Glossary
What is operating margin?
Definition
Operating margin is operating income as a percentage of revenue: the share of revenue left after the costs of running a business, before finance costs and tax. It is also called operating profit margin. For example, NVIDIA's operating margin for FY2026 (ended 25 Jan 2026) was 60.4%, our calculation from its Form 10-K.
Formula
Operating margin = Operating income ÷ Revenue
Operating margin divides operating income by revenue, with both inputs taken from the income statement for the same period. Revenue is the top line, and operating income is the subtotal after cost of revenue and operating expenses.[1] Operating income comes before interest, other income and income tax, so the margin leaves finance costs out.
The result is a percentage, and it is negative when operating income is a loss. Operating margin sits between gross margin, measured before operating expenses, and net margin, measured after interest, other income and tax. It relates profit to revenue, while free cash flow measures cash from the cash flow statement.
Worked example: NVIDIA
This example calculates operating margin from NVIDIA's income statement for its latest fiscal year. NVIDIA's operating expenses include research and development, and operating income is the subtotal that follows them. To get the margin, divide operating income by revenue and show the result as a percentage.
NVIDIA's fiscal year ends on the last Sunday in January. Most of each fiscal year therefore falls in the calendar year before its label. The table caption names the fiscal year, and the source line names the Form 10-K. Its cover page gives the exact date the fiscal year ended, and checking it is the first step in how to read a 10-K.
| USD m | FY2026ended |
|---|---|
| Revenue | 215,938 |
| Operating income | 130,387 |
| Operating margin % | 60.4% |
Source: NVIDIA Form 10-K for FY2026, SEC EDGAR
Totals may not add up because of rounding.
All periods: NVIDIA income statement
How StockFactsheet calculates it
StockFactsheet calculates operating margin from operating income and revenue as reported, with no adjustment for one-off items. A trailing 12 months (TTM) margin divides TTM operating income by TTM revenue, a ratio of sums. Where no filing reports the fourth quarter on its own, we derive both inputs as the fiscal year minus the first 9 months. They then carry the D marker (derived by StockFactsheet), while the margin itself carries none.
We never build operating income for a standard company, so where the statements print none, no operating margin is calculated. Banks have no operating margin in our tables: a bank's operating income, labelled total net revenue at US banks, is its top line. The full rule is in our methodology for operating margin.
Common mistakes
- Taking operating margin from the adjusted operating income in an earnings release: adjusted figures leave out items the company chooses, while our margin uses the income statement line.
- Averaging the 4 quarterly margins of a fiscal year: the annual margin divides total operating income by total revenue, so each quarter counts in proportion to its revenue.
- Assuming every company builds operating income the same way: until IFRS 18 applies, from annual periods beginning on or after 1 Jan 2027, IFRS reporters choose their own profit subtotals.[2]
- Reading operating margin as the amount of profit a business makes: it is a share of revenue, so a larger business can show a lower margin and higher operating income.
Sources and data
The references explain the term; the worked example's figures are as reported in the filings after them. Derived figures are our calculations (see Methodology).
(opens in new tab)- [1] Reference Beginners' Guide to Financial Statements
- [2] Reference New IFRS Accounting Standard will aid investor analysis of companies' financial performance
- [3] Filing Form 10-K, fiscal year ended 25 Jan 2026
- [4] Our dataset StockFactsheet fundamentals dataset, extracted from SEC EDGAR XBRL on ; derived values (Q4, TTM, free cash flow, net debt, margins, growth rates and ratios) are explained in Methodology.
Cite this page
StockFactsheet (2026). "What is operating margin?" Signed off by OffScriptBySami. Updated ; data as of . https://stockfactsheet.com/learn/operating-margin/
For information only. StockFactsheet does not recommend buying, selling or holding any security. Figures can contain errors; always check the original filings. Full disclaimer
Update history
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