Operating margin by industry
Operating margin is one of the most useful profitability metrics for comparing companies across industries. It focuses on the profit a business generates from its core operations before interest and taxes, making it a practical way to evaluate operating efficiency and pricing power. Because industries have different cost structures, competitive dynamics, and capital requirements, average operating margins can vary substantially from one industry to another.
The operating margin measures operating income as a percentage of revenue. It shows how much of each dollar of sales remains after a company pays for the direct costs of producing its goods or services and its operating expenses.
Operating Margin (%) = Operating Income / Revenue
Operating margin sits between gross margin and net margin in the profitability stack. It is broader than gross margin because it includes selling, general, and administrative expenses, but narrower than net margin because it excludes interest expense and taxes. That makes it especially useful when comparing businesses with different financing structures but similar operations.
Industry Averages Operating Margin
The average operating margins can vary significantly across different industries. Here is a table of some common company industries in the US and their average operating margins as of Jun 2026:
| Industry | Average operating margin | Number of companies |
|---|---|---|
| Advertising Agencies | -0.5% | 28 |
| Aerospace & Defense | 8.2% | 67 |
| Agricultural Inputs | 12.7% | 10 |
| Airlines | 5.8% | 16 |
| Airports & Air Services | -0.4% | 5 |
| Aluminum | 10.3% | 4 |
| Apparel Manufacturing | 4.7% | 14 |
| Apparel Retail | 4% | 29 |
| Asset Management | 43.4% | 82 |
| Auto Manufacturers | 3.6% | 17 |
| Auto Parts | 4.7% | 44 |
| Auto & Truck Dealerships | 5% | 22 |
| Banks - Diversified | 40.8% | 6 |
| Banks - Regional | 35.5% | 284 |
| Beverages - Non-Alcoholic | 12.9% | 12 |
| Biotechnology | -170.3% | 454 |
| Broadcasting | -3.7% | 11 |
| Building Materials | 16.9% | 12 |
| Building Products & Equipment | 9.9% | 27 |
| Business Equipment & Supplies | 0.6% | 4 |
| Capital Markets | 22.5% | 52 |
| Chemicals | 3.1% | 14 |
| Coking Coal | -2.2% | 5 |
| Communication Equipment | 4.9% | 43 |
| Computer Hardware | 5.9% | 30 |
| Conglomerates | 5.2% | 16 |
| Consulting Services | 6.1% | 17 |
| Consumer Electronics | -0.9% | 8 |
| Credit Services | 31.6% | 41 |
| Diagnostics & Research | -24.7% | 43 |
| Discount Stores | 5.8% | 8 |
| Drug Manufacturers - General | 20.9% | 14 |
| Drug Manufacturers - Specialty & Generic | -27.2% | 47 |
| Education & Training Services | 7.9% | 20 |
| Electrical Equipment & Parts | 4% | 41 |
| Electronic Components | -0.5% | 38 |
| Electronic Gaming & Multimedia | -8.3% | 13 |
| Electronics & Computer Distribution | -0.5% | 8 |
| Engineering & Construction | 6.9% | 38 |
| Entertainment | 4.8% | 38 |
| Farm & Heavy Construction Machinery | 5.6% | 19 |
| Farm Products | 5.6% | 15 |
| Financial Data & Stock Exchanges | 35.4% | 11 |
| Food Distribution | 1.5% | 9 |
| Footwear & Accessories | 6.4% | 10 |
| Furnishings, Fixtures & Appliances | 1.8% | 24 |
| Gambling | 11.5% | 9 |
| Gold | 42.4% | 34 |
| Grocery Stores | 1.8% | 9 |
| Healthcare Plans | 1% | 10 |
| Health Information Services | -12.3% | 41 |
| Home Improvement Retail | 6.9% | 6 |
| Household & Personal Products | 7.3% | 23 |
| Industrial Distribution | 7.6% | 18 |
| Information Technology Services | 7.5% | 48 |
| Insurance Brokers | 15.2% | 14 |
| Insurance - Diversified | 23.1% | 9 |
| Insurance - Life | 13% | 15 |
| Insurance - Property & Casualty | 18.8% | 40 |
| Insurance - Reinsurance | 19.7% | 7 |
| Insurance - Specialty | 32.4% | 20 |
| Integrated Freight & Logistics | 1.5% | 18 |
| Internet Content & Information | 4.3% | 46 |
| Internet Retail | 4% | 27 |
| Leisure | 8% | 24 |
| Lodging | 19.5% | 7 |
| Luxury Goods | 3.5% | 8 |
| Marine Shipping | 15.7% | 29 |
| Medical Care Facilities | 2.6% | 40 |
| Medical Devices | -51.8% | 110 |
| Medical Distribution | 1.8% | 5 |
| Medical Instruments & Supplies | -25.2% | 44 |
| Metal Fabrication | 5.9% | 15 |
| Mortgage Finance | 34.6% | 13 |
| Oil & Gas Drilling | 10.5% | 8 |
| Oil & Gas E&P | 17% | 59 |
| Oil & Gas Equipment & Services | 9% | 46 |
| Oil & Gas Integrated | 15% | 10 |
| Oil & Gas Midstream | 28.5% | 40 |
| Oil & Gas Refining & Marketing | 3.8% | 17 |
| Other Industrial Metals & Mining | 6% | 23 |
| Other Precious Metals & Mining | 31% | 11 |
| Packaged Foods | 4.3% | 44 |
| Packaging & Containers | 7.2% | 20 |
| Paper & Paper Products | -4.8% | 4 |
| Personal Services | 15.3% | 8 |
| Pollution & Treatment Controls | 10.9% | 13 |
| Publishing | 1.2% | 6 |
| Railroads | 21.7% | 8 |
| Real Estate - Development | 17.4% | 10 |
| Real Estate Services | 0.3% | 27 |
| Recreational Vehicles | 1.6% | 10 |
| REIT - Diversified | 27.8% | 16 |
| REIT - Healthcare Facilities | 28.8% | 18 |
| REIT - Hotel & Motel | 11.1% | 14 |
| REIT - Industrial | 32% | 17 |
| REIT - Mortgage | 44.5% | 38 |
| REIT - Office | 12.3% | 19 |
| REIT - Residential | 24.4% | 20 |
| REIT - Retail | 33.8% | 26 |
| REIT - Specialty | 29.4% | 18 |
| Rental & Leasing Services | 13.1% | 18 |
| Residential Construction | 9.6% | 20 |
| Resorts & Casinos | 10.5% | 16 |
| Restaurants | 7% | 42 |
| Scientific & Technical Instruments | 8.4% | 26 |
| Security & Protection Services | 9.9% | 16 |
| Semiconductor Equipment & Materials | 6.8% | 28 |
| Semiconductors | 5.2% | 64 |
| Software - Application | 2.2% | 169 |
| Software - Infrastructure | 5.6% | 117 |
| Solar | -1.2% | 18 |
| Specialty Business Services | 9.2% | 33 |
| Specialty Chemicals | 5.8% | 51 |
| Specialty Industrial Machinery | 11.5% | 70 |
| Specialty Retail | 4.4% | 35 |
| Staffing & Employment Services | 4.5% | 20 |
| Steel | 2.5% | 13 |
| Telecom Services | 4.4% | 35 |
| Thermal Coal | 15.3% | 6 |
| Tools & Accessories | 13% | 9 |
| Travel Services | 15.3% | 12 |
| Trucking | 2.2% | 13 |
| Utilities - Diversified | 18.1% | 9 |
| Utilities - Independent Power Producers | 10.4% | 6 |
| Utilities - Regulated Electric | 21.8% | 33 |
| Utilities - Regulated Gas | 20% | 15 |
| Utilities - Regulated Water | 27.9% | 12 |
| Utilities - Renewable | 17.2% | 15 |
| Waste Management | 6.4% | 12 |
As an example, the REIT - Mortgage industry has an average operating margin of approximately 44.5%, whereas the Asset Management industry has an average operating margin of around 43.4%. In contrast, the Biotechnology industry has an average operating margin of about -170.3%, and the Medical Devices industry has an average operating margin of around -51.8%.
Please note that these figures are based on industry averages and can vary significantly depending on the specific company, its scale, cost controls, pricing strategy, and competitive environment.
Industries with highest operating margin
You can explore the top industries with the highest operating margin in the chart and table below. The chart allows you to apply additional sector-based filters to the industries, enabling you to explore a breakdown of the industries with the highest operating margin within each sector.
| Industry | Average operating margin | Number of companies |
|---|---|---|
| REIT - Mortgage | 44.5% | 38 |
| Asset Management | 43.4% | 82 |
| Gold | 42.4% | 34 |
| Banks - Diversified | 40.8% | 6 |
| Banks - Regional | 35.5% | 284 |
| Financial Data & Stock Exchanges | 35.4% | 11 |
| Mortgage Finance | 34.6% | 13 |
| REIT - Retail | 33.8% | 26 |
| Insurance - Specialty | 32.4% | 20 |
| REIT - Industrial | 32% | 17 |
Industries with lowest operating margin
Industries with the lowest operating margin are shown in the following chart and table. You can use the chart to group industries by sector and find the ones with the lowest operating margin in each sector.
| Industry | Average operating margin | Number of companies |
|---|---|---|
| Biotechnology | -170.3% | 454 |
| Medical Devices | -51.8% | 110 |
| Drug Manufacturers - Specialty & Generic | -27.2% | 47 |
| Medical Instruments & Supplies | -25.2% | 44 |
| Diagnostics & Research | -24.7% | 43 |
| Health Information Services | -12.3% | 41 |
| Electronic Gaming & Multimedia | -8.3% | 13 |
| Paper & Paper Products | -4.8% | 4 |
| Broadcasting | -3.7% | 11 |
| Coking Coal | -2.2% | 5 |
Industry Overview of Operating Margin
Operating margins vary widely because industries incur different operating costs to generate revenue. Asset-light software and service businesses can often convert a larger share of revenue into operating profit, while industries with high labor, logistics, or maintenance costs may operate on thinner margins even when demand is healthy.
Competitive intensity also matters. Industries with differentiated products, recurring revenue, or high switching costs may maintain stronger operating margins because they have more pricing power. By contrast, commodity-like industries or markets with heavy price competition often show lower operating margins because companies must absorb cost increases or compete aggressively on price.
High Operating Margin Example: Software and Digital Platforms
Software and digital platform businesses often post high operating margins once they reach scale. After the initial investment in development and infrastructure, each additional customer can generate revenue with relatively low incremental cost. That operating leverage can translate into strong margins, especially for companies with subscription-based revenue and limited distribution costs.
Low Operating Margin Example: Retail and Distribution
Retailers and distributors frequently operate with lower operating margins because they face higher fulfillment, labor, and overhead costs while competing in price-sensitive markets. Even if sales volumes are large, margin pressure from inventory management, transportation, and store or warehouse expenses can limit operating profitability.
Operating Margin Compared with Other Margin Metrics
Compared with gross margin, operating margin gives a more complete picture of operating efficiency because it includes overhead and operating expenses beyond direct production costs. Compared with EBITDA margin, operating margin is more conservative because it includes depreciation and amortization. And compared with net margin, it removes the effects of financing decisions and taxes, which can make peer comparisons cleaner.
Investment Considerations
When investors analyze a company’s operating margin, they typically compare it with industry averages and with the company’s own historical trend. A rising operating margin can suggest improving efficiency, better pricing discipline, or greater scale. A declining operating margin may signal rising input costs, operational inefficiencies, or weakening competitive positioning.
Operating margin should still be used together with other metrics. It does not capture capital intensity, working-capital demands, or non-operating risks, and it can be influenced by temporary cost actions. A strong analysis usually combines operating margin with revenue growth, cash flow, return metrics, and a review of the company’s cost structure.