ROAS tells you how many rupees of sales your ads brought in for every rupee you spent on them. It is a sales ratio, not a profit figure.
Formula
ROAS = revenue from ads ÷ ad spend
Example
Meera spends ₹1,00,000 on Instagram and Google ads in a month and the ads bring in ₹4,00,000 of sales. Her ROAS is ₹4,00,000 ÷ ₹1,00,000 = 4x, which means ₹4 of sales for every ₹1 of ads.
How you'll hear it
“We're at 4x ROAS on Meta this month, but we still need 4.86x to cover the month's costs.”
What it helps you decide
Whether to raise, hold or cut ad spend, and which campaigns get the budget. It only makes sense when you compare it with your breakeven ROAS.
Where people misread it
People treat a high ROAS as proof the business is making money. A 4x ROAS can still lose money once product cost and fixed costs are paid, and a lower ROAS on a bigger budget can make more profit in total.
The story
Meera's ads look healthy. She spends ₹1,00,000 and the ads bring in ₹4,00,000 of sales. Her agency reports 4x ROAS and calls it a good month. For this example, leave her walk-in sales aside and ask whether the ad-driven sales pay the month's bills.
| Sales from ads | ₹4,00,000 |
| Clothes (30% of price) | −₹1,20,000 |
| Ad spend | −₹1,00,000 |
| Rent, salaries, electricity | −₹2,40,000 |
| Month result | −₹60,000 |
|---|
The 4x hides the costs. Her breakeven ROAS at this spend is (₹2,40,000 + ₹1,00,000) ÷ (70% × ₹1,00,000) = 4.86x. Below that, she loses money.
Now she doubles spend to ₹2,00,000. Reaching more people costs more per sale, so ROAS falls to 3.5x. Most people would call that worse.
| Sales from ads (3.5x) | ₹7,00,000 |
| Clothes (30% of price) | −₹2,10,000 |
| Ad spend | −₹2,00,000 |
| Rent, salaries, electricity | −₹2,40,000 |
| Month result | +₹50,000 |
|---|
The rent did not grow with the sales, so the breakeven fell to (₹2,40,000 + ₹2,00,000) ÷ (70% × ₹2,00,000) = 3.14x. A lower ROAS made more money. Look at ROAS next to its breakeven, and at the rupees left at the end of the month.
All figures are illustrative. Real ROAS usually falls as spend rises, but not always by this amount.
Work out your ROAS and breakeven
The example's numbers are filled in. Replace them with yours.
Your ROAS would fall, yet the month turns positive. Fixed costs are spread over more sales, so the breakeven drops faster than ROAS.
Don't confuse it with
- ROI: ROI measures profit against cost; ROAS measures sales against ad spend only.
- Breakeven ROAS: the ROAS you need to stop losing money, which depends on your margins and fixed costs.
In India: If you sell on cash on delivery, the sales your ad platform reports include orders that will come back undelivered. Work out ROAS on delivered orders. See RTO.
Related terms
Want to use this at work? AI-led PPC Excellence is aFactor's 16-week program for paid ads.
Sources
- Return on Ad Spend: How To Calculate Your ROAS, Shopify, 2026
- About Target ROAS bidding, Google Ads Help