Gross Margin: Industry Benchmarks and How to Improve Yours in 2026

Gross margin is the percentage of revenue that remains after paying the direct costs of producing and delivering your product or service. It's the first test of whether your business can ever be profitable — because if gross margin is thin or negative, no amount of operational efficiency will rescue the bottom line.

How to Calculate Gross Margin

Gross Profit = Revenue − Cost of Goods Sold (COGS) Gross Margin = Gross Profit ÷ Revenue × 100

Revenue: €500,000 COGS: €175,000 Gross Profit: €325,000 Gross Margin: 65%

• SaaS: hosting, cloud infrastructure, third-party APIs, customer support (sometimes)
• E-commerce: product purchase cost, inbound shipping, packaging
• Professional services: direct labour costs, subcontractors
• Manufacturing: raw materials, direct labour, factory overhead

EU Industry Benchmarks (2026)

Why Gross Margin Is a Ceiling

Your gross margin sets a ceiling on your potential operating margin and net margin. If gross margin is 40%, your operating margin can never exceed 40% — and in practice will be much lower once you account for R&D, G&A, and sales and marketing.

This is why investors pay significant attention to gross margin in early-stage companies — it determines how much of scale flows through to profit.

Improving Gross Margin

For SaaS: negotiate better cloud infrastructure pricing (AWS/GCP/Azure discounts at scale), reduce support costs per customer through better self-serve tools, migrate to more efficient architecture.

For e-commerce: negotiate supplier pricing (volume discounts, payment terms), reduce returns through better product descriptions and sizing guides, optimise packaging to reduce shipping costs.

For services: move from time-billing to productised services with fixed scope; reduce subcontractor dependency; increase utilisation of permanent staff.

Across all: annual price increases that maintain customer value but improve unit economics.

Calculate Your Gross Margin

[👉 Use the Gross Margin Calculator](/calculators/gross-margin)

Enter your revenue and COGS to calculate gross margin — and compare against industry benchmarks to understand where you stand.