IV. The Proof: Check Our Work
Cost Structure and Profitability: The Certified Data
The Cost Reset
The headline of the last two years is a contraction: median total operating expense fell from 118% of revenue in 2022 to 88% in 2024, thirty points removed in two actual years. The stacked bars show where those points came from. Sales and marketing was both the largest cost line and the deepest cut, falling from 54% of revenue to 37%. Research and development came down from 39% to 29% and general and administrative from 26% to 22%. We draw attention to it because the reductions fell hardest on the two functions that build future revenue, sales and R&D, which is the setup for the efficiency trade the data forces later on this page.
View data table
| year | S&M | R&D | G&A |
|---|---|---|---|
| 2022 | 54 | 39 | 26 |
| 2023 | 42 | 35 | 23 |
| 2024 | 37 | 29 | 22 |
| 2025E | 35 | 28 | 20 |
| 2026E | 32 | 26 | 17 |
| Metric (% of revenue, median) | 2022 | 2023 | 2024 | 2025E | 2026E | Source |
|---|---|---|---|---|---|---|
| Sales & Marketing | 54% | 42% | 37% | 35% ᴱ | 32% ᴱ | 2025 Survey, p. 39 |
| Research & Development | 39% | 35% | 29% | 28% ᴱ | 26% ᴱ | 2025 Survey, p. 39 |
| General & Administrative | 26% | 23% | 22% | 20% ᴱ | 17% ᴱ | 2025 Survey, p. 39 |
| Total OpEx | 118% | 99% | 88% | 82% ᴱ | 75% ᴱ | 2025 Survey, p. 39 |
| EBITDA margin | (47%) | (24%) | (12%) | (4%) ᴱ | 1% ᴱ | 2025 Survey, p. 4 |
| EBITDA margin, 25th pctile | (120%) | (71%) | (38%) | (21%) ᴱ | (8%) ᴱ | 2025 Survey, p. 9 |
| EBITDA margin, 75th pctile | (11%) | (6%) | (1%) | 6% ᴱ | 9% ᴱ | 2025 Survey, p. 9 |
| Subscription gross margin | 75% | 77% | 78% | 78% ᴱ | 79% ᴱ | 2025 Survey, p. 4 |
| Rule of 40 (median) | (14%) | (3%) | 6% | 13% ᴱ | 27% ᴱ | 2025 Survey, p. 4 |
| % meeting/exceeding Rule of 40 | 11% | 4% | 5% | 9% ᴱ | 20% ᴱ | 2025 Survey, p. 43 |
By ARR Segment and Growth Cohort
| 2024 OpEx by segment | <$10M | $10–25M | $25–50M | >$50M | Overall |
|---|---|---|---|---|---|
| Sales & Marketing | 41% | 41% | 38% | 37% | 37% |
| Research & Development | 43% | 29% | 33% | 24% | 29% |
| General & Administrative | 31% | 25% | 23% | 17% | 22% |
| Total | 115% | 94% | 93% | 78% | 88% |
Source: 2025 Survey, p. 40 (medians, % of revenue)
Growth rate cuts the same 2024 operating expense differently than company size does.
View data table
| cohort | Total OpEx (% of revenue) |
|---|---|
| <10% growth | 85 |
| 10-20% | 79 |
| 20-30% | 100 |
| >30% | 128 |
Source: 2025 Survey, p. 40 (2024 total OpEx by growth cohort, % of revenue)
The fastest growers spend more than their entire revenue on operating expense: 128% of revenue for companies growing above 30%. Efficiency peaks in the middle of the growth distribution and deteriorates toward both ends, but the steep end is the growth end. This is the same trade the aggregate reset described, read the other way: the industry lowered its OpEx ratio partly by slowing down, and the companies still growing fast are the ones still spending well past breakeven to do it.
Reading the Efficiency Trade
Pair the total-OpEx line with Growth and New-ARR Composition and the causal reading is hard to miss: the industry cut S&M by a third, and median growth fell from 31% to 15% over the same window. EBITDA improved from a catastrophic −47% to −12%, so the cuts improved the margin. They didn’t restore growth: only 5% of companies met the Rule of 40 in 2024. The efficiency trade turned a growth problem into a slightly smaller profitability problem. Inference
The EBITDA quartile rows record where the cost reset actually happened: the 25th-percentile margin improved from −120% to −38% in two years, an 82-point swing at the bottom of the distribution, against 10 points at the top. The deepest burners either restructured or exited the sample, and the survey can’t separate the two. Either way, a quarter of private SaaS no longer burns more than its entire revenue. Inference
This section underwrites The OpEx Squeeze primarily, with supporting evidence for The CAC Trap.
Frequently asked questions
How much did SaaS companies cut operating expenses by 2024?
Median total operating expense fell from 118% of revenue in 2022 to 88% in 2024, a thirty-point reduction in two years. Sales and marketing was both the largest expense line and the deepest cut, falling from 54% to 37% of revenue.
Did the SaaS cost cuts actually improve company health?
Only partially. EBITDA margin improved from negative 47% to negative 12% between 2022 and 2024, but just 5% of companies met the Rule of 40 in 2024, down from 11% in 2022. The cuts bought survival, not excellence.
How does SaaS operating expense vary by company size?
Sub-$10M companies spent 115% of revenue on operating expense in 2024 while the over-$50M cohort ran at 78%, a 37-point spread driven mostly by R&D (43% vs. 24%) and G&A (31% vs. 17%) rather than sales and marketing (41% vs. 37%).
Why did SaaS operating expense cuts fail to fix growth?
The industry cut its growth engine's fuel line by roughly a third, and median organic growth fell from 31% to 15% over the same window. EBITDA improved to negative 12%, but the cuts converted a growth problem into a smaller profitability problem, not genuine excellence.
Last reviewed: July 2026