Understanding Operating Margin

By Jeremy Bowman – Updated Jun 2, 2025 at 1:38 PM EST

Key Points

Operating margin is calculated by dividing operating income by net sales times 100.
Apple's operating margin of 30.2% indicates strong profitability, below its gross margin of 39.8%.
Operating margin is a consistent metric, reflecting core business strength, unlike net profit margin.

Operating margin measures the percentage of revenue a company keeps as operating profit. This is an important metric because it indicates to investors the profitability of a business and offers a convenient way to compare competing businesses or different industries.

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A graphic of the operating margin formula: Operating margin = operating income divided by net sales, multiplied by 100. — Image source: The Motley Fool

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Data source: Apple

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In the example above, Apple's operating margin of 30.2% is found by dividing its operating profit of $33.5 billion by its revenue of $111.4 billion and multiplying that amount by 100. The company's operating margin is lower than its gross margin because operating margin accounts for fixed expenses like research and marketing that do not vary with manufacturing output.

As you can see, Apple's operating margin is phenomenal at more than 30% and just 9.6% below its gross margin. This operating margin shows the strength of the company's business and illustrates why it's one of the most valuable companies in the world.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.