2025 and Beyond: Insights for TMT Leaders

The technology, media, and telecommunications (TMT) sector is no stranger to volatility and in many ways is a driver of volatility through its innovation and advances. With the moving target of consumer habits and expectations, supply chain disruptions that can halt production, and ever-evolving regulations that reshape the playing field, these industries face a constant barrage of forces that can upend operations and strategies. Economic headwinds, such as shifting global trade dynamics, only compound the challenges.

Amid these changes, deep insights into market trends and regulatory developments become paramount. Merely reacting to volatility has never been enough – leaders in the TMT sector must proactively embrace volatility. By staying ahead of emerging trends, anticipating potential disruptions, and fostering a culture of adaptability, companies can turn volatility into an opportunity for growth and innovation.

Achieving this mindset requires a steady stream of insights – an understanding of the forces at play, their implications, and the potential paths forward. With these insights, TMT leaders can navigate the volatile landscape with confidence, seizing opportunities and mitigating risks along the way.

Embracing the possibilities of AI agents

In today’s rapidly evolving technological landscape, AI agents stand as a transformative force, offering unprecedented opportunities for businesses to innovate and thrive. These intelligent systems have the potential to revolutionize industries, streamline processes, and unlock new avenues for growth and efficiency.

At their core, AI agents are artificial intelligence-driven systems designed to autonomously perform tasks, make decisions, and interact with users or other systems in a goal-oriented manner. Using advanced algorithms and contextual understanding, AI agents can manage complex tasks with minimal human intervention while adapting to dynamic environments.

The possibilities of AI agents are vast and impactful. Companies across various sectors already are harnessing the power of these agents to enhance operations and drive business outcomes. For instance, AI agents in customer service can resolve inquiries, personalize interactions, and provide instant assistance, significantly improving the customer experience while reducing the workload for support teams.

Moreover, AI agents can optimize workflows in areas like supply chain management, scheduling, and resource allocation. These agents can predict demand, identify inefficiencies, and recommend actionable solutions, enabling organizations to save time and reduce costs.

Another compelling application of AI agents is in data analysis and insights generation. By continuously monitoring and processing data streams, these agents can identify trends, detect anomalies, and provide actionable recommendations in real time. Industries such as healthcare, finance, and logistics – where speed and precision are critical – stand to benefit immensely from these capabilities.

As exciting as these possibilities are, it’s essential to approach AI agent implementations thoughtfully and with a strategic mindset. Ensuring data privacy, security, and ethical compliance is crucial, particularly as these systems often deal with sensitive information. Collaborating with trusted technology partners and using robust, enterprise-grade solutions can mitigate potential risks and foster secure adoption.

To unlock the full potential of AI agents, organizations should develop a comprehensive road map, identifying high-impact use cases and prioritizing initiatives based on their potential return on investment. Additionally, fostering a culture of innovation and equipping employees to collaborate effectively with AI technologies can help enable seamless integration and maximize benefits.

Strengthening financial disclosures for public companies

For public companies, segment reporting is an area of intense scrutiny by regulators and investors alike. The new disclosure requirements aim to provide greater transparency into a company’s significant expenses and operational segments. By shining a light on these areas, companies can enhance trust and give stakeholders a clearer view into their financial performance.

The updated rules require public entities to disclose significant expense categories that regularly are reviewed by the chief operating decision-maker (CODM). This review could include areas like research and development spending, acquisition costs, or impairments – expenses that can materially impact profitability for a given segment. No longer can these be included in broad “other expense” line items.

Beyond listing the amounts, the disclosures must describe the metrics and review process employed by the CODM. For companies with multiple reportable segments, these significant expenses might differ across the organization. The guidance enforces an ongoing evaluation each reporting period.

For companies pursuing an initial public offering, these new segment reporting rules take on even greater importance. The Securities and Exchange Commission (SEC) review process places a sharp focus on segment conclusions and the level of disaggregation. An incomplete or inconsistent approach can lead to lengthy delays in going public as companies revise filings in response to SEC questions and comments. Given the volatility in tech valuations, an ill-timed delay could derail an offering entirely.

Preparing for increased transparency with tax disclosures

New tax disclosure requirements are on the horizon for companies in the TMT space. These changes, introduced by Accounting Standards Update (ASU) 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” aim to provide investors with greater transparency into a company’s tax affairs.

Public business entities (PBEs) already are required to include a rate reconciliation in their income tax footnotes. However, the new standard gives very specific guidance on the categories that must be included in every rate reconciliation, such as nondeductible expenses and state taxes. The update also requires separate disclosure of any item within one of the prescribed categories that meets a certain percentage threshold of the statutory rate. This reconciliation will break down the material components of a company’s income tax expense, shedding light on factors that contribute to the difference between the statutory tax rate and the effective tax rate. While this requirement is specific to PBEs, nonpublic entities considering an initial public offering might consider adopting this practice to enhance their tax disclosures.

Additionally, all entities subject to the income tax disclosure requirements under U.S. GAAP will need to disaggregate their income taxes paid disclosures. This means that companies will need to disclose the amount of income taxes paid, net of refunds received, to each jurisdiction that exceeds 5% of their total net income tax payments during the year. This level of granularity will provide stakeholders with a better understanding of a company’s global tax footprint.

For multinational companies, the new rules require the disaggregation of pretax book income from continuing operations between domestic and foreign jurisdictions. Furthermore, income tax expenses must be broken down into federal, state, and international components, offering greater insight into the geographical distribution of a company’s tax obligations.

While these disclosure requirements are not effective until 2025 for PBEs and 2026 for nonpublic entities, companies are advised to start gathering the necessary data now. Being proactive will help the comparative financial statements, which allow retrospective application of the new rules, be prepared accurately and efficiently.

Embracing volatility with actionable insights

In an ever-changing business landscape, volatility has become the rule rather than the exception. From supply chain disruptions to economic headwinds, companies across industries face a multitude of challenges that can significantly affect their operations and bottom line.

In this volatile environment, having access to actionable insights is crucial for organizations to not only avoid and mitigate risks, but also uncover new sources of value. By leveraging the expertise and knowledge of industry specialists who embrace volatility, TMT companies can gain a deeper understanding of emerging trends, potential risks, and opportunities for growth.