How Coty Is Building AI Into Its Margin Strategy

Coty Inc. (COTY) has launched an aggressive artificial intelligence initiative that’s reshaping its operational cost structure. Rather than treating AI as a peripheral upgrade, the company is embedding intelligent systems directly into procurement, content production and customer engagement. This integrated approach is emerging as a tangible lever for margin expansion.

The AI Deployment Roadmap

The company’s strategy centers on three critical areas. First, agentic AI is automating routine workflows and accelerating content generation at scale. By replacing manual processes with intelligent agents, Coty is reducing production cycles while maintaining quality. Second, predictive analytics and enhanced data visualization are enabling faster, more informed decision-making across departments. Third, AI-powered chatbots and virtual try-on technologies are transforming how customers interact with products on retail platforms, driving personalization without proportional cost increases.

A particularly significant focus area is procurement. Digital assistants are now structuring contracts and streamlining negotiations, unlocking efficiency gains that traditionally required substantial manual effort. According to management, these early automations are already delivering measurable savings that flow directly to the bottom line.

Early Results and Scaling Potential

Management has highlighted that initial benefits are already visible across procurement, content creation and backend processes. The company expects these efficiencies to compound meaningfully over the coming year as systems mature. This positions AI not as a one-time cost reduction, but as a sustainable margin lever capable of delivering continuous improvement.

Stock Valuation Context

COTY currently trades at a forward 12-month P/E ratio of 7.32, trading well below both its industry average of 26.35 and the sector average of 16.48. Over the past three months, shares have declined 22.9% versus the Consumer Staples sector’s 3.5% decline, suggesting the market may not yet be pricing in the potential uplift from AI-driven operational gains. The stock carries a Zacks Rank #3 (Hold).

Investment Perspective

The market’s current skepticism presents an asymmetric opportunity. If Coty successfully scales its AI initiatives and converts operational savings into margin expansion—a scenario management appears confident in—the disconnect between current valuation and potential earnings power could narrow meaningfully.