As Artificial Intelligence (AI) becomes increasingly embedded in business operations, ethical concerns regarding its deployment have intensified. Despite growing regulatory and academic attention, it remains unclear whether the strategic benefits of firm-level awareness in AI ethics justify the associated implementation costs. To address this gap, this study develops a novel measure of firm-level AI ethical awareness (FAIEA) by applying textual analysis to earnings call transcripts from U.S. public firms between 2010 and 2023. FAIEA captures the extent to which firms recognize and integrate ethical considerations into their AI-related strategies and practices. We validate the measure through multiple approaches, demonstrating that it accurately identifies AI ethics discussions, exhibits intuitive variation across time and industries, and captures firm-specific heterogeneity. In the short term, FAIEA is significantly associated with lower asset turnover, consistent with the view that awareness of AI ethics may constrain operational efficiency. However, we find no statistically significant effects on profit margins or overall profitability. In the long term, FAIEA is positively associated with market valuation, suggesting that its benefits may take time to materialize. To address endogeneity concerns, we implement a difference-in-differences design leveraging the EU AI Act proposal as an exogenous shock to firms’ AI ethical positioning, and find consistent results. Further mechanism analyses reveal that enhanced innovation quality, increased stakeholder trust, and reduced firm-specific risk are key underlying drivers. These results remain significant after addressing the confounding effect of AI activity. Overall, our findings indicate that a firm’s AI ethical awareness functions not merely as a compliance obligation, but as a strategic capability with long-term value implications.