Operating leverage

Operating leverage describes how much a company's operating profit changes in response to a change in revenue, driven by the mix of fixed and variable costs in its cost structure. A company with high fixed costs and low variable costs has high operating leverage, meaning profit can grow much faster than revenue once fixed costs are covered.

This is different from financial leverage, which comes from debt rather than cost structure. A software company with high fixed engineering costs but low costs to serve each additional customer is a classic example of high operating leverage, small revenue growth can translate into much larger operating margin gains.