The adoption of artificial intelligence tools by US corporations is beginning to show tangible returns, offering reassurance to investors who had been skeptical about massive AI spending concentrated among a few technology giants. This is a key takeaway from the second-quarter earnings season, where nearly 90% of S&P 500 index constituents have reported results. According to an analysis by 22V Research LLC, roughly 25 component companies explicitly quantified AI's impact on their profit margins — on average, AI technology contributed 180 basis points of margin expansion. Excluding firms that conflated AI with other productivity improvements, the average margin boost from AI stood at 150 basis points.
AI dividends no longer exclusive to tech giants
Notably, the beneficiaries are no longer limited to the tech sector — waste management firms, heating system manufacturers, and insurance brokers are also reaping the rewards. Dennis DeBusschere, President and Chief Market Strategist at 22V Research, stated that extrapolating this margin improvement across the entire index suggests at least a 10% upside potential for the fair value of the S&P 500. "In these early estimates, direction matters more than precision, and the direction points to a growing number of AI users reporting more significant margin improvements," DeBusschere noted. A rising number of S&P 500 companies are detailing how AI tools are boosting margins, with improvements expanding consistently. In the first quarter, only 17 companies discussed AI's impact on margins, with an average improvement of just 20 basis points.
Case study: Smart garbage trucks deliver results
Waste Management Inc. (WAST.US) reported that its "Smart Truck" platform, which enhances service upgrades, optimizes routes, and lowers operational costs, has already contributed over $300 million in annualized EBITDA. Company President John Morris stated on the earnings call: "We are also innovating further with AI tools, autonomous long-haul vehicles, and remote operation of heavy equipment, which we expect will support higher revenue capture, lower operating costs, and sustained margin expansion." Additionally, credit bureau Equifax Inc. (EFX.US) CEO Mark Begor said during a July call that AI-related cost savings and productivity benefits are already materializing in 2026. Logistics firm C.H. Robinson Worldwide Inc. (CHRW.US) noted that AI has driven a 60% productivity increase since 2022.
More industries join the AI wave
Dozens of companies have reported similar progress. Cybersecurity firm Fortinet Inc. (FTNT.US) saw its second-quarter operating margin rise by 490 basis points. Insurance brokerage giant Willis Towers Watson Plc (WTW.US) indicated it would achieve $400 million in cost savings, driven primarily by "process automation." On the stock level, investors are rewarding companies with quantifiable margin improvements. 22V Research pointed out that Johnson Controls International Plc, which expects margin expansion of 260 basis points, has seen its shares rise 11% since its July 29 earnings release.
Easing concerns over the AI 'circular trade'
This development has somewhat alleviated worries that massive AI spending is not translating into corporate profit margin growth. Previously, concerns about a "circular trade" — where chip giants like NVIDIA (NVDA.US) invest in customers and projects, then encourage those customers to buy their chips, creating a self-reinforcing revenue loop — further fueled market anxiety. Michael O'Rourke, Chief Market Strategist at JonesTrading Institutional Services, commented: "You are starting to see beneficiaries of AI who are able to seize this opportunity to drive productivity and profit margin improvements." In his view, the growing number of non-tech companies leveraging AI for margin gains helps explain the strong performance of the small-cap Russell 2000 index and the equal-weight S&P 500 this year — the latter gives equal weight to companies like Nucor Steel (NUE.US) and NVIDIA.
Growing management confidence, few dissenters
Even without quantifying AI's specific contribution to margins, an increasing number of S&P 500 firms still expect general improvements from AI. According to the data, 43 S&P 500 company executives have explicitly stated during this earnings season that AI is contributing to margins, while about 85 executives said AI is providing some support for margin growth. Only three S&P 500 companies expressed opposing views. Looking ahead, the key question is whether a broader range of companies can demonstrate AI's impact on their margins. Chris Senyek, Chief Investment Strategist at Wolfe Research, noted that the rising weight of the technology and communication services sectors, along with AI beneficiary companies, has been a significant driver of S&P 500 margin expansion. "The compounding effect of strong fundamentals (aided by AI) has pushed margins higher," Senyek wrote in an August 5 research report. He expects "margins to continue expanding through the remainder of the year as the US economy remains robust."
Comments