March 24 (Reuters) - Martin Sorrell's advertising group S4 Capital said on Tuesday its 2026 like-for-like net revenue is expected to come in below last year's levels, broadly matching analysts'
Sorrell's S4 confident on 2026 despite hit from MidEast conflict, AI spending
S4 Capital's 2026 Outlook and Market Dynamics
By Rishab Shaju
March 24 (Reuters) - Martin Sorrell's advertising group S4 Capital on Tuesday forecast 2026 net revenues would meet analyst expectations despite a first-quarter hit from lower client spending from the Iran conflict, sending its shares up as much as 27%.
Revenue Forecast and Market Response
The group said 2026 like-for-like net revenue will be in line with analysts' consensus and that it is targeting higher margins, with second-half performance expected to improve from cyclical demand following lower first-quarter net revenues.
S4 shares jumped to as much as 26 pence. The stock had been under pressure in the past year from weak client spending, which forced it to cut its revenue forecast four times during 2025.
Impact of Artificial Intelligence on Advertising
AI Spending to Stay
Artificial intelligence is reshaping the ad industry by automating content, driving demand for data-driven campaigns and shifting businesses' spending towards AI-led efficiency initiatives - a trend Sorrell said is here to stay.
Industry Trends and Client Strategies
"I think we've gone from a sort of cutting phase on marketing spend to stabilization," Sorrell told Reuters in an interview, citing recent varying spend and hiring across technology behemoths, largely in the U.S.
S4's clients include Google parent Alphabet, Amazon and Meta.
Geopolitical Uncertainties
Meanwhile, heightened uncertainties from tariffs and the escalating U.S.-Israeli conflict with Iran continue to weigh on business and consumer sentiment.
Sorrell said the company will have to wait and see the impact of the war on client spending. S4's revenues from the Middle East account for about 2-3% of its total.
Cost Management and Financial Performance
Cost Cuts Paying Off
S4 has been cutting costs and streamlining operations to offset pressures on margins and has sought to cut debt. It is hoping a full-year impact of the drive will be seen in 2026, even as it anticipates that clients will remain cautious in the near term.
Profit and Dividend Updates
The company reported operational core profit of 81.2 million pounds ($109.03 million) for 2025, above its own forecast of 75 million pounds, after margins improved on net revenues of 673 million pounds. It lifted its final dividend by 10% to 1.1 pence apiece.
($1 = 0.7448 pounds)
(Reporting by Rishab Shaju in Bengaluru; Writing by Pushkala Aripaka; Editing by Harikrishnan Nair, Sherry Jacob-Phillips and Jan Harvey)
