Sector mean 28.0%; the published all-sector averages of 0.64x revenue and 2.49x SDE imply 25.7%, which is consistent.

The spread runs from 48.2% for financial services practices down to 18.6% for wholesale and 19.4% for both retail and food service. Notice how much higher these are than the public net margins in the table above. That is not because small businesses are more profitable. It is because SDE includes the owner salary, which a listed company reports as an operating expense. A restaurant group with a 9.37% net margin and an independent restaurant with a 19.4% SDE margin can be equally profitable operations described two different ways. Before you compare yourself to anything, decide which of those two languages you are speaking. Our guide to SDE versus EBITDA works through the conversion.

The practical use of a benchmark table is not to grade yourself against it. It is to notice when you are far outside the range and go find out why. A margin ten points below your sector usually points at pricing or at a cost line nobody has looked at in three years. A margin ten points above usually points at underinvestment or at owner compensation that is not market rate, both of which a buyer will find in diligence.