The May 2026 Manufacturing CFO Outlook shows finance leaders growing more confident even as tariff-driven cost pressure continues to build. The report is based on responses from 28 CFOs at mid- to large-cap manufacturing companies. Under half report optimism over the next 12 months, rising to 46%, up 8% from our February 2026 survey. The majority also report demand holding firm due to higher unit sales compared to a year ago. At the same time, CFOs are accelerating investment in AI and data infrastructure, even as tariffs continue to squeeze costs of goods sold and margins.
Despite this improving sentiment, the operating environment remains far from settled. Commodity and raw material prices have overtaken general economic and market volatility as the single most-cited pressure on manufacturers' businesses. Trade policy uncertainty continues to work its way directly into the cost structure: more CFOs now report higher cost of goods sold and renegotiated supplier pricing than did three months ago.
Key Insights
- Optimism is rising. 46% of CFOs are optimistic about the next 12 months, up from 38% last quarter, while pessimism has held roughly steady.
- Demand remains resilient. 57% of manufacturers report higher unit sales than the same quarter last year.
- Tariff costs are biting harder, even as planning stabilizes. More CFOs report higher input costs and supplier renegotiations than in Q1, even as fewer report capex disruption or planning paralysis.
- AI has become the clear top finance priority. 64% of CFOs name AI for back-office/finance efficiency among their top two technology investments, tied with data analytics/ERP upgrades.
- Capital spending intentions are strong. 61% of CFOs expect capex to increase over the next year, and most of those expect increases above 6%.
- M&A is a growing theme. Acquisition integration and active deal activity now show up repeatedly among CFOs' top stated priorities for the quarter ahead.
- Cost competitiveness, not red tape, is the top site-selection deal-breaker. Nearly half of CFOs say uncompetitive total operating costs are most likely to disqualify a location for their next major capital investment.
Financial Outlook Improves, With Optimism Now Outpacing Neutral Sentiment
As reported above, manufacturing CFOs report a modest but real improvement in financial sentiment, despite the fact that 36% of CFOs remain neutral and 18% continued to report pessimism.
This aligns with broader signals across the manufacturing economy. The S&P Global US Manufacturing PMI increased to 55.7 in June 2026, surpassing market forecasts and reaching its highest level since May 2022, while the ISM Manufacturing PMI registered 54% in May, its highest reading since May 2022, marking the fifth consecutive month of sector expansion. Stronger factory-level data appears to be reinforcing CFOs' own read on the year ahead. Our CEO Outlook report from Q1 in 2026 found a similar pattern, with manufacturing CEOs' expectations for 2026 expansion climbing 19 points from their mid-2025 low.
Positive Financial Sentiment Grows, CFOs Less Neutral
Source: Manufacturers Alliance CFO surveys, February & May 2026.
Operating Margins Hold Steady as Cost Pressure Persists
Operating margin trends this quarter look similar to the start of the year: half of CFOs (50%) report stabilized margins, 32% report expansion, and 18% report contraction. That continuity is notable given that tariff-related cost pressure has intensified over the same period (see below), suggesting many manufacturers have found ways to offset higher input costs through pricing actions and supplier negotiations rather than absorbing them into margins outright.
Unit Sales Growth Continues to Outpace Flat or Declining Volumes
Demand conditions remain a bright spot. 57% of CFOs report higher unit sales than the same quarter a year ago, compared with 25% reporting flat volumes and 18% reporting declines. Combined with the PMI data above — where the New Orders Index expanded for a fifth consecutive month, registering 56.8%, up 2.7 points from April — the picture is one of firming demand rather than a temporary bounce.
Tariffs Are Cutting Deeper Into Costs, Even as Planning Uncertainty Eases
The clearest shift in this quarter's data is how tariffs are affecting the income statement. Compared with February 2026, more CFOs now report direct cost impacts:
- Increased cost of goods sold: 82%, up from 65% in Q1
- Reduced profit margins: 57%, up from 49%
- Renegotiated pricing with suppliers: 68%, up from 49%
- Increased complexity in financial planning and forecasting: 68%, down slightly from 70%
- Changes in capital expenditure plans: 4%, sharply down from 22%
- No significant impact: 7%, down from 19%
Taken together, these results suggest manufacturers have moved past the initial phase of tariff-driven planning disruption and are now managing a more predictable, but more expensive, cost structure. Fewer CFOs are altering capital plans because of tariffs, but far more are absorbing higher costs or passing them through supplier and customer pricing. That pattern is consistent with what other recent manufacturing research has found: in the Manufacturers Alliance's own Mid-Year Tariff Impact survey, 77% of manufacturers reported passing tariff costs to customers through price increases, while only 10% reported shifting production as a response.
This quarter's ranking of external risk factors reinforces the theme. Commodity and raw material prices now rank as the single highest-impact external factor for manufacturers, edging out general economic and market volatility, which topped the list in Q1. Expected changes in tariffs and global supply chain disruptions round out the top four — largely the same set of pressures CFOs flagged last quarter, but with input costs now weighing more heavily than broad macro uncertainty.
AI Adoption Becomes the Defining Finance Priority
If Q1 was about technology modernization broadly, Q2 is about AI specifically. Asked to name their top two technology investment priorities, 64% of CFOs cited AI for back-office and finance efficiency — tied with data analytics and ERP upgrades, also at 64% — well ahead of automation/robotics on the shop floor (39%) and cybersecurity (14%).
That emphasis shows in the CFOs responses when asked about their top priority for the coming quarter. AI adoption was the single most common theme in open-ended responses, with CFOs describing goals ranging from "leveraging AI" broadly to more specific use cases like AI-driven analytics, productivity gains, and even early agentic AI applications in commercial finance. This tracks with the broader industry conversation: Deloitte's 2026 manufacturing outlook similarly points to targeted investments in digital tools, including agentic AI, as essential for manufacturers seeking to maintain a competitive edge in 2026 and beyond.
Capital Spending Intentions Strengthen
CFOs are backing that technology push with real capital commitments. 61% expect capex to increase over the next 12 months, versus 32% expecting it to hold steady and just 7% expecting a decrease. Among those increasing spend, the appetite is sizable: nearly three-quarters expect increases of 6% or more, and 42% expect increases above 10%. That's a more aggressive capital posture than the cautious, wait-and-see tone that has characterized much of the past year's tariff-driven planning environment.
M&A and Portfolio Activity Emerge as a Recurring Theme
Several CFOs cited acquisition integration, ongoing M&A transactions, or "managing potential M&A activities" among their top priorities for the quarter — a theme that wasn't prominent in Q1. This fits a broader pickup in dealmaking sentiment across industry: EY's 2026 CEO Outlook found 53% of CEOs intend to pursue acquisitions in the next 12 months, with those deals strategically aligned to enterprise-wide transformation agendas, and 79% of CEOs planning joint ventures or strategic alliances in 2026, up sharply from 62% in 2025. For manufacturing finance teams, that activity adds integration and structuring work — tax structure and captive insurance considerations, organizational alignment, and system consolidation — on top of already-full digital transformation agendas.
Cost, Not Regulation, Drives Site-Selection Decisions
Asked what would most likely disqualify a location for their next major capital investment, CFOs were unambiguous: 46% point to uncompetitive total operating costs, high taxes, utility rates, or labor costs that permanently compress margins. This ranked far ahead of regulatory and ESG volatility (21%) or labor scalability constraints (18%). Notably, infrastructure readiness and the availability of shovel-ready sites, often cited as practical bottlenecks to reshoring, rank near the bottom of CFOs' concerns.
This helps explain why broader reshoring activity has remained more modest than some headlines suggest. A recent industry analysis found that, when excluding electronics and semiconductor megaprojects, manufacturing construction spending rose 5.6% between February 2025 and March 2026, a positive but far from booming pace once inflation is factored in. For most manufacturers, the math on where to locate the next dollar of capital still comes down to plain cost competitiveness rather than policy incentives or site readiness.
Consistent with that view, CFOs report a real but measured shift in physical footprint over the past three years: 32% say they've focused capital spending on U.S. facilities and 18% have increased investment in Mexico or Canada, while 29% report no significant change to their footprint at all.
Conclusion
Manufacturing CFOs are entering the second half of 2026 more confident than they were a quarter ago, supported by strong demand, stabilizing margins, and a manufacturing economy that, per the latest PMI readings, is expanding at its fastest pace in four years. But that confidence coexists with a tariff and commodity cost environment that is squeezing income statements more directly than it was last quarter, even as the planning uncertainty itself has begun to ease.
The finance function's response is clear: lean harder into AI and data infrastructure to drive efficiency, back that up with real capital investment, and, for a growing number of organizations, manage the added complexity of M&A activity at the same time. As one CFO put it simply when asked about their top priority for the quarter ahead: "planning for the upcycle." The data suggests many of their peers are doing the same.
AI Transparency:
Data for this article was analyzed with assistance from an AI tool and reviewed by the Manufacturers Alliance research team.
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