The Rule of 40 Revisited
The classic heuristic still works — but its components have shifted in importance.
MT
Marcus ThorneContributor, The Signal
The Rule of 40 — growth rate plus profit margin should exceed 40 — has survived every macro cycle because it captures a real tradeoff. What has changed in 2026 is the weighting investors apply to its components. A company hitting 40 with a 10/30 split (10% growth, 30% margin) is now viewed roughly on par with one hitting 40 with a 35/5 split. That was decidedly not true in 2020.