DEEP RESEARCH · PALANTIR
Palantir 4Q24 SG&A Increase Check
A review of whether the SG&A jump was structural cost growth or one-off stock-based compensation
0. Bottom line first
The reason I did not buy Palantir immediately after the 4Q24 earnings release was the sudden increase in SG&A. Management explained it as one-off expenses and stock-based compensation, but I wanted to see another quarter. The drawdown was large enough that I added a little, but the next report needs to show whether operating leverage is still intact.
1. Quarter-over-quarter SG&A movement
| Line item | 3Q24 | 4Q24 | Main cause |
|---|---|---|---|
| Sales & Marketing | About $209.47 million | $288.29 million | Salesforce stock-based compensation tied to SAR achievement |
| General & Admin | About $138.71 million | $182.15 million | Stock-based compensation for executives and headquarters staff plus SAR-related taxes |
Official fact: The CFO said adjusted operating expenses in the fourth quarter rose only 1% quarter over quarter. The fourth-quarter adjusted operating margin was presented as a record-high 45%.
Interpretation: The raw SG&A number looks like a spike, but the adjusted explanation says core operating expense growth was limited. The question is whether that explanation holds in the next quarter.
2. Management comments and 2025 outlook
Official fact: Management guided for GAAP operating income and net income in every quarter of 2025 and said R&D expense would be kept around 6-7% of revenue.
Interpretation: The company is not saying it will stop investing for growth. It is saying it will support growth while restraining cost growth. If SG&A and R&D stay below revenue growth, expectations for a 39-40% adjusted operating margin can remain intact.
One-off expense
If SAR-related stock compensation and taxes were the main issue, the expense ratio can normalize next quarter.
Growth with control
Watch R&D at 6-7%, quarterly GAAP profitability, and adjusted operating margins in the high 30s to around 40%.
Leverage slowdown
If the cost increase repeats, the operating leverage may not be as strong as expected.
3. Related prior memo
The original post links to the prior memo [Palantir] Can it continue quarterly earnings surprises?. This post is a follow-up review of the cost structure after that thesis.
Sources
- Original Naver Blog post: https://m.blog.naver.com/PostView.naver?blogId=star_of_self&logNo=223825563764
- Related prior post: https://m.blog.naver.com/star_of_self/223729513811