January 2026 sector data
Average Profit Margin by Industry
There is no single good profit margin for every business. NYU Stern’s January 2026 US sector data reports net margins of 9.37% for Restaurant/Dining, 1.32% for Retail (Grocery and Food), and 25.49% for Software (System & Application). These are public-company sector figures, not independent small-business averages.
Use the sourced sector figures below as context, checking the sample and accounting definition before comparing your own business. Start with your revenue and costs in our free profit margin calculator.
Source and scope: Aswath Damodaran, NYU Stern — Margins by Sector (US). Data as of January 2026; source values checked October 9, 2026. We reproduce the published gross and net columns and firm counts without converting them into small-business ranges. Gross margin reflects the source’s cost-of-goods classification; net margin reflects net income. Differences in scale, financing, owner compensation, and product mix limit comparisons.
Food & hospitality
| Source industry | Firms | Gross margin | Net margin |
|---|---|---|---|
| Restaurant/Dining | 64 | 32.24% | 9.37% |
| Hotel/Gaming | 63 | 60.85% | 10.38% |
Retail & apparel
| Source industry | Firms | Gross margin | Net margin |
|---|---|---|---|
| Retail (Grocery and Food) | 15 | 26.31% | 1.32% |
| Retail (General) | 23 | 33.18% | 5.61% |
| Retail (Special Lines) | 94 | 35.30% | 5.19% |
| Apparel | 35 | 56.88% | 3.85% |
Construction & materials
| Source industry | Firms | Gross margin | Net margin |
|---|---|---|---|
| Engineering/Construction | 48 | 15.46% | 5.94% |
| Homebuilding | 30 | 22.70% | 9.47% |
| Building Materials | 41 | 30.94% | 7.42% |
Business services
| Source industry | Firms | Gross margin | Net margin |
|---|---|---|---|
| Business & Consumer Services | 155 | 33.38% | 7.03% |
| Advertising | 52 | 36.24% | -0.30% |
| Computer Services | 64 | 24.26% | 4.45% |
Software
| Source industry | Firms | Gross margin | Net margin |
|---|---|---|---|
| Software (System & Application) | 309 | 71.72% | 25.49% |
| Software (Internet) | 29 | 62.58% | -0.93% |
Transport
| Source industry | Firms | Gross margin | Net margin |
|---|---|---|---|
| Transportation | 19 | 24.10% | 8.23% |
| Trucking | 26 | 21.19% | 3.79% |
The source does not provide separate averages here for an independent cafe, food truck, salon, plumber, or freelance practice. Use your own matched historical figures or a verifiable peer survey for those tasks. These public-company figures are not a target or a forecast for your business.
How to use these benchmarks
Calculate your margins
Find your gross margin (after COGS) and net margin (after everything). Use our profit margin calculator for both.
Compare to your industry
Match the industry definition, scale, and accounting treatment first. A difference from this public-company figure does not by itself prove underperformance or outperformance.
Diagnose the gap
Reconcile price and direct-cost changes, then operating expenses, interest, taxes, and unusual items. Compare the same definition across your own periods.
A practical margin check
Start with gross margin
If gross margin falls against your own comparable periods, review pricing, supplier costs, waste, and the classification of direct costs.
Then bridge to net margin
Reconcile payroll, occupancy, software, interest expense, taxes, and unusual income or expenses. Loan principal and owner drawings are cash flows, not themselves profit-and-loss expenses.
Track the trend
Compare the same definition month over month. A falling margin can be a pricing problem even when revenue is growing.
Frequently asked questions
What is a good profit margin for a small business?+
There is no universal good margin. Compare the same gross or net definition, business model, location, scale, and owner-compensation treatment. The table here reproduces US public-company sector data, not measured averages for independent small businesses. Use it as context, then compare your own costs and prior periods.
What is the difference between gross and net profit margin?+
Gross margin = (Revenue − Cost of Goods Sold) ÷ Revenue × 100. Net margin = Net Income ÷ Revenue × 100, after operating expenses, interest, and taxes. Other income, accounting classification, and unusual items can affect the comparison. Use consistent definitions rather than comparing different accounting treatments.
Where do these industry profit margins come from?+
The table reproduces the Industry Name, Number of firms, Gross Margin, and Net Margin columns from Aswath Damodaran’s NYU Stern Margins by Sector (US) table, with data as of January 2026. Source values were checked on October 9, 2026. Sector labels are unchanged; they are not cafe, freelance, or independent-store averages.
Why can an industry net margin be negative?+
A negative published net margin means losses at the sector level in the source data. It does not mean every company in that sector lost money. Software (Internet), for example, is a different source category from Software (System & Application); do not combine them into a single SaaS average.
Why is my profit margin lower than the sector figure?+
First check whether the comparison fits: public companies may have different scale, product mixes, financing, and accounting policies. Review pricing and direct costs when gross margin falls; reconcile operating expenses, interest, and taxes when net margin falls. Owner drawings are not themselves an expense, and owner salary treatment should be consistent.
How do I calculate my profit margin?+
Net profit margin = Net Income ÷ Revenue × 100. In a worked example, $20,000 net income on $200,000 revenue gives 10%. Gross margin = (Revenue − COGS) ÷ Revenue × 100. The profit margin calculator uses the cost and revenue you enter; choose which costs to include before interpreting its result as gross or net margin.
Calculate and improve your margin
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Raise margins by pricing on value, not just cost-plus.
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