In 30 seconds
- EBITDA margin divides EBITDA by revenue: how much of each sale is left before interest, taxes, depreciation and amortization.
- Verizon posted a 34.5% EBITDA margin in 2025 ($47,608 million on $138,191 million of revenue), but its net margin was 12.4%.
- Kaplio expects an EBITDA margin of at least 30% from a telecom company and 20% from a media company; comparing across different sectors is misleading.
- Because it comes before interest, it lets you compare companies with different debt loads, but it sees neither the debt nor the investment the business needs.
- Be wary of "adjusted EBITDA": WeWork lost $1,927.4 million in 2018 while it was showcasing a positive contribution margin.
Introduction
Verizon closed 2025 with an EBITDA margin of 34.5%: out of every $100 it billed, it kept $34.50 before paying interest, taxes and the wear and tear on its network. Walmart, in fiscal 2026, came in at 6.2%. And WeWork, in 2018, at −75.6%, even though its IPO prospectus showcased a positive margin. Three figures you can't compare casually, and one that teaches you to distrust the labels companies attach to EBITDA.
Explanation
In the lesson on EBITDA you saw what that figure is: operating income before depreciation and amortization. Here we measure it against sales. EBITDA margin divides EBITDA by revenue and tells you how much of each sale is left after paying day-to-day costs (staff, materials, energy, rent, advertising) and before three things: wear and tear on the assets, interest on the debt, and taxes.
Picture two cab drivers who take the same fares and bill $60,000 a year each. After gas, insurance and maintenance, each one keeps $24,000: an EBITDA margin of 40%. One bought his car outright; the other is paying it off with a loan that costs him $3,000 a year in interest. Their EBITDA margins are identical, because EBITDA comes before interest. That's why it works for comparing the businesses of companies with very different debt. And for the same reason, it can't tell you which of the two drivers has an easier time making ends meet.
Why it varies so much from sector to sector
A telecom company spends a fortune on towers, fiber and spectrum licenses, but that spending doesn't run through EBITDA: it shows up later, as depreciation. Its EBITDA margin comes out high. A supermarket has hardly any depreciation, but it pays for the goods it sells, and that does count: its EBITDA margin comes out low. Walmart's 6.2% against Verizon's 34.5% doesn't mean Walmart is a worse business. It means its costs sit somewhere else. That's why, across sectors, you should also look at operating margin, which does subtract the wear on the assets.
Formula
EBITDA margin = EBITDA / Revenue × 100
EBITDA = Operating income (EBIT) + Depreciation and amortization
Operating income (EBIT) = Revenue − Operating expenses
Operating margin = EBITDA margin − (Depreciation and amortization / Revenue)
Example
The table below compares the EBITDA margin of the three big US wireless carriers: AT&T, Verizon and T-Mobile US. Read it as cents left from every dollar billed before interest, taxes and network wear. Kaplio's stock page expects a telecom company to post an EBITDA margin of at least 30%; notice whether all three clear it, and by how much.
Step by step: Verizon, fiscal 2025 (Form 10-K annual report, millions of dollars)
1. Revenue for 2025: 138,191.
2. Operating income: 29,259.
3. Depreciation and amortization: 18,349.
4. EBITDA = 29,259 + 18,349 = 47,608.
5. EBITDA margin = 47,608 / 138,191 = 34.5%.
Keep going down Verizon's 2025 income statement. Depreciation eats 13.3% of revenue and leaves an operating margin of 21.2%. Interest on the debt, $6,694 million, takes another 4.8%. After taxes and other items, net income came to $17,174 million: a net margin of 12.4%. From 34.5% to 12.4%: that's the distance between what EBITDA promises and what's actually left for the shareholder.
Your turn. AT&T had revenue of $125,648 million in 2025, operating income of $24,162 million and depreciation and amortization of $20,886 million. Work out its EBITDA margin and its operating margin.
Before you look: do you think AT&T has a better EBITDA margin than Verizon? What about operating margin? Answer: an EBITDA margin of 35.9%, ahead of Verizon, and an operating margin of 19.2%, behind it. AT&T spends 16.6% of its revenue on depreciation, against 13.3% at Verizon. A higher EBITDA margin doesn't always mean a more profitable business: sometimes it means a business that needs more investment.
Real-data example
| Company | Ticker | EBITDA margin |
|---|---|---|
| AT&T Inc. | T | 42.2% |
| Verizon Communications Inc. | VZ | 34.5% |
| T-Mobile US, Inc. | TMUS | 30.7% |
How to read it
How to read it
The thresholds for telecom, media and internet platforms are the ones the sector guide on every Kaplio stock page applies. The ones for software and retail are rough guides:
| Sector | Weak | Normal | Good |
|---|---|---|---|
| Telecom (Kaplio: 30% or more) | below 25% | 25-30% | 30% or more |
| Internet platforms (Kaplio: 30% or more) | below 20% | 20-30% | 30% or more |
| Media and entertainment (Kaplio: 20% or more) | below 15% | 15-20% | 20% or more |
| Software | below 20% | 20-35% | above 35% |
| Retail and grocery | below 4% | 4-7% | above 7% |
Always compare within the sector, and look at the trend over several years rather than a single year: a margin that falls two years in a row tells you more than its level.
Pitfalls and limitations
1. It's blind to capital spending. Verizon spent $17,011 million on capital expenditures in 2025, 12.3% of its revenue, and AT&T $20,842 million, 16.6%. None of that comes out of EBITDA. Warren Buffett put it bluntly in his 2000 letter to shareholders: references to EBITDA made him shudder, and he wondered whether management thought the tooth fairy paid for capital expenditures. To see the cash that's really left over, go to free cash flow.
2. "Adjusted EBITDA." Many companies publish an EBITDA that adds back costs they consider one-offs: restructuring, stock-based compensation, the cost of launching products. Some adjustments are reasonable; others turn losses into profits. Charlie Munger was harsher than Buffett: at Berkshire's 2003 annual meeting he said that every time you read "EBITDA" you should substitute "bogus earnings" (the word he actually used was cruder). When you see "adjusted," find the reconciliation to operating income and check what was added back.
3. Accounting standards change the number. Under international standards (IFRS 16, in force since 2019), rent on stores and offices drops out of EBITDA and moves to depreciation and interest. Under US GAAP, operating lease cost still counts against it. Two identical companies, one European and one American, won't show the same EBITDA margin.
Case in point: WeWork and the margin that wasn't
On August 14, 2019, The We Company, WeWork's parent, filed its IPO prospectus (Form S-1) with the SEC. Its 2018 accounts: revenue of $1,821.8 million, an operating loss of $1,691.0 million and depreciation and amortization of $313.5 million. EBITDA: −$1,377.5 million. EBITDA margin: −75.6%. Net loss: $1,927.4 million. Yet the prospectus put front and center a "contribution margin" for its buildings that excluded the non-cash portion of rent and stock-based compensation for location staff, among other costs. Measured that way, 2018 came out at a positive $467.1 million. Investors didn't buy it: on September 30, 2019, the company withdrew its IPO filing. It did go public in 2021, by another route, and in November 2023 it filed for bankruptcy. When a company has to invent a new margin to get a positive number, the real margin is usually the one it doesn't want you to see.
Practice on Kaplio
Frequently asked questions
What is a good EBITDA margin?
It depends on the sector. Kaplio expects at least 30% from telecom companies and internet platforms, and 20% from media companies. In retail and grocery, 6% or 7% is already typical: Walmart posted 6.2% in fiscal 2026. Always compare a company with rivals in the same business, and watch the trend over several years.
Is EBITDA margin the same as operating margin?
No. Operating margin subtracts depreciation and amortization; EBITDA margin adds them back. The gap can be large in capital-heavy businesses. Verizon's EBITDA margin was 34.5% in 2025, but after depreciation, which ate 13.3% of revenue, its operating margin was 21.2%. For comparing across sectors, operating margin is the more honest of the two.
What is adjusted EBITDA?
It's EBITDA with costs the company considers one-off or non-cash added back, such as restructuring charges or stock-based compensation. It doesn't follow any accounting standard, and every company calculates it its own way. Before you trust it, find the reconciliation to operating income and check which costs were left out.
How is EBITDA margin calculated?
Add depreciation and amortization to operating income to get EBITDA, then divide by revenue. In 2025 Verizon had operating income of $29,259 million and depreciation and amortization of $18,349 million: EBITDA of $47,608 million on $138,191 million of revenue, which gives a margin of 34.5%.