How it is calculated
ROAS = revenue from ads ÷ ad spend
Gross profit from ad sales = revenue × margin %
Profit after ads = gross profit − ad spend
POAS (profit on ad spend) = gross profit ÷ ad spend
Cost per purchase = ad spend ÷ purchases
ROAS is often shown as a ratio (4.0) or a percentage (400%). They mean the same thing: four units of revenue for every unit spent.
Example
You spend $2,500 and record $9,000 in sales from the ads: a ROAS of 3.6. With a 45% margin, those sales leave $4,050 before advertising. Subtract the $2,500 of ad spend and the ads produced $1,550 of profit, a POAS of 1.62. If the margin were 25%, the same 3.6 ROAS would lose $250.
Why ROAS on its own can mislead
- Margins differ. A 3x ROAS is excellent for a 60% margin product and loss-making for a 25% margin one. Work out your minimum with the Break-Even ROAS Calculator.
- Attribution is an estimate. Meta counts conversions within its attribution window, including some people who would have bought anyway. Compare platform-reported revenue with your store or CRM.
- New and returning customers are mixed. Retargeting past buyers usually shows a high ROAS but adds less new revenue than prospecting.
- It ignores what comes later. Subscription and repeat-purchase businesses can accept a lower first-order ROAS. See the Target CPA Calculator.
What to do with the result
- Losing money after ads: look at conversion rate and order value before cutting spend. Our guide to clicks without conversions covers the usual causes.
- Profitable but thin: test offers or bundles that raise order value, and cut audiences or ads with the weakest cost per purchase.
- Comfortably profitable: increase budget gradually (often 20–30% at a time) and watch whether cost per purchase holds.
Make sure the conversion data feeding these numbers is reliable first; the Meta Tracking Setup Checklist helps.