Learn the stock market › Key ratios › Lesson 7 of 7
What is a profit margin? Gross, EBITDA, operating and net
The four margins, worked out on Walmart
All four divide something by revenue. The difference is how much is already gone. Walmart, the year that ended in January 2026, with revenue of $713 billion:
- Gross margin: $178 billion / $713 billion = 24.9%. Only what the goods cost is gone.
- EBITDA margin: $46.5 billion / $713 billion = 6.5%. Other costs are gone too, but not the wear on old investments.
- Operating margin: $29.8 billion / $713 billion = 4.2%. Now depreciation is gone too. What is left is what the business earned.
- Net margin: $21.9 billion / $713 billion = 3.1%. Interest and tax are gone too. What is left is the owners' share, often just called the profit margin.
This lesson goes through the lines of the income statement.
Margins at the largest companies
| Company | Gross | EBITDA | Operating | Net |
|---|---|---|---|---|
| Netflix | 48.5% | 67.0% | 29.5% | 24.3% |
| Nvidia | 71.1% | 66.9% | 60.4% | 55.6% |
| Visa | 80.4% | 65.0% | 66.4% | 50.1% |
| Microsoft | 67.9% | 62.5% | 46.8% | 40.3% |
| Mastercard | 77.9% | 62.3% | 59.5% | 45.6% |
| Broadcom | 67.8% | 54.3% | 40.8% | 36.2% |
| Meta | 82.0% | 52.6% | 41.4% | 30.1% |
| Oracle | 65.8% | 49.7% | 33.3% | 25.4% |
| Eli Lilly | 83.0% | 48.6% | 45.6% | 31.7% |
| Alphabet | 59.7% | 44.9% | 32.0% | 32.8% |
| Apple | 48.8% | 35.8% | 33.0% | 27.6% |
| Palantir | 82.4% | 32.2% | 31.6% | 36.3% |
| Amazon | 50.3% | 23.1% | 11.2% | 10.8% |
| AMD | 49.5% | 21.0% | 10.7% | 12.5% |
| Exxon Mobil | 22.0% | 21.0% | 10.5% | 8.9% |
| Tesla | 18.0% | 12.4% | 5.1% | 4.0% |
| Walmart | 24.9% | 6.5% | 4.2% | 3.1% |
| Costco | 12.8% | 5.0% | 3.9% | 3.0% |
The table is sorted by EBITDA margin. Banks and holding companies are left out, because they don't sell goods: Berkshire Hathaway and JPMorgan Chase.
Netflix shows an EBITDA margin of 67.0%, above its gross margin of 48.5%, which looks impossible. Netflix books the cost of its films and series as amortization, inside its cost of revenues. EBITDA adds amortization back, so that cost disappears from it. This is why a high EBITDA margin needs a second look.
Visa has an EBITDA margin of 65.0%, below its operating margin of 66.4%. EBITDA here is worked out from profit before tax, so costs outside the operating line are in it.
Why they differ so much
Costco had a net margin of 3.0%, and Visa an EBITDA margin of 65.0%. A warehouse club pays for nearly everything it sells before it sells it. A card network has most of its costs whatever the volume, so each extra payment costs it little.
So margins can only be compared between companies that sell about the same thing, and with the same company over time. The lesson on what makes a company strong shows four companies over four years.
What to watch for
One-off items. A large gain or write-down lands in the net margin, and sometimes in the operating margin. If a net margin looks high, read what is in it.
Adjusted numbers. Many companies report their own adjusted margin, with costs they consider temporary taken out. It can differ from this table.
A high margin isn't high profit. Small sales at a high margin can earn less than large sales at a low one. The price of the stock isn't in it either, which is what the price-to-sales ratio is about.
Test yourself
A company has revenue of $200 and operating income of $30. Depreciation is $10. What is its EBITDA margin?
More numbers are on Walmart's stock page.
Source
- Netflix, Form 10-K for 2025: content amortization in cost of revenues, read through search text on 5 November 2026.