Find gross profit and gross margin from revenue and cost of goods sold, and compare with your industry.
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Estimates for planning only; not financial, tax or investment advice. See our Disclaimer.
Gross profit is what is left of your sales after paying for the goods you sold: revenue minus cost of goods sold (COGS). Gross profit margin is the same figure as a percentage of revenue — the share of every sales dollar that remains to pay rent, salaries, marketing and, finally, profit. Enter net revenue and COGS for the same period and this calculator shows the gross profit in dollars, the gross margin percentage, and COGS as a share of revenue. Use it to price a product, compare product lines or months, check whether rising supplier costs are eating into your margin, or benchmark against your industry. Gross margin is the first profitability line on an income statement: operating and net margins can never be higher than it.
Enter net revenue for the period (sales minus returns, allowances and discounts, without sales tax).
Enter cost of goods sold for the same period: the direct cost of the goods actually sold.
Press Calculate to see gross profit, gross margin and COGS as a share of revenue.
By O.E. — Partner, chairman of the board and CEO of a metal products manufacturer for 21 years; the company exports to 45 countries.
Drafted with AI assistance; calculations checked against primary sources and tested with the site's own code. About FlowUtil
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Gross profit = net revenue − cost of goods sold (COGS). Gross profit margin = gross profit ÷ net revenue × 100, and COGS as a share of revenue = COGS ÷ net revenue × 100. Gross margin and COGS % always add up to 100%.
Net revenue is sales for the period after returns, allowances and discounts — the IRS's "net receipts". Leave out sales tax or VAT collected for the government.
COGS is the direct cost of the goods actually sold in the period, not everything you bought: beginning inventory + purchases + direct labor + materials and supplies + other direct costs − ending inventory (the method of IRS Schedule C, Part III). A service business uses the direct cost of delivering the service.
| Symbol | Meaning |
|---|---|
| Revenue | Net sales for the period (after returns and discounts, without sales tax) |
| COGS | Cost of the goods sold in the same period |
| Gross profit | Revenue − COGS, in dollars |
| Gross margin | Gross profit ÷ Revenue × 100 |
| COGS % | COGS ÷ Revenue × 100 = 100% − gross margin |
| Usually in COGS | Not in COGS (operating expenses) |
|---|---|
| Purchase cost of goods for resale, inbound freight | Rent of offices and shops, office utilities |
| Raw materials and manufacturing supplies | Marketing, advertising, sales commissions* |
| Direct labor in manufacturing | Administrative salaries, accounting, software subscriptions |
| Factory overhead (manufacturers) | Interest and income tax |
| Payment processing on each sale* | Depreciation of office equipment |
* Treatment varies; use the same rule every period so margins are comparable.
1An online shop's year: net sales $250,000, cost of the products shipped $162,500.
Gross profit = 250,000 − 162,500 = 87,500; margin = 87,500 ÷ 250,000
Gross Profit = $87,500 · Gross Margin = 35.00% · COGS = 65.00% of revenue
Out of every $100 of sales, $35 is left for overheads and profit. Sensitivity: raising prices 5% (revenue $262,500) lifts the margin to 38.10%; a 5% rise in supplier costs (COGS $170,625) cuts it to 31.75% — about 3 percentage points either way.
2Pricing one product: it costs $30 to buy and land; target gross margin 40%.
Price = cost ÷ (1 − margin) = 30 ÷ 0.60 = 50; check: revenue 50, COGS 30
Gross Profit = $20.00 · Gross Margin = 40.00%
Adding 40% to cost instead (a 40% markup) gives a $42 price and only a 28.57% margin.
3A negative gross margin: a manufacturer sold $48,000 of product; materials and direct labor for those units cost $52,000.
48,000 − 52,000 = −4,000; −4,000 ÷ 48,000
Gross Profit = −$4,000.00 · Gross Margin = −8.33% · COGS = 108.33% of revenue
Every unit loses money before rent or salaries; selling more makes it worse. The fix is price, product mix or unit cost, not volume.
Both compare the same profit over a different base: margin divides by the selling price, markup divides by the cost. Markup = margin ÷ (1 − margin); margin = markup ÷ (1 + markup). Margin can never reach 100%; markup has no upper limit.
| Gross margin | Equivalent markup on cost | Price for a $30 cost |
|---|---|---|
| 20% | 25.00% | $37.50 |
| 25% | 33.33% | $40.00 |
| 33.33% | 50.00% | $45.00 |
| 40% | 66.67% | $50.00 |
| 50% | 100.00% | $60.00 |
| 60% | 150.00% | $75.00 |
A higher gross margin is not automatically better: a grocer with a 26% margin and fast-moving stock can be more profitable than a boutique with 60% margin and slow sales. Look at gross profit in dollars, and at operating margin, too.
Track the trend: a margin that slips from 35% to 32% over a year usually means costs rose faster than prices, or the product mix shifted toward cheaper lines.
Gross → operating → net: subtract operating expenses to get operating profit, then interest and tax to get net profit. Gross margin sets the upper limit for both.
Gross margins differ hugely by industry, so compare with your own sector rather than with a single "good" number. US averages by sector from Aswath Damodaran's NYU Stern data set:
| Sector (US) | Gross margin |
|---|---|
| Drugs (Pharmaceutical) | 71.73% |
| Software (System & Application) | 71.72% |
| Apparel | 56.88% |
| Retail (General) | 33.18% |
| Restaurant / Dining | 32.24% |
| Retail (Grocery and Food) | 26.31% |
| Auto & Truck | 10.41% |
| Total US market | 37.76% |
Source: Damodaran, Margins by Sector (US), data as of January 2026.