Operating expenses climb at rated US nonfinancial companies in Q2

Combined operating expenses for nonfinancial US companies rated by S&P Global Ratings rose in the second quarter, resuming a cyclical increase that may peak by the end of the year.

Total operating expenses among rated nonfinancial companies ticked up to $3.781 trillion in the second quarter from $3.666 trillion a quarter earlier, according to S&P Global Market Intelligence data. The quarterly result was the second highest in recent history behind the $3.821 trillion in cumulative operating expenses logged in the fourth quarter of 2024.

Operating expenses include employee pay, rent of facilities, equipment, supplies and other noncapital expenditures. Costs typically rise throughout the year, peaking in the fourth quarter before coming back down in the first quarter. Still, companies are facing higher prices at the producer level, signaling continued concerns about the impacts of tariffs and inflation above the US Federal Reserve's target.

At investment-grade companies, that is, those rated BBB- and higher by Ratings, operating expenses climbed $77.82 billion to $3.182 trillion. Lower-rated nonfinancial companies, meanwhile, reported a combined $36.94 billion rise in operating expenses during the quarter to $598.58 billion.

Among the investment-grade companies, consumer discretionary and healthcare reported the largest increases in combined operating expenses at $41.26 billion and $43.83 billion, respectively. Among non-investment-grade companies, communication services and industrials posted the biggest gains at $13.19 billion and $11.24 billion, respectively.

Ratios

While total operating expenses rose quarter over quarter, so too did the efficiency of companies to realize greater revenue from those costs. The ratio of operating expenses to total revenue for the median investment-grade US nonfinancial company dipped to 82.22% from 82.91% in the first quarter.

Among investment-grade sectors, median ratios fell in all sectors except information technology, consumer staples and utilities. Energy companies reported the largest drop in the median ratio of operating expenses to total revenue, falling 3.8 percentage points to 81.94%.

Non-investment-grade companies, meanwhile, saw their median ratio improve to 90.51% from 92.08% in the first quarter. Consumer staples companies reported the only rise in median ratio among non-investment-grade sectors.