Profits, More or Less

Here’s an interesting question: what are the most profitable sectors of the U.S. economy?  Put another way: what kind of businesses tend to generate the highest profit margins?

A recent study listed all gross and net profit margins for all industry sectors—‘net’ being the profits after all expenses and taxes paid; how much money a company keeps for every dollar it makes.  As a baseline, the average net profit margin across all U.S. industries came to 8.54%.

The list includes everything from advertising and aerospace/defense (0.89% and 4.95% respectively) down to electrical and water utilities (13.51% and 19.34%; and you probably thought utility companies operated as nonprofits).  You might guess the tobacco industry is the most profitable, and you’re not far off; tobacco companies operate on a net profit margin of 27.52%.  

Maybe oil and gas production, considering the recent cost at the pump?  Not a bad guess; the oil and gas industry generates a consistent 28.26% net profit margin, which suggests that they could, if they wanted, hold prices stable through short-term oil shocks.  Oil and gas distribution, meanwhile, adds another 23.59% net profit margin.  

Given the price of food, maybe you’re wondering about food wholesalers and farmers.  Farming and agriculture is way down the list, at 7.12% net profits, and food wholesalers take home an anemic 1.21% net profit.

Give up?  The champion profit industries are large money center banks (including brokerage firms) at an average 30.89% profit margin, and regional banks are not far behind, at 29.67%.  Brokerage profits would be much higher, except that the firm executives and their brokers enjoy extravagant salaries and bonuses.  Top-tier ‘producers’ (that is, the people who sell the firm’s products under the guise of advisors) routinely receive $1 million a year, and the average end-of-year bonus for all brokerage employees last year was $246,900.  To put that in perspective, that bonus alone amounts to about four times the average salary of a U.S. elementary school teacher.

There are a few industries that generate net losses every year (precious metals extraction and the home furnishings industry), while others are squeaking by.  Publishing and newspapers, as a category, generates a 1.82% profit margin.

Sources:

• https://www.venasolutions.com/blog/average-profit-margin-by-industry
• https://www.investmentnews.com/wirehouses/wall-street-bonuses-climb-to-246900-in-2025-as-profit-surge-fuels-payouts/265879