Stagwell Q3 2026 Earnings: Adjusted EBITDA Rises 25% despite Lower GAAP Profit

Stagwell (NASDAQ: STGW) reported Q3 2026 revenue of $816.0 million, up 10% from $743.0 million, while diluted GAAP EPS fell to $0.07 from $0.09. Adjusted EBITDA increased 25% to $144.8 million as Digital Transformation, Communications, and The Marketing Cloud offset declines in Marketing Services and Media & Commerce. Nine-month operating cash flow also improved substantially, supporting management’s decision to raise full-year adjusted EBITDA and adjusted EPS guidance.

Core Financial Results

Revenue grew faster than net revenue because billable costs increased to $152.0 million from $128.5 million. Net revenue, which excludes billable costs, rose 8.1% to $664.0 million and increased 7.4% organically.

Profit measures moved in opposite directions. Adjusted EBITDA and adjusted EPS rose, but operating income, attributable net income, and GAAP EPS declined as operating expenses increased faster than revenue and non-GAAP adjustments expanded.

Adjusted EBITDA margin was approximately 21.8% of net revenue, reported by the company as 22%, compared with about 18.9% a year earlier. In contrast, GAAP operating margin based on total revenue declined to approximately 5.9% from 8.2%.

Business and Segment Performance

Growth was concentrated in Digital Transformation, Communications, and The Marketing Cloud. These businesses more than offset organic net revenue contractions in Marketing Services and Media & Commerce.

Communications’ total net revenue increased 28.0%, with organic growth supplemented by a $7.7 million acquisition contribution. The Marketing Cloud moved from an adjusted EBITDA loss to a $24.7 million profit, while Digital Transformation’s adjusted EBITDA increased by approximately 47%.

These gains were partly offset by a wider adjusted EBITDA loss in corporate, eliminations, and other, which reached $27.5 million compared with $15.8 million. Stagwell also reported $168 million of third-quarter net new business and $586 million over the last 12 months. Enterprise technology products contracted through the first nine months totaled $59 million, more than double the company’s initial 2026 goal.

Adjusted Growth Masked a Decline in GAAP Profitability

Stagwell’s operating expenses rose by approximately $85.9 million, exceeding the $73.0 million increase in revenue. Office and general expenses increased to $206.9 million from $166.4 million, while depreciation and amortization rose to $48.3 million from $44.3 million.

The gap between GAAP and adjusted results also widened because the current quarter contained more excluded expenses. Adjusted EPS excluded a net $67.9 million of after-tax adjustments, compared with $38.6 million a year earlier. The Q3 2026 adjustments included $42.9 million of amortization, $28.9 million of stock-based compensation, and $7.7 million of deferred acquisition consideration, partially offset by the related tax adjustment.

Stock-based compensation was especially notable, rising from $12.6 million in the prior-year quarter. Deferred acquisition consideration also shifted from a $13.3 million benefit in Q3 2025 to a $7.7 million expense in Q3 2026. These items help explain why adjusted EBITDA grew 25% while GAAP operating income fell 21%.

Cash Flow and Balance Sheet

For the nine months ended September 30, operating cash flow increased to $152.3 million from $30.7 million. Working-capital movements contributed to the improvement, particularly accrued expenses and other liabilities, which produced a $5.3 million inflow compared with a $117.1 million outflow in the prior-year period. This was partly offset by a larger cash use from accounts receivable.

Stagwell reported nine-month free cash flow of $52 million, up 227%. Capitalized software spending increased to $75.9 million from $45.3 million, while capital expenditures were nearly unchanged at $27.4 million.

Cash and cash equivalents rose to $132.2 million from $104.5 million at the end of 2025. Long-term debt increased to $1.415 billion from $1.326 billion, although management reported net leverage of 2.7 times, an improvement of 0.7 times year over year. The company also spent $90.7 million repurchasing and canceling shares during the first nine months.

Financial Guidance

Stagwell raised its full-year adjusted EBITDA and adjusted EPS ranges following the first nine months. The prior ranges were not included in the supplied earnings release, so the size of the increases cannot be quantified. Net revenue growth and free cash flow conversion guidance were reiterated.

The outlook includes the anticipated effects of acquisitions and dispositions. Adjusted EBITDA, adjusted EPS, and free cash flow conversion are non-GAAP measures.

Recent Insider Transactions

The supplied six-month insider summary records 776,295 shares under purchases and 2,225,790 shares under sales, resulting in net sales of 1,449,495 shares across 14 transactions. Total insider holdings were listed at 145.98 million shares, with a net transaction percentage of negative 1.00%.

Recent individual records included stock grants and a derivative-security conversion, which should not be treated as open-market purchases. The transactions below are presented without inferring insiders’ views of the company.

Risks Investors Should Monitor

• Weakness in established service businesses: Marketing Services organic net revenue fell 7.5%, while Media & Commerce declined 2.1%. Continued contractions could offset growth in technology-oriented businesses.
• Large GAAP and non-GAAP divergence: Higher stock-based compensation, amortization, and deferred acquisition consideration contributed to declining GAAP profit despite higher adjusted EBITDA and adjusted EPS.
• Full-year cash conversion requirement: Applying the 50%–60% conversion target to adjusted EBITDA guidance implies approximately $245 million to $324 million of full-year free cash flow. With $52 million reported through nine months, a substantial portion of the annual target must come later in the year; the release did not provide a quarterly cash flow cadence.
• Debt and investment demands: Long-term debt increased during the first nine months, while capitalized software spending also rose. Investors should monitor whether technology investments generate sufficient earnings and cash flow to support capital allocation and leverage reduction.
• Growth concentration: Much of the quarter’s incremental growth came from Digital Transformation, Communications, and The Marketing Cloud. Maintaining the raised outlook depends on these businesses continuing to offset weaker segments and higher corporate costs.

Summary

Stagwell’s third quarter combined 10% revenue growth and a 25% increase in adjusted EBITDA with lower GAAP operating income and net income. Digital Transformation, Communications, and The Marketing Cloud drove the adjusted improvement, while Marketing Services, Media & Commerce, and higher corporate costs remained pressure points. The raised outlook and stronger nine-month operating cash flow support the company’s transformation strategy, but GAAP profitability, legacy segment trends, and the cash flow required to meet full-year conversion guidance remain the main items to monitor.