Profitability · updated October 21, 2026
What is operating margin and how is it calculated
Operating margin shows how many dollars of profit from the core business are left from every $100 of sales, after all running costs but before interest and tax. It shows how well the business itself is run.
Operating margin formula
- Operating profit
- Sales minus all running costs: products, salaries, rent, advertising, research, depreciation.
- Sales
- Revenue over the last 12 months.
Worked example
A company sells $20 billion and has an operating profit of $3 billion.
From every $100 sold, $15 is left from operations, before interest and tax.
How to read operating margin
On our pages we also track the operating margin trend over several years: a rising margin shows the company keeps more of every dollar it sells.
When operating margin can fool you
One-off costs: a restructuring or a fine lowers the margin for a single year. Different accounting between countries can move costs between lines.
Related terms
Questions about operating margin
How is it different from net margin?
Operating margin does not subtract interest and tax. It shows the business; net margin shows what is left for shareholders.
These explanations are for information only. They are not a recommendation to buy or sell.
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