U.S. companies are discussing cost control in earnings calls at a record pace, as they look to reallocate funds and invest in new technologies such as artificial intelligence (AI). An analysis by Morgan Stanley strategists found that mentions of “operational efficiency” are at their highest this earnings season, reflecting companies’ focus on spending discipline while also investing in technologies that can drive future productivity.
The overlap between industries most frequently discussing operational efficiency and those discussing AI is notable. Software, professional services, healthcare services, and financial services are among the groups leading the discussion on both fronts.
Notable S&P 500 companies touting operational efficiency in their earnings reports include Pfizer Inc., BlackRock Inc., and Lam Research Corp. This increasing focus on cost control comes as companies position themselves to protect margins amid hopes for an economic soft landing.
Expense management has been a key issue this season, with several companies implementing cost-cutting measures to boost profits. Walt Disney Co., Hertz Global Holdings Inc., and Levi Strauss & Co. have all announced plans to cut costs through various initiatives.
However, some companies are reallocating these funds to grow their businesses. Estée Lauder Cos. is cutting jobs as part of a renewal plan that will allow it to respond more quickly to new beauty trends and invest more in its brands. Meta Platforms Inc. is spending aggressively on advances in artificial intelligence, while Amazon.com Inc. is being cautious about new investments.
On the AI front, all eyes will be on Nvidia Corp., which is expected to report later this month. Arm Holdings Plc has already seen soaring success from spending on artificial intelligence technology, and Palantir Technologies Inc.’s AI offerings have also seen high demand.
Analysts estimate that Nvidia’s earnings per share will rise 602% in the fiscal quarter ending Jan. 31 from a year ago due to its strong position within the AI trend. Morgan Stanley analysts have included Nvidia among a screen of high-quality growth stocks with overweight ratings from the bank.
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In a similar vein to these insights into U.S. company strategies, today’s top stories feature discussions about Facebook’s future prospects under CEO Mark Zuckerberg’s leadership and Elon Musk’s purchase of Twitter facing legal challenges from the US SEC.
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