Egan-Jones Warns AI Could Squeeze Margins at Firms That Bill by the Hour
Egan-Jones argues that advances in artificial intelligence could compress margins at audit, consulting, law and engineering firms, with knock-on effects for venture capital returns and the US housing market. In a commentary released on Oct. 16, 2026, the ratings firm says broad economic disruption is a near certainty.
- Egan-Jones expects AI to push down prices at audit, consulting, law and engineering firms.
- The commentary says KPMG won a 14% fee cut from its auditor by demanding AI savings be passed on.
- It argues AI lets startups scale on less capital, compressing venture returns.
- Home prices rose 1.6% in the year to June versus inflation of 3.5%; Egan-Jones sees short-term downward pressure.
Professional services in the firing line
According to Egan-Jones, the latest AI models have crossed a threshold of quality and speed that makes widespread adoption possible. The commentary puts audit, consulting, law and engineering firms at the center of its analysis. These firms sell intellectual capital by the hour, and Egan-Jones expects their prices to decline significantly as small teams using AI match the output of large practices.
As an example, the commentary says KPMG pressed its auditor to pass on AI savings and won a 14% fee cut. Egan-Jones expects every audit client to make the same demand.
Seniority, it argues, offers little protection. Senior staff sell expertise that AI now makes readily available, and their leverage buys time but not a guarantee of future employment. Lower barriers to entry also let new rivals compete on price and quality without years of hiring.
Software and private markets
For software providers, the commentary points to the Model Context Protocol, an open standard that lets AI models connect directly to outside software and data. Egan-Jones says this makes a product's own interface matter less. It sees pricing power eroding for legacy software and data providers, where a single product launch can now reprice a company in a day.
In private markets, Egan-Jones describes a quiet deflation in the value of money. Startups reach scale faster and on less capital, because AI does much of the work that venture funding once paid for. That compresses venture returns, and the commentary suggests few limited partners have priced this in.
The housing channel
On housing, Egan-Jones says job losses among screen-based workers are the channel to watch. It cites home prices that rose 1.6% in the year to June, below inflation of 3.5%. It also notes that the median new home cost 4.7 times median household income in 2025, up from 3.6 times in 1984.
The firm's view is short-term downward pressure on prices, while the long-run case for urban land holds.
Who the commentary is for
Egan-Jones notes that the commentary was not written by its credit analysts. It is aimed at institutional investors and risk managers, offering a framework for assessing the structural pressures building across professional services, private markets and housing. Egan-Jones is an NRSRO founded in 1995 that offers credit ratings and proxy services.
The projections are the firm's own views rather than established outcomes. For investors, the commentary's main message is that pricing in hourly-billed services, software and venture portfolios may need to be reassessed as AI adoption spreads.
PR Newswire: Egan-Jones Examines AI's Pressure on Firms That Sell Expertise by the Hour
