The share of revenue left after all the costs of running the business, before interest and tax.
Leave blank only if your operating expenses figure already includes COGS.
Example Result
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Estimates for planning only; not financial, tax or investment advice. See our Disclaimer.
Operating margin answers a simple question: out of every dollar of sales, how many cents are left once the business has paid for what it sells and for everything it takes to run — staff, rent, marketing, research, depreciation — but before interest and income tax? Because it leaves out financing and tax, it lets you compare a company that borrows heavily with one that does not, or the same company across years. Enter net revenue, the cost of goods sold and operating expenses (SG&A, R&D, depreciation) as they appear on the income statement, and the calculator returns operating profit, the operating margin, the gross margin and costs as a share of revenue, with the US average for comparison. The guide below shows which lines go into the calculation, how to compare the result with your sector, and why a small change in sales moves operating profit by much more.
Enter net revenue from the income statement.
Enter cost of goods sold (or cost of revenue).
Enter operating expenses: selling, general and administrative, research and development, and operating depreciation.
Press Calculate and compare the margin with your sector.
By O.E. — Partner, chairman of the board and CEO of a metal products manufacturer for 21 years; the company exports to 45 countries.
Drafted with AI assistance; calculations checked against primary sources and tested with the site's own code. About FlowUtil
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Operating margin = (revenue − cost of goods sold − operating expenses) ÷ revenue × 100. Interest, income tax and non-operating items such as investment income or one-off gains are left out. On $5,000,000 of revenue with $3,200,000 of COGS, $1,000,000 of SG&A, $200,000 of R&D and $100,000 of depreciation, operating profit is $500,000: a 10% margin. The gross margin on the same figures is 36%; the 26-point gap is the cost of running the business.
| Symbol | Meaning |
|---|---|
| COGS | Cost of goods sold / cost of revenue |
| Operating expenses | SG&A + R&D + operating depreciation and amortization |
| Operating profit | Revenue − COGS − operating expenses |
Many income statements label only SG&A and R&D as "operating expenses" and show COGS separately above gross profit. Leaving COGS out gives a margin that is far too high: $5,000,000 of revenue against $1,200,000 of SG&A and R&D alone looks like a 76% margin, while the true operating margin is 10%. That is why COGS has its own field; if your result is close to or above your gross margin, a cost line is missing.
1Revenue $5,000,000; COGS $3,200,000; operating expenses $1,300,000.
5.0 − 3.2 − 1.3 = 0.5
Operating margin 10.00% · gross margin 36.00%
Below the 12.8% US average across all sectors — compare with your own sector.
2Sales up 10% to $5,500,000; COGS moves with sales to $3,520,000; the $1,300,000 of other costs are fixed.
5.5 − 3.52 − 1.3 = 0.68
Operating margin 12.36% · operating profit $680,000
Sales grew 10%, operating profit 36%: operating leverage. It works in reverse too, which is why businesses with a high share of fixed costs feel downturns most.
3Revenue $2,000,000 with $1,400,000 of total costs, COGS already included.
2.0 − 1.4
Operating margin 30.00%
Leave COGS blank only when your cost figure already includes it.
| Sector | Operating margin |
|---|---|
| Semiconductors | 35.3% |
| Software (system & application) | 33.0% |
| Utilities (general) | 23.5% |
| Hotels & gaming | 19.4% |
| Machinery | 15.9% |
| Restaurants & dining | 15.8% |
| All US companies | 12.8% |
| Retail (general) | 6.8% |
| Air transport | 5.3% |
| Autos & trucks | 2.3% |
| Grocery & food retail | 2.3% |
Pre-tax operating margins from Aswath Damodaran's dataset of 5,994 US-listed companies. A 5% margin is weak for a software company and strong for a supermarket.
Operating profit comes straight from the income statement and covers the core business only. EBIT (earnings before interest and tax) adds non-operating items such as investment income or one-off gains; it is often, but not always, equal to operating profit. EBITDA adds back depreciation and amortization, so EBITDA margin is always at least as high as operating margin. "Adjusted operating margin" in company reports excludes items management considers unusual — there is no standard list, so read the reconciliation.