Stagwell NASDAQ: STGW reported record third-quarter revenue, net revenue, adjusted EBITDA and adjusted earnings per share, as the marketing company emphasized its expansion into AI-based marketing transformation software and services.
Chairman and Chief Executive Officer Mark Penn said the company is shifting from a primarily marketing-services model toward a technology-focused marketing transformation business. He pointed to partnerships with ServiceNow, Adobe and Palantir, as well as growth in Stagwell’s suite of agentic AI products known as the “Machines.”
“We aim to be nothing less than number one in AI marketing transformation,” Penn said, describing a market in which companies are looking to update marketing operations alongside their IT, HR and supply-chain systems.
Record quarter and raised outlook
Revenue rose 10% year over year to $816 million, while net revenue increased 8% to $664 million, according to Chief Financial Officer Ryan Greene. On an organic basis, revenue grew 11% and net revenue increased more than 7%, which Greene said marked the company’s strongest organic growth in seven quarters.
Adjusted EBITDA rose 25% year over year to $144.8 million, while adjusted EBITDA margin expanded about 290 basis points to 21.8% of net revenue. Adjusted EPS increased 42% to $0.34.
The company raised its full-year adjusted EBITDA outlook to $490 million to $540 million and increased its adjusted EPS forecast to $1.07 to $1.21. It reiterated expectations for total net revenue growth of 8% to 12% and free-cash-flow conversion of 50% to 60% of adjusted EBITDA.
Greene said the outlook reflects expectations for continued organic-growth acceleration in the fourth quarter, margin expansion and contributions from recent M&A activity.
Technology segments drive growth
Digital Transformation and The Marketing Cloud were the largest contributors to quarterly growth. Digital Transformation net revenue rose 23% organically to $119 million, driven by demand for technology implementation, integration and workflow optimization. The Marketing Cloud’s organic net revenue increased 108% to $56 million, primarily reflecting software sales tied to the Stagwell Machines and increased demand for research products.
The Digital Transformation segment generated a 32.1% adjusted EBITDA margin during the quarter, while The Marketing Cloud posted a 44.3% margin, Greene said. He attributed the results in part to the greater contribution of software sales.
Stagwell reported year-to-date enterprise technology bookings of $59 million, more than double its initial target. Penn said the company doubled its enterprise technology bookings goal for 2027 to $150 million, citing its pipeline and demand for digital transformation projects.
Penn said clients can buy individual AI products or use Stagwell for broader marketing transformation projects, which he characterized as typically $20 million to $40 million assignments with recurring revenue potential. He also said the company’s systems are designed to integrate with customers’ data and technology stacks and can be operated by the clients themselves.
Other businesses and geographic trends
Communications delivered 20% organic net revenue growth to $124 million, supported by corporate communications, public affairs and work tied to the U.S. midterm election cycle. Stagwell’s political business is now expected to record low-single-digit growth compared with 2024, ahead of prior expectations for flat performance.
Media and commerce net revenue declined 2% organically to $159 million. Growth in owned media and customer relationship management was offset by reduced Middle East spending tied to the regional conflict. Marketing services generated $218 million in net revenue, declining 9% year over year and 7.5% organically, which management attributed to difficult comparisons and the timing of recently won business.
The U.S. business grew organically by $53 million, or 11%, while Latin America expanded 54% from a smaller base. These gains were partly offset by a $9 million, or 35%, organic decline in the Middle East.
Penn said recently awarded marketing-services engagements are taking longer to become fully integrated, but the company expects those wins to support a return to growth in 2027. Greene said media and commerce is expected to return to growth early next year.
Federal work, partnerships and capital allocation
Stagwell disclosed a major federal assignment in which it will serve as prime subcontractor to CACI on work for U.S. Central Command. Penn said the total contract value is $1.5 billion over five years, and Stagwell conservatively expects to capture 10% of that total in fees, with potential for more. He also said the company has since won a second significant federal assignment.
The company expanded its relationship with Palantir, which named Stagwell a Premier Marketing Transformation partner and established a joint go-to-market effort. Penn said Stagwell is building products on Palantir’s Foundry platform and is also partnering with ServiceNow around its Control Tower offering.
During the first nine months, Stagwell repurchased about 12.1 million shares at an average price of $6.23 per share. At quarter-end, it had repurchased roughly 260,000 shares during the quarter and had approximately $326 million remaining under its authorization.
Stagwell also increased its investment in RealClearPolitics and acquired Freestar after the quarter ended. Penn described Freestar as a technology-driven ad-operations platform serving more than 1,000 websites, including Fortune and The Boston Globe.
Year-to-date operating cash flow increased by about $125 million to $155 million, and free cash flow improved by roughly $93 million to $52 million. Net leverage ended the quarter at 2.73 times, down from 3.42 times a year earlier. Greene said the company remains on track to exit 2026 with leverage in the mid-2-times range.
About Stagwell (NASDAQ:STGW)
Stagwell Inc is a global marketing and communications services company that helps brands, organizations and institutions develop strategies, engage audiences and manage their reputations. Its services include advertising, media, public relations, digital marketing, consumer insights, creative development and marketing technology.
The company operates through a network of agencies and specialized businesses serving clients across North America, Europe, Asia-Pacific and other international markets.
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