Stagwell’s Q3 financials revealed its “biggest quarter” with a 10 per cent increase in Q3 revenue to US$816 million (AU$1.1 billion).
Year to date, the company’s revenue was also up 10 per cent. Chairman and CEO of Stagwell Mark Penn said this proved its pivot to AI-powered marketing was working.
“This is the biggest quarter in Stagwell’s history. It shows we are on track to become number one in marketing transformation,” said Penn, in the Q3 earnings call.
“Software products, like our agentic Stagwell Machines, and the Digital Transformation segment are driving our business as we pivot from primarily marketing services to AI-powered marketing transformation. We have more than doubled our initial Enterprise Technology Bookings goal for the year, saw 23 per cent organic net revenue growth in Digital Transformation, and 108 per cent organic growth in The Marketing Cloud.”
In the quarter, Stagwell posted a Digital Transformation revenue of $119 million, up 23.1 per cent on the previous year. A similar story can be told about the holding company’s Marketing Cloud revenue, which more than doubled to $56 million.
However, its Marketing Services declined 7.5 per cent from the previous year to $218 million, and the Media and Commerce revenue also fell 2.1 per cent to $159 million.
Its adjusted EBITDA increased 25 per cent year-over-year to $145 million.
Penn also explained that he continues to see government work as “a real opportunity”.
“Over the last two years, we’ve been building our team and gaining expertise. This work has paid off. In the third quarter, we won our first major federal assignment, which will really kick off beginning of the year. Stagwell will serve as the prime subcontractor to CACI for work with the US Central Command. The total size of the win is $1.5 billion over 5 years. We conservatively expect to capture 10 per cent of this total size in fees with potential for significantly more,” he said.
“Winning this first federal assignment is often the hard part. We’re now establishing the ecosystem and new opportunities are emerging. Just weeks ago, we won a second significant federal assignment. Government-related work can become 10 per cent or more of our business over time. The change obvious from our numbers is that our digital transformation services are just right for the agentic retooling companies need to do to stay competitive, and our products are just right for enabling large-scale marketing transformation.”
Geographically, the US is Stagwell’s biggest region, growing more than 11 per cent organically. This helped offset the weakness in the Middle East, where the holdco saw a $9 million (2 per cent) decrease “due to the ongoing conflict in the region and pause of work.”
Stagwell operates in this network through 72andSunny, This is Flow and Allison.
In Australia, This is Flow has won a bag full of new clients, including Cranky Health, Workwear Group, Charles Sturt University, Proximo, Amazon Ring, Fuji Film, Panasonic and Opal Health Care.
The financial results follows the holding company launching its own media group under the banner Stagwell Media.
It is designed for the rapidly changing media landscape. By transforming media into a more connected and adaptive growth engine, the agency empowers brands to unlock greater ambition and drive stronger business results.
