Profitability vs Growth Matrix: 27 Tech Companies Ranked by Rule of 40 (2025)
Plot revenue growth vs operating margin for 27 major technology companies. Filter by sector, color by Rule of 40 score, and find which companies combine high growth with high profitability. Custom calculator included.
Primary Query
Which tech companies have the best combination of growth and profitability? Plot revenue growth rate against operating margin for 27 companies across AI, enterprise software, cloud SaaS, social media, payments, and consumer tech — and see who passes the Rule of 40.
Tool Purpose
Revenue growth and operating margin are often in tension: high-growth companies typically sacrifice margin to fund expansion, while mature profitable companies grow slowly. The Profitability vs Growth Matrix plots both dimensions simultaneously, revealing which companies achieve the rare combination of fast growth and high margins — and which are sacrificing profitability without delivering the growth to justify it.
Rule of 40 — the benchmark used by SaaS investors and analysts to evaluate the growth-profitability trade-off:
$$\text{Rule of 40 Score} = \text{Revenue Growth %} + \text{Operating Margin %}$$
A score ≥ 40 indicates a company is generating enough combined growth and profitability to be considered healthy by this standard. A score ≥ 60 is elite. The Rule of 40 was originally developed for SaaS companies but is increasingly applied to any capital-light technology business.
The four quadrants of the matrix:
| Quadrant | Growth | Margin | Character |
|---|---|---|---|
| Quality Growth (top-right) | High | High | Exceptional businesses — rare |
| Cash Cows (top-left) | Low | High | Mature, dominant businesses with limited reinvestment opportunities |
| Hypergrowth (bottom-right) | High | Low | Early-stage scaling; betting on future margin expansion |
| Value Traps (bottom-left) | Low | Low | Structural challenges; neither growing nor profitable |
The quadrant lines are set at 15% revenue growth (peer median) and 20% operating margin (enterprise software profitability threshold). For context on what drives the margin axis, see gross margin vs operating margin and operating leverage: how fixed costs amplify margin expansion.
Data covers the most recently completed fiscal year (FY2024 for most; FY2025 ending January 2025 for Nvidia). All figures are GAAP operating margin and annual revenue growth. Sources: SEC 10-K filings and equivalent international disclosures.
Inputs
No input required for the peer matrix. Use the controls to:
- Filter by sector — show only AI/Semiconductors, Enterprise Software, Cloud/SaaS, Social/AdTech, Consumer/Streaming, or Payments companies
- Color mode — toggle between color-by-sector and color-by-Rule-of-40 score
- Custom calculator — enter your own company’s revenue growth and operating margin to compute its Rule of 40 score and see which quadrant it occupies
Output
- Interactive scatter plot — 27 companies plotted by Revenue Growth % (x-axis) vs Operating Margin % (y-axis); quadrant lines at 15% growth / 20% margin
- Abbreviated ticker labels on each data point
- Color modes — sector palette or R40 score gradient (elite green → failing red)
- Rule of 40 leaderboard table — all 27 companies ranked by R40 score, sortable by any column
- Custom company plotter — adds your company to the scatter and ranks it against all 27 peers
How To Use
- Read the scatter — top-right quadrant companies combine high growth with high profitability; identify the clusters
- Switch color mode to Rule of 40 to see which companies pass (blue/green) vs fail (amber/red) on this benchmark
- Filter by sector to reduce clutter and compare within peer groups
- Review the leaderboard table — sorted by R40 score by default; resort by growth or margin to identify single-dimension leaders
- Use the custom calculator to plot your own company against the peer set
Profitability vs Growth Matrix — 27 Companies
Rule of 40 Leaderboard
Click any column header to sort. Rule of 40 Score = Revenue Growth % + Operating Margin %. Scores ≥60 are elite; ≥40 pass the standard; below 40 indicates the company is not yet generating sufficient combined growth and profitability to meet the benchmark on a GAAP basis.
| R40 Score ▾ | Ticker | Company | Rev Growth | Op. Margin | Sector | Rating |
|---|
Custom Company Plotter
Enter your company's revenue growth and GAAP operating margin to compute its Rule of 40 score, plot it on the matrix, and rank it against all 27 peers.
Sources: SEC 10-K filings (EDGAR) and equivalent international financial disclosures. All operating margins are GAAP. Data reflects most recently completed fiscal year: FY2024 for all companies except Nvidia (FY2025, ending January 31, 2025). Revenue growth is year-over-year full fiscal year. Quadrant thresholds: 15% revenue growth (peer median), 20% operating margin (enterprise software profitability benchmark). Rule of 40 is a standard SaaS valuation heuristic; it was not designed for capital-intensive businesses — semiconductor and hardware companies may score high or low for reasons unrelated to SaaS-style scalability.
Required Internal Links
Company pages:
- Nvidia profitability and operating margin history
- Meta Platforms: operating margin expansion and Rule of 40 trajectory
- Microsoft revenue growth and operating leverage history
- Alphabet revenue growth and margin profile
- Palantir operating leverage: from GAAP losses to 30%+ margin
- Apple revenue growth and segment profitability
Comparison pages:
- Google vs Meta: revenue growth and operating margin comparison
- Apple vs Microsoft: growth rate and profitability comparison
- Nvidia vs AMD: operating margin and profitability divergence
- Palantir vs Snowflake: operating margin and Rule of 40 comparison
Glossary terms:
- Gross margin vs operating margin: how to read the profitability axis
- Operating leverage: why high-fixed-cost businesses have extreme DOL
- Price-to-sales ratio: how growth rate affects SaaS valuation multiples
Related Pages
- Operating Leverage Calculator — compute degree of operating leverage for any of the 6 core companies; understand how the current margin level was achieved
- Sector Margin Rankings — current gross and operating margin rankings within each sector; the margin axis of this matrix in detail
- Earnings Surprise Tracker — companies in the Quality Growth quadrant also tend to have the highest EPS surprise rates
- Free Cash Flow Comparator — Rule of 40 uses operating margin; FCF margin tells a similar story with different accounting inputs
- Annual Recurring Revenue: the SaaS metric that underpins Rule of 40 analysis
Frequently Asked Questions
What is the Rule of 40? The Rule of 40 is a heuristic used by SaaS investors and growth equity analysts to evaluate whether a software company’s combined growth and profitability is healthy. The formula is: Revenue Growth % + Operating (or FCF) Margin % ≥ 40. A score of 40 means the company is generating enough momentum — either through fast growth or strong margins — to be considered fundamentally sound. A score below 40 suggests the company is not growing fast enough to justify its margin sacrifice, or not profitable enough for the growth rate it is delivering.
Which companies in this matrix score highest on the Rule of 40? On a GAAP operating margin basis, the top performers in this peer set are Nvidia (124.0 — extraordinary), Broadcom (91.2), Palantir (87.8), TSMC (78.8), Visa (77.3), and Mastercard (69.1). Among pure software companies, Palantir leads with 87.8, followed by Microsoft (63.4) and Meta (63.5). The result that surprises many analysts: high-growth SaaS companies like Snowflake (21.0), CrowdStrike (30.0), and Cloudflare (33.0) all score below 40 on a GAAP basis, reflecting how far their GAAP operating margins remain from profitability despite strong revenue growth.
Why do some high-growth SaaS companies fail the Rule of 40? Companies like Snowflake, CrowdStrike, and Cloudflare have strong revenue growth (29%+ YoY) but GAAP operating margins that are either negative or near zero. This is because GAAP includes stock-based compensation (SBC) as an expense — and high-growth SaaS companies typically grant SBC equal to 15-25% of revenue. On a non-GAAP basis (excluding SBC), all three companies pass the Rule of 40 comfortably. This is why investors in SaaS companies often reference non-GAAP Rule of 40 scores, and why understanding GAAP vs non-GAAP is essential for this analysis.
What does the top-right “Quality Growth” quadrant mean? Companies in the top-right quadrant (revenue growth >15% AND operating margin >20%) represent the rarest category in tech: businesses growing fast enough to expand their market position while simultaneously generating strong profitability. In this peer set of 27 companies, only Nvidia, Broadcom, TSMC, Palantir, Meta, Microsoft, and ServiceNow occupy this quadrant. The combination is rare because rapid growth typically requires heavy sales, marketing, and R&D investment that compresses margins — companies that achieve both usually have strong network effects, pricing power, or a fixed-cost platform being scaled over a growing revenue base.
Is Rule of 40 the best way to evaluate tech companies? The Rule of 40 is a useful single-number benchmark, but it has limitations. It treats 1% of revenue growth as exactly equal in value to 1% of operating margin — which is rarely true. High-growth companies typically command higher valuation multiples because future earnings power is worth more than current earnings. Additionally, GAAP margins include SBC, which affects software companies far more than hardware or semiconductor companies. Professional analysts use Rule of 40 as a starting filter, then examine growth trajectory, margin expansion rate, capital efficiency (ROIC), and free cash flow conversion to build a complete picture.