3M (MMM) raised its 2026 profit forecast on July 21, as stronger demand and price increases helped its safety and industrial business post a better second quarter.The company reported adjusted earnings of $2.40 a share on sales of $6.5 billion. It now expects full-year adjusted earnings of $8.80 to $8.95 per share, up from its previous forecast of $8.50 to $8.70.3M shares rose about 8.86% to $173.21 in midday trading on July 21, making the stock one of the stronger performers in the Dow Jones Industrial Average.”We delivered a strong second quarter, exceeding expectations with mid-single-digit sales growth, robust operating margins of about 25%, and double-digit EPS growth,” said 3M chairman and CEO, William Brown.The beat-and-raise quarter was the main reason for the move. But 3M also gave investors a more unusual growth story to watch: a small optical-connectivity business that is beginning to appear in artificial intelligence data centers.3M and Microsoft (MSFT) said last week that Microsoft Azure would become the first announced hyperscale cloud provider to deploy 3M’s Expanded Beam Optical technology. The product is designed for fiber connections in dense data-center environments, where dust, vibration, and small alignment problems can interfere with high-speed data transmission.3M’s industrial business drives the profit raiseThe safety and industrial segment remained the main source of strength. The business sells products used in personal safety, industrial adhesives, abrasives, electrical markets, and automotive aftermarket applications.Reuters reported that continuing demand and price hikes in the unit helped drive 3M’s higher profit forecast. The company said pricing should fully offset the profit impact from oil-related inflation.Related: 3M: The history behind the massive global conglomerate3M’s transportation and electronics business also improved. The Wall Street Journal reported that safety and industrial sales rose 7.5% to $3.09 billion, while transportation and electronics sales increased 6.2% to $2.07 billion.Those numbers help explain why the earnings report, rather than the Microsoft partnership alone, drove Tuesday’s move. 3M’s near-term profit story still comes from demand, pricing, and margin improvement in its core businesses.3M finds a new opening inside AI data centersAI data centers rely on dense fiber networks that carry information among servers, chips, and networking equipment. Dust, vibration, and connector misalignment can weaken optical signals, especially when equipment is installed, moved, or serviced.3M says its Expanded Beam Optical technology expands and collimates light inside fiber connections, making them less sensitive to contamination or movement.Microsoft’s deployment gives EBO a named hyperscale customer and places 3M in a less visible layer of the AI buildout: the physical network that moves data between computing systems.More AI:The new Chinese AI model rattling U.S. tech investorsAnthropic restores access to Mythos 5 for select organizationsSoftBank CEO offers stinging critique of Musk’s AI betFor 3M, it is supplying a component that helps dense data-center systems maintain faster, more reliable optical connections, rather than chips, cloud contracts, and electricity demand. Brown told analysts on July 21 that EBO revenue could grow four to five times from its current annual level of $40 million to $50 million.Key numbers behind 3M’s quarter and AI opportunity$2.40: 3M’s second-quarter adjusted earnings per share$6.5 billion: 3M’s second-quarter sales$8.80 to $8.95: 3M’s new 2026 adjusted earnings forecast$8.50 to $8.70: 3M’s previous 2026 adjusted earnings forecast7.5%: Safety and industrial sales growth$40 million to $50 million: Current annual revenue level for EBOFour to five times: Potential EBO revenue growth cited by CEO William Brown
3M’s industrial, transportation, and electronics departments are performing well.wellesenterprises / Getty Images
3M’s AI opportunity starts from a small baseAt $40 million to $50 million in current annual revenue, EBO is tiny compared with 3M’s overall business. 3M generated $6.5 billion in sales in the second quarter alone.Even a four- or fivefold increase would put EBO’s annual revenue at roughly $160 million to $250 million, still small compared with 3M’s multibillion-dollar safety, industrial, transportation, and electronics businesses.Azure’s deployment gives 3M a credible customer in a fast-growing data-center market, but the company’s 2026 earnings outlook still depends mostly on industrial demand, pricing, cost control, and margin improvement.A broader rollout among hyperscale cloud providers would make EBO a more visible growth driver. Limited adoption would leave it as a useful but relatively small extension of 3M’s electronics portfolio.July 21’s rally still largely reflected 3M’s beat-and-raise quarter. The Microsoft partnership raises a different question for the next few quarters: whether EBO can move from a small optical-connectivity product into a meaningful niche in the AI data-center supply chain.Related: Microsoft CEO’s Anthropic criticism reveals bigger AI power struggle