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S4 says tech clients prioritise AI over marketing

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Q1 revenue drops to 163.7 million pounds

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Reaffirms 2025 forecast

May 8 (Reuters) - Martin Sorrell's ad group S4 Capital ( SCPPF )

posted an 11.4% drop in first-quarter revenue, in line

with its expectations following two profit warnings last year,

as technology clients prioritised spending on artificial

intelligence over marketing.

The owner of ad agencies Monks and MightyHive, which derives

almost half of its business from the tech sector, said ongoing

growth challenges from a key tech clients had continued in the

quarter.

"The global macroeconomic environment has become even more

challenging in 2025. Clients, therefore, are likely to remain

cautious," Sorrell said in S4's trading update on Wednesday.

Sorrell acknowledged that the company was operating in

"volatile global macroeconomic conditions" and that tariffs

imposed by U.S. President Donald Trump were a principal risk.

"However, once the levels of tariffs are negotiated and

impacts assessed, we believe clients will become more selective

about the geographies in which they operate in order to find

growth," he said.

Last month, GroupM and Ogilvy owner

WPP ( WPP )

said tariffs had not yet had a major impact on

spending by its clients as they were still assessing their scope

before making budget decisions.

S4 reported revenue of 163.7 million pounds ($218 million)

for the three months to March 31, and affirmed its forecast for

2025 revenue and operational core earnings to be broadly similar

to 2024.

($1 = 0.7510 pounds)