Profitability margins
Gross vs operating margin: 3 cohorts
Gross margin vs operating margin vs net margin, on the 2026-09-07 build, came from cohorts of 2,401, 3,164 and 3,905 companies. They are not one staircase.
By Javier SanzPublished
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
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On the 2026-09-07 distribution build the market median gross margin, operating margin and net margin came from cohorts of 2,401, 3,164 and 3,905 US companies respectively, and gross margin is the one held for the fewest of them. Three market medians drawn from three different populations are not a waterfall.
The picture everybody draws is a staircase. Revenue at the top, gross margin after cost of revenue, operating margin after the operating cost base, net margin after interest and tax. Three numbers, two subtractions, one company.
For a single company that picture is exactly right. For a market it falls apart, and the way it falls apart is worth knowing before you quote a market median for any of the three.
The three medians come from three different sets of companies
On the 2026-09-07 distribution build:
| Margin | Companies in the cohort | Median |
|---|---|---|
| Gross | 2,401 | 39.39 |
| Operating | 3,164 | 3.98 |
| Net | 3,905 | 3.79 |
Subtract those medians and you get a story: 35.41 points of operating cost, then 0.19 points of everything else. Both figures are meaningless. The gross margin median describes 2,401 companies and the net margin median describes 3,905, and the 1,504 companies in the second set but not the first are exactly the companies with no cost of revenue line to subtract.
A median is not a company. Three medians taken over three populations do not form a chain, and no amount of rounding makes them into one.
The counter-intuitive part: the top of the statement is the thinnest
Coverage counted at 2026-09-07 04:37 UTC over the 5,257-listing screener pool, from the field census:
| Figure | Listings holding it |
|---|---|
| Net margin | 4,638 |
| Operating margin | 3,893 |
| Gross margin | 3,186 |
Net income is available for 1,452 more listings than gross profit is. The figure furthest down the income statement is the one we hold most often, and the figure at the top is the one we hold least often.
This is the opposite of the intuition, which says that the further down you go the more judgement is involved and the less reliable it gets. On availability the order runs the other way, for a plain reason: a company must report net income, and a great many companies do not present a cost of revenue line at all. Banks and insurers do not. Property trusts do not. A software company that reports total costs and expenses as one line does not.
Six hundred and seventeen companies were withheld from the gross margin cohort as not applicable, being banks, insurers, equity real estate trusts and mortgage trusts. No company was withheld from the operating or net margin cohorts on those grounds. That single rule accounts for a large part of the gap, and the rest is filers who simply do not split cost of revenue out.
Where the money actually goes, one company at a time
This is the arithmetic that does work. Four companies, the stored figures as of the 2026-09-06 nightly recompute, with each step written out.
| Company | Gross | Operating | Net | Gross to operating | Operating to net |
|---|---|---|---|---|---|
| Microsoft | 67.94 | 46.78 | 40.31 | 21.16 | 6.47 |
| Apple | 46.91 | 31.97 | 26.92 | 14.94 | 5.05 |
| Walmart | 24.93 | 4.18 | 3.07 | 20.75 | 1.11 |
| Costco | 12.84 | 3.77 | 2.94 | 9.07 | 0.83 |
Two things fall straight out.
The first step is the large one in every case. For Microsoft the operating cost base consumes 21.16 points of margin and everything below the operating line consumes 6.47. For Costco the numbers are 9.07 and 0.83. Whatever the business, the distance between gross and operating dwarfs the distance between operating and net.
Costco's whole income statement fits inside Walmart's first step. Costco's gross margin, 12.84, is smaller than the 20.75 points Walmart spends between its gross and operating lines. The two companies sell similar things to similar people, and the shape of their income statements is not similar at all, because one charges a membership fee and marks goods up by a little and the other marks goods up by more and spends more to sell them.
For Apple and Walmart every figure above is also the figure in the most recent annual report. Apple's are its fiscal 2025 10-K, accession 0000320193-25-000079, filed 2025-10-31. Walmart's are its fiscal 2026 10-K, accession 0000104169-26-000055, filed 2026-03-13.
What to do with a market median for a margin
Use it as a sanity check on one figure at a time, inside one sector, and never as a term in an arithmetic chain. The moment you subtract one published median from another you have assumed the two describe the same companies, and for these three they demonstrably do not.
What this leaves out
One build, dated 2026-09-07, and one coverage count taken at 04:37 UTC the same day. Both move. The distribution endpoint stamps every response with its build date and marks itself stale after 35 days, and /coverage carries the live figures.
Cohort sizes are deduplicated companies with filed statements on record. Coverage counts are listings in the screener pool. They are different denominators and the post keeps them apart, which is why the two tables above do not reconcile to each other.
The four-company table is the stored figures, which prefer a data vendor's trailing-twelve-month ratio where one is published. For Apple and Walmart the stored figures equal the latest filed annual figures exactly, which is stated because it was checked and not because it is guaranteed.
Four companies is an illustration, not a sample. Nothing here says the pattern holds across a sector, and nothing here is a view on any of the four.