GlossaryOperating Margin

Operating Margin

Profit from core operations, before interest and tax.

Operating margin is operating income as a percentage of revenue — profit from the core business, before interest and tax. It's a cleaner read on operating performance than net margin, since it isn't distorted by debt load or tax rate.

The formula

Operating IncomeRevenue
= Operating Margin

Why it matters

  • Strips out financing and tax decisions, so it's a fairer way to compare core operations across companies.
  • A rising operating margin alongside flat revenue usually signals improving efficiency or scale.
  • High operating leverage businesses (software, platforms) can expand this margin quickly as revenue grows.

How to read it

< 10%Lower operating leverage
10%–25%Solid for most industries
> 25%High operating leverage — often scalable software or platforms

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