What is ROAS and How to Calculate It? [with Calculator] [2026]

What is ROAS

ROAS (Return on Ad Spend) is one of the most important metrics in digital advertising — it measures how much revenue you generate for every € (or $, £) invested in ads.

Plainly: if you spend €1,000 on Google Ads and get €4,000 in revenue back, your ROAS is 4× (or 400%). For every €1 invested, €4 came back through sales.

Why ROAS matters:

• Standard metric — Google Ads, Meta Ads, Microsoft Ads all report it natively
• Powers Smart Bidding — tROAS strategy is directly tied to a ROAS target
• Easy to understand — stakeholders and execs grasp it without extra context
• Compares campaigns — different campaigns with different budgets compared on the same axis

But — and this is critical — ROAS is not profit. More on that in the ROAS vs POAS section below.

Formula and calculation

The formula is simple:

It can be expressed as:

• Ratio — "4×" or "4:1" (most common form in Google Ads)
• Percentage — "400%" (multiplied by 100)
• Decimal — "4.0" (how it appears in some reports)

Here are a few examples:

Break-even ROAS

Break-even ROAS = 1 ÷ margin (margin as a decimal). Margin here is contribution margin: revenue minus cost of goods, shipping, payment fees, returns and discounts, before fixed costs and before ad spend. Example: at a 40% margin, break-even ROAS is 2.5× - below that, every extra sale from ads is losing you money, not making you any.

ROAS above break-even means your ads cover their own cost out of contribution margin, and fixed costs (salaries, rent, tools) are paid only from what is left. If the margin you use leaves out shipping, returns and fees, your break-even ROAS is too low. See ROAS vs POAS below for the full picture.

ROAS calculator

Enter your ad revenue and ad spend. The calculator returns your ROAS and compares it against an industry benchmark. Optionally pick your industry for a more precise benchmark.

The benchmarks in the calculator are industry averages. Your profitable threshold depends on margin — low margin means you need a higher ROAS just to break even.

What is a good ROAS?

There's no universal number. A good ROAS is one that sits above your break-even ROAS for your own margin, not a benchmark copied from a different business with a different cost structure. In accounts I manage, average eCommerce ROAS is 3.7×, but that's an average across different margins and verticals, not a target to chase.

Break-even ROAS by margin:

ROAS benchmarks by industry

ROAS varies dramatically by vertical. Luxury brands carry a high ROAS but low conversion rate; lead-gen businesses run a lower ROAS but make it back via long customer LTV. Treat the numbers below as directional estimates from industry reports, not as targets to copy onto your own account.

These are rough estimates that are often cited, not averages I measured. Your real target should be margin-based — if your margin is 30%, break-even ROAS is ~3.3×, so anything below that means losing money.

ROAS vs POAS: why ROAS doesn't measure profit

Example: an eCommerce retailer with 4× ROAS and 20% margin sells €4,000 of product with €1,000 in spend. Gross profit is €800 (20% of revenue), minus €1,000 spend = €200 loss. "Great ROAS" actually means losing money.

The solution is POAS (Profit on Ad Spend) — a metric that factors in margin. POAS = (Revenue × Margin) ÷ Spend, with margin as contribution margin, as above. For the same example: (4,000 × 0.20) ÷ 1,000 = 0.8× POAS → below 1× means loss. Clear, unambiguous.

POAS isn't native in the Google Ads UI, but you can calculate it manually or via custom columns. Google Ads gives you a gross profit report if you supply cart data and cost of goods in Merchant Center. For eCommerce clients where I run Tiered Shopping strategy, POAS is the primary KPI — ROAS is only a secondary view.

How to improve ROAS

FAQ

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