Companies that have been at the heart of recent anxiety over artificial intelligence-driven disruption are, for the most part, still delivering solid earnings, according to analysts at Goldman Sachs.
Over the past three months, software shares have dropped by double-digit percentages as investors reacted nervously to the rollout of advanced AI models capable of replicating services traditionally offered by these firms. The weakness has not been confined to software, with selling pressure spreading across multiple sectors amid broader concerns about how AI could reshape industries from data analytics to logistics.
Despite that backdrop, many of the affected companies reported robust fourth-quarter results. Analysts at Goldman Sachs, including Ben Snider and Ryan Hammond, noted in a client report that several firms also benefited from upward revisions to their full-year earnings-per-share forecasts, supported by healthy revenue growth and widening profit margins.
Corporate results were further bolstered by macroeconomic tailwinds. A softer U.S. dollar and steady economic expansion contributed to a 7% year-over-year increase in fourth-quarter revenues among companies in the S&P 500.
Still, “regardless of this near-term strength, investors continue to debate the risk of long-term earnings disruption from AI,” the analysts wrote.
At the same time, escalating capital expenditure plans tied to AI have intensified scrutiny over when those investments will translate into dependable returns. Major technology players such as Meta and Microsoft are ramping up spending, and Goldman estimates now suggest U.S. hyperscalers will collectively invest $660 billion in 2026. That projection is 22%, or $120 billion, higher than estimates at the beginning of the current earnings season just weeks ago.
As capital outlays have climbed, shareholder returns via buybacks have weakened. Repurchases by S&P 500 companies declined 7% year over year in the fourth quarter, marking a third consecutive quarter of flat-to-lower activity.
“We expect the increasing scarcity of free cash flows and buybacks will strengthen the premium for companies focused on returning cash flows to shareholders,” the analysts said.