Good morning. Companies are spending more on AI, and employees overwhelmingly say the technology makes them more productive. So far, those gains aren’t translating into operating profit for most companies.
Nearly nine in 10 respondents say their organizations regularly use AI for at least one business function, and 44% say they are scaling it enterprise-wide, according to a McKinsey survey of 1,719 professionals and business leaders globally. Eighty percent say AI has improved their individual productivity, and half say it helps them make better decisions.
But just 37% say AI is having a meaningful impact on earnings before interest and taxes (EBIT), unchanged from a year ago.
AI is also taking up a larger share of corporate budgets. Twenty-eight percent of respondents say AI now accounts for more than 10% of their IT budget, and 60% expect to increase AI investment next year. Twenty percent say AI-related operating costs, including token costs, are already constraining their use of the technology.
The companies reporting the largest financial gains offer one clue about where that spending pays off.
What McKinsey calls “AI high performers,” the 6% of organizations that attribute at least 5% of EBIT to AI, are far more likely to redesign workflows rather than add AI to existing processes. Nearly three-quarters have fundamentally redesigned workflows, up from 55% last year.
Company size also shows up in the results. Fifty-four percent of organizations with more than $1 billion in revenue report scaling AI enterprise-wide, compared with a third of smaller firms. Among large companies, the share scaling AI agents in at least one function rose from 27% to 40% in a year, while the share among smaller companies remained at 22%.
For finance chiefs weighing another year of higher AI spending, McKinsey’s findings suggest that increasing the investment is the easy part. The next AI budget may be as much a workflow budget as a technology budget.
Sheryl Estrada
Sheryl.Estrada@fortune.com
Leaderboard
Kevin Messerle was appointed CFO of Atom Computing, a quantum computing company. Messerle brings over 20 years of financial leadership experience. Most recently, he served as CFO of York Space Systems, Inc. In his tenure, he played a key role in preparing the company for its public market debut on the New York Stock Exchange and supported the acquisition and integration of six companies.
Takaaki “Tad” Tanaka was appointed SVP of finance and accounting and CFO of Canon U.S.A., Inc., a digital imaging provider. A 31-year Canon veteran, Tanaka brings extensive financial expertise gained across key global offices, including past leadership roles at Canon Virginia, Canon U.S.A., and Canon Europe. Since 2023, he has served as general manager of Canon Inc.’s finance division.
Big Deal
E*TRADE from Morgan Stanley clients were net buyers in five of 11 S&P 500 sectors in August. Similar to a few other recent months, they appeared to be selling strength and buying weakness in some of the sectors that rallied and sold off the most, according to Chris Larkin, managing director of trading and investing. But there was also an indication that they may have rotated into some defensive areas of the market ahead of potential seasonal volatility.
The three sectors with the most net-buying activity in August were utilities (+11.43%), consumer staples (+8.10%), and real estate (+7.23%). The sectors with the most net-selling activity were energy (-5%), materials (-4.67%), and financials (-4.02%). Energy was the S&P 500’s strongest sector in August, and clients appeared to be selling some of the oil-related stocks that got another boost late in the month as oil prices increased, Larkin noted.
Going deeper
“Why bond yields are warning Washington” is the topic of the latest episode of Wharton’s This Week in Business podcast. Jeremy Siegel, Wharton emeritus professor of finance and senior economist at WisdomTree, discusses tariffs, rising bond yields, federal deficits, AI investments, and what could drive markets through the fall.
Overheard
“Target’s annual meeting results should send a clear message to the board that investors are hungry for fresh leadership to help the company regain lost ground.”
—Tejal Patel, executive director of SOC Investment Group, argues in a Fortune opinion piece that Target’s missteps have alienated consumers and shaken investors.
