Wall Street looks for AI to extend beyond tech
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Second-quarter earnings season could be a "show me" moment for artificial intelligence, as companies outside of the large-cap technology sector tout their adoption of AI as a profit margin expansion tool for the first time.
Why it matters: The margin risk presented by tariffs may have accelerated AI adoption last quarter, according to a midyear outlook from ETF company Global X, which could lead to greater margin expansion this earnings season.
Catch up quick: We're not even a week into the second-quarter earnings season and we're already seeing businesses using AI to maximize profits.
- Delta is "optimizing revenue" through a partnership with Fetcherr, according to its earnings call earlier this month.
- Fetcherr allows the airline to leverage "AI-enhanced pricing solutions." That's earnings speak for personalized pricing.
- Netflix also received praise from Wall Street, including Morgan Stanley, for its AI-powered streaming content tools.
What they're saying: "Companies that have a clearly defined AI strategy will continue to move higher while those that have struggled to show their relevance in the space will continue to disappoint," wrote Michael Landsberg, chief investment officer of Landsberg Bennett Private Wealth Management, with $1 billion in assets under management.
- Notice Landsberg didn't specify tech companies. He's saying companies overall may need to prove out their AI strategy sooner rather than later.
Between the lines: Analysts still expect AI to power additional gains for adjacent industries.
- Dan Ives, managing director at Wedbush, called out software, semiconductors, robotics and cybersecurity as some of the tech beneficiaries in a research note.
- "After a relatively strong few months navigating tariff and geopolitical storms, now tech stocks are poised to see another major move higher in the second half of 2025 led by the tech winners," he wrote.
The bottom line: AI is "providing a whole new tool kit for companies to automate," Savita Subramanian, equity and quant strategist at Bank of America, told Axios.
- Companies that show automation as a profit margin expansion tool will be rewarded this earnings cycle.
