S4 Capital, Martin Sorrell’s ad group, issued its second profit warning in less than two months, forecasting a low double-digit decline in annual like-for-like net revenue due to softer ad spend from content and technology clients.
Following the announcement, shares plummeted by as much as 17% to a record low. S4 Capital is facing a challenging economic environment that is forcing tech clients to trim marketing budgets.
With nearly half of its business tied to the technology sector, S4 Capital has been significantly affected by cautious ad spending as clients respond to economic challenges and higher interest rates. This pullback from tech clients contributed to a 15.2% drop in third-quarter net revenue, a decline greater than initially forecasted earlier this year.
“Data & Digital Media’s like-for-like run rate improved, while Content saw a slight uptick in the third quarter but did not benefit as much as anticipated from easier prior-year comparisons,” Sorrell commented. “We continue to focus on our larger, scaled relationships with leading enterprise clients and on margin improvement through greater efficiency, utilisation, billability, and pricing.”
Sorrell said the company’s focus on cost reduction to offset revenue losses, stating that S4 Capital is actively managing expenses in response to “continued net revenue softness.” However, he remains optimistic about future growth, pointing to new business activity and a focus on AI-driven hyper-personalisation as areas of opportunity.
Despite the current downturn, S4 expects full-year profit to be weighted towards the fourth quarter, expressing hope for a rebound as clients plan their year-end budgets. For the ad industry, S4’s trajectory highlights the broader pressure on marketing spend, particularly in the technology sector, where brands are cautiously navigating an unpredictable economy.