This study investigates the effect of university-educated labor on industrial profitability across the provinces of Iran. Using panel data of industries across Iranian provinces from 2013 to 2021 (1392–1400) and a fixed-effects regression model, the analysis examines the relationship between university-educated labor and industrial profitability. The dependent variable is profitability, while the independent variables include industry size, value-added growth, university-educated labor, industry concentration, and the square of concentration. The findings indicate that industry size and value-added growth have a positive and statistically significant impact on profitability, consistent with theoretical expectations. In contrast, university-educated labor exhibits a negative effect on profitability. This adverse effect may be attributed to increased wage costs, a mismatch between acquired skills and operational industry needs, or because the returns to human capital materialize over a longer term than the short-term profitability horizon. Furthermore, the negative coefficient on the squared concentration term implies an inverted-U-shaped relationship between concentration and profitability. Specifically, as concentration increases, profitability initially rises but declines after an optimal threshold. This phenomenon may result from reduced competition, inefficiencies at very large scales, or heightened regulatory interventions in highly concentrated markets. The results underscore the necessity of revisiting policies for hiring specialized labor, improving the alignment between the educational system and industry requirements, and simultaneously considering labor quality, skill matching, and competitive market structure in industrial policymaking. Increasing the share of university-educated labor without proper skill alignment, as well as excessive market concentration, can have adverse effects on firm financial performance.