Operating Margin Calculator
Calculate operating income and operating margin from revenue, cost of goods sold and operating expenses — plus the gross margin alongside.
How it works
Gross profit = revenue − COGS · Operating income = gross profit − operating expenses · Operating margin % = operating income ÷ revenue × 100
Operating margin measures profit from core operations, after both the direct cost of goods and the operating expenses of running the business (SG&A, R&D, depreciation), but before interest and taxes. It sits between gross margin and net margin and is a cleaner gauge of operational efficiency than net margin, because it strips out financing choices and tax effects. Operating income is also known as EBIT — earnings before interest and taxes.
Worked example
With $500,000 revenue, $300,000 COGS and $120,000 of operating expenses, gross profit is $200,000 (40% gross margin) and operating income is $80,000. The operating margin is 80,000 ÷ 500,000 = 16%.
Frequently asked questions
What is a good operating margin?
It varies by industry — software and pharma can exceed 30%, while grocery and airlines run in the low single digits. Compare against peers in the same sector rather than a universal benchmark, and watch the trend over time.
How is operating margin different from net margin?
Operating margin stops at operating income (EBIT), before interest and taxes. Net margin goes further and subtracts those, so it reflects financing and tax decisions as well as operations. Operating margin isolates how well the core business runs.
Is operating income the same as EBIT?
Very nearly — both exclude interest and taxes. They can differ slightly when a company has non-operating income or expenses (like investment gains), which EBIT may include but operating income does not.
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Educational estimate, not financial advice.