What is operating margin?
Operating margin is operating income divided by revenue, as a percentage. Operating income is what is left of sales after the costs of running the business, before interest and income tax. So the margin shows how many dollars of each $100 of sales were left as operating profit.[S1]
How is operating margin worked out?
Operating margin = operating income ÷ revenue × 100. The SEC's guide calls the two inputs "income from operations" and "net revenues".[S1]
Home Depot's page shows operating income of $20.9B (FY2025) on net sales of $164.7B (FY2025). It gives the GAAP operating margin as 12.7% (FY2025).
Where do you find it in a 10-K or 10-Q?
Both inputs sit on the income statement.[S1] That is in 10-K Item 8, or 10-Q Part I, Item 1. Management explains the results in MD&A: 10-K Item 7, or 10-Q Part I, Item 2.[S2][S3]
The SEC's list of income statement lines has no operating income line. It separates operating costs from non-operating income and expenses.[S4] So the name can vary; the SEC's guide notes it is often called "income from operations".[S1]
What is adjusted operating margin?
It is a company's own version, which removes items the company chooses. In an SEC filing, the GAAP figure must also be shown, at least as prominently.[S5] Cityfort stores a GAAP operating margin only where such a pair appears, so few pages show one. See non-GAAP measures.
What does operating margin leave out?
- Interest paid on debt and earned on cash.[S1]
- Income tax.[S1]
- Non-operating items, such as dividends received and gains or losses on securities.[S4]
It does include depreciation, the period's charge for wear on machines and other assets.[S1] For margins measured at other steps, read what a margin means.