Analyzing Q1 2026 AI Spend Impact on Popular’s Financials and Growth Drivers

Bottom line

Based on Popular’s Q1 2026 earnings commentary, BPOP’s AI/technology spending appears to be impacting results primarily through (1) higher “technology and software” operating expenses in Q1 and (2) a shift in how certain transformation/ERP-related costs flow through the P&L (capitalized vs. amortized)—while management also emphasized cost-control actions and efficiency efforts that helped keep operating expenses contained. There is no indication in the provided excerpts that AI spending has been curtailed or that it materially worsened core profitability in Q1. ¹²

---

1) How AI/technology investment shows up in the Q1 2026 financials

A. Operating expense level: technology/software cost increased, but overall expenses fell

Popular reported total operating expenses of $467 million, which was down $6 million vs. Q4 (and down $22 million excluding the FDIC reversal in Q4). ²
Management specifically noted that expense trends were partly offset by higher “technology and software expenses,” while many other line items decreased (e.g., personnel/healthcare, promotions, and professional fees). ²

Implication for your question: even though Popular is continuing technology/transformation investment (including the AI/technology direction referenced by management as “technology and transformation initiatives”), that investment is visible in operating costs as “technology and software expenses,” but it did not prevent a net decline in operating expenses in Q1. ²

---

B. Transformation/ERP timing affects whether costs are expensed or amortized

Management discussed a major transformation milestone: Popular went live on its ERP in January, and this changed how some costs translate into expenses—costs that may have been capitalized previously are now being amortized. ¹

Implication: this kind of accounting/timing change can affect reported quarterly expense levels and comparability, because capitalized costs later show up through amortization expense rather than as earlier capitalized balances. ¹
Management also framed these as “shifts” rather than cancellations or reductions in technology spend. ¹

---

C. Management explicitly denies pulling back on technology/transformation

Popular stated that it is continuing to invest in technology and people and that it is not “pulling back on our technology and transformation efforts,” though it expects timing differences in how costs appear in results. ¹

Implication: for Q1 2026 performance, the excerpt supports the view that AI/technology investment is ongoing, and any short-term earnings impact is more likely timing and classification than a deliberate reduction in spend. ¹

---

2) Did AI/technology spending pressure Q1 earnings, or was it absorbed?

Q1 profitability improved despite ongoing technology investment

Popular reported net income of $246 million and EPS of $3.78 for Q1 2026. ³
Management attributed Q1 improvement to higher net interest income, margin expansion, and lower operating expenses. ³

Technology spend appears to be one factor within operating expense movements, but the overall direction of operating expenses (down vs. Q4) and profitability (up vs. prior periods) suggests the company absorbed these technology-related costs in the quarter. ³²

---

Expense control actions offset technology spend

Management described multiple items that benefited first-quarter expenses, including “adjustments to expected expenditures that were lower in the first quarter” and reduced excess accruals from incentive payouts; management also referenced efficiency efforts embedded in guidance, including around $50 million of efficiency efforts for the year. ¹

Implication: even with higher technology/software expenses, expense discipline and efficiency mitigated the net impact on total operating expenses. ¹²

---

3) What guidance signals exist about the forward expense impact of AI/technology?

Popular guided that full-year expenses are expected to increase by 2% to 3% (vs. original guidance of 3%) and emphasized continued prioritization of investments in people and technology while targeting expense efficiencies. ²

Implication for your question: while Q1 showed technology/software cost pressure within operating expenses, management’s guidance suggests the company expects total expense growth to remain modest and consistent with an efficiency-balanced investment plan—rather than accelerating cost drag from AI/technology. ²

---

4) Net effect on Q1 2026 results attributable to AI/technology spending (best-supported conclusion from the excerpts)

From the provided excerpts, the most supportable characterization is:

1. Technology/AI-related spending increased the operating expense mix (via higher technology and software expenses) even though total operating expenses declined versus Q4. ²
2. ERP/transformation timing changed the expense mechanics (from capitalization to amortization for some costs), creating timing-driven shifts rather than evidence of reduced investment. ¹
3. Management’s overall earnings drivers in Q1 (net interest income/margin expansion and lower operating expenses) were favorable enough that reported net income and EPS increased, implying AI/technology investment did not dominate the quarter’s earnings outcome in the excerpts. ³²

Therefore: based strictly on the provided filing excerpts, AI/technology investment appears to be “visible” in Q1 through technology/software expense and transformation-related accounting/timing effects, but management indicates it is being offset by expense control and efficiency initiatives, resulting in improved profitability rather than deterioration. ¹³²

---