Operating income (EBIT) divided by revenue. Microsoft at 42% operating margin earns 42 cents of operating profit per dollar of revenue. Amazon retail at 4% earns 4 cents.
Why it's the better profitability number
Gross margin tells you about pricing power. Operating margin tells you about pricing power AND operational discipline. A company with a 60% gross margin but a 5% operating margin is bleeding money on overhead, marketing, or R&D - the topline is healthy but the underlying business isn't.
< 5% or negative: commodities, low-margin businesses, growth-stage tech
Pair with revenue growth
The most powerful Buffett-quality signature is expanding operating margin alongside growing revenue. A business that gets more profitable per dollar AS it grows has true operating leverage and a real moat.