Middle market companies continue to invest despite growing economic uncertainty, according to the latest edition of KeyBank’s Middle Market Sentiment Report. For the second consecutive survey, 77% of executives rate their company’s financial outlook as excellent or very good, even as confidence in the broader U.S. economy remained relatively flat at 51%.
Rather than waiting for economic conditions to improve, companies continue investing in the capabilities they believe will drive long-term growth, including AI, workforce development and M&A. The findings reinforce a broader trend emerging across recent editions of the report: resilient companies are doubling down on investments they can control, even as macroeconomic uncertainty persists.
“The defining characteristic of today’s middle market isn’t simply confidence; it’s resilience,” Ken Gavrity, president of Key Commercial Bank, said. “They’ve shown the ability to be dynamic in the face of fairly substantial macro shocks, and they trust their ability to allocate capital toward investments they believe will create long-term value, regardless of short-term volatility.”
Companies Continue Investing Through Uncertainty
Confidence is translating into action. Companies with a positive business outlook are significantly more likely to seek additional capital to fund growth than their more cautious peers, a 26-point gap. At the same time, reliance on private equity has moderated across recent editions of the report, no longer the top choice for capital investment.
Rather than pursuing broad expansion, companies are increasingly directing capital toward investments that strengthen core capabilities and long-term competitiveness, with manufacturing joining technology as the most optimistic industry for growth.
AI is Moving from Experimentation to Execution
The evolution of AI investment is one of the clearest examples of how middle market priorities have shifted.
More than half (54%) of middle market companies now identify AI and technology expansion as their top capital investment priority for 2026. Across recent editions of KeyBank’s Middle Market Sentiment Report, AI has evolved from an emerging technology discussion centered on cybersecurity and fraud prevention to a core business strategy focused on improving operations, productivity and decision-making.
Technology and Talent Are Advancing Together
Companies are investing in people alongside technology to maximize the value of AI.
The report finds reskilling existing employees and hiring AI talent are becoming increasingly important workforce priorities, reflecting a growing recognition that technology investments deliver the greatest impact when paired with the right talent and capabilities.
Long-Term Growth Plans Remain Intact
While companies have become more measured in the timing of acquisitions, long-term growth ambitions remain intact. Buy-side M&A activity is expected to strengthen throughout 2027 and 2028, particularly among technology companies, larger firms and organizations led by CFOs and CEOs with active acquisition strategies.
Cybersecurity also remains a consistent investment priority regardless of business outlook, underscoring its role as foundational to future growth as AI adoption accelerates.
Key Findings
- 77% of middle market executives rated their company’s financial outlook as excellent or very good for the second consecutive survey.
- Confidence in the U.S. economy declined from 53% in Q2/25 to 51%, widening the confidence gap from 19 percentage points to 26 percentage points.
- 54% of companies identified AI and technology expansion as their top capital investment priority for 2026.
- Companies with a positive business outlook are significantly more likely to seek additional capital to fund growth than their more cautious peers, a 26-point gap.
- Long-term M&A expectations remain strong throughout 2027 and 2028, particularly among larger and technology-focused companies.
