AI Margin Gains Are at Last Appearing in Corporate Earnings

Shareholders who had worried that heavy corporate spending on artificial intelligence was not paying off are beginning to see evidence that it is. More companies are adopting AI to improve profitability, which is relieving fears that heavy investment in the tech is not showing up in bottom-line results.

Several firms in the S&P 500, many from non-tech industries, have posted margin gains linked to AI, pushing the typical lift to 1.5 percentage points. This is a central insight from the latest earnings period, which has wrapped up for nearly nine-tenths of the benchmark's members. Twenty-five companies in the index have quantified AI's impact, saying the technology will generate 180 basis points of margin expansion on average, according to 22V Research LLC. If you exclude firms that combine AI with other efficiency measures, the typical margin bump from AI remains 150 basis points.

The beneficiaries extend far beyond big tech, as waste haulers, HVAC makers, and insurance brokers also appear on the roster. Scaling such an improvement across the entire index suggests the S&P 500 is undervalued by at least 10%, said Dennis DeBusschere, the firm's president and chief market strategist.

"Direction matters more than precision in these early estimates, and the direction is toward more AI users reporting better margin improvement," DeBusschere said.

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Margins Keep Rising

More and more S&P 500 firms are detailing precisely how AI is lifting profitability, with the gains becoming more pronounced. During Q1, just 17 index constituents reported margin gains from AI, averaging a mere 20 basis points.

For example, Waste Management Inc. reports that its Smart Truck system is delivering over $300 million in yearly EBITDA thanks to enhanced customer service, better route optimization, and reduced expenses. "We are also continuing to innovate for the future through AI-enabled tools, autonomous long-haul vehicles, and remote-operated heavy equipment, all of which we expect to support higher revenue capture, lower operating costs, and sustain margin expansion over time," said President John Morris during the firm's earnings call.

Equifax CEO Mark Begor mentioned during a July earnings call that AI-related cost savings and efficiency gains are beginning to appear in 2026. Logistics firm CH Robinson Worldwide Inc. credits AI for a 60% productivity improvement since 2022.

Many other businesses have reported comparable improvements. Fortinet Inc. announced that its operating margin for Q2 increased by 490 basis points. Meanwhile, Willis Towers Watson Plc expects $400 million in cost cuts, "thanks mostly to process automation," the company said.

Why It Matters

These disclosures are an important shift because investors have been skeptical about whether AI's benefits would ever justify its costs. That skepticism has been especially intense for a few big technology companies whose heavy spending had drawn shareholder doubt. The latest data suggests the payoff may be arriving faster than many expected.

Investors have been giving higher stock valuations to companies that demonstrate concrete margin gains.

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