How is 3M Using AI in Business Growth?
Company discusses Microsoft data center partnership, internal AI tools, and automation during second quarter earnings call.
3M outlined several artificial intelligence initiatives during its second quarter 2026 earnings call on July 21, spanning internal sales tools, back-office automation, product development, and a recently announced data center infrastructure partnership with Microsoft. Chairman and Chief Executive Bill Brown and Chief Financial Officer Anurag Maheshwari discussed the initiatives alongside the company's quarterly financial results.
The company reported a second quarter operating margin of 24.9%, up 40 basis points year over year, and earnings per share of $2.40, up 11%. Free cash flow reached $1.3 billion. 3M also raised its full-year EPS guidance to a range of $8.80 to $8.95, representing growth of 9% to 11%.
Brown highlighted a strategic partnership announced the previous week under which Microsoft became the first hyperscale cloud provider to deploy 3M's patented Expanded Beam Optical (EBO) connector technology in Azure data centers. Brown described data centers as one of the fastest-growing markets in the world and said the technology helps customers stand up AI capacity more quickly.
"Our connectors install faster, hold up far better to dust and handling, and help customers stand up AI capacity more quickly," Brown said.
Brown said 3M has demonstrated with a hyperscale customer that EBO can reduce the time required to install circuits in a data center by about 85%. The company holds about 100 patents covering the technology, with another 50 patent applications pending.
EBO is expected to generate between $40 million and $50 million in revenue this year. Brown said the business could grow four to five times that level over the next several years as adoption increases.
Brown estimated the addressable market for EBO technology at about $1 billion this year, growing to roughly $2 billion by 2028. To support broader adoption, 3M has formed a multi-supplier agreement involving 44 ecosystem participants, including hyperscalers, chip manufacturers, and connector manufacturers.
AI Supports Sales, Operations, and Product Development
Beyond AI infrastructure, Brown described how artificial intelligence is being deployed across 3M's internal operations.
He said AI-enabled tools are supporting the company's commercial excellence initiatives by improving sales planning, prioritizing opportunities, and increasing sales force productivity. During the question-and-answer session, Maheshwari said these efforts have contributed to about 200 basis points of improvement in customer attrition, primarily within the company's Safety and Industrial business.
Brown also outlined plans to consolidate finance, human resources, and customer service into a single global service delivery model. He said 3M is partnering with an external provider to operate these functions "at scale using automation and AI."
Artificial intelligence is also expected to accelerate research and development. Brown said the company plans to "leverage AI to move more quickly from idea generation to development and production" as it works toward launching more than 1,000 new products by 2027 while reducing development cycle times.
The AI initiatives were discussed as 3M reported second quarter organic sales growth of 5.4% and raised its full-year guidance for organic sales growth, earnings per share, and free cash flow.
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Key Takeaways
- 3M announces strategic partnership with Microsoft to enhance AI capacity in data centers.
- Company reports strong financials with $1.3 billion in free cash flow and raised EPS guidance.
- Expanded Beam Optical technology expected to generate $40-$50 million in revenue this year.
- EBO technology could grow significantly, with an addressable market projected to reach $2 billion by 2028.
- 3M holds extensive patents on EBO technology, aiming for broader adoption through multi-supplier agreements.