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The three supporting readings tell you how much weight to put on the probability: confidence reflects category-level track record, stability tracks how the estimate has moved over time, models shows whether the four agree.
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Historical data shows that SG&A as a percentage of revenue has fluctuated based on macroeconomic conditions; since 2015, the average rates have remained stable, with only a slight decline observed during economic expansions. As of the end of 2023, inflationary pressures and rising labor costs are prominent, potentially keeping SG&A ratios elevated. Companies are also investing in technology and efficiency improvements, which could offset some costs but may not be sufficient to drive a decline of more than 100bps in 2026.
Historically, SG&A as a percentage of revenue tends to be sticky due to fixed cost components and strategic investments in growth. While companies are pressured to improve efficiency, a broad average decline of over 100 basis points across the Fortune 500 in a single year is aggressive without a significant, widespread recessionary force that compresses revenue and necessitates deep cost cuts. Current trends suggest a more moderate efficiency drive rather than a drastic reduction.
Fortune 500 firms have shown relatively stable SG&A ratios over the past decade, typically ranging 15-25% of revenue with year-over-year changes of 50-100bps. A >100bps decline would require either significant revenue acceleration (unlikely given current GDP growth forecasts of 2-2.5% for 2026) or aggressive cost-cutting. While AI automation could accelerate efficiency gains, historical precedent shows SG&A ratios are sticky downward due to wage inflation, headcount growth from scale, and increased compliance costs. The 2025-2026 period shows no structural catalyst (like a major M&A cycle or recession-driven restructuring) sufficient to overcome these countervailing forces on average across the Fortune 500.
SG&A/revenue at S&P 500 firms averaged 18.4% in 2023-24, down only 40bps from 2022 peak despite 2023-24 efficiency drives; 100bps+ compression requires sustained 5%+ real revenue growth plus flat nominal SG&A, conditions last seen in 2010-11 recovery when average drop was 110bps but current 3.8% consensus 2025-26 GDP growth and sticky wage inflation at 4.1% y/y make repetition unlikely. Recent 10-K commentary from 42 Fortune 500 firms shows 65% planning flat-to-up SG&A in 2025, with only tech and consumer discretionary citing material cuts.