Glossary
Operating Margin
Operating income as a percentage of revenue — profitability before interest and tax.
Operating Margin = Operating Income / Revenue × 100%. It measures profitability after both the direct cost of sales and the broader operating costs (salaries, marketing, R&D, rent) but before interest and tax.
It is a sharper measure of management efficiency than gross margin because it captures the full overhead base, and a more conservative one than EBITDA because it includes depreciation and amortisation of long-lived assets.
Compare operating margins within sector and over multiple years. Margin expansion across a cycle typically indicates operating leverage at work; sudden margin spikes often reverse the next quarter.