Stagwell Raises 2026 Profit Outlook as Q3 Adjusted EBITDA Climbs 25%

Stagwell Inc. raised its 2026 adjusted profit outlook after third-quarter adjusted EBITDA increased 25%, supported by strong growth in its Digital Transformation, Marketing Cloud and Communications businesses. The marketing company also reported a wider adjusted EBITDA margin and improved operating cash flow, although GAAP operating income and net income declined from a year earlier.

For 2026, Stagwell now expects adjusted EBITDA of $490 million to $540 million and adjusted diluted earnings per share of $1.07 to $1.21. The company reiterated its forecasts for total net revenue growth of 8% to 12% and free cash flow conversion of 50% to 60% of adjusted EBITDA. The guidance was issued as of Oct. 29.

Revenue Growth and Margin Expansion

Third-quarter revenue rose 9.8% to $816.0 million from $743.0 million a year earlier. Net revenue, which excludes billable costs, increased 8.1% to $664.0 million, including organic net revenue growth of 7.4%. Acquisitions and divestitures added 0.7 percentage points, while foreign exchange had a negative 0.1-point impact.

Adjusted EBITDA increased to $144.8 million from $116.0 million. The adjusted EBITDA margin on net revenue expanded to 21.8% from 18.9%, an improvement of 290 basis points. Adjusted diluted EPS rose 42% to $0.34.

The stronger adjusted results contrasted with Stagwell’s GAAP performance. Operating income declined to $48.1 million from $60.9 million, while net income attributable to common shareholders fell to $18.1 million from $24.6 million. GAAP diluted EPS was $0.07, compared with $0.09 in the prior-year quarter. Adjustments used to calculate non-GAAP earnings included amortization, stock-based compensation, deferred acquisition consideration and other items.

For the first nine months of 2026, revenue increased 9.7% to $2.31 billion and net revenue rose 5.8% to $1.88 billion. Adjusted EBITDA advanced 17.3% to $343.2 million, with the margin increasing to 18.3% from 16.5%. Stagwell recorded a nine-month GAAP net loss attributable to common shareholders of $3.0 million, compared with net income of $16.4 million a year earlier.

Digital and Software Businesses Lead Growth

Digital Transformation generated third-quarter organic net revenue growth of 23.1%, making it one of the principal contributors to Stagwell’s expansion. The segment represented 18% of quarterly net revenue, while its adjusted EBITDA grew 47.1% from a year earlier.

The Marketing Cloud, which accounted for 8% of net revenue, posted organic net revenue growth of 108.4%. Stagwell attributed the performance to Software and Enterprise Technology sales. Committed revenue for Enterprise Technology Solutions reached $59 million year to date, more than double the company’s initial $25 million target, with identified pipeline and committed revenue totaling $71 million.

Communications reported organic net revenue growth of 20%, alongside adjusted EBITDA growth of 90.8%. By contrast, organic net revenue declined 2.1% in Media & Commerce and 7.5% in Marketing Services. Marketing Services remained the company’s largest segment at 32% of quarterly net revenue, followed by Media & Commerce at 24%.

Geographically, the United States, which generated 80% of third-quarter net revenue, recorded organic net revenue growth of 11.2%. Organic net revenue declined 0.8% in the United Kingdom and 7.1% across the rest of the world.

New Business, Costs and Cash Flow

Stagwell reported $168 million of net new business during the quarter, bringing the last-12-month total to $586 million, up $114 million from the comparable prior-year period. The company highlighted a multi-agency win with ServiceNow and its first major U.S. federal government contract, with U.S. Central Command. Revenue from its top 100 customers increased 29% from a year earlier.

The company said it had actioned $78 million of the $80 million to $100 million in cost savings targeted by the end of 2026. Its labor ratio improved by 400 basis points to 57.6% in the quarter.

GAAP net cash provided by operating activities increased by $121.6 million to $152.3 million. Excluding a $3.1 million pension settlement contribution, the year-over-year improvement was $125 million. Stagwell ended September with $542 million of available liquidity, comprising $132 million of cash and cash equivalents and $410 million of undrawn credit facility commitments. Its net leverage ratio was 2.7 times.

Management’s strategic initiatives during the quarter included an expanded partnership with Palantir, the launch of global media agency Stagwell Media and the consolidation of its artificial-intelligence products under Stagwell AI. The company also acquired Freestar, an advertising operations platform serving online publishers.

Stagwell cautioned that its outlook remains exposed to changes in client demand and marketing spending, unfavorable economic conditions, inflation, tariffs and trade policies, foreign-exchange movements and geopolitical disruption. Other identified risks include competition for clients and employees, execution of cost-saving and strategic initiatives, acquisition integration, debt and contingent payment obligations, cybersecurity threats, and the development and use of artificial intelligence and other emerging technologies.