Palantir Technologies just achieved a milestone that would have seemed outlandish even for its boldest promoters a year ago: a first-ever billion-dollar quarter, propelled by a runaway boom in artificial intelligence that is now fundamentally transforming how the company operates—and how many employees it believes it needs.

The software and data analytics giant reported $1 billion in revenue for its most recent quarter, up 48% year-over-year, as it dramatically outpaced Wall Street estimates and posted surges in both commercial and government contracts. U.S. revenue alone jumped 68% to $733 million, with domestic commercial sales skyrocketing 93%. Profit, too, soared by 33% to $327 million, and Palantir raised its outlook for the year, projecting full-year revenues of $4.14 billion–$4.15 billion.

The company’s “rule of 40” score—a key measure of growth plus profit margin—hit a near-unprecedented 94%, “once again obliterating the metric,” according to Karp. Palantir’s executives made it clear there is one main source for these new levels of productivity: artificial intelligence, blended into every layer of its business and rapidly automating tasks that once required armies of highly paid coders and IT staff.

CEO Alex Karp was notably exuberant in both the earnings call and his shareholder letter. “This was a phenomenal quarter,” he wrote in the earnings release. “We continue to see the astonishing impact of AI leverage.”

In a statement provided to Fortune, Karp warned that “America is in the lead in government and commercial, but we could lose the lead. We must have an all-of country, all-in effort to keep America first or we will lose.” He urged the U.S. to double down on its current incumbent status as a beacon for the emerging technology. “It’s not a given that we win just because we’re ahead. In fact, being so far ahead is often a danger zone.”

In a subsequent appearance on CNBC, Karp said, “We’re planning to grow our revenue … while decreasing our number of people,” and described what AI is enabling his company to do. “This is a crazy, efficient revolution. The goal is to get 10x revenue and have 3,600 people. We have now 4,100.” Karp also laid out the company’s goals on the earnings call with analysts, explaining that it won’t conduct mass layoffs, but will freeze hiring and rely on AI to multiply every employee’s productivity. This has already been under way: in March, the company cut its IT workforce from 200 to fewer than 80 full-time employees.

Earnings call victory lap

Karp and other Palantir executives celebrated their astonishing quarter on the analyst call, saying that Palantir’s bespoke models are core to maximizing the impact large language models. “LLMs simply don’t work in the real world without Palantir,” Chief Revenue Officer Ryan Taylor said. “This is the reality fueling our growth.” 

Taylor discussed how Palantir is thriving where other firms are not seeing the return on investment yet from AI. “LLMs, on their own, are at best a jagged intelligence divorced from even basic understanding,” Taylor said in remarks reported by Business Insider. “In one moment, they may appear to outperform humans in some problem-solving task, but in the next, they make catastrophic errors no human would ever make.”

Chief Technology Officer Shyam Sankar said that “twenty years of grinding has built a unique moat and a massive lead.” He also claimed that “AI is giving the American worker superpowers,” citing advances seen at the AI race summit in DC from examples including an ICU nurse, a factory worker, a hospital administrator, and an electric vehicle battery maintenance technician.

Karp was so bullish on Palantir’s particular employment of AI technology that he issued a challenge to higher education and elite institutions like the Ivy League. All the previous credentials for success are worthless, he suggested. “If you did not go to school, or you went to a school that’s not that great, or you went to Harvard or Princeton or Yale, once you come to Palantir, you’re a Palantirian — no one cares about the other stuff,” Karp said. He added that the environment at Palantir is different from what most workers have experienced: “Most of them come from university, where they’ve just been engaged in platitudes.”

Karp told CNBC that he wants to engage with unions as reindustralization will require AI, arguing that blue-collar workers’ salaries should go up as a result. “This is an America story,” he said. Another statement from Karp: “Just tell the haters: read ’em and weep.”

“Palantir is clearly benefiting from AI industry momentum across its government and commercial customer bases,” noted William Blair analysts. Meanwhile Bank of America Research reiterated its buy rating, saying it expects growth to continue as Palantir “remains the best in class for deploying and operationalizing AI into enterprises.”

[This article has been updated with a statement provided to Fortune by Palantir CEO Alex Karp.]

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

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President Donald Trump announced Tuesday that Treasury Secretary Scott Bessent will no longer be considered for the role of Federal Reserve chair, clarifying a key point of intrigue as the White House narrows the search for a successor to Jerome Powell. Trump’s decision, revealed during a CNBC interview, comes after weeks of speculation about Bessent’s possible appointment and spotlights the shifting dynamics in the Trump administration’s approach to the nation’s central bank.

“Well, I love Scott, but he wants to stay where he is,” Trump said. “I asked him just last night, ‘Is this something you want?’ He replied, ‘Nope, I want to stay where I am.’ Trump said he was taking Bessent off the list of potential Powell successors.

Trump’s announcement seems to finally end mounting rumors that Bessent might slide into the Fed’s top job. Bessent, who made his name as a hedge-fund chief before joining the Treasury, has become one of the most visible defenders of Trump’s economic and trade policies—earning a reputation for vocal support and public criticism of the Fed’s reluctance to cut interest rates in line with Trump’s repeated demands.

Mounting criticism of Powell from the Trump White House

The Federal Reserve chairmanship, currently held by Jerome Powell, will become vacant when his term expires in May 2026. Trump has spent the past year openly criticizing Powell for what he views as slow progress on interest-rate reductions and costly overhaul projects at the Fed’s headquarters, often making ominous threats about firing Powell and undermining central bank independence. Amid criticism on this encroachment from prominent voices including JPMorgan CEO Jamie Dimon, Trump has relented and signaled that he does not intend to remove Powell before the end of his term.

Bessent, for his part, has repeatedly sought to tamp down speculation about his interest in the Fed job. In late June, he told CNBC he believes he has “the best job in Washington” and intends to stay put as long as the president sees fit. Still, Bessent has remained closely tied to the selection process and has made waves by calling for internal reviews at the Fed, while also being the first member of Trump’s cabinet to confirm an official process was underway to choose Powell’s successor.

Bessent’s criticism has differed from that of other Trump advisors, who have questioned Powell’s oversight of the $2.5 billion renovation project at central bank headquarters in Washington. Trump and his advisors have openly discussed the possibility of firing Powell “for cause,” with some officials suggesting that the headquarters renovation could provide legal justification. Trump himself visited the construction site with Powell, the two of them engaging in a bizarre argument on live TV, wearing hard hats and looking at construction plans.

As the vetting process accelerates, Trump’s rhetoric signals his intent to pivot toward a Fed chair who closely aligns with his priorities: lower interest rates, responsiveness to White House goals, and a more circumspect approach to the Fed’s non-monetary functions.

Talking to Bloomberg Intelligence in July, Bessent said, “There are a lot of good candidates inside and outside the Federal Reserve.” Kevin Hassett, director of the National Economic Council, has been floated as a potential Powell successor, as have Kevin Warsh, a former Fed governor and Wall Street veteran with close ties to the Trump administration; Michelle Bowman, the current Fed vice chair; and Christopher Waller, a sitting Fed governor.

For now, the vacancy remains a matter of speculation, but Bessent’s self-removal from contention lends some additional shape to the race. In his own words, Bessent says he will “go where the president thinks that I am best suited,” yet maintains his preference for the Treasury role. Trump is expected to announce his final selection for Powell’s replacement soon, ushering in a new phase for the nation’s monetary policy.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

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As the U.S. labor market shows clear signs of stalling, one of Wall Street’s leading strategists is sounding a sharp warning: With America’s workforce in a demographic crunch and historic changes in immigration policy under way, it is “quite possible that the next five years will see no growth in workers at all.”

The implications, according to David Kelly, Chief Global Strategist at JPMorgan Asset Management, are profound for the Federal Reserve and for investors—chief among them, the need for exceptional caution before lowering interest rates.

Kelly used his regular “Notes on the Week Ahead” research note to survey the implications—perhaps assess the damage—of Friday’s shocking jobs report, which revised downward job creation in May and June by 258,000 jobs. Furthermore, employers added just 73,000 jobs in July, well below the 110,000 consensus estimate. This left the average monthly increase for the past quarter at a paltry 35,000 jobs. The unemployment rate ticked up to 4.2% in July, as both employment numbers and labor force participation slipped further.

Kelly also highlighted signs of tightness in the labor market, namely the decline in the labor participation rate from 62.65% in July 2024 to 62.22% in July 2025. That translates to almost 1.2 million fewer people aged 16 and over who are working or actively looking for a job.

He attributed about half this decline to Americans aging into retirement, but noted the participation rate has also fallen among those aged 18 to 54.

Kelly commented on these signs of labor tightness as pivotal context for the wider question of the labor supply in the economy, with long-running trends implying that the Federal Reserve and embattled chair Jerome Powell will face major challenges fighting inflation going forward—meaning ever-slimmer chances of the all important rate cut the market wants so much.

The worker problem in the economy

The aging population and declining labor participation also speak to a deeper, structural challenge that will persist well into the future.

According to Census projections, he noted the working-age population will actually contract in coming years without immigration returning to previous levels.

Kelly highlights the Census prediction that the population aged 18 to 64 would actually fall by over 300,000 people in the year ending July 2026, and continue to fall at roughly that pace through 2030. He notes that the retirement wave and recent changes to major immigration programs are further sapping labor supply, reducing potential growth.

Fed’s dilemma: inflation, growth, and political pressure

This squeeze comes at a time when the Federal Reserve is under immense political pressure to lower interest rates, with President Trump and his allies calling for easier money to offset the effects of new tariffs and support flagging markets.

Yet Kelly argues the central bank must tread carefully, as cutting rates into a structurally tight labor market risks spurring wage and price inflation rather than accelerating economic growth.

He observed that U.S. economic growth has averaged 2.1% per year since the beginning of the 21st century, largely driven by a 0.8% annual increase in the workforce.

“Starting from a point of roughly full employment, given the continued retirement of the baby boom and considering the possibility that deportations and voluntary departures of immigrants entirely offset new immigration in the next few years, it is quite possible that the next five years will see no growth in workers at all,” he added.

If this happens, the economy will grow more slowly, Kelly predicted, “but will only be capable of growing more slowly without igniting higher inflation.”

For the Fed, the message is clear, he adds: Be extremely cautious about any rate cuts. For investors, it’s a warning to temper expectations for rapid economic gains or a sustained bull market driven by easy money. In other words, American “exceptionalism” isn’t a given, going forward.

Investors, Kelly said, “should no longer bet broadly on a strongly rising U.S. economic tide or lower interest rates.”

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

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In a candid and far-reaching discussion on Nikhil Kamath’s YouTube channel, legendary venture capitalist Vinod Khosla, one of Fortune‘s most powerful people in business, delivered some advice for Gen Z. It could be seen as a stark warning or as simple pragmatism: the single most important skill for young workers at this moment is not specialization, but the ability to learn rapidly and adapt continuously. His reasoning is simple yet profound: “ChatGPT can teach you any new areas,” rendering traditional academic paths and fixed skill sets increasingly obsolete. The title of the episode was more blunt: “College Degrees Are Becoming Useless.”

The Sun Microsystems co-founder, known for his contrarian views and unwavering certainty in technological possibilities, painted a future where artificial intelligence (AI) will fundamentally transform the job market. He asserted that “there isn’t a job where AI won’t be able to do 80% of 80% of all jobs” within the next three to five years. He explained that the vast majority of all job functions will be replicable by AI, hence the 80% of 80% estimate. It recalled Sam Altman’s claim that AI will make result in “intelligence too cheap to meter.”

Looking 10 to 15 years out, Khosla said, he believes “there’s no chance there’s a job that humans do that AI can’t do almost as well.” He allowed for some minor exceptions and said even heart or brain surgery an AI should theoretically be able to perform to a high level, although regulation may not allow it. This rapid pace of change, faster than the world has seen in the last 50 years, demands a radical shift in how young people approach their careers, he argued.

For a 22-year-old wondering where to focus their efforts, Khosla’s advice is clear: “you have to optimize your career for flexibility, not a single profession.” He emphasized that the value of learning lies not in mastering one specific trade like welding, finance, or even accounting, but in cultivating “the ability to learn” in its own right. He claimed that at 70 years old, he is learning at a much faster pace than ever before, and every young person should strive for this capability. This includes thinking from first principles and jumping into diverse fields, whether physics, biology, or finance, because AI tools will facilitate the rapid acquisition of new knowledge.

Khosla argued that even disciplines like computer science are valuable less for programming expertise (which AI increasingly handles) and more for the “process of thinking” and understanding systems and architectures they impart. The ultimate goal for a young individual, he suggests, is to choose a path where “your knowledge compounds and your capability compounds over time,” mirroring the principle of financial compounding in knowledge acquisition.

The quality of the entrepreneur

For aspiring entrepreneurs, Khosla advises a strategic focus, since he believes that anybody in any industry not using AI will be rendered obsolete by somebody who is using the tool. While AI may democratize technology, he said, success will hinge on the innate “quality of the entrepreneur” — their ability to think strategically, envision long-term goals, select the right teams, and wisely choose who to trust for advice. Khosla believes the current shortage is not of technology or capital, but of “great entrepreneurs who know how to make these choices.”

Beyond individual careers, Khosla and Kamath talked about the wider implications of AI on the economy. Khosla said it should drive down the cost of many things, acting as a deflationary force on many services, and he envisioned an AI-powered utopian future where services like education, medical expertise, and legal advice become “almost free.” He speculated that in 20 to 25 years, $10,000 might buy more goods and services than $50,000 does today, thanks to the deflationary impact of machines providing abundant services.

The career path open to Gen Z

Khosla is far from the only thought leader weighing in on the employment prospects for Gen Z in the age of AI. Anthropic CEO Dario Amodei and Nvidia CEO Jensen Huang have engaged in an ever-more-heated war of words over the former’s doomsday prediction that 50% of all white-collar jobs will be wiped out. Geoffrey Hinton, the so-called “godfather of AI,” has largely agreed with Amodei, saying that only the “very skilled” will remain employed. Huang and Federal Reserve chair Jerome Powell have largely agreed with Khosla, arguing that creativity and constant learning will create new jobs for the economy in a virtuous cycle.

Goldman Sachs chief economist Jan Hatzius has looked at the data and echoed Khosla’s argument that college degrees are losing value, finding that the “safety premium” of a college degree is disappearing. Berkeley economist Brad DeLong agrees that the college degree is losing its status, but casts the blame away from AI and toward the policy uncertainty plaguing the economy, arguing that many Gen Z college graduates are going unhired because conditions are just too risky for most companies. Goldman seems to agree with DeLong, finding in July that AI was overhyped as a reason for most corporate layoffs. Meanwhile, the Federal Reserve isn’t completely sold on the revolutionary prospects of AI, arguing that it may be a revolutionary invention like the electric dynamo, but may end up being a one-off boost to productivity, like the light bulb.

Gen Z, for its part, seems to be craving more human connection. Starbucks recently announced it would sunset its mobile-only locations, thought to be more appealing to Gen Z and a desire for “frictionless” experience, in favor of a renewed emphasis on hospitality and human-to-human connection. The generation has been weathering criticism of late that they lack in social skills necessary for success, with the stereotypical “Gen Z stare” at the center of the conversation. Careers site Glassdoor, for its part, has punctured the myth of “conscious unbossing” by Gen Zers, finding that they are becoming managers at exactly the same historical rate as any other generation, AI notwithstanding.

Ultimately, Khosla’s message for the next generation is one of relentless pursuit of learning and adaptability. In a world rapidly being reshaped by AI, the ability to continuously reinvent oneself and embrace new knowledge may be the ultimate differentiator for survival and success. The human capacity to learn new things, after all, is endless.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

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Standard Chartered CEO Bill Winters is standing out in the global banking sector by maintaining a flexible, hybrid work policy and resisting the rigid office mandates now sweeping through much of Wall Street. As peers from companies like JPMorgan and Goldman Sachs urge staff back to traditional office rhythms, Winters has doubled down on a philosophy of employee autonomy and trust, placing his bank in sharp contrast to its US and UK peers.

In a recent interview with Bloomberg Television, Winters was unequivocal: “We work with adults, and the adults can have an adult conversation with other adults and decide how they’re going to best manage their team.” He emphasized that the approach is “working for us,” adding, “How other companies make that work? Everybody’s got their own recipe.” For Standard Chartered, that recipe is rooted in flexibility, allowing teams and managers to agree on in-office schedules that fit their business needs and personal lives.

Winters, who himself follows a hybrid schedule and aims to be in the office four days a week, says his approach is about fostering responsibility. “Our MDs want to come to the office. They come to the office because they collaborate. They manage their people. They lead teams. But if they need the flexibility, they can get it from us,” he said. This hands-off stance has helped the bank retain talent, keep attrition low, and, according to Winters, maintain a productive workforce that manages to deliver results in a post-pandemic landscape.

Standard Chartered’s performance is thriving at the moment. In the second quarter of 2025, the bank reported a 48% jump in pre-tax profit—performance Winters points to as validation of the flexible model. On the second-quarter earnings call with analysts, Winters commented on the strong results, saying they are “testament to our ability to deliver exceptional services in support of our clients’ needs, and it is clear that our strategy is working.”

A bank unlike the others

The bank’s flexible policy stands in contrast to a growing wave of office mandates from industry rivals. JPMorgan, Goldman Sachs, and HSBC have all tightened office attendance requirements in the last year. JPMorgan CEO Jamie Dimon has criticized remote work for slowing decision-making and inhibiting innovation, recently directing most employees to return to the office full-time. Goldman Sachs CEO David Solomon has similarly dismissed remote work as “not a new normal” but an “aberration that we are going to correct as quickly as possible.” HSBC, too, recently directed its managing directors to return to the office at least four days a week.

Other banks, like Citi, remain more flexible but still require at least three days of in-office attendance, while offering hybrid employees set windows for remote work. The trend across many sectors, including tech and telecommunications, is toward stricter in-office requirements, with some large employers warning that ongoing remote work could put jobs at risk.

Despite these pressures, Standard Chartered is holding its ground. Winters and the bank’s leadership remain vocal in their conviction that flexibility works—citing strong business results, low attrition, and positive feedback from employees, especially those balancing care responsibilities or preferring non-traditional schedules. The company was among the first major banks to formally adopt hybrid work in November 2020 and has shown little inclination to change course, even as industry sentiment shifts.

Companies who stand by remote or flexible work schedules say it leads to a better talent pool, less turnover, and a happier workplace, while critics say it’s corrosive to the human element that goes with great teamwork. Winters dismisses such concerns. He insists that, with the right leadership, teams remain collaborative and engaged, and that forcing staff into rigid molds can actually hinder, rather than help, performance.

As Wall Street and other sectors debate the future of work, Standard Chartered’s approach offers a compelling case study in the value—and business logic—of empowering employees to strike their own balance.

Standard Chartered did not respond to a request for comment.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

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In 2025, CEO turnover in the United States is shattering prior records and shifting the very nature of executive leadership. According to fresh data from executive placement firm Challenger, Gray & Christmas, the number of CEO departures at U.S. companies increased to 207 in June—a 23% jump from May’s 168. While this represents a 12% decrease from the 234 departures logged in June 2024, the first half of 2025 tells a story of acceleration: A whopping 1,235 CEOs left their posts. That’s a 12% increase from last year and the highest year-to-date total since Challenger began tracking this data in 2002.

This wave of exits isn’t simply a statistical outlier, the firm says. More than ever, companies are relying on interim chiefs, and the short-term revolving door has become so common that the highest-paid corner office is increasingly looking like a “gig economy” job, Challenger says, adding: “2025 marks the rise of the CEO gig economy.”

CEOs as gig workers

Through June 2025, a staggering 33% of newly named CEOs had stepped into their roles on an interim basis, compared to just 9% during the same period last year. Many of these leaders, including veterans who navigated companies through the Covid-19 pandemic, are returning to guide firms on their own terms, choosing flexible, project-based tenures over the once-standard multi-year engagement.

“With growing uncertainty across the economy, shifting corporate values like DEI, the impact of tariffs, potential deregulation, evolving consumer behavior, and the rapid implementation of new technologies such as AI, identifying the right leader for long-term success has become increasingly difficult,” said Andy Challenger, labor and workplace expert at Challenger, Gray & Christmas.

Interim roles offer both organizations and executives a strategic edge: companies gain agility and fresh perspectives swiftly; executives gain exposure and maintain flexibility.

The perils of the C-suite gig economy

There are real risks to a gig-like approach to the corner office. Teams led by an interim or short-term CEO may struggle with trust, long-term cohesion, and cultural stability. “When teams know their leader could leave at any moment,” Andy Challenger notes, “it’s harder to build lasting cohesion or trust.” Frequent leadership turnover can disrupt culture, diminish morale, and spark higher employee attrition—particularly if staff feel their voices aren’t heard or priorities are in constant flux.

Another sharp trend is the even split between internal and external interim CEOs: 53% were selected from within the organization, while 47% came from outside. When interim roles become permanent, internal and external candidates fare equally: 20% of each ultimately landed the role long-term.

The surge in CEO gig work contrasts with another shift: the lagging rate of new women CEOs. Only 25% of new CEOs appointed in 2025 are women, down from 28% last year.

Industries with surging turnover

Some sectors have been especially hard hit. The government/non-profit space leads (or trails), with 256 CEO exits through June—1.6% higher than last year’s 252 exits through the first half. The space has seen the highest turnover in both years.

Then there’s a big drop to technology, with 138 CEO departures through June, one of the highest monthly totals of the year; the turnover represented a 16% increase from 2024 as well. Health care/products saw 121 exits, a 20% increase from 2024. Hospitals, a subset, saw 68 departures, up 3%. Financial firms had 76 CEO exits year-to-date, a 29% increase year-over-year.

This upheaval reflects broad changes—uncertainty, rapid tech shifts, pressure on traditional leadership models—that are turning the CEO role into something more fluid, flexible, and, increasingly, temporary. In this era of “gig economy” leadership, both organizations and executives face new rules—and new risks—in navigating the future of the C-suite.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

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Dan Sheridan has worked at Brooks Running for over 25 years, and he’s been CEO for over a year now, but he says he’s still learning things every day from his own boss: Warren Buffett. The 95-year-old investing legend is famous as the “Oracle of Omaha” for his deep business acumen. You won’t see Sheridan disagree with that sentiment.

“We’re so fortunate,” Sheridan recently told Fortune‘s Leadership Next podcast, reflecting on Brooks’ status as a wholly owned subsidiary of Berkshire Hathaway. “Our ownership structure may be the greatest in the world, right? We’re owned by—who I would call the GOAT of capitalism—Warren Buffett,” Sheridan remarked. “GOAT,” of course, stands for “greatest of all time,” an acronym from the sports world increasingly spreading to other walks of life.

The remark is more than a casual compliment. For Brooks Running, being part of the Berkshire Hathaway family has meant a rare degree of stability and confidence, especially in a retail world known for its fickleness and fast pivots.

Sheridan, a 25-year Brooks employee who took the reins as CEO in April 2024, fondly recalls his encounters with Buffett over the years, including the annual Berkshire Hathaway shareholder meetings. These gatherings, often a pilgrimage for investors and business enthusiasts, also became a time for Brooks to celebrate milestones with its famously hands-on owner.

Back in 2014, as Brooks marked its 100th anniversary, Buffett made a special trip to Seattle to commemorate the occasion. Speaking before Brooks employees, Buffett distilled his investing philosophy into a single, memorable challenge. “Berkshire focuses on the long term, and your jobs are simply this: to make sure the brand is stronger at the end of the year than it was at the beginning,” Sheridan recounted. The advice resonated deeply—and has continued to shape his outlook as a leader.

‘You have to do a thousand things to keep your brand strong’

At first glance, the maxim sounds simple. But as Sheridan points out, “The truth is, that’s a huge thing for us to do. You have to do a thousand things to keep your brand strong. You have to create great product. You have to keep your morale and your culture going. You have to keep your customers happy. For me in my leadership role, that’s how I think about it: Is our brand strengthening every season, in every market?”

This focus on gradual and consistent improvement echoes the Warren Buffett playbook, eschewing quick fixes and risky gambles for what Sheridan calls “investment, really hard decisions, and capability.” For Brooks, that has meant steady investment in innovation and technology, careful brand cultivation, and an unwavering connection to its core community of runners. But Sheridan is alert from something he learned from another Berkshire GOAT, Buffett’s long-time right-hand-man, Charlie Munger.

Mind your ABCs

Sheridan has adopted a leadership mantra learned at Munger’s heel: Avoid the “ABCs” of corporate decay. “He talks a lot about organizations avoiding the ABCs: arrogance, bureaucracy, and complacency.” For Sheridan, this is more than a cautionary tale; it’s a daily discipline.

“I approach things with low arrogance because I don’t know everything. So I’m super curious in how I approach people,” Sheridan said. He stresses the importance of humility and listening, aiming to foster an organization where questions are invited and learning is constant—echoing a central tenet of Munger and Buffett’s shared philosophy of lifelong learning.

Sheridan’s intolerance for bureaucracy is equally strong. “I often say I’m allergic to bureaucracy … even in nonprofits or school committees that I’m asked to be on, my first question is, ‘Is there a lot of bureaucracy in this organization?’ I can’t function in that. I don’t know how to function in it. And so, Brooks is a place where there’s low bureaucracy,” Sheridan remarked.

This approach has helped keep Brooks nimble—despite its size and growing global reach. Complacency, the third danger, is ever-present at market leaders like Brooks. “I think every organization can rest on your history, and we’re not immune to that at Brooks,” Sheridan acknowledged.

Brooks breaks forward

Brooks Running currently holds the No. 1 position in performance-running shoes in both the U.S. and Germany, and has seen record-breaking growth in international markets—posting a 15% jump in global revenue in the first quarter of 2025, with surges as high as 221% in Asia Pacific and Latin America. But Sheridan is adamant: “In every other market, we’ve got a lot of room to grow.”

Brooks has been on a growth tear in recent years, posting $1.2 billion in revenue for 2023, with North America accounting for the lion’s share. Sheridan played a key role in navigating the company through everything from global supply-chain disruptions to the changing dynamics of consumer taste in the sporting-goods arena. Now, with a fresh mandate from both Buffett and the board, Brooks is looking to expand further overseas, especially in China and Europe.

That growth, according to Sheridan, depends on ruthlessly avoiding complacency and focusing on daily execution. Brooks’ recent expansion—from Olympic athlete partnerships to surging popularity in China and Europe—has been fueled by this mindset.

“We're owned by who I would call the G.O.A.T. of capitalism: Warren Buffett.”

On the latest episode of #LeadershipNext, @brooksrunning CEO Dan Sheridan shared the best piece of advice he’s received from investing legend and Berkshire Hathaway CEO Warren Buffett.

🎧 Listen to… pic.twitter.com/DFmBmO0MRn

— FORTUNE (@FortuneMagazine) July 29, 2025

The CEO’s leadership style, shaped by nearly three decades at Brooks, has also been marked by a willingness to “keep your head above the clouds, but your feet in the mud,” Sheridan said earlier this year. For Sheridan, balancing a high-level vision with hands-on operational focus is crucial in leading a brand through rapid industry changes, fierce competition, and expanding global complexity.

For Brooks Running, the “GOATs of capitalism” at Berkshire Hathaway aren’t just distant boardroom figures—they are active mentors whose business philosophy shapes every major decision. By embracing humility, slashing through red tape, and refusing to coast on past wins, Sheridan aims to write the next chapter in Brooks’ century-plus story—one defined by resilience, adaptability, and above all, staying hungry.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

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As recent college graduates face one of the toughest job markets in years, Berkeley economist and voluble Substacker Brad DeLong has a message for those struggling to land their first full-time gig: Artificial intelligence (AI) and automation are not to blame. Larger forces are at work.

DeLong, a professor at UC Berkeley and former Deputy Assistant Secretary of the Treasury, argued in a recent essay that the challenges confronting young job-seekers today are primarily driven by widespread policy uncertainty and a sluggish economy—not by the rapid rise of AI tools like ChatGPT or data-crunching robots. DeLong offered his analysis on July 23, roughly 10 days before the July jobs report stunned markets, revealing that the economy has been much weaker than previously thought for several months.

Prominent business leaders had also flagged troubling signs in the economy before the July jobs report dropped. IBM Vice Chair and former Trump advisor Gary Cohn went on CNBC a day before the jobs data, noting “warning signs below the surface.” Cohn said he pays close attention to the quits rate in the monthly JOLTS data, arguing that 150,000 fewer quits was an ominous sign of poor economic health.

DeLong sounded a prophetic note, writing that “policy uncertainty” over trade, immigration, inflation, and technology has “paralyzed business planning,” leading to a self-reinforcing cycle of hiring freezes. New entrants to the job market are bearing the brunt of the retreat to risk aversion. In other words, the college graduate class of 2025 is really unlucky.

The economist argued that the uncertainty causes companies to delay major decisions—including hiring—in the face of an unpredictable policy environment.

“This risk aversion is particularly damaging for those at the start of their careers, who rely on a steady flow of entry-level openings to get a foot in the door,” he wrote.

DeLong has sounded similar warnings of a slowdown for years. He talked to Fortune in 2022 about his theory of the economy starting to sputter from his book Slouching Towards Utopia. In 2025, he wrote, the big story in the jobs market is not actually AI, but something different.

Policy paralysis

So, what’s really keeping freshly minted graduates from clinching that all-important first job? DeLong cited Bloomberg BusinessWeek’s Amanda Mull and her theory about “stochastic uncertainty”—a cocktail of unpredictability around government policies, trade, immigration, and inflation. Companies aren’t firing; instead, they’re just waiting. And many are delaying new hires in anticipation of possible sudden shifts in tariffs, inflation rates, and regulatory environments. The result is a wait-and-see climate where employers, worried about future economic shocks, have selected caution over expansion. The holding pattern hits new entrants to the workforce especially hard.

While overall unemployment in the U.S. remains low, the situation is uniquely difficult for new graduates relative to the rest of the workforce. Citing economists including Paul Krugman, DeLong noted that while the absolute unemployment rate for college graduates isn’t alarming, the gap between graduate unemployment and general unemployment rates is at record highs. In the past, higher education reliably led to lower unemployment, but now recent grads are struggling “by a large margin” compared to previous generations.

As previously reported by Fortune Intelligence, Goldman Sachs has argued that the college degree “safety premium” is mostly gone. The team, led by Goldman’s chief economist Jan Hatzius, wrote: “Recent data suggests that the labor market for recent college graduates has weakened at a time when the broader labor market has appeared healthy.”

It also found that since 1997, young workers without a college degree have become much less likely to even look for work, with their participation rate dropping by seven percentage points.

Goldman Sachs

Mull cited an analysis by the Federal Reserve Bank of New York which found that tech and design fields, including computer science, computer engineering, and graphic design, are seeing unemployment rates above 7% for new graduates.

Why the AI hype misses the mark

Although the tech sector is buzzing about AI’s potential to replace junior analysts or automate entry-level tasks, DeLong urged caution in assigning blame. In his typical style, he noted, “there is still [no] hard and not even a semi-convincing soft narrative that ‘AI is to blame’ for entry-level job scarcity.” Hiring slowdowns, he pointed out, are driven by broader economic forces: uncertainty, risk aversion, and changes in how companies invest.

Here again, DeLong’s analysis rhymes and aligns with recent research from Goldman’s Hatzius. The bank’s quarterly “AI Adoption Tracker,” issued in July, found that the unemployment rate for AI-exposed occupations had reconciled with the wider economy, which contradicts fears of mass displacement. They also noted there have been no recent layoff announcements explicitly citing AI as the cause, underscoring that it’s contained to disruption of specific functions, not entire industries.

Goldman Sachs

Crucially, he argued, rather than hiring people, companies in the tech sector are splurging on “the hardware that powers artificial intelligence”—notably Nvidia’s high-performance chips—fueling a boom in capital investment while sidelining junior hires.

“For firms, the calculus is straightforward: Investing in AI infrastructure is seen as a ticket to future competitiveness, while hiring junior staff is a cost that can be postponed.”

Underpinning these trends is a shift away from any and all risk. Employers prefer to hire for specific short-term needs and are less willing to invest in developing new talent—leaving young applicants caught in a cycle where “just getting your foot in the door” is more difficult than ever. Incumbent workers, worried about job market uncertainty, are less likely to change jobs, leading to fewer openings and greater stagnation.

DeLong’s analysis harmonized with Goldman Sachs’ findings about the declining premium attached with a college degree:

“For the longer-run, the rise in the college wage premium is over, and a decline has (probably) begun.”

For decades, he continued, a college degree was a ticket to higher earnings, and the labor market rewarded those with advanced skills and credentials. In recent years, though, “this has plateaued and may even be falling.” The causes are complex, he added, but the takeaway: While degrees remain valuable, they are no longer the ever-ascending ticket to prosperity they once were.

These comments confirm the gloomy remarks of University of Connecticut professor emeritus Peter Turchin, who recently talked with Fortune about the declining status of the upper middle class in 21st century America. When asked where else he sees this manifesting in modern life, Turchin said, “It’s actually everywhere you look.

“Look at the overproduction of university degrees,” he said, arguing that the decreasing premium that Goldman and DeLong write about shows up in declining rates of college enrollment and high rates of recent graduate unemployment. “There is overproduction of university degrees and the value of a university degree actually declines.”

DeLong’s bottom line for recent grads: Blame a risk-averse business climate, not technology, for today’s job woes. And now that we know the economy may have been much more risk-averse in 2025 than previously, DeLong’s warnings are worth revisiting.

DeLong did not respond to a request for comment.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

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A surprisingly weak July employment report has intensified expectations that the Federal Reserve will resume cutting interest rates as soon as September, with mounting evidence of a slowing U.S. economy and faltering labor market offsetting persistent inflation worries driven by new tariff hikes.

The Federal Open Market Committee (FOMC) had previously left rates unchanged at a range of 4.25% to 4.50% at its July meeting, despite internal disagreements, growing signs that economic conditions warranted a more dovish approach, and mounting pressure from President Donald Trump on Fed Chair Jerome Powell to cut. The July jobs report, of course, is changing the picture rapidly.

The Labor Department reported a gain of just 73,000 nonfarm payroll jobs in July, well below consensus forecasts. More troubling were the significant downward revisions for May and June, which cut a combined 258,000 jobs from the previous estimates and reduced those months’ average gains to less than 20,000 jobs per month. While July’s number alone would not spell crisis, the back-to-back weakness and hefty revisions roused investor concerns about potential cracks forming in the U.S. labor market. Powell has repeatedly emphasized the balance between labor supply and demand, and said the unemployment rate is the “key indicator to watch.” July’s unemployment rate ticked up to 4.2%, just shy of a 12-month high, providing further evidence of softening conditions.

Market reaction was swift. Stephen Brown, Deputy Chief North America Economist for research firm Capital Economics, called it a “payrolls shocker.” He noted an immediate change in markets, which repriced the likelihood of a September rate cut at 85%, a jump from below 50% prior to the jobs data, as futures traders bet that the Federal Open Market Committee will need to respond to mounting evidence of economic softening.

“The July jobs report goes a long way toward providing the evidence of a weaker labor market that the Fed needs to justify cutting interest rates in the face of above-target inflation,” said Brian Rose, senior U.S. Economist at UBS Global Wealth Management, in a statement to Fortune Intelligence. Rose noted that GDP data had shown the economy’s growth slowing to an annualized 1.2% pace in the first half of 2025, well below the longer-term trend rate of 2.0%. “We expect soft data in the second half of 2025 as well. This should help to offset some of the inflationary pressure driven by tariff hikes,” he added.

Other recent data reinforce the picture of an economy under strain. Survey indicators such as the ISM manufacturing employment index fell further in July, while measures of business capital spending have only recovered modestly after disruptions following April’s “Liberation Day.” Meanwhile, President Trump’s new tariff measures have pushed up import costs, adding to the inflation outlook.

Fiendishly mixed signals

The July payroll dip, coming on the heels of the disruptive “Liberation Day” in April, may not yet herald a deeper jobs slide, other data suggests. Brown noted that initial jobless claims ticked down to 218,000 last week, and continuing claims have declined steadily since peaking in early June.

Analysts expect Powell to use the upcoming Jackson Hole Economic Symposium, to be held August 21–23, as an opportunity to signal the central bank’s readiness to act if labor market weakness persists and larger inflation effects from tariffs do not materialize.

Rose’s baseline scenario now sees the Fed resuming rate cuts at its September meeting and continuing to cut by 25 basis points each meeting through January, trimming the federal funds rate by a full percentage point to bring borrowing costs back to a “roughly neutral” level.

“Given this morning’s data, Powell may be willing to drop a hint that the Fed is leaning toward a September cut,” Rose said.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

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President Donald Trump on Friday ordered the firing of Dr. Erika McEntarfer, the Commissioner of the Bureau of Labor Statistics (BLS), igniting a political and economic firestorm as the administration grappled with unexpectedly weak jobs numbers that included a large downward revision of the last two months of jobs data. “I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY,” Trump said on social media Friday.

The decision followed the release of July’s employment report, which showed that only 73,000 nonfarm payroll jobs were added to the U.S. economy—far below economist forecasts. The report also included sharp downward revisions to the previous two months, with 258,000 jobs stripped from earlier estimates and unemployment ticking up to 4.2%.

On social media, Trump also claimed without evidence that McEntarfer “faked the Jobs Numbers before the Election to try and boost Kamala’s chances of Victory,” referencing to his defeated opponent in the 2024 election, Vice President Kamala Harris. Trump declared: “Important numbers like this must be fair and accurate, they can’t be manipulated for political purposes.”

Appointed in January 2024, McEntarfer had previously served in senior roles within federal statistical agencies. The move marks a rare and dramatic intervention in federal economic reporting. Since its founding in 1884, the BLS has operated independently from political pressure, with its data releases pre-scheduled to reduce the risk of manipulation. The BLS commissioner typically serves a four-year term, confirmed by the Senate, with past presidents largely respecting the office’s autonomy regardless of economic headwinds.

Remarking on the jobs report, including the large downward revisions which he called a “major mistake,” Trump added: “Similar things happened in the first part of the year, always to the negative.”

Markets responded swiftly to the jobs report and the abrupt leadership shakeup. Stocks fell sharply on Friday as investors digested the weak employment numbers alongside the uncertainty created by turmoil within the government’s statistical agencies. U.S. bond yields dropped as traders increased bets on imminent Federal Reserve interest rate cuts, which Trump and some Republican allies have also accused the Fed of timing to help Democrats—allegations the central bank strongly denies.

McEntarfer, who has yet to issue a public statement, was widely regarded as a data-focused technocrat. White House officials have not yet named a replacement.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

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Monday’s mass shooting in Midtown Manhattan claimed the life of Wesley LePatner, a 43-year-old executive at Blackstone, the company confirmed Tuesday morning. LePatner was among four victims killed at 345 Park Avenue when a lone gunman stormed the office building, which also serves as the headquarters of the National Football League and features other business clients such as KPMG. The shooter has been identified by police as 27-year-old Shane Tamura of Las Vegas.

LePatner served as Blackstone’s global head of core+ real estate and chief executive officer of Blackstone Real Estate Income Trust (BREIT), a property fund with a $53 billion net asset value and a $275 billion market capitalization. 

The LePatner family provided a statement to Fortune, saying, “We cannot properly express the grief we feel upon the sudden and tragic loss of Wesley. She was the most loving wife, mother, daughter, sister and relative, who enriched our lives in every way imaginable.” The family noted that she was a beloved, loyal, and caring friend to many others and a “driven and extraordinarily talented professional and colleague.”

The family offered its condolences to those who have also lost loved ones, and asked for privacy in the coming days and weeks. “At this unbearably painful time, we are experiencing an enormous, gaping hole in our hearts that will never be filled, yet we will carry on the remarkable legacy Wesley created.”

A decorated background

LePatner joined Blackstone in 2014 after more than a decade with Goldman Sachs and was credited with driving the firm’s real estate ventures to new heights. A Yale graduate, LePatner served on the boards of organizations including the Metropolitan Museum of Art, the Abraham Joshua Heschel School, the UJA-Federation of New York, and Yale University Library Council, according to her Blackstone biography page. She is survived by a husband whom she met on the first day of freshman year at Yale, according to their New York Times wedding announcement. She had two children, the New York Post was first to report.

New York Rep. Ritchie Torres posted on social media that LePatner “represented the very best of New York.” Calling her a “distinguished professional,” he honored her sense of civics, as a “devoted congregant” at the Altneu synagogue and a dedicated board member at the Heschel School.

Authorities say Tamura acted alone and had a history of mental-health issues. Investigators recovered a note where Tamura raged against the NFL, claiming to suffer from chronic traumatic encephalopathy (CTE)—a neurodegenerative disease associated with head injuries in contact sports. While Tamura played football in high school, there is no evidence he played professionally or was ever diagnosed with CTE.

“Words cannot express the devastation we feel. Wesley was a beloved member of the Blackstone family and will be sorely missed,” Blackstone said in an emailed statement. “She was brilliant, passionate, warm, generous and deeply respected within our firm and beyond.”

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

© The Wesley LePatner family

A sweeping July 2025 report from UBS Evidence Lab highlights that artificial intelligence, and generative AI in particular, is rapidly becoming a strategic imperative for consumer-sector companies around the globe, but its not really “visible” yet.

“It’s becoming an essential strategic focus and a competitive differentiator across the entire value chain, not just a tool for efficiency,” the authors write. They see wide-reaching use cases, from demand forecasting to supply-chain automation to product recommendations, and believe it should provide a “more pleasant customer experience” on top of improving operations. The use of AI will be a critical factor going forward that separates winners and losers in the consumer space, they add. It’s just so early.

Despite prominent case studies and a surge in executive attention, UBS finds the direct, quantifiable financial impact of AI remains limited, stating simply about profits and loss statements, or P&L: “AI’s impact on P&L is not material, but we expect it to be visible in the next 3 years.” Meanwhile, despite many headlines about AI-related layoffs, UBS finds little evidence of reductions in headcount: “We have heard some anecdotal evidence but not within our coverage.” Such reductions in force are likely to come, though, UBS added.

Drawing on in-depth interviews with analysts and company disclosures across more than 20 global sectors, the report details how AI is reshaping everything from supply chains and marketing to customer experience, while underscoring the most significant changes—and competitive divides—are yet to fully appear. “Most consumer companies expect the impact of generative AI to be more visible in 3 to 5 years,” the note adds.

AI moves from back office to boardroom

A central theme: AI has moved beyond being a back-office efficiency tool to a core part of business strategy. Large retail and consumer-oriented firms, notably Walmart, are appointing executives dedicated to AI transformation, underscoring its rising importance. The number of AI mentions on consumer-sector conference calls has doubled since 2022, and major investments are being made not only to streamline operations, but also to power growth through personalized recommendations, smarter inventory management, and targeted marketing.

Leading companies are finding a wide range of AI applications, the UBS Evidence Lab found.

• Walmart uses AI-driven recommendations and assistants to personalize the shopping experience and optimize fulfillment. Automation in its supply chain is credited with up to 30% reductions in unit costs at fulfillment centers.
• L’Oréal leans on AI for marketing optimization and product innovation, reporting 10%-15% productivity gains in advertising tasks due to its bespoke BETiq tool, which it expects to cover 60% of its marketing spend by 2024.
• P&G utilizes AI for logistics, and it has quantified a potential $200 million-$300 million in savings from smarter truck scheduling.

Globally, consumer-facing companies are also deploying AI for tasks ranging from product design (e.g., Robam’s proprietary LLM called “AI Gourmet” in China), to dynamic pricing, to smarter labor scheduling. In Australia, travel firms and retailers have cited cost savings and improved margins from AI-enabled automation.

Bigness will matter

A recurring takeaway is that large, well-capitalized incumbents are set to benefit most in the near to medium term. These players, such as Walmart, Home Depot, Coca-Cola, L’Oréal, and China’s Midea and Haier, can better afford the investments and have the customer data troves needed to maximize AI’s benefits. In contrast, smaller and less technologically advanced companies may struggle to compete, potentially accelerating industry consolidation or leaving followers at a disadvantage.

While patterns of AI adoption are broadly similar worldwide, impacts vary by region and sector. U.S. retailers and restaurant chains have focused on operational efficiency and customer engagement. The European luxury sector, more dependent on craftsmanship and brand, should see less near-term impact from AI. In Asian markets, market leaders are leveraging AI to drive product differentiation and cost advantages, but there is little evidence of broad profit impact yet.

Only a handful of companies, usually industry giants with deep pockets and rich data sets, are reporting clear improvements in margins or revenue directly attributable to AI adoption. Most firms, especially smaller ones, have yet to see material P&L enhancements. In many cases, AI’s efficiency gains are being reinvested to spur growth, rather than dropping to the bottom line.

Outlook: gains to materialize over 3–5 years

Most analysts expect the true financial benefits—higher margins, revenue growth, and labor productivity—to become “visible” within three to five years, as AI applications mature and become more deeply integrated into core business processes. In the meantime, a wave of experimentation—particularly in marketing, logistics, and customer experience—is laying the foundation for a potentially transformative decade for consumer industries.

For now, UBS concludes that for all the excitement, the AI revolution’s effects on consumer-sector profits and workforce structure are only just beginning to be felt.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

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A new Federal Reserve Board staff paper concludes that generative artificial intelligence (gen AI) holds significant promise for boosting U.S. productivity, but cautions that its widespread economic impact will depend on how quickly and thoroughly firms integrate the technology.

Titled “Generative AI at the Crossroads: Light Bulb, Dynamo, or Microscope?” the paper, authored by Martin Neil Baily, David M. Byrne, Aidan T. Kane, and Paul E. Soto, explores whether gen AI represents a fleeting innovation or a groundbreaking force akin to past general-purpose technologies (GPTs) such as electricity and the internet.

The Fed economists ultimately conclude their “modal forecast is for a noteworthy contribution of gen AI to the level of labor productivity,” but caution they see a wide range of plausible outcomes, both in terms of its total contribution to making workers more productive and how quickly that could happen. To return to the light-bulb metaphor, they write that “some inventions, such as the light bulb, temporarily raise productivity growth as adoption spreads, but the effect fades when the market is saturated; that is, the level of output per hour is permanently higher, but the growth rate is not.”

Here’s why they regard it as an open question whether gen AI may end up being a fancy tech version of the light bulb.

Gen AI: A tool and a catalyst

According to the authors, gen AI combines traits of GPTs—those that trigger cascades of innovation across sectors and continue improving over time—with features of “inventions of methods of invention” (IMIs), which make research and development more efficient. The authors do see potential for gen AI to be a GPT like the electric dynamo, which continually sparked new business models and efficiencies, or an IMI like the compound microscope, which revolutionized scientific discovery.

The Fed economists did caution that it is early in the technology’s development, writing: “The case that generative AI is a general-purpose technology is compelling, supported by the impressive record of knock-on innovation and ongoing core innovation.”

Since OpenAI launched ChatGPT in late 2022, the authors said gen AI has demonstrated remarkable capabilities, from matching human performance on complex tasks to transforming frontline work in writing, coding, and customer service. That said, the authors noted they are finding scant evidence that many companies are actually using the technology.

Limited but growing adoption

Despite such promise, the paper stresses that most gains are so far concentrated in large corporations and digital-native industries. Surveys indicate high gen AI adoption among big firms and technology-centric sectors, while its use in small businesses and other functions lag behind. Data from job postings show only modest growth in demand for AI skills since 2017.

“The main hurdle is diffusion,” the authors write, referring to the process by which a new technology is integrated into widespread use. They note that typical productivity booms from GPTs like computers and electricity took decades to unfold as businesses restructured, invested, and developed complementary innovations.

“The share of jobs requiring AI skills is low and has moved up only modestly, suggesting that firms are taking a cautious approach,” they write. “The ultimate test of whether gen AI is a GPT will be the profitability of gen AI use at scale in a business environment, and such stories are hard to come by at present.” They know that many individuals are using the technology, “perhaps unbeknownst to their employers,” and they speculate that future use of the technology may become so routine and “unremarkable” that companies and workers no longer know how much it’s being used.

Knock-on and complementary technologies

The report details how gen AI is already driving a wave of product and process innovation. In health care, AI-powered tools draft medical notes and assist with radiology. Finance firms use gen AI for compliance, underwriting, and portfolio management. The energy sector uses it to optimize grid operations, and information technology is seeing multiple uses, with programmers using GitHub Copilot to complete tasks 56% faster. Call center operators using conversational AI saw a 14% productivity boost as well.

Meanwhile, ongoing advances in hardware, notably rapid improvements in the chips known as graphics processing units, or GPUs, suggest gen AI’s underlying engine is still accelerating. Patent filings related to AI technologies have surged since 2018, coinciding with the rise of transformer architecture—a backbone of today’s large language models.

‘Green shoots’ in research and development

The paper also finds gen AI increasingly acting as an IMI, enhancing observation, analysis, communication, and organization in scientific research. Scientists now use gen AI to analyze data, draft research papers, and even automate parts of the discovery process, though questions remain about the quality and originality of AI-generated output.

The authors highlight growing references to AI in R&D initiatives, both in patent data and corporate earnings calls, as further evidence that gen AI is gaining a foothold in the innovation ecosystem.

Cautious optimism—and open questions

While the prospects for a gen-AI-driven productivity surge are promising, the authors warn against expecting overnight transformation. The process will require significant complementary investments, organizational change, and reliable access to computational and electric power infrastructure. They also emphasize the risks of investing blindly in speculative trends—a lesson from past tech booms.

“Gen AI’s contribution to productivity growth will depend on the speed with which that level is attained, and historically, the process for integrating revolutionary technologies into the economy is a protracted one,” the report concludes. Despite these uncertainties, the authors believe gen AI’s dual role—as a transformative platform and as a method for accelerating invention—bodes well for long-term economic growth if barriers to widespread adoption can be overcome.

Still, what if it’s just another light bulb?

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

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The doomers versus the optimists. The techno-optimists and the accelerationists. The Nvidia camp and the Anthropic camp. And then, of course, there’s OpenAI, which opened the Pandora’s Box of artificial intelligence in the first place.

The AI space is driven by debates about whether it’s a doomsday technology or the gateway to a world of future abundance, or even whether it’s a throwback to the dotcom bubble of the early 2000s. Anthropic CEO Dario Amodei has been outspoken about AI’s risks, even famously predicting it would wipe out half of all white-collar jobs, a much gloomier outlook than the optimism offered by OpenAI’s Sam Altman or Nvidia’s Jensen Huang in the past. But Amodei has rarely laid it all out in the way he just did on tech journalist Alex Kantrowitz’s Big Technology podcast on July 30.

In a candid and emotionally charged interview, Amodei escalated his war of words with Nvidia CEO Jensen Huang, vehemently denying accusations that he is seeking to control the AI industry and expressing profound anger at being labeled a “doomer.” Amodei’s impassioned defense was rooted in a deeply personal revelation about his father’s death, which he says fuels his urgent pursuit of beneficial AI while simultaneously driving his warnings about its risks, including his belief in strong regulation.

Amodei directly confronted the criticism, stating, “I get very angry when people call me a doomer … When someone’s like, ‘This guy’s a doomer. He wants to slow things down.'” He dismissed the notion, attributed to figures like Jensen Huang, that “Dario thinks he’s the only one who can build this safely and therefore wants to control the entire industry” as an “outrageous lie. That’s the most outrageous lie I’ve ever heard.” He insisted that he’s never said anything like that.

His strong reaction, Amodei explained, stems from a profound personal experience: his father’s death in 2006 from an illness that saw its cure rate jump from 50% to roughly 95% just three or four years later. This tragic event instilled in him a deep understanding of “the urgency of solving the relevant problems” and a powerful “humanistic sense of the benefit of this technology.” He views AI as the only means to tackle complex issues like those in biology, which he felt were “beyond human scale.” As he continued, he explained how he’s actually the one who’s really optimistic about AI, despite his own doomsday warnings about its future impact.

Who’s the real optimist?

Amodei insisted that he appreciates AI’s benefits more than those who call themselves optimists. “I feel in fact that I and Anthropic have often been able to do a better job of articulating the benefits of AI than some of the people who call themselves optimists or accelerationists,” he asserted.

In bringing up “optimist” and “accelerationist,” Amodei was referring to two camps, even movements, in Silicon Valley, with venture-capital billionaire Marc Andreessen close to the center of each. The Andreessen Horowitz co-founder has embraced both, issuing a “techno-optimist manifesto” in 2023 and often tweeting “e/acc,” short for effective accelerationism.

Both terms stretch back to roughly the mid-20th century, with techno-optimism appearing shortly after World War II and accelerationism appearing in the science-fiction of Roger Zelazny in his classic 1967 novel “Lord of Light.” As Andreessen helped popularize and mainstream these beliefs, they roughly add up to an overarching belief that technology can solve all of humanity’s problems. Amodei’s remarks to Kantrowitz revealed much in common with these beliefs, with Amodei declaring that he feels obligated to warn about the risks inherent with AI, “because we can have such a good world if we get everything right.”

Amodei claimed he’s “one of the most bullish about AI capabilities improving very fast,” saying he’s repeatedly stressed how AI progress is exponential in nature, where models rapidly improve with more compute, data, and training. This rapid advancement means issues such as national security and economic impacts are drawing very close, in his opinion. His urgency has increased because he is “concerned that the risks of AI are getting closer and closer” and he doesn’t see that the ability to handle risk isn’t keeping up with the speed of technological advance.

To mitigate these risks, Amodei champions regulations and “responsible scaling policies” and advocates for a “race to the top,” where companies compete to build safer systems, rather than a “race to the bottom,” with people and companies competing to release products as quickly as possible, without minding the risks. Anthropic was the first to publish such a responsible scaling policy, he noted, aiming to set an example and encourage others to follow suit. He openly shares Anthropic’s safety research, including interpretability work and constitutional AI, seeing them as a public good.

Amodei addressed the debate about “open source,” as championed by Nvidia and Jensen Huang. It’s a “red herring,” Amodei insisted, because large language models are fundamentally opaque, so there can be no such thing as open-source development of AI technology as currently constructed.

An Nvidia spokesperson, who provided a similar statement to Kantrowitz, told Fortune that the company supports “safe, responsible, and transparent AI.” Nvidia said thousands of startups and developers in its ecosystem and the open-source community are enhancing safety. The company then criticized Amodei’s stance calling for increased AI regulation: “Lobbying for regulatory capture against open source will only stifle innovation, make AI less safe and secure, and less democratic. That’s not a ‘race to the top’ or the way for America to win.” 

Anthropic reiterated its statement that it “stands by its recently filed public submission in support of strong and balanced export controls that help secure America’s lead in infrastructure development and ensure that the values of freedom and democracy shape the future of AI.” The company previously told Fortune in a statement that “Dario has never claimed that ‘only Anthropic’ can build safe and powerful AI. As the public record will show, Dario has advocated for a national transparency standard for AI developers (including Anthropic) so the public and policymakers are aware of the models’ capabilities and risks and can prepare accordingly.”

Kantrowitz also brought up Amodei’s departure from OpenAI to found Anthropic, years before the drama that saw Sam Altman fired by his board over ethical concerns, with several chaotic days unfolding before Altman’s return.

Amodei did not mention Altman directly, but said his decision to co-found Anthropic was spurred by a perceived lack of sincerity and trustworthiness at rival companies regarding their stated missions. He stressed that for safety efforts to succeed, “the leaders of the company … have to be trustworthy people, they have to be people whose motivations are sincere.” He continued, “if you’re working for someone whose motivations are not sincere who’s not an honest person who does not truly want to make the world better, it’s not going to work you’re just contributing to something bad.”

Amodei also expressed frustration with both extremes in the AI debate. He labeled arguments from certain “doomers” that AI cannot be built safely as “nonsense,” calling such positions “intellectually and morally unserious.” He called for more thoughtfulness, honesty, and “more people willing to go against their interest.”

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

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Andy Jassy, who sent shockwaves through the jobs market as one of the first major chief executives to say that “AI will mean fewer jobs,” sounded a different tone on the earnings call accompanying Amazon’s earnings on July 31. He reiterated his view that artificial intelligence (AI) will be a transformative force, saying it “is going to change very substantially the way we work” and emphasizing sweeping impacts already under way. It’s changing the way Amazon does coding, finance, all sorts of things, he said: “really the way we do business process automation, the way we do customer service.”

But then he pivoted.

Jassy said AI “will make all our teammates’ jobs more enjoyable,” freeing them up from having to do the “rote” functions that could not previously be automated. Companies have a choice in the AI revolution, he added: they can embrace the change that’s happening and help shape the new era, “or you can wish it away and have it shape you.” He said he has worked to make clear, internally and externally, that Amazon will embrace this moment.

‘Much more advanced’

While AI’s promise and pitfalls have dominated tech headlines for the past two years, Jassy’s comments detailed concrete examples of how Amazon is rapidly embedding advanced AI into both its internal workflows and customer-facing services. He highlighted the company’s investments in generative AI agents that can assist with—or even independently perform—complex coding tasks.

“Coding agents, having AI do a lot of the coding for us … allows our teammates to start from a much more advanced starting spot,” Jassy explained.

This philosophy of combining human creativity with AI-powered efficiency is reshaping other vital departments as well. In research and finance, Jassy described AI tools that can quickly synthesize vast quantities of information or flag anomalies in financial data, freeing up skilled employees for strategic work.

Jassy also spotlighted AI’s growing influence in Amazon’s expansive call center and customer service operations. He pointed to services like AWS Connect—the company’s cloud-based call center solution—which now has deep AI integrations for more natural customer interactions and automated issue resolution.

Jassy’s transformative outlook

Jassy has been emphasizing the increasing impact of AI for several months now, for instance suggesting that employees attend AI trainings while promising investors that AI will make them “very happy” down the road.

Amazon had delivered strong earnings earlier on July 31, yet investors sent the stock down roughly 7% in post-market trading with investors concerned about trade headwinds and Amazon’s long-term spending plans. Jassy told analysts on the call that, with regard to the impact of tariffs through the first half of the year, “we haven’t yet seen diminishing demand, nor prices meaningfully appreciating.”

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Apple blew past Wall Street expectations with its third-quarter earnings report released Thursday, revealing robust growth driven by persistent iPhone demand, surging services revenue, and resilience in key international markets—even as tariff anxieties and questions over its artificial intelligence (AI) roadmap loomed over the industry.

For the quarter ended June 28, 2025, Apple posted revenue of $94 billion, representing a 10% increase compared to the same period last year. Net income soared to $1.57 per share—up 12% from a year ago and significantly ahead of analyst forecasts, which had pegged earnings per share at $1.43 on expected revenue of $89.22 billion. Gross margin nudged up to 46.5%.

CEO Tim Cook celebrated the results, noting “Apple is proud to report a June quarter revenue record with double-digit growth in iPhone, Mac and Services and growth around the world, in every geographic segment.” Apple’s board declared a quarterly dividend of $0.26 per share, payable August 14 to shareholders of record as of August 11. 

The installed base of active devices hit a “new all-time high,” according to CFO Kevan Parekh, underscoring Apple’s customer loyalty amid intensifying market competition. Apple shares climbed more than 2.5% post-market on the results.

Segment highlights

Apple’s signature iPhone business was the principal engine of growth, generating $44.6 billion in sales—up from $39.2 billion the previous year. This far exceeded most forecasts and reinforced the iPhone’s dominance, even as competitors ramp up their global push.

The Services segment, encompassing the App Store, Apple Pay, Apple TV+, Apple Music, and iCloud, also set a new record: revenue there hit $27.4 billion, a 13% increase over last year. The success of Apple TV+ was underscored by the summer box office triumph of “F1: The Movie,” which has grossed nearly $513 million worldwide. Mac sales also posted double-digit growth, rising to $8 billion.

In contrast, iPad and Wearables revenue both saw modest declines, but these were more than offset by the core and services businesses.

International & trade dynamics

Growth was broad-based—notably including China, where Apple outperformed expectations with $15.4 billion in sales. This comes amid a tense geopolitical environment: President Donald Trump, seeking to enact tariffs of at least 25% on non-U.S.-made iPhones, had warned Apple to “manufacture in the U.S., not India, or anyplace else.” The company had projected a $900 million headwind from tariffs this quarter but successfully navigated the challenge, in part by accelerating its shift in device manufacturing from China to India.

Looking ahead

Despite these achievements, investor scrutiny remained focused on Apple’s comparative lag in artificial intelligence rollouts—especially as competitors like Meta and Microsoft grab headlines for major AI advances.

Apple’s stock, while buoyed after the earnings beat, has fallen 16% year-to-date, underperforming the broader S&P 500. Still, many analysts remain bullish, citing Apple’s ecosystem strength, user retention, and ability to deftly manage global headwinds. Some analysts have expressed impatience with Tim Cook, even arguing for him to be replaced. Longtime Apple bull Dan Ives has thrown his support behind Cook but argued for a transformative M&A deal for Apple to get a leg up in the AI race, slamming a recent presentation as something that “felt like an episode out of ‘Back to the Future,'” although though that was a film, not an episodic TV series.

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Amazon reported robust second-quarter 2025 financial results on July 31, surpassing Wall Street expectations with sharp revenue growth and notable gains in key business segments. Yet, investor enthusiasm was tempered as the company’s shares dropped as much as 3% in after-hours trading, reflecting lingering concerns about retail headwinds and long-term spending plans.

For the April-June period, Amazon posted revenue of $167.7 billion, climbing 13% year-over-year and outpacing analyst predictions of $162.1 billion. Earnings per share came in at $1.68, also topping the expected $1.33. Net income for the quarter reached an impressive $18.2 billion, more than a 10% increase from last year.

Amazon’s financial outperformance stems from strong execution across several areas. Though its sprawling retail operations remain the largest part of its business, the real engine of profit growth continues to be Amazon Web Services (AWS), the company’s cloud-computing arm.

AWS and AI power profitability

AWS generated $30.9 billion in revenue, marking a 17.5% increase year-over-year and landing squarely in line with industry forecasts. The unit contributed $10.2 billion in operating profit—more than half of Amazon’s total $19.2 billion operating income for the quarter. This confirms AWS’s role as Amazon’s financial powerhouse, driven by surging demand for AI and cloud infrastructure as businesses accelerate technology investments.

Chief executive Andy Jassy has spotlighted AI as a transformative force for Amazon, with the majority of 2025’s planned $100 billion in capital expenditures dedicated to expanding AWS’ capacity for generative AI and machine learning. As major clients move more workloads to the cloud and adopt AI-driven services, AWS remains positioned for long-term leadership, despite short-term margin pressures from its heavy investments.

Retail and advertising show resilience

Despite ongoing concerns about tariffs and consumer spending, Amazon’s core online store sales grew 11% to $61.5 billion. The company’s third-party seller services also expanded, with revenue rising 11% to $40.3 billion. Physical stores, including Whole Foods, delivered a 7% increase to $5.6 billion, while subscription revenue—such as Prime memberships—rose 12% to $12.2 billion.

Amazon’s advertising segment was a standout performer, raking in $15.6 billion in revenue, up 23% from the prior year. This ad business is becoming an increasingly critical pillar within Amazon’s profit structure, as brands compete for consumer eyeballs on the platform’s massive shopping interface.

Challenges and outlook

The company is navigating a complex macroeconomic climate that includes inflation, changing trade policies, and labor market constraints. Shipping expenses climbed 6% to $23.4 billion, reflecting both global cost pressures and heightened demand for fast delivery.

Although Amazon’s Q2 earnings don’t reflect the impact of July’s Prime Day—held after quarter’s end—the company remains optimistic, projecting third-quarter revenue in the range of $174 billion to $179.5 billion, above analyst expectations. Operating income is forecast between $15.5 billion and $20.5 billion.

Meanwhile, Amazon’s headcount inched up 1% year-over-year to 1.55 million, with CEO Andy Jassy signaling further workforce streamlining as automation and generative AI gain traction internally. “Our AI progress across the board continues to improve our customer experiences, speed of innovation, operational efficiency, and business growth, and I’m excited for what lies ahead,” he said in the earnings press release.

Investor response

Despite the upbeat earnings report, Amazon stock fell in extended trading, illustrating Wall Street’s wariness about continued retail volatility, capital-intensive growth, and competitive dynamics in cloud and AI. Still, analysts remain bullish on Amazon’s strategic direction, citing leadership in cloud innovation, resilient retail fundamentals, and an aggressive expansion into the future of artificial intelligence.

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IBM Vice Chairman Gary Cohn, the former Director of the National Economic Council under President Trump, sounded a cautious note on the state of the U.S. economy in his July 30 interview with CNBC’s Money Movers, warning that despite upbeat surface indicators, troubling signs are brewing beneath the headline numbers.

Cohn’s assessment came in the aftermath of a surprisingly robust GDP report showing 3% growth, which he acknowledged looked positive on its face. He said if you take a “big, wide aperture snapshot of the economy, the headline looks really good,” before arguing that a deeper analysis, even a “half-step back,” reveals important red flags. Notably, he highlighted a 15% drop in investment and concerning labor market statistics, including a significant decline in voluntary quits—a traditional signal of worker confidence in the job market. Cohn cited the latest JOLTS report, which showed 280,000 jobs lost and 150,000 fewer voluntary quits, suggesting Americans are growing more cautious about leaving their jobs for better opportunities. “People quit their job when they believe the next job is better and higher-paying,” he said, calling that a “bold statement on individuals’ view on the economy.”

Who eats the tariffs and who drinks the coffee?

“A snapshot of the economy right now is, ‘we’re fine, we’re good,’” Cohn said, referencing both the strong labor market and inflation measures that have moderated closer to the Federal Reserve’s 2% target. In fact, he argued the Fed is fulfilling its dual mandate of full employment and price stability, as the jobs market looks close to full employment, in his view. However, he warned about softer data such as consumer sentiment and in specific segments of the economy. Cohn noted that several soft retail earnings, such as Starbucks, show that “consumers are not out there willfully spending money.”

One of the interview’s major themes was the effect of tariffs and trade uncertainty. Cohn, who famously resigned from the Trump White House in 2018, seemingly after internal disagreements over tariffs, argued that tariffs should be applied carefully and strategically. He has clarified in 2024 and onwards that he supports tariffs on products the U.S. also produces, such as electric vehicles, but warned that indiscriminate tariffs risk inflaming inflation, especially on goods the U.S. does not manufacture domestically. Cohn has been saying for months that tariffs are “highly regressive” and essentially function as a tax on all Americans, with a greater impact on poorer people.

Cohn told Money Movers on July 30 that initially, U.S. companies may absorb some tariff-related costs, but said this was unsustainable in the long term due to shareholder and debt obligations. Ultimately, he argued, “companies are going to pass these costs along” to the consumer, squeezing household budgets and creating “one-time price shocks” that erode purchasing power if wages do not rise accordingly. Host Sara Eisen pushed back, arguing corporate balance sheets are healthy, companies are incorporating AI to boost efficiency, and companies may not want to anger the Trump administration, which has famously instructed companies to “eat the tariffs.”

Cohn’s consistent warnings about tariffs through the years have not come to fruition so far, but he’s far from alone in seeing a massive hit coming—at some point—from tariffs. The entire economics establishment has warned about the delayed impact of tariffs for months; as of July, though, the Trump administration has collected $100 billion in tariff revenue with seemingly little impact on inflation. Fortune‘s Irina Ivanova reported on how economists explain that, ranging from “it’s too soon” to “consumers won’t stand for it.” At the same time, Trump is increasingly winning trade deals on favorable terms to the United States, such as the EU’s agreement to a 15% tariff, with carve-outs on pharmaceuticals and metals, while U.S. imports to the EU will be duty-free.

Cohn’s question remains: Who will ultimately eat the tariffs, and who will buy the coffee? The American consumer is waiting for the economic dust to settle.

IBM did not immediately respond to a request for comment.

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LinkedIn co-founder and major Democratic donor Reid Hoffman delivered candid criticism of his own party on Joe Lonsdale’s “American Optimist” podcast this week, saying Democrats “really did alienate a section of Silicon Valley” during the last election cycle.

Hoffman, long recognized as a political power broker and tech visionary, did not mince words as he lamented the shifting relationship between Silicon Valley and the Democratic Party. “I regret this and wish it didn’t happen, but I think the Democratic Party really did alienate a section of Silicon Valley and the tech people, whether it was attacks on crypto, whether it was, you know, kind of just attacks on big tech, all these things,” he said, reflecting on a schism he regards as increasingly dangerous for the party and the U.S. technology sector.

A representative for Hoffman declined to comment further.

The criticism was perhaps surprising from Hoffman, who is among the most influential—and generous—donors to the Democratic Party in recent U.S. political history. Over the past decade, he has contributed tens of millions of dollars to Democratic candidates, state parties, super PACs, and advocacy groups across the country.

He told Lonsdale “attacks on crypto” and unspecified attacks on Big Tech were particularly harmful. “One of the things that I think Silicon Valley shares is this deep view that the way you make massive progress for humanity is creating scale technologies,” Hoffman said. “And the principal way of creating scale technologies is companies, and so if you’re attacking that and limiting it, then you have all kinds of problems.”

And yes, he said, at times this conflict has even led them to abandon traditional Democratic alliances. Lonsdale, a longtime right-of-center entrepreneur and investor, pressed Hoffman on the tension between supporting pro-innovation policy and traditional Democratic priorities such as labor protections and union power. Both Hoffman and Lonsdale decried the pessimism and tribalism they see infecting public discourse, agreeing that America requires leaders willing to collaborate across ideological lines for the sake of national progress. They cautioned that if regulatory and political obstacles continue to drive innovation out of traditional tech hubs, the country risks ceding its technological advantage.

Innovation and growth

Cited his own experience as an investor in Aurora—an autonomous-trucking company that is headquartered in California, but launching its first test drives in Texas due to the “modern regulatory environment”—Hoffman described how red states are rapidly becoming new laboratories of tech innovation.

He also acknowledged the recent political shift of several former allies away from the Democratic camp, including fellow member of the “PayPal Mafia,” Elon Musk. Marc Andreessen has also emerged as a right-friendly figure, and even OpenAI CEO Sam Altman has broken with Democrats as well, saying in early July that he was “politically homeless.”

The podcast conversation ranged widely—from Hoffman’s new book “Superagency” and the PayPal Mafia’s distinctive culture, to AI optimism and the new regulatory battles shaping the technology industry. Even as he championed the promise of AI and entrepreneurship, Hoffman repeatedly returned to his core critique: Innovation has to be a core value for both left and right in America.

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Microsoft delivered a blockbuster quarter to close its 2025 fiscal year, riding the wave of surging demand for cloud and AI services and sending its stock to new heights in after-hours trading. For the quarter ended June 30, 2025, Microsoft reported revenue of $76.4 billion, an 18% jump over the previous year. Net income climbed even more swiftly, up 24% to $27.2 billion. Earnings per share reached $3.65, outpacing analyst estimates of $3.37. “In our largest quarter of the year,” CEO Satya Nadella told analysts on the subsequent earnings call, “we significantly exceeded expectations.”

Investors responded decisively to the upbeat results and bullish AI outlook. Microsoft’s shares spiked over 7% in after-hours trading, pushing the stock toward record highs and lifting Microsoft’s market capitalization past the $4 trillion mark—cementing its place as one of just two companies to reach that level globally, along with Nvidia. The reaction underscored Wall Street’s confidence in Microsoft’s strategy, particularly its aggressive investments in cloud infrastructure and its push to commercialize AI tools such as Copilot across its productivity and developer platforms.

Nadella was emphatic in the earnings press release: “Cloud and AI is the driving force of business transformation across every industry and sector. We’re innovating across the tech stack to help customers adapt and grow in this new era.”

On the subsequent earnings call, one analyst expressed surprise at the size of the results. “Satya, back to the strength across the board in the quarter… It’s just the magnitude of upside that has shocked many here.”

To that point, the company’s Intelligent Cloud segment—home to Azure—generated $29.9 billion in revenue, up a robust 26%. Azure and other cloud services revenue soared 39% for the quarter, while annual Azure revenue surpassed $75 billion, growing 34% year-over-year. Nadella cited major enterprise customers leveraging both traditional and AI-powered workloads on Azure, highlighting that this is no longer just about experimentation—companies are moving quickly to deploy AI at scale.

Nadella claimed on the analyst call that “we continue to lead the AI infrastructure wave and gained market share every quarter this year,” noting that Microsoft operates more data centers than any other cloud provider, having opened new facilities across six continents. He said it operates over 400 data centers across 70 regions.

Strength across the board

The Productivity and Business Processes segment, anchored by Microsoft 365 and LinkedIn, generated $33.1 billion (+16%), and More Personal Computing brought in $13.5 billion (+9%), bolstered by a rebound in devices demand and rising Xbox content revenue. Throughout fiscal 2025, Microsoft amassed $281.7 billion in revenue (+15%) and $101.8 billion in net income (+16%). The company also returned $9.4 billion to shareholders in the fourth quarter through dividends and buybacks.

CFO Amy Hood emphasized Microsoft’s operational discipline and the scaling of AI investments, and revealed on the earnings call that the company expects over $30 billion of capital expenditure for the first quarter of 2026, “driven by the continued strong demand signals we see.

When asked about the return on investment on this massive spending, Hood responded that Microsoft has $368 billion of contracted backlog across the “breadth of the Microsoft Cloud,” not just Azure. She added that she feels very confident that this spending is “directly tied to business that is already contracted and on the books — and that we need to deliver.”

Hood also reassured employees and investors of the company’s forward momentum, noting in an internal post-earnings memo, as reported by Business Insider, that “FY26 will require intensity, clarity, and bold execution,” reflecting both the opportunities and competitive pressures ahead as Microsoft doubles down on AI and security priorities.

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