Publicis offers cheap bet on adland Darwinism

Publicis Groupe

17/07/2025 12:42

The author is a Reuters Breakingviews columnist. The opinions expressed are her own. Updates to add graphic.

By Jennifer Johnson

LONDON, July 17 (Reuters Breakingviews) - The bear case for advertising agencies has rarely been clearer. Tariff-driven economic chaos could scare clients off, while new artificial intelligence tools developed by tech groups like Meta Platforms META.O help them take marketing functions in-house for cheap. These fears explain why the shares of adland’s big four – WPP WPP.L, Publicis PUBP.PA, Omnicom OMC.N and Interpublic IPG.N – are all down at least 10% across the year to date. The selloff looks anomalous in the case of 22-billion-euro Publicis which has continued to exceed analyst expectations. The group run by Arthur Sadoun appears to be thriving amidst the disruption.

At its half-year results on Thursday, Publicis said it would achieve organic growth of close to 5% this year, up from a previous range of 4% to 5%. Against the bleak backdrop of the past four years, the French group has managed to deliver organic net revenue growth of at least 5% per annum and now boasts an industry-leading operating margin of 17.4%. Compare that with WPP, which this month said net sales will fall this year by up to 5%. Publicis has even managed to win clients like Mars and Coca-Cola KO.N from the London-listed group.

Sadoun also downplayed the threat from tech upstarts like Meta. The big fear is that generative AI will make it far cheaper to make an ad and figure out where to place it, hurting incumbent agencies. Yet Sadoun argued that his clients – meaning major multinationals– don’t just want to advertise on a handful of social media platforms. Coordinating a major campaign, and measuring its effectiveness, is Publicis’ specialty. The group’s history of smart acquisitions, including the data group Epsilon and digital consulting firm Sapient, also gives it a valuable stock of consumer data that it can use to tailor ads. This means it can compete with data-rich Silicon Valley stalwarts like Meta.

These strengths aren’t fully expressed in Publicis’ valuation. It trades at less than 12 times its predicted earnings for the next 12 months, as per LSEG data. Though that’s considerably richer than Omnicom and WPP, with multiples of 8 times and 6 times respectively, it’s still roughly in line with the group’s five-year average.

As more of its business is derived from data services and digital advisory, investors may come to see Publicis more like a consultancy. Barclays analysts reckon the Epsilon and Sapient divisions accounted for a third of its revenue in 2024. Accenture ACN.N, for instance, trades on around 20 times forward earnings. That could be the direction Publicis is heading, if Sadoun plays his hand carefully.

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CONTEXT NEWS

On July 17, French advertising group Publicis said it expected 2025 sales to reach the top end of previous guidance following a better-than-expected second quarter in which organic net revenue growth reached nearly 6%.

Citing over a dozen material client wins in the first half, Publicis said it now anticipates organic revenue to grow by close to 5% this year – up from a previous estimate of 4% to 5%.

As of 1235 GMT on July 17, the group’s shares were trading at 85 euros, down 5%.

In just a few years, Publicis climbed to the top of the pack in valuation terms https://www.reuters.com/graphics/BRV-BRV/jnvwbxenkpw/chart.png

In just a few years, Publicis climbed to the top of the pack in valuation terms https://www.reuters.com/graphics/BRV-BRV/jnvwbxenkpw/chart.png

(Editing by Neil Unmack; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on JOHNSON/Jennifer.Johnson@thomsonreuters.com))