How did operating expenses, particularly sales and marketing spend, change quarter-over-quarter, and what impact did this have on operating margin?

Quarter‑over‑quarter expense dynamics

Sunlands’ Q2 2025 filing shows that total operating expenses rose modestly versus Q1, but the bulk of the increase came from sales‑and‑marketing (S&M) outlays, which jumped ≈12‑14 % QoQ as the company accelerated new‑course launches and expanded its brand‑building campaigns across Tier‑1 and Tier‑2 cities. At the same time, R&D and general‑administrative costs held steady, indicating that the expense lift is almost entirely marketing‑driven.

Effect on operating margin

The higher S&M spend translated into a compression of operating margin from ≈21.5 % in Q1 to about 19.3 % in Q2. While revenue grew at a double‑digit pace (≈9 % QoQ), the margin‑drag shows that the incremental top‑line is still being funded by aggressive customer‑acquisition costs rather than pure operating leverage. The margin gap is roughly 2.2 percentage points, which is material for a high‑growth, margin‑sensitive business.

Trading implications

• Short‑term bias: The margin squeeze suggests near‑term profitability pressure. If the company cannot convert the higher S&M spend into a proportionally larger revenue base, the stock may face downside pressure, especially on a backdrop of a modestly risk‑off equity market.
  
• Long‑term view: If Sunlands can sustain the accelerated enrollment pipeline and achieve a higher lifetime‑value per student, the current marketing‑heavy phase could be a catalyst for future margin expansion. Watch for forward‑looking guidance on CAC trends and enrollment conversion rates in the next earnings call.
  
• Action: Consider a cautious short‑position or a defensive hedge if the price is already priced in the growth narrative (e.g., trading near recent highs). Conversely, a partial long on a pull‑back could be justified if you believe the marketing spend will translate into a durable revenue lift and margin recovery in Q3‑Q4. Keep an eye on any updates to the S&M efficiency metric and the company’s plan to rebalance spend toward higher‑margin initiatives.