Markets
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Luke Kawa

Will Corporate America’s AI adoption justify the massive capital spending?

We don’t seem to live in a world where AI capex for capex’s sake is rewarded by investors anymore. Investors likely need to see increasing downstream adoption — that is, AI being used more and more in the field.

One problem with this is that surveys on Corporate America’s utilization of AI are all over the map; I’ve seen some in the low double digits and others in the neighborhood of 60% or more.

AI capex is both offensive — a bid to create new revenue streams and enable products that don’t exist — but also defensive, made by tech behemoths trying to ensure their existing dominant positions don’t get swept away by the tide of this new technology.

In many cases, Fortune 500 companies that want to implement — or, at least, dip their toe in the AI waters — don’t have a preestablished strategy or plan of action to do so. They need outside help for that.

Some good proxies for Corporate America’s willingness to spend on AI, therefore, can be found through consulting giant Accenture’s new bookings as well as IBM’s generative-AI book of business.

Accenture is in the business of helping companies “reinvent” themselves, a process that the consulting giant itself has had to undergo in light of how the industry has been rattled by the emergence of AI. And to do that, it’s turned to… AI, overhauling its work force, striking partnerships with OpenAI, Anthropic, Snowflake, and Palantir, and also buying a majority stake in DLB Associates, an AI data center engineering and consulting firm.

“We are expanding in these partnerships because of what we see in client demand,” CEO Julie Sweet said during Accenture’s December 18 earnings call. “We really try to be number one with all of the partners so that we can help our clients integrate and use these new technologies with their existing ecosystem, which is absolutely critical to them.”

Annoyingly, Accenture has decided that it won’t be breaking out AI-specific financial performance going forward, but that’s also a signal of how much management thinks this is integral to its overall growth.

And for IBM, AI-related consulting feeds through to other parts of its business, as its AI book of business also includes associated software revenues.

“Definitely the AI piece is a strong contributor to the software growth and I believe it’s a big piece of why consulting is beginning to return to growth, because we called the play to move toward AI almost two years ago,” IBM CEO Arvind Krishna said on the company’s most recent earnings call.

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Helena Cheng

Lululemon’s stretch getting tested: Stock plunges after after outlook is cut

Lululemon shares are down double digits in premarket trading after the company cut its full-year sales and profit outlook, overshadowing a Q1 beat and raising fresh concerns about the brand’s turnaround efforts.

The company now expects fiscal 2026 revenue to be flat to down 1%, compared with its prior forecast for 2% to 4% growth. Guidance for full-year diluted earnings per share was dragged down to a range of $10.95 to $11.15, below the company’s previous guidance of $12.10 to $12.30 and well below Wall Street’s estimate of $13.26.

Key numbers for Q1:

  • EPS of $1.69 vs. the $1.68 expected.

  • Revenue of $2.47 billion vs. the $2.43 billion expected.

The modest top-line beat masked a widening divergence between Lululemon’s geographic markets. While international revenue rose 22% overall with a 30% increase in Mainland China, the bigger problem remains North America, where revenue fell 5%.

Interim co-CEO and CFO Meghan Frank acknowledged during the earnings call that recent product rollouts underperformed. A highly anticipated yoga campaign failed to generate its expected “halo effect” across broader product lines.

Profitability metrics took a major hit, with gross margins contracting by 410 basis points to 54.2% due to mounting tariff costs and promotional markdowns. Operating income consequently fell 37% year over year to $276.9 million.

“We experienced spikes of negative commentary in the media and on social channels with regard to our brand, which had an impact on traffic and overall top-line performance,” Frank said during the earnings call. “And second, not all of our product launches have met our expectations. While we have had several successful launches so far this year, we have seen others as we start Q2 not generate the anticipated guest response.”

Lululemon’s valuation has already been steadily compressing for years. While it was once one of retail’s richly valued stocks, investors have been questioning whether the company can return to the double-digit growth era.

The results also arrive during a leadership transition. Lululemon announced back in April that former Nike executive Heidi O’Neill is set to take over as CEO in September, with investors looking to her to revive growth in North America and restore the brand’s growth.

As Lululemon faces both macroeconomic pressure and brand-specific challenges, its stock has dropped around 40% year to date.

markets
Paige Oamek

US job growth skyrocketed in May, blasting past expectations

The US economy added 172,000 jobs in the month of May, the Bureau of Labor Statistics reported Friday, sending 10-year Treasury yields higher.

The strong May job market surprised economists. Experts had predicted only 85,000 new jobs — just half the reported number. The unemployment rate held steady at 4.3%, as expected.

The job growth story is a hopeful spot for the economy as consumers continue to feel inflationary pressure from the Iran war.

Job gains were buoyed by the leisure and hospitality sector, which added 70,000 jobs, as well as local government, healthcare, and education.

Both the March and April jobs reports were revised upward, making them collectively 93,000 higher than previously reported.

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