Operating Margin Calculator

Calculate gross margin and operating margin from revenue and expenses.

By Konstantin Iakovlev · Updated September 2026 · Source: SBA — Business Guide

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Gross Margin

60.00%

Operating Margin

30.00%

Income Breakdown

Revenue$1,000,000.00
Gross Profit$600,000.00
Gross Margin60.00%
Operating Income$300,000.00
Operating Margin30.00%

Use the Operating Margin Calculator above to calculate your results. Enter your values and see instant results — all calculations run in your browser.

Disclaimer: This calculator is for informational purposes only and does not constitute tax, financial, or legal advice. Results are estimates based on the information you provide and current rates. Always consult a qualified tax professional or financial advisor for advice specific to your situation.

How It Works

Operating margin measures what share of revenue survives once a company covers both the cost of goods sold (COGS) and the day-to-day cost of running the business. It is one of the cleanest reads on operational efficiency.

The math runs in two stages. Gross Profit comes first, found by subtracting COGS from Revenue, and Gross Margin is that profit divided by Revenue. Operating Margin then takes the Gross Profit, strips out every operating expense, including SG&A, R&D, and depreciation, divides the result by total Revenue, and reports it as a percentage.

Accurate expense classification is what makes those figures trustworthy. Slotting COGS in with operating expenses, or the reverse, quietly distorts both margins. And a healthy operating margin still says nothing about the bottom line when non-operating costs such as interest or taxes run unusually high.

Example: A Software Startup's Quarter

  1. 1 An AI software startup, 'NeuralNet Innovations', books quarterly revenue of $1,250,000, with Cost of Goods Sold (COGS) of $375,000 and operating expenses of $425,000 covering salaries, marketing and office rent.
  2. 2 Gross Profit: $1,250,000 − $375,000 = $875,000. Gross Margin: $875,000 / $1,250,000 × 100 = 70.00%.
  3. 3 Operating Income: $875,000 − $425,000 = $450,000. Operating Margin: $450,000 / $1,250,000 × 100 = 36.00%.
  4. 4 NeuralNet keeps 36 cents of operating profit from every dollar of revenue. Interest and taxes come out below operating income, so its net margin will be lower than 36%.

Source: SBA — Business Guide · Last updated: September 2026

Frequently Asked Questions

What is a good operating margin?
Operating margins vary widely by industry. Software companies often achieve 20-40%, retail runs 3-8%, restaurants average 3-9%, and manufacturing targets 10-20%. Compare to your specific industry peers.
What is the difference between gross margin and operating margin?
Gross margin = (revenue - cost of goods sold) / revenue. Operating margin additionally subtracts operating expenses (salaries, rent, marketing). Operating margin is always lower than gross margin.
How do you improve operating margin?
Increase revenue without proportionally increasing costs, reduce cost of goods sold through better sourcing, cut operating expenses, automate processes, or raise prices if the market allows it.

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