Report: Small business profits rise as technology spending grows in February

NEW YORK — Small business profitability increased in February despite ongoing cost pressures, according to  Bank of America data. Profits rose 1.2% from a year earlier, reaching their highest level since March 2025.

The bank’s inflow-to-outflow ratio, a measure of profitability, rose to 1.03 in February. The data showed a rebound among businesses with annual revenue of less than $500,000, which recorded their strongest growth since April 2025.

Some of the increase may reflect seasonal factors. Nearly 40% of small business owners view tax refunds as both business and personal funds, which can boost balances early in the year.

At the same time, cost pressures remain. Data from the Bureau of Labor Statistics showed a January rise in the Producer Price Index, driven by higher margins in trade services. Goods prices were unchanged, suggesting some businesses passed higher costs to consumers.

Hiring trends were mixed. Payments to hiring firms increased from January to February, indicating some improvement, but payroll growth per small business client remained negative. Payroll payments were about 5% below the 2024 average, though slightly higher than in January.

Survey data from the National Federation of Independent Business showed the labor market remains tight, with elevated job openings and compensation pressures, though conditions have eased compared with late 2025.

Spending on technology services, including artificial intelligence, rose more than 14% from a year earlier in February, the largest increase in the data series. Retailers led the increase, followed by manufacturers.

Bank of America said the increase in technology spending may reflect a focus on productivity as businesses delay hiring. Federal data showed business applications with planned hiring declined 4.4% while total applications increased 15.1% in January.

“Productivity is showing signs of accelerating relative to the pre-pandemic average,” the report said.

Overall spending by small business clients rose 1.9% from a year earlier in February but declined from the previous month. Debit card spending increased nearly 3% year over year.