S4 Capital shares tumble after sales hit by sluggish marketing spend
S4 said tech clients were continuing to prioritise spending on AI infrastructure over marketing budgets.
Shares in S4 Capital have plunged by a fifth after the advertising firm said its customers were tightening marketing budgets in favour of AI spending.
The company, headed up WPP’s founder Sir Martin Sorrell, said its financial performance was being dampened by challenging conditions in the market.
Revenues for the third quarter, between July and September, totalled £173.5 million – which was a 10th lower than the same period a year ago.
S4 said tech clients were continuing to prioritise and increase spending on AI infrastructure over marketing budgets, which was resulting in weaker sales.
This was particularly the case for so-called “hyperscalers” who are investing heavily in data centres to power AI processes.
Sir Martin said clients had remained “cautious” which reflected “heightened macroeconomic uncertainty, including the continuing conflicts in Ukraine and the Middle East”.
But this was set against bigger AI spending ambitions, he said, adding: “The four biggest hyperscalers are projected to spend over five trillion US dollars (£3.76 trillion) on AI-related capital expenditure between 2025 and 2030.
“While the macroeconomic environment remains uncertain, we see growing opportunities as clients become more selective about growth geographically and increasingly focused on implementing technologies such as AI, blockchain and quantum computing to drive efficiency.”
S4 Capital said it was expecting revenues for the year to be “marginally below” previous guidance, and down on the previous year by “high single digits”.
Nevertheless, it ended the quarter with net debts of £76 million – around half the £151 million it reported at the same time last year.
Shares in the company were down around 20% on Wednesday morning.