Agency peers are reporting a tougher new business environment. How is Stagwell performing, and what are the key themes driving its success?

Mark Penn acknowledged competitive differences but stated Stagwell is winning by offering 'premium creativity' powered by AI, which helps brands differentiate. He noted wins from legacy players across digital transformation, government, and global markets. “We step up with premium creativity that really helps brands differentiate themselves. And we're finding that, that is really winning in the marketplace. That's why as I went through in the script, we won so many bigger and amazing accounts really from legacy players because we think creativity, human creativity on top of being powered by AI is really what's going to win in the marketplace and with big companies need to differentiate themselves in this increasingly competitive world.”

How is Stagwell using AI to accelerate revenues and lower costs, and what are the trends in the first half and expectations for the back half?

Mark Penn explained that AI is infused throughout every process, from back-office services to agentive coding, making work faster and simpler. Ryan Greene added that CapEx investments are consistent with last year, focusing on technology to support future growth. “No. Look, I think that we set out really 1.5 years ago to sure that AI was infused throughout every single process. Remember, we've always had a strong internal technology first team built to help the entire enterprise, not connected just to individual brands within the enterprise.”

What is the importance of the BD machine, how will it drive revenue, and what is its current traction?

Mark Penn stated that the BD machine is part of a performance-first, technology-first, and agentive-first media strategy. He believes this approach will allow Stagwell to carve out market share against legacy media companies and hinted at further competitive announcements. “We are going to be technology first. We're a genetic first. We're performance first. and we believe we'll be able to carve out an increasing market share as we reveal to the industry, the new tech products on which our media operation is based.”

STGW

Stagwell (STGW) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Communication Services· Jul 30, 2026

Source: earnings call transcript

Executive summary

Stagwell Q2 FY26 — Strong Organic Growth Driven by Digital Transformation and AI Adoption

Stagwell delivered a strong second quarter, validating its tech-forward strategy with significant organic growth, particularly in digital transformation and communications, fueled by AI adoption. The company is leveraging cost efficiencies and share buybacks to drive profitability and EPS, while strategically shifting capital allocation towards CapEx and smaller M&A. Management anticipates a multi-year growth cycle, with strong momentum expected to continue into the second half of the year and beyond.

Highlights

Organic revenue grew 10% year-over-year.
Adjusted EBITDA increased 15% year-over-year to $109 million, with margin expanding 140 basis points to 17.2%.
Adjusted EPS grew 39% year-over-year to $0.25.
Net new business of $171 million was 45% greater than 2Q FY25.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year total net revenue growth	8% to 12% high materiality	FY26	High
Full-year adjusted EBITDA	$475 million to $525 million high materiality	FY26	High
Full-year free cash flow conversion	50% to 60% of adjusted EBITDA medium materiality	FY26	High
Full-year adjusted EPS	$1.03 to $1.17 high materiality	FY26	High
Net leverage	mid-2s medium materiality	End of FY26	High
Enterprise technology bookings goal	exceed $25 million medium materiality	FY26	High
Second half net revenue growth	double-digit high materiality	H2 FY26	High
Margins	continue expanding medium materiality	Ongoing	High
Adjusted EBITDA growth	solid growth in 2027, excellent growth in 2028 high materiality	FY27, FY28	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Digital Transformation Strongest growth in the segment, driven by high-value AI-related work. Highest margin since the merger. 2-year organic net revenue growth: >29%	$107M	18% organic net revenue growth	—	30% adjusted EBITDA margin
Communications Strongest second quarter since the merger, with corporate demand and election-related activity contributing.	$112M	12% organic net revenue growth	almost 700 basis point acceleration QoQ	—
Marketing Cloud Driven by demand for AI-embedded products, higher platform utilization, and additional subscription-based offerings.	$27M	4% organic net revenue growth	—	—
Marketing Services Several significant creative assignments awarded in Q2 are expected to scale in H2 FY26 and position for stronger growth in FY27.	$243M	0.5% organic net revenue growth	—	—
Media and Commerce Modest organic growth in the quarter.	$155M	1% organic growth	—	—
U.S. Largest geographic region, showing solid growth.	—	7.1% organic net revenue growth	—	—
U.K. Second largest region, showing accelerated growth due to new structure and team approach.	—	13.4% organic growth	—	—

Product announcements

Product	Type	Timeline
Stagwell content supply chain	roadmap	—
The machine	roadmap	—
Marketing cloud offerings	roadmap	—
Suite of agentic products for enterprise	roadmap	—

Deals & partnerships

Adobe Expanded relationship, including taking IBM's creative business and adding Cuestas consulting to the Code and Theory network.

Stagwell expanded its relationship with Adobe and added Columbia-based Cuestas consulting to the Code and Theory network, leveraging Adobe input presentation.

Cuestas consulting Acquisition of a Columbia-based Adobe input presentation firm, added to the Code and Theory network.

Acquired and integrated into the Code and Theory network, expanding capabilities related to Adobe.

Palantir Partnership for SaaS, built on Palantir's founder fit.

Stagwell's agent targeting system (SaaS) is built on Palantir's founder fit, seamlessly integrating into customer workflows.

IBM Won IBM's creative business from a 30-plus year legacy incumbent.

A significant new assignment contributing to net new business momentum.

Hershey Won mandates in the packaged food segment.

Won mandates from legacy competitors.

Mondelez Won mandates in the packaged food segment.

Won mandates from legacy competitors.

Heineken Expanded European presence, winning both Higher Europe and All Win.

Contributed to European expansion and new business wins.

Navy Federal Credit Union New business win.

One of countless new business wins in the quarter.

Allegiant Airlines New business win.

One of countless new business wins in the quarter.

Visit California Won government work, an account that hadn't turned over in 20 years.

Significant win in the government sector.

What to watch in Q3 FY26

Digital Transformation Growth Sustainability

next quarter and beyond

Current 18% organic net revenue growth in Q2 FY26

Target Continued strong growth, validating 10-year sustainability claim

Why it matters

Digital Transformation is a major driver of Stagwell's growth and profitability, and its sustained performance is key to the investment thesis.

Well, I think it's sustainable for about 10 years. What's really driving it is the conversion to AI.

Find out whether STGW delivers this. Inve re-checks your case every morning.

Q&A highlights

Is the strong growth in digital transformation sustainable into the future, and what is driving it?

Mark Penn stated that the growth is sustainable for about 10 years, driven by the conversion to AI and the need for every company to redo consumer communication. He highlighted that Stagwell is getting higher-level assignments and working more efficiently due to agentive coding.

“Well, I think it's sustainable for about 10 years. What's really driving it is the conversion to AI. I think, as I've said for actually 2 years now, every single company that touches the consumer will have to redo the way they communicate with that consumer based on AI.”

asked by Ben Allanson (Executives) · answered by Mark Penn

2 min read 6 chapters

Detailed narrative

AI-Driven Transformation and Efficiency

Stagwell is actively infusing AI throughout its operations, from back-office automation to agentive coding, which is driving significant efficiency gains and enabling the company to take on higher-value assignments. This strategic focus on AI is a core differentiator, contributing to expanding margins and positioning Stagwell as a leader in marketing transformation.

The company's internal technology team has been at the forefront of implementing AI across the enterprise, not just within individual brands.

Digital Transformation Segment Outperformance

The digital transformation segment achieved an impressive 18% organic net revenue growth in Q2 FY26, marking its eighth consecutive quarter of improvement and a meaningful acceleration from Q1. This segment also delivered a 30% adjusted EBITDA margin. Management attributes this success to the market's shift towards high-value work that combines business strategy, technology, creativity, and AI transformation, an area where Stagwell's agencies, like Code and Theory, excel.

Strong New Business Momentum and Market Positioning

Stagwell secured $171 million in net new business, a 45% increase over Q2 FY25, with flagship wins from major clients such as IBM, Hershey, Mondelez, Heineken, Navy Federal Credit Union, and Allegiant Airlines. This momentum is driven by Stagwell's tech-forward, collaborative approach, offering a unique combination of strong creativity, great technology, and agility.

The company believes this positions it among the top-tier players in the industry, winning mandates from legacy competitors.

Strategic Capital Allocation and Shareholder Returns

The company is pursuing a balanced capital allocation strategy, prioritizing debt reduction, continued share buybacks, and CapEx investments over large-scale M&A. In Q2 FY26, Stagwell repurchased 5.9 million shares at an average price of $6.22 per share, contributing to a 39% increase in adjusted EPS.

The goal is to exit FY26 with net leverage in the mid-2s, while also funding CapEx at similar levels to last year and pursuing smaller, strategic acquisitions.

Political Cycle and Communications Segment Growth

The Communications segment experienced 12% organic net revenue growth in Q2 FY26, representing a significant acceleration from Q1. This growth is expected to further accelerate in the second half of the year due to the increasingly competitive midterm elections in November. Management anticipates a 'political super cycle' extending through the 2028 presidential election, which is projected to drive substantial growth for the company's political work.

Traction in Enterprise Technology Products

Stagwell's proprietary enterprise technology products, including 'the machine' and SaaS offerings, are gaining significant traction. The company reported $16 million in committed enterprise technology revenue in the first half of the year, with a pipeline exceeding another $16 million. This puts Stagwell firmly on track to surpass its initial bookings goal of $25 million for the year, with new sales teams being built to support further expansion in this area.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.