Credit: Fredrick F via Unsplash
Pure play digital advertising group S4 Capital expects the conflict in the Middle East to drag at revenue in the March quarter.
However, “cost management initiatives” will partially mitigate the full impact of the revenue shortfall.
“We expect clients to remain cautious in the near term, reflecting heightened macroeconomic uncertainty as a result of the conflict in the Middle East,” Martin Sorrell, the executive chairman, told analysts in a briefing on results for the full year to December.
Billings were up 0.4% to £1,912.9 million like-for-like but revenue fell 8.7% to £754.8 million.
Staff numbers were down 11.5% to 6,350 at the end of December 2025.
“This challenging environment results in more measured decision-making, particularly as technology clients continue to prioritise AI-related capital expenditure over operating expenditure, such as marketing,” Sir Martin said.
“However, we remain confident in our strategy, business model and talent base. Combined with our scaled client relationships and the strong traction of our new go-to-market propositions, we believe we are well positioned to deliver sustainable long-term growth.”
Looking ahead, S4 sees 2026 like-for-like net revenue to be in line with current analyst consensus, slightly below 2025.
However, with a tight rein on costs the operational EBITDA margin is targeted to increase by at least 100 basis points.
Sir Martin said trading in 2025 reflected the continuing impact of increasingly volatile global macroeconomic conditions, heightened by tariff negotiations and increasing geopolitical risks.
“Clients remained cautious amid this uncertainty, with technology clients - representing almost half our revenue - continuing to prioritise capital expenditure on expanding AI capacity over operating expenditure.
“Technology Services was affected in the first half by a reduction in one of our larger relationships and longer sales cycles, although this impact was reduced as the year progressed.
“Despite the challenging backdrop and usual seasonal weighting to the second half, liquidity and cashflow improved significantly year-on-year, driven by disciplined cost control and strong working capital management, resulting in a substantial reduction in net debt over the course of the year.
“Performance strengthened in the second half, supported by the phasing of new business wins and expanding relationships with major enterprise clients.”
While the macroeconomic environment remains uncertain, Sir Martin said clients become more selective about growth geographically and increasingly focused on implementing technologies such as AI, Blockchain and Quantum to drive efficiency.
“It may be -- and I don't mean this to draw positives from the conflict in the Middle East or the war in the Middle East -- but it may be that acts as a catalyst,” Sir Martin said.
“If global growth slows, inflation rises and interest rates are stickier, which seems to be the scenario already being built in by some of the analysts and the investment banking firms.
“If that is the case, that might be the engine for increased tech adoption and AI adoption.
“I think it's an important point because the market is certainly painting everybody with the same brush at the minute.”
Financial highlights for the year to December 2025:
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