JPMorgan cut jobs 40% in some units with AI, but margins won't improve

JPMorgan Chase has reduced headcount by as much as 40% in select business units through artificial intelligence deployment, but CEO Jamie Dimon made clear during the bank's second-quarter earnings call that the technology won't translate into dramatically improved profit margins.

Dimon fielded multiple questions from analysts about when AI would slow expense growth or create a leaner organization. His answer: the competitive dynamics of banking mean efficiency gains get passed to customers rather than retained as profit.

"In a competitive, capitalist world, we all will use AI to do a better job for the customers. We can't just say, 'Oh, it's going to increase our margins. We're going to keep that,'" Dimon said. He pointed to two decades of computerization that haven't pushed margins to 80%, illustrating how technology gains get competed away.

Job reductions and redeployment

While AI has enabled significant workforce reductions in discrete areas—ranging from 30% to 40% in some units—most affected employees were offered positions elsewhere in the organization, Dimon noted. The bank continues to expect similar patterns as AI adoption expands.

In May, Dimon indicated JPMorgan would likely hire fewer bankers in certain functions while increasing recruitment of "AI people." The bank now operates nearly 1,000 AI use cases across fraud protection, marketing, and administrative tasks like note-taking, supported by a technology budget approaching $20 billion.

Token costs emerging as new expense category

Chief Financial Officer Jeremy Barnum introduced a new line item for investors to monitor: token expenses associated with large language model usage. While currently "trivial" and expected to remain minimal through year-end 2026, Barnum forecast "meaningful acceleration" in token spending during the second half of the year.

The bank tracks individual engineers' AI usage and evaluates which models suit specific purposes, according to Business Insider's previous reporting. This granular approach aims to optimize costs as token consumption scales.

Why it matters

Dimon's comments provide a reality check for investors expecting AI to deliver windfall margin expansion in financial services. As every major bank invests heavily in similar capabilities, the technology becomes table stakes rather than a competitive differentiator. The real beneficiaries are customers receiving better service, while banks must continue managing expenses even as AI reshapes workflows. For the broader economy, this dynamic suggests AI-driven productivity gains may flow primarily to consumers through lower prices and improved products rather than to corporate shareholders through expanded margins.

JPMorgan reported $21.2 billion in net income for the quarter, up 41% year-over-year, though significantly boosted by gains on a Visa investment. Investment banking fees reached $3.3 billion, up 30% and the highest since 2021. These details were first reported by Business Insider.