When asked to look ahead to 2026, middle market financial decision-makers reported being optimistic about the dynamic external landscape, with ambitions to strengthen capabilities and accelerate momentum.

Middle market businesses are the engine of our economy, and they remain resilient in the face of uncertainty. With survey data collected at the end of 2025, the Capital One Middle Market Strategic Investments research reveals that leaders are confident in their businesses' futures and have robust plans for investment in growth, talent and innovation.

Middle market firms report improved revenue at a rate of 71% compared to a year ago. With 69% reporting higher sales and 67% seeing stronger consumer demand, the sector appears healthy and primed for continued growth this year.

Middle market leaders are optimistic going into 2026

Financial decision-makers leading middle market companies are optimistic entering 2026 across their respective industries. These leaders report broad year-over-year improvements in revenue, profitability, sales and consumer demand. They also come into 2026 confident about their positioning to navigate these challenges and capitalize on new opportunities.

ADDITIONAL INSIGHTS

• Middle market leaders express strong confidence in the future, with 95% believing their business will continue operating in the next 12 months, 89% expecting business growth and 87% optimistic about their industry's growth prospects.

• In fact, 73% of leaders see the current business environment as providing more opportunities than challenges.

• The top two challenges respondents identify are inflation (60%) and economic uncertainty or market volatility (53%). Of the common challenges to consider, taxation was cited least often (22%).

The middle market is deploying capital for risk mitigation and growth. Leaders are also motivated for M&A.
There is a tight balance between capital deployment strategies focused on growth and stability. Almost half of surveyed financial decision makers plan to deploy capital for priorities such as cybersecurity and risk management, while nearly the same percentage of leaders prioritize growth through sales and marketing.

ADDITIONAL INSIGHTS

• Other common areas for capital deployment include cash flow optimization (44%) and research and development (42%).

• Middle market leaders who indicated their business had been involved in M&A in the past 12 months report their greatest motivations being to increase market share through consolidation (43%), acquire new technology or capabilities (41%), expand geographically (40%) and diversify product or service offerings (39%).

Beyond the bank: Private equity and credit power middle market’s tech bets

With growth on the agenda, half of the middle market business leaders surveyed are turning to alternative financing as a means to support it. Slightly more than one quarter of them have already secured these resources, while slightly fewer than one quarter are actively pursuing them.

ADDITIONAL INSIGHTS

• The types of alternative financing that middle market leaders are seeking most include private equity (e.g., venture capital, growth equity) (58%) and private credit (e.g., direct lending from non-bank lenders, mezzanine debt, unitranche loans or distressed debt) (50%).

• The primary intended uses for this type of funding are technology investments (68%) and working capital needs (45%).

• The largest percentage of companies that received alternative financing (18% of respondents) received between $50 million and $100 million in the past 12 months.

Organic growth and product innovation are big bets for the next 12 months

For the next 12 months, middle market leaders are focused on expanding through organic customer growth, while product and service innovation and market expansion were also frequently cited as growth strategies. To support these strategies, leaders are planning to invest the most significant resources in technology, and this is the area in which they also have the most significant expectations for return on investment.

ADDITIONAL INSIGHTS

• As leaders plan their investments of capital and resources for the next 12 months, their most common focus areas are AI (66%), IT infrastructure and cloud (53%), and data and analytics (47%).

• Middle market leaders also indicate a commitment to more "traditional" (by comparison) drivers of growth; 43% say they are investing in customer experience, 41% are investing in marketing and sales, and 40% in workforce and talent.

• The top reasons leaders give for prioritizing investments are to improve operational efficiency or productivity (53%) and to increase revenue or market share (48%).

• In the next 12 months, leaders expect investments in AI (29%), Marketing & Sales (13%) and IT Infrastructure & Cloud (10%) to have the greatest ROI.

Middle market executives are deepening investments in AI

A large majority of middle market leaders surveyed are actively investing in AI, while just over half of their companies are in the implementation and scaling stage of AI adoption.

ADDITIONAL INSIGHTS

• Nearly all leaders surveyed (93%) work for companies actively investing in AI. With 92% reporting leadership support, a strong majority of 89% feel their AI funding is adequate to reach their targets.

• Reports of the most common current uses of AI are for internal operations and communications (65%), enhancing employee productivity (63%), and gaining financial or business insights (52%).

• The most common motivations middle market leaders cite for their AI investments are to improve operational efficiency or productivity (53%), and to increase revenue or market share (48%).

Upskilling and talent development are top priorities

Retention of top performers, rising compensation costs and upskilling current workers top the list of talent challenges that middle market leaders say they’re facing. It is no surprise that most of these companies are making corresponding investments in training and development programs.

ADDITIONAL INSIGHTS

• Businesses are heavily investing in formal training, professional development and upskilling programs (68%), followed by technology-based learning tools and platforms (57%) to plug technical skills gaps.

• Among the technical skills gaps leaders report in their organizations, the most common are expertise related to artificial intelligence (AI) (58%) and cybersecurity (43%).

Middle market businesses are navigating with confidence into 2026

Middle market leaders surveyed in the 2025 Capital One Middle Market Strategic Investments study signal optimism as their businesses have grown through acknowledged challenges such as inflation, economic uncertainty and market volatility. They are making strategic investments aimed at growth and strengthening their capabilities, particularly in skills and technology, and anticipate continued growth in the near term.

• The majority of middle market leaders say there are currently more opportunities for their business than challenges.

• Recent success in key metrics (e.g., sales, demand and revenue) reinforces business leaders’ optimism moving into 2026.

• Growth plans are focused on organic expansion, product innovation and talent.