Net margin measures what percentage of revenue remains as profit after all expenses, taxes, and costs are deducted.
Net Profit Margin is a key profitability metric that shows how much of each dollar of revenue a company keeps as net income after paying all operating expenses, interest, taxes, and other costs. It's the "bottom line" profitability measure that reveals how efficiently a company converts sales into actual profit. High net margins indicate pricing power, operational efficiency, and competitive advantages.
A company with $10B revenue and $2B net income has a net margin of (2 / 10) × 100% = 20%. For every dollar of sales, the company keeps $0.20 as profit.
Net margin above 20% is exceptional, indicating strong pricing power, low cost structure, or dominant market position. Common in software and luxury brands.
Net margin below 5% suggests thin profitability, intense competition, or high operating costs. Common in retail and commodity businesses.
Ideal net margin varies by industry. Software companies may have 25-40% margins, while retailers typically operate at 2-5% margins.
